Colorado ex rel. Colorado State Banking Board v. Resolution Trust Corp.

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EBEL, Circuit Judge,

dissenting:

I must respectfully dissent. After applying the traditional rules of statutory construction to 12 U.S.C. § 1823(k)(l) & (k)(4), I find these statutory provisions to be unambiguous and the RTC’s interpretation of them to be incorrect. The RTC is not entitled to substantial deference with respect to its interpretation. Furthermore, the *949RTC’s interpretation is unacceptable under any standard of review.

Standard of Review

The substantial deference standard of review discussed in Chevron, U.S.A. v. Natural Resources Defense Council, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), and its progeny is not implicated in this case. We are to afford an administrative agency substantial deference in its interpretation of Congressional authority only if we find the relevant authority to be ambiguous. Before we find an ambiguity, however, we must first employ the traditional rules of statutory construction to aid us in discerning the Congressional intent:

The judiciary is the final authority on issues of statutory construction and must reject administrative constructions which are contrary to clear congressional intent_ If a court, employing traditional tools of statutory construction, ascertains that Congress had an intention on the precise question at issue, that intention is the law and must be given effect.

Id. at 843 n. 9, 104 S.Ct. at 2782 n. 9.

The Court subsequently reaffirmed this principle in INS v. Cardoza-Fonseca, 480 U.S. 421, 446-47, 107 S.Ct. 1207, 1221, 94 L.Ed.2d 434 (1987) (rejecting an INS construction of the Refugee Act of 1980 by “[ejmploying traditional tools of statutory construction”). See also NLRB v. United Food & Commercial Workers Union, 484 U.S. 112, 123, 108 S.Ct. 413, 421, 98 L.Ed.2d 429 (1987) (“On a pure question of statutory construction, our first job is to try to determine congressional intent, using ‘traditional tools of statutory construction.’ If we can do so, then that interpretation must be given effect, and the regulations at issue must be fully consistent with it.”). Therefore, the deference principle upon which the RTC bases its argument only applies if we find the applicable provisions to be ambiguous after applying the traditional tools of statutory construction,1 After applying the tools of statutory construction, I find the applicable provisions to be anything but ambiguous.

McFadden Act

The analysis must begin with the McFadden Act, 12 U.S.C. § 36. The McFadden Act reads in pertinent part:

The conditions upon which a national banking association may retain or establish and operate a branch or branches are the following:
A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches ... at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not *950merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks.

12 U.S.C. 36(c).

Section 36(c) permits national banks to establish branches if such branches could be established by state banks under state law. First Nat’l Bank of Logan v. Walker Bank and Trust Co., 385 U.S. 252, 260, 87 S.Ct. 492, 496, 17 L.Ed.2d 343 (1966). Section 36(c) is the cornerstone branching authority for national banks and represents a Congressional “response to the competitive tensions inherent in a dual banking structure where state and national banks coexist in the same area.” First Nat’l Bank in Plant City v. Dickinson, 396 U.S. 122, 131, 90 S.Ct. 337, 342, 24 L.Ed.2d 312 (1969).

The RTC interpretation of § 1823(k)(l) & (k)(4) is in direct conflict with the McFadden Act because the RTC reads those provisions to permit branch banking in circumstances under which the McFadden Act would prohibit it. One of the fundamental cannons of statutory construction that we must consult before deferring to the RTC’s “interpretive expertise” is that “[ajmend-ments by implication, like repeals by implication, are not favored.” United States v. Welden, 377 U.S. 95, 102 n. 12, 84 S.Ct. 1082, 1087 n. 12, 12 L.Ed.2d 152 (1964). See National Resources Defense Council, Inc. v. Hodel, 865 F.2d 288, 317-18 (D.C.Cir.1988). See also Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1017, 104 S.Ct. 2862, 2880, 81 L.Ed.2d 815 (1984) (partial repeal by implication is disfavored). Admittedly, the Congress could provide an alternative authority for national bank branching allowing national banks to operate branches in states where state laws prohibit state banks from operating branches. But, whether codified as a separate statute or as a modification of the McFadden Act itself, the result would be the same — such an action would constitute an amendment of the McFadden Act.2 Therefore, the RTC’s Override Regulation, based upon a purported amendment of the McFadden Act by implication, is unacceptable.3

