First Gibraltar Bnk v. Morales ( 1995 )

IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
_____________________
No. 93-8170
_____________________
FIRST GIBRALTAR BANK, FSB and
BENEFICIAL TEXAS, INC.,
Plaintiffs-Appellants,
v.
DAN MORALES, Atty. General, as
Attorney General for the State of
Texas, ET AL.,
Defendants-Appellees.
_________________________________________________________________
Appeal from the United States District Court
for the Western District of Texas
_________________________________________________________________
(January 4, 1994)
Before POLITZ, Chief Judge, KING and DAVIS, Circuit Judges.
PER CURIAM:
Our prior opinion in this case, First Gibraltar Bank, FSB v.
Morales, 19 F.3d 1032 (5th Cir.), cert. denied, 115 S. Ct. 204
(1994), is vacated and the following is substituted therefor.
The issue presented for our determination is whether the Home
Owners' Loan Act,1 12 U.S.C. §§ 1461-1468c, and Chapter 39 of Title
12 of the United States Code, formerly designated as the
Alternative Mortgage Transaction Parity Act of 1982, together with
regulations thereunder, have preempted the Texas homestead law to
1
Terms defined in our prior opinion will have the same
meaning herein as therein defined.
the extent that it prohibits lenders from enforcing liens on home
equity created in reverse annuity mortgages or line of credit
conversion mortgages. The district court granted summary judgment
in favor of the defendants, concluding that the federal statutes
and regulations did not preempt Texas homestead law. We affirm the
judgment of the district court.
I. FACTUAL AND PROCEDURAL BACKGROUND
This lawsuit began as an action for declaratory and injunctive
relief. First Gibraltar sought a judicial declaration that the
HOLA and the Parity Act (together with the regulations promulgated
thereunder) preempted portions of the Texas homestead law. In
addition, First Gibraltar sought an injunction to prevent the Texas
Attorney General and the Texas Consumer Credit Commissioner from
enforcing the allegedly preempted portions of the Texas homestead
law. In First Gibraltar Bank, FSB v. Morales, 19 F.3d 1032 (5th
Cir.), cert. denied, 115 S. Ct. 204 (1994), we reversed the
district court's grant of summary judgment for the State
defendants, holding, inter alia, that the OTS and its predecessor,
the FHLBB, had the statutory authority to effectuate such a
preemption.
Before the issuance of our mandate, however, the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 was signed
into law on September 29, 1994.2 See Pub. L. No. 103-328, 108
2
At this time, the State's petition for certiorari to
the Supreme Court was pending.
2
Stat. 2338 (1994). Section 102(b) of this Act amends section 3 of
the HOLA, 12 U.S.C. 1462a, by adding a new subsection (f) (the
"Amendment"):
(f) STATE HOMESTEAD PROVISIONS. -- No provision of this
Act or any other provision of law administered by the
Director [of the Office of Thrift Supervision] shall be
construed as superseding any homestead provision of any
State constitution, including any implementing State
statute, in effect on the date of enactment of the
Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994, or any subsequent amendment to such a State
constitutional or statutory provision in effect on such
date, that exempts the homestead of any person from
foreclosure, or forced sale, for the payment of all
debts, other than a purchase money obligation relating to
the homestead, taxes due on the homestead, or an
obligation arising from work and material used in
constructing improvements on the homestead.
Pub. L. No. 103-328, § 102(b), 108 Stat. 2338, 2352 (1994). Our
mandate has not yet issued in this appeal, and "[t]he normal rule
in a civil case is that we judge it in accordance with the law as
it exists at the time of our decision." Tully v. Mobil Oil Corp.,
455 U.S. 245, 247 (1982). Thus, we must examine the effect of the
Amendment in our consideration of this matter on appeal. See id.
at 247-49 (applying statutory changes that occurred during the
pendency of the appeal); United States Dep't of Justice v.
Provenzano, 469 U.S. 14, 15 (1984) (per curiam) (noting that the
issue on which certiorari was granted is "to be judged under the
law presently in effect").
II. STANDARD OF REVIEW
A district court's conclusions of law are reviewable de novo.
Prudhomme v. Tenneco Oil Co., 955 F.2d 390, 392 (5th Cir.), cert.
denied, 113 S. Ct. 84 (1992). Nevertheless, we are required to
3
give deference to an executive agency's interpretation of a statute
or regulation that the agency is responsible for administering. Of
course, if the intent of Congress is clear, that intent will trump
any agency interpretation to the contrary. See Chevