Opinion
No. 85-589
Decided May 8, 1985.
Savings and loan associations — Deposit guaranty association — Termination of conservatorship — Prohibition to prohibit enforcement of temporary restraining order — Writ granted — R.C. Chapter 1157, construed.
IN PROHIBITION.
Intervening respondent, Ohio Deposit Guarantee Fund (hereinafter "ODGF"), is a mutual deposit guaranty association incorporated pursuant to R.C. 1151.80 to 1151.92, inclusive, for the purpose of providing liquidity to its members and to guarantee the deposits in member savings and loan associations. ODGF is the only mutual deposit guaranty association in Ohio and was incorporated with Ohio's state chartered savings and loan associations as its members.
Its largest member is Home State Savings Bank, holding approximately $525 million in deposits. In March 1985, Home State Savings Bank failed and was unable to meet the demands of its depositors. It closed on March 9, 1985 and has not reopened.
As a result of the closing of Home State Savings Bank, it was feared that public confidence in state-chartered savings and loan associations would falter and in order to prevent mass withdrawals from other state-chartered savings and loan associations, emergency measures were undertaken.
On March 13, 1985, Sub. S.B. No. 113 was enacted effective immediately as an emergency measure. It was passed with thirty-one affirmative votes and one negative vote in the Ohio Senate (Senate Journal, Wednesday, March 13, 1985, at 121) and with seventy-three affirmative votes and fourteen negative votes in the Ohio House of Representatives (House Journal, Wednesday, March 13, 1985, at 255). The Senate Journal for March 13, 1985 reflects that a motion was "agreed to" to suspend the three-day reading requirement. (Senate Journal, Wednesday, March 13, 1985, at 119.) The House Journal also reflects a vote on March 13, 1985 to suspend the three-day rule and immediately consider Sub. S.B. No. 113. (House Journal, Wednesday, March 13, 1985, at 254.)
Sub. S.B. No. 113 amended R.C. 1151.01 to provide that a deposit guaranty association organized under R.C. 1151.81 to 1151.92 was included within the definition of "building and loan association" as that term was defined in R.C. Chapter 1157.
The effect of that amendment was to allow the Superintendent of Savings and Loan Associations to appoint a conservator over a deposit guaranty association or liquidate a deposit guaranty association as formerly authorized only against savings and loan associations. Formerly, no statutes existed authorizing comparable overseeing or takeover powers with respect to a deposit guaranty association.
In Sections 3 and 4 of Sub. S.B. No. 113 (later amended in certain respects by Am. Sub. S.B. No. 143), the General Assembly authorized the creation of the Savings and Loan Stabilization Special Account to be created from funds from the liquor control profits and mortgage insurance fund. Section 4 also authorized the Director of Commerce, upon recommendation of the Superintendent of Savings and Loan Associations, to loan money to a new deposit guarantee fund to be created. It also provided that no savings and loan association over which a conservator had been appointed could be a member.
On March 20, 1985, former Superintendent of Savings and Loan Associations, Thomas Batties, appointed a conservator for ODGF pursuant to R.C. 1157.01(A).
On April 8, 1985, ODGF filed an action in the Court of Common Pleas of Franklin County which was assigned to respondent herein, Judge George C. Smith. The action was brought, inter alia, on authority of R.C. 1157.01(D) which authorizes suit to be filed in the Court of Common Pleas of Franklin County to seek removal of a conservator.
The Franklin County action named Governor Richard F. Celeste, the present and former superintendents of savings and loan associations, Director of Commerce, Kenneth R. Cox, and the Deputy Superintendent of Savings and Loan Associations who was appointed conservator of ODGF, as defendants. In addition to relief under R.C. 1157.01(D), the action sought a declaratory judgment declaring Sub. S.B. No. 113 unconstitutional and an injunction against the defendants for violations of their federal constitutional rights under Section 1983, Title 42, U.S. Code.
Specifically, the complaint alleges that Sub. S.B. No. 113 was enacted without compliance with the three-reading rule in Section 15(C), Article II, Ohio Constitution. The complaint further alleges that the Act subjects ODGF to the deprivation of its property without due process of law and discriminates against ODGF; and that the Act's provisions authorizing the appointment of a conservator for ODGF is an unconstitutional delegation of legislative authority and is unconstitutionally vague.
On April 12, 1985, the Superintendent of Savings and Loan Associations posted a notice taking possession of ODGF at its principal place of business in Hamilton County and filed liquidation proceedings in the Court of Common Pleas of Hamilton County, according to R.C. 1157.02.
On the same date, ODGF sought and obtained from Judge Smith an ex parte temporary restraining order prohibiting the defendants in the Franklin County action from "* * * attempting to liquidate, dispose of, take possession of or otherwise control the assets and funds of the Ohio Deposit Guarantee Fund, and * * * [further enjoining them] from attempting to enforce against Ohio Deposit Guarantee Fund any power purportedly conferred upon defendants, or any of them, by S.B. 113 [ sic]." On April 15, 1985, the temporary restraining order was amended on reconsideration in respects not pertinent herein.
Relators, Governor Celeste, the Director of Commerce, and Superintendent of Savings and Loan Associations Robert B. McAlister, then filed this original action in prohibition against Judge Smith, seeking the issuance of a writ to prevent him from enforcing his restraining order.
Relators' request for an alternative writ and ODGF's motion to intervene as a respondent were granted on April 17, 1985. ODGF then filed a motion to require relators to comply with the alternative writ which was denied.