The RTC’s interpretation of § 1823(k) also violates a second cannon of statutory construction: “[Wjhere there is no clear intention otherwise, a specific statute will not be controlled or nullified by a general one, regardless of the priority of enactment.” Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445, 107 S.Ct. 2494, 2499, 96 L.Ed.2d 385 (1987) (quotation omitted) (emphasis in the original). Here, the RTC seeks to rely primarily on the general language of § 1823(k)(l) to override the very specific language of the McFadden Act, which unequivocally and directly prohibits federal branch banking in states where state branch banking is not allowed. I do not believe that it is too much to ask that when and if Congress decides to amend a fundamental sixty-three year-old banking statute that it should do so explicitly. These two canons of statutory construction lead me to conclude that § 1823(k) does not, in any manner, authorize branch banking in a way that otherwise is clearly prohibited by the McFadden Act. Thus, I would never reach the point of relying on the RTC’s interpretation of these provisions.

Section 1823(k)(l)(A)(i)

Putting aside for a moment the McFadden Act, it seems to me that the RTC’s interpretation of § 1823(k)(l)(A)(i) by itself is flawed.4 Section 1823(k)(l)(A)(i) begins *951with a phrase that is relied upon heavily by the RTC: “Notwithstanding any provision of State law....” This phrase, however, does not exist in a vacuum — it exists in a particular location within § 1823. It grammatically modifies just the three subparts that fall directly beneath it (I, II and III). When read together, § 1823(k)(l)(A)(i)(I-III) reads:

Notwithstanding any provision of State law ... the Corporation ... may authorize—
(I) a savings association ... to merge or consolidate with, or to transfer its assets and liabilities to, any other savings association or any insured bank,
(II) any other savings association to acquire control of such savings association, or
(III) any company to acquire control of such savings association or to acquire the assets or assume the liabilities thereof.

Section 1823(k)(l)(A)(i)(I) allows the RTC to override any state law that precludes a merger of a savings and loan with a bank. That would include any state law that straight out precludes such mergers — and that was undoubtedly the main purpose behind this statutory provision. We are not confronted here with any such law in Colorado or New Mexico. Section 1823(k)(l)(A)(i)(I) would also, presumably, override state laws which apply so onerously to a merger transition between a bank and a savings and loan that they effectively preclude such a merger. Such laws might be, for example, laws that harshly tax such transactions or that impose other restrictions that materially disadvantage such a merged entity. Here, however, by circumventing the McFadden Act, the RTC is seeking not to remove a disadvantage, but rather is seeking a competitive advantage over all other federal and state banks in Colorado and New Mexico — an advantage that it hopes to turn into cash. I cannot believe Congress intended to give the RTC such power, particularly via the tortured and subtle inferences upon which the RTC relies.

In any event, the RTC’s reliance upon the “notwithstanding any provision of state law” language in support of the Override Regulation is misplaced. It is not state law that prohibits these federal banks, which are the subject of the instant litigation, from operating with branches; it is federal law (the McFadden Act) that prohibits them from so operating. The McFadden Act incorporates by reference state branch banking laws governing state banks. Therefore, it is the McFadden Act that requires uniformity between the way federal and state banks may operate insofar as branching is concerned. There is absolutely nothing in the language of § 1823(k)(l)(A)(i)(I) that gives the RTC the authority to override federal law.5

The State’s interpretation of (k)(l) will not lead to any inequality between federal and state banks that may desire to take over a failed savings and loan that has branch locations. If the state prevents state bank branching, then a state bank could not maintain the branches of the acquired savings and loan as separate bank branches. Nothing in (k)(l) authorizes the RTC to override that particular state law. Similarly, if a federal bank acquired such a savings and loan, the McFadden Act would prevent it from maintaining the branches as bank branches. Nothing in (k)(l) overrides the McFadden Act. Thus, there is complete equality between federal and state banks, and the choice of whether to *952allow banks to maintain branches is left to the states, as the McFadden Act intended, See State of Utah ex rel., Department of Financial Institutions v. Zions First National Bank of Ogden, Utah, 615 F.2d 903, 906 (10th Cir.1980), where this court construed the McFadden Act as guaranteeing States the right to determine “when, where and how, a national bank may branch, if indeed it may branch at all.”

