United States Court of Appeals,
Fifth Circuit.
No. 92-1041.
UNITED STATES FIRE INSURANCE COMPANY, Plaintiff-Counter Defendant-Appellee,
v.
FEDERAL DEPOSIT INSURANCE CORPORATION, as receiver for Empire Savings and Loan
Association, Defendant-Counter Plaintiff-Appellant.
Jan. 27, 1993.
Appeal from the United States District Court for the Northern District of Texas.
Before WISDOM, JOLLY, and DeMOSS, Circuit Judges.
DeMOSS, Circuit Judge:
I.
The Federal Deposit Insurance Corporation (FDIC) requires all member banks to purchase
insurance coverage under Savings and Loan Blanket Bond Standard Form No. 22 (Form 22). Form
22 provides insurance against, among other things, loss by fraud or dishonesty of Savings and Loan
employees discovered during the term of the bond.
Empire Savings and Loan Association (Empire), a Texas Savings and Loan and its
predecessor, Town East Savings and Loan Association, purchased a Form No. 22 Blanket Bond from
the United States Fire Insurance Company (US Fire).1 The Bond was effective August 5, 1978.
Section 11(c) of this bond provides that the bond automatically terminates "immediately upon the
taking over of the Insured by a receiver or other liquidator or by State or Federal officials."
In 1982, both state and federal regulators began to monitor Empire because of questionable
lending practices. In 1983 the Federal Home Loan Bank Board (FHLBB) issued a temporary cease
and desist order, and on January 9, 1984, the Texas Savings and Loan Commission issued a cease and
desist order, and Empire placed itself under voluntary supervisory control by the Texas Commission.
1
While the Savings and Loan Bond involved in this case was issued in Texas, it is the same
standard Form 22 bond used across the country and required by the FDIC in it national
regulations 12 C.F.R. § 563.190 (formerly 12 C.F.R. 563.19).
US Fire contended that on January 9, 1984, the Bond terminated after Empire was taken over
by the Texas Savings and Loan Commission. As the acts giving rise to FDIC's claims were not
discovered until after January 9, 1984, US Fire argued that it was entitled to summary judgment as
to FDIC's claims and a judgment declaring it to be without liability on the Bond.
FDIC responded that § 11(c) of the Bond, under which the Bond was terminated, is
unenforceable because it is contrary to federal law and violates public policy. FDIC further
contended t hat the term "taking over" as used in § 11(c) of the Bond is ambiguous and should be
interpreted against US Fire as the drafter of the term. Alternatively, FDIC contended that a takeover
did not occur within the meaning of § 11(c).
The District Court granted summary judgment in favor of U.S. Fire, after concluding that the
Texas Savings and Loan Commission's assumption of control constituted a takeover thereby
triggering the Bond's automatic termination provision. The FDIC appeals.
II. DISCUSSION
This Court reviews a summary judgment de novo. Summary judgment is appropriate if "there
is no genuine issue of material fact (so) that the moving party is entitled to a judgment as a matter of
law." Fed.R.Civ.P. 56(c).
Sharp v. FSLIC, 858 F.2d 1042 (5th Cir.1988) guides our determination of the issues in this
case. Sharp resolves the FDIC's argument regarding public policy, enforceability of § 11(c), and
ambiguity and makes clear that a takeover does not have to be in the form of a receivership or
liquidation, but occurs any time the government assumes control over a thrift institution. Id. at 1045.
In this case, the summary judgment evidence reflects that Empire was prohibited by the
supervisory takeover from engaging in activities that are core functions of a savings and loan.2
The dictionary definition of takeover: "assume control or management of;—not necessarily
involving the transfer of absolute title," Black's Law Dictionary 1454 (6th ed. 1990) suggests that
a takeover indeed occurred in this case.
2
Empire could not lend or invest any of its funds, withdraw any bank accounts, encumber any
assets or incur any debt including accepting deposits without approval; in effect it could no
longer operate as a Savings and Loan unless it got approval.
Sharp put the issue of the ambiguity of the takeover termination provision in § 11 to rest by
stating that neither the Form 22 Bond nor the takeover provision were ambiguous. Id. at 1045.3
Therefore, based on the clear terms of the cease and desist order and the supervisory control
order, we hold that the District Court did not err in finding that Empire was taken over on January
9, 1984, and that the bond terminated on that date. The fact that Empire voluntarily accepted the
January 9, 1984 supervisory order does not affect our decision. We are not concerned with the
manner in which the order was implemented in determining the application of § 11 but rather its
effect. The Bond's termination provision does not require a "hostile" or "involuntary" taking over but
merely requires a "taking over", regardless of whether it be by consent or by force of law. Id. 1045-
46.
Moreover, this Court noted in Sharp, that because the language the court is being asked to
construe was the result of a collaborative effort between the American Bankers Association and the
American Surety Association, there is no reason to construe the term against US Fire even if it were
ambiguous. Id. at 1046.
FDIC's arguments that § 11(c) permits only liquidators to take over has also been rejected by
Sharp. Although, Sharp involved a conservator and not a supervisor, we look at the actual authority
and control exercised over Empire in determining whether Empire was taken over within the meaning
of § 11(c). The title given to the state supervisory agent and the fact that the state or federal
authorities could have employed more restrictive means of controlling the institution do not
es
determine whether § 11(c) is implicated.
III. CONCLUSION
The judgment of the District Court is AFFIRMED.
3
Section 12, the termination provision in the Bond in Sharp, is equivalent to § 11 in this case.
U.S. Fire Ins. Co. v. F.D.I.C.
Combined Opinion