Anthony J. Celebrezze, Jr., attorney general, Joel S. Taylor, Kathleen McManus, Connie J. Harris, Porter, Wright, Morris Arthur, James E. Pohlman, Robert W. Trafford, Daniel W. Costello and Kathleen M. O'Malley, for relators.
S. Michael Miller, prosecuting attorney, William B. Shimp and Joan G. Robinson, for respondent.
Vorys, Sater, Seymour Pease and John C. Elam, for intervening respondent.
Manley, Jordan Fischer, Timothy A. Fischer and Andrew S. Lipton, urging allowance of the writ for amicus curiae, Home State Depositors Association.
Relators argue, in support of the allowance of the writ of prohibition, that R.C. Chapter 1157, made applicable to ODGF by Sub. S. B. No. 113, sets forth the exclusive and mandatory procedure to be followed in conservatorship and/or liquidation proceedings and that any attempt by respondent to circumvent the statutorily mandated proceedings amounts to a usurpation of judicial power. If established, such a claim is grounds for the allowance of a writ of prohibition. State, ex rel. Maynard, v. Whitfield (1984), 12 Ohio St.3d 49; State, ex rel. Republic Steel Corp., v. Ohio Civil Rights Comm. (1975), 44 Ohio St.2d 178 [73 O.O.2d 478].
R.C. 1157.01(A) provides that "[t]he superintendent of building and loan associations may appoint a conservator for any savings and loan association whenever he deems it necessary in order to conserve the assets of such association for depositors, members, and creditors. * * *" The powers of a conservator so appointed are further defined in R.C. 1157.01(B).
R.C. 1157.01(D) provides:
"Within thirty days after appointment of a conservator, the association may bring an action in the court of common pleas of Franklin county, for an order that the superintendent remove the conservator. Immediately upon filing such action, summons shall be issued to the sheriff of Franklin county to be served on the superintendent, returnable within five days from its date, which in all other respects such summons shall be made as in civil actions, whereupon the allegations of the petition shall be deemed to stand denied without pleading and the cause shall be advanced and heard without delay."
R.C. 1157.01(E) goes on to state:
"The superintendent may terminate the conservatorship and permit the association to resume the transaction of its business, subject to such terms and restrictions as he prescribes, when the superintendent determines that the termination of such conservatorship may be safely done and would be in the public interest. The superintendent may terminate the conservatorship and take possession on any of the grounds provided in section 1157.02 of the Revised Code."
R.C. 1157.02 provides that "[i]f upon examination the superintendent of building and loan associations finds that the affairs of a domestic building and loan association are in an unsound or unsafe condition, that it is conducting its business in whole or in substantial part contrary to law, that it is failing to comply with the law, or that its affairs are not being conducted for the best interests of its depositors, shareholders, or creditors, he may forthwith take possession of the business and property of such building and loan association. * * *" R.C. 1157.02 further sets forth the notice and filing requirements of such liquidation proceedings. It provides that the action shall be filed in the "* * * court of common pleas of the county in which the principal office of such association is located * * *."
Relators argue that under this statutory framework, commencement of liquidation proceedings under R.C. 1157.02 automatically terminates a prior conservatorship imposed pursuant to R.C. 1157.01(A), and consequently moots any action commenced under R.C. 1157.01(D). We agree. R.C. 1157.01(E) specifically provides that "[t]he superintendent may terminate the conservatorship and take possession on any of the grounds provided in section 1157.02 of the Revised Code." (Emphasis added.) Thus, once liquidation proceedings have been instituted, the conservatorship is terminated.
Moreover, as we construe the proceeding authorized by R.C. 1157.01(D) to terminate a conservatorship, it contemplates a situation whereby the affected association can have the opportunity to show that it has improved its position and the conditions which led to the appointment of a conservator no longer exist. If the facts are such that the association's condition is worse or appears to be uncorrectible and the superintendent commences liquidation proceedings under R.C. 1157.02, then the proceeding authorized by R.C. 1157.01(D) is no longer necessary. The conservatorship having been terminated, its propriety is no longer an issue and the only issues remaining are those which relate to the liquidation proceedings.
Nothing in this opinion should be construed to indicate that a common pleas court does not have jurisdiction in an action against the Superintendent of Savings and Loan Associations and other state officials to test the constitutionality of legislation pursuant to which the officials propose to act. There is ample support for the proposition that a preliminary injunction may be granted where the constitutionality of a legislative act is challenged in order to temporarily restrain the enforcement of the act until its validity may be adjudicated. See Ex Parte Young (1908), 209 U.S. 123; Pennhurst State School Hospital v. Halderman (1984), ___ U.S. ___, 79 L. Ed. 2d 67.
Accordingly, we hold that the temporary restraining order issued by respondent, having the effect of precluding relators from pursuing the exclusive statutorily prescribed remedies in R.C. 1157.02 et seq. became on and after April 12, 1985 a usurpation of judicial power and for this reason we conclude that relators are entitled to the issuance of the writ requested.
By our decision today, we do not purport to address any of the constitutional claims asserted by ODGF nor to preclude ODGF from asserting any of its claimed defenses. ODGF has become a party to the proceedings in Hamilton County and may assert any objections or constitutional claims in that proceeding.
Accordingly, the writ prayed for is allowed.
Writ allowed.
CELEBREZZE, C.J., SWEENEY, LOCHER, HOLMES, C. BROWN, DOUGLAS and WRIGHT, JJ., concur.