Further, in order to sustain its position, the RTC is forced to advance a novel and most peculiar definition of the term merger that includes within its scope the operation of the surviving entity after the merger actually occurs. The RTC is forced to take the position that any state laws that materially affects the resultant entity’s operation after the merger is one which could be considered to preclude the underlying merger or consolidation. Under the RTC’s definition, if the surviving entity is forced to divest itself of any of the holdings of the merged entity or even if it is forced to operate any of the merged holdings in a different way, that transaction is not, therefore, a merger. The RTC can point to no authority supporting this expansive definition of merger. The ordinary and standard definition of merger has to do only with the form of the legal joinder of two entities, not with the way the surviving entity is subsequently operated. Black’s Law Dictionary defines merger of corporations as:

An amalgamation of two corporations pursuant to statutory provision in which one of the corporations survives and the other disappears. The absorption of one company by another, the former losing its legal identity, and latter retaining its own name and identity and acquiring assets, liabilities, franchises, and powers of former,6 and absorbed company ceasing to exist as separate business entity.

Black’s Law Dictionary 988 (6th ed. 1990) (footnote added). See also 15 W. Fletcher, Cyclopedia of the Law of Private Corporations § 7041 (rev. perm. ed. 1990). The RTC’s unique definition of merger has no support in the caselaw. See, e.g., United States v. Connecticut Nat’l Bank, 418 U.S. 656, 659, 94 S.Ct. 2788, 2791, 41 L.Ed.2d 1016 (1974) (bank merger viewed as a merger even though the banks intended to divest themselves of a number of branch offices); Reibert v. Atlantic Richfield Company, 471 F.2d 727, 728 (10th Cir.), cert. denied, 411 U.S. 938, 93 S.Ct. 1900, 36 L.Ed.2d 399 (1973) (viewing the transaction as a merger even though the surviving entity “was forced to divest itself of all marketing properties in the Northeastern and Southeastern states.”). Indeed, to make matters worse, even if there was support for the RTC’s anti-divestiture definition of the term merger, this definition would have no application in this case. A state law prohibiting a bank from operating former savings and loan branches as bank branches does not work a divestiture. The bank is not required to disgorge any of the customer deposits or other financial assets — the law simply prohibits it from operating the former savings and loan branch offices as bank offices.7

The RTC argues that the post-merger operating restriction on branch banking may render the target savings and loan so unattractive as to destroy its value as a merger candidate. There are several problems with this argument. First, it is simply unsupported in the record. Second, the ability to operate bank branches is not an asset that the savings and loan had in the first place. Because the savings and loan never had such a right or interest to sell, it does not diminish the value of the savings and loan to prohibit a successor bank from operating its savings and loan branches as bank branches. Such a restriction only *953forecloses an enhancement of the value of the savings and loan. Of course, the value of a savings and loan could be enhanced in many ways if a bank could somehow acquire immunity from state laws by the expediency of purchasing a savings and loan. But absolutely nothing in § 1823(k)(l)(A)(i)(I) gives the RTC the power to sell not only a failed savings and loan but also to create new dispensations from state law that may be appended to the savings and loan to enhance its value. The RTC has suggested no limit to its power to create dispensations from state law other than its suggestion that we trust it not to abuse this power. What if the RTC decides that a savings and loan will have more value as a merger candidate if it can bestow immunity to its merger partner from state zoning laws, or pollution laws, or Sunday closure laws? May the RTC abrogate those state laws too? There is absolutely nothing in the way the RTC reads its authority under § 1823(k)(l) that would limit its power to override those laws as surely as it claims power to override state bank branching laws. Under the RTC’s interpretation of § 1823(k)(l)(A)(i)(I), it has the power (though it assures us it would not use it) to vitiate all state laws that would make a failed savings and loan a less attractive merger candidate.

Congress could not have intended to give the RTC such sweeping powers so contrary to the McFadden Act and basic principles of federalism. Although the RTC clearly has the desire and intent to acquire such powers, we must keep in mind that it is Congressional intent — not the RTC’s intent — 8 that we are seeking to determine. It seems clear to me that Congress did not intend to give the RTC such sweeping powers and certainly nothing in § 1823(k) explicitly gives it such powers.9

Section 1823(h)(4)

The other statutory provision the RTC cites is § 1823(k)(4)(A). Section 1823(k)(4)(A) is, in fact, the most relevant portion of FIRREA because it is the only provision that deals explicitly with branch banking. Section 1823(k)(4)(A) reads in pertinent part:

If a merger, consolidation, transfer, or acquisition under this subsection involves a savings association eligible for assistance and a bank or bank holding company, a savings association may retain and operate any existing branch or branches or any other existing facilities. If the savings association continues to exist as a separate entity, it may establish and operate new branches to the same extent as any savings association that is not affiliated with a bank holding company and the home office of which is located in the same State, (emphasis added).

By its terms, this section appears to provide independent authority to maintain branches in only two situations. The first sentence provides that if the savings and loan is the survivor in a merger or if it survives as a separate entity in a consolidation, transfer or acquisition, it may retain and operate its existing branches even though it may be owned by a bank holding company. The second sentence provides that if, after a merger, consolidation, transfer or acquisition, the savings and loan continues to exist as a separate entity, it may open new branches to the same extent as a savings and loan that is not affiliated *954with a bank holding company.10 This interpretation is straightforward; it gives meaning to every word; it does not violate any defined terms; it does not conflict with the McFadden Act; and it makes sense. Because this section only expressly authorizes branches to be maintained when they are operated by a surviving savings and loan entity, a negative implication may be drawn that Congress did not intend banks to be able to maintain branches if to do so would violate the McFadden Act.

The RTC contorts this section to provide support for the Override Regulation by pretending that if a savings association merges into a bank, the second reference to “savings association” in the first sentence refers to the surviving bank that has absorbed the savings association as a result of the merger.11 However, this gives the term “savings association” a meaning that is statutorily proscribed.12 In 12 U.S.C. § 1813(b), Congress defined savings association as follows:

The term “savings association” means—

(A) any Federal savings association
(B) any State savings association; and
(C) any corporation (other than a bank) that the Board of Directors and the Director of the Office of Thrift Supervision jointly determine to be operating in substantially the same manner as a savings association, (emphasis added).

Thus, Congress has specifically precluded the definition of “savings association” that the RTC now advances.13

Legislative History

The legislative history also undermines the RTC’s interpretation of (k)(l) and (k)(4). During the floor debates, Senator Wirth specifically asked Senator Riegle, the chairman of the Senate Banking Committee, whether the FIRREA conversion transaction provisions — including the (k)(4) emergency transaction — would permit the RTC to circumvent the McFadden Act. Senator Riegle assured him that they would not:

MR. WIRTH: Mr. President, I seek recognition to inquire about certain provisions contained in the Savings and Loan Conference Report. I would like to ask the distinguished Chairman of the Banking Committee, Senator Riegle, to clarify provisions in the legislation concerning the conversion of thrift charters to bank charters.
Is it correct that the provisions of this act that permit thrifts to be converted to banks are not intended to allow banks resulting from such conversions to estab*955lish, retain, maintain, or operate branches that do not comply with the laws relative to the establishment and operation of bank branches or offices in the respective States where such banks are located?
MR. RIEGLE: The Senator’s statement is correct.

135 Cong.Rec. S10,200 (daily ed. August 4, 1989). Congressman Leach of the House Banking Committee agreed with this assessment:

As for specific provisions of the conference report, the record should be clear on the following items:
First, that provisions of this act that permit thrifts to be converted to thrifts [sic.] [banks] are not intended to allow banks resulting from such conversions to establish, retain, maintain, or operate branches that do not comply with the laws relative to establishment and operation of bank branches or offices in the respective States where such banks are operated. In other words, the Douglas or McFadden Acts are not intended to be circumvented by this statute.

135 Cong.Rec. H4980 (daily ed. August 3, 1989) (emphasis added).

The majority argues that these “passing comments” and “casual statements” are not authoritative. Nonetheless, the Supreme Court in Chevron U.S.A., a case upon which the majority heavily relies, frequently cited to key portions of relevant floor debate in order to discern legislative intent. Chevron U.S.A., 467 U.S. at 852-53 & n. 25, 104 S.Ct. at 2786-87 & n. 25. Even the House Conference Committee Report, which as the majority notes is the “authoritative source for finding the Legislature’s intent,” suggests that the RTC’s interpretation is incorrect. The Conference Report states that:

The acquisition of failing thrifts by banks or bank holding companies is authorized. A thrift subsidiary of a bank or bank holding company may branch in the same manner as a savings association (not affiliated with a bank holding company) that has its home office in the same state as the home office of such thrift subsidiary.

H.R.Conf.Rep. No. 101-222, 101st Cong., 1st Sess. 398, reprinted in 1989 U.S.Code Cong. & Admin.News 432,- 437. There would have been no reason to limit the discussion of authorized branches in this report to a thrift subsidiary if banks could directly retain and establish branches in their own names in contravention of the McFadden Act.14

After applying the well-established rules of construction, I reach the conclusion that § 1823(k)(4)(A) clearly and unambiguously does not allow banks to use the branches of acquired savings and loans as bank branches in violation of the McFadden Act. This reading of the statutes in question is further bolstered by the long-established policies of the McFadden Act and by the legislative history of FIRREA. From all quarters it seems to me that the RTC has taken an indefensible position. Therefore, I DISSENT.

. Furthermore, the RTC in promulgating the Override Regulation arguably violated a Presidential Executive Order:

By the authority vested in me as President by the Constitution and laws of the United States of America, and in order to restore the division of governmental responsibilities between the national government and the States that was intended by the Framers of the Constitution and to ensure that the principles of federalism established by the Framers guide the Executive departments and agencies in the formulation and implementation of policies, it is hereby ordered as follows:
(4) Special requirements for Preemption
(b) Where a Federal statute does not preempt State law (as addressed in subsection (a) of this section), Executive departments and agencies shall construe any authorization in the statute for the issuance of regulations as authorizing preemption of State law by rule-making only when the statute expressly authorizes issuance of preemptive regulations or there is some other firm and palpable evidence compelling the conclusion that the Congress intended to delegate to the department or agency the authority to issue regulations preempting State law.

Exec. Order No. 12612, 52 Fed.Reg. 41685 (1987).

.The thought that the legislative wellspring for a regulation of the magnitude of the Override Regulation would be buried four organization levels within a section of the code entitled Corporation Monies is certainly troubling. Perhaps the real problem is that if statutory interpretation can legitimately be based upon isolated subsections of a statutory scheme that spans 1106 pages of the United States Code, one could find support for an unimaginable number of agency actions.

. Cf. 12 U.S.C. § 36(c) where federal branch banking is authorized only where it is “authorized to state banks by the statute law of the state in question by language specifically granting such authority affirmatively and not merely by implication_” (emphasis added).

. Expanding § 1823(k)(l)(A)(i)(I) to reach state branch banking laws strains credulity — especially since § 1823(k) actually contains a subsection that directly addresses branch banking. *951The effect of the RTC’s analysis is to give a subsection of § 1823(k) that does not explicitly address the topic of branch banking— (l)(A)(i)(I) — more weight than the subsection that explicitly addresses branching — (4)(A).

. I find little persuasive value in the fact that Congress enacted subsections (vi) to (k)(l)(A) that prevents an override of state laws restricting activities of a savings association on behalf of another entity. The fact that Congress specifically chose to prohibit one particular form of override of state law does not mean that it intended to authorize override of other provisions. To the contrary, it appears that (k)(l)(A)(vi) provides additional support for the principles of federalism by allowing states to pass laws preventing banks or other entities from circumventing state laws by transacting business through "sham” savings and loan institutions.

. As pointed out, infra, an absorbed savings and loan had the power to maintain savings and loan branches prior to the merger and that power may unquestionably be passed on to the acquiring bank to maintain savings and loan branches. It never had the power to maintain bank branches, and hence it could not pass such a right on to the surviving bank.

. The bank could service the savings association's branch accounts at the former savings and loan branch locations by incorporating each location as a separate bank and by meeting the bank capital requirements at each location.

. The intent of the RTC and the Comptroller of the Currency is clear. They hope to achieve through the unfortunate savings and loan crisis something that they have never been able to persuade Congress to do forthrightly — to vitiate and override federal law prohibiting branch banking by national banks in states where branch banking by state banks is prohibited. See Arkansas State Bank Comm'r v. Resolution Trust Corporation, 911 F.2d 161, 177 (8th Cir.1990) (Heaney, J., dissenting).

. Although the majority argues that these examples are farfetched, it might actually be easier to argue that the RTC has the power to override state zoning, polution, and Sunday closure laws that it would be to justify the RTC's power to authorize federal branch banking in states where branch banking is prohibited. This is because Congress has expressly addressed branch banking, both in the McFadden Act and in § 1823(k)(4), whereas it has not sought explicitly to preserve state authority in these other areas.

. The RTC argues that the second sentence, which begins with "If the savings association continues,” implies that the first sentence deals with a situation where the savings and loan does not continue as a separate entity following the merger. I do not find this argument persuasive. The plain language of the first sentence simply provides that the savings association may retain and operate the pre-transaction branches and the second sentence then provides that the savings association may establish and operate new branches notwithstanding the fact that it may be owned by a bank or may not have its home office in the state where the branches are located. This is the only interpretation that does not violate the definition of savings association provided by Congress and that uses all the words, and only the words, that appear in the statute. See infra note 12 & accompanying text.

. This reference cannot refer to the former savings association because as the majority notes, after a merger "the less important ceases to have an independent existence." Blacks Law Dictionary at 988.

. The RTC’s reliance upon the “conditional if’ in the second sentence in interpreting the first reference to savings association is troubling for still another reason. The second sentence was added when Congress enacted § 1823(k)(4) to replace § 1730a(m)(5). Because the first sentence predated the second sentence, we cannot rely on the second sentence as an interpretative guide for the meaning of the first sentence when it was first enacted. And there is absolutely nothing in the legislative history to suggest that Congress intended the narrowly-drawn second sentence to result in such a far-reaching amendment to the first sentence and to the McFadden Act. See infra n. 14 & accompanying text.

.The RTC makes the disingenuous argument that if a savings association merges into a bank, “the second reference to ‘savings association' [in the first sentence] [can] ... be read as ‘the entity that the savings association becomes.’ ” Unfortunately for the RTC, in this type of merger the entity that the savings association becomes is a bank, and the definitional statute specifically says that a bank cannot be a savings association.

. The majority argues that the Conference Committee Report is inapposite because it only addresses the second sentence of § 1823(k)(4)(A), which was added as an amendment to the precusor statute, § 1730a(m)(5)(A). I disagree. It is clear that the Conference Committee Report is a summary of § 1823(k)(4)(A) in its entirety. For example, the first sentence (“The acquisition of failing thrifts by banks or bank holding companies is authorized.”) was true under § 1730a(m)(5)(A) as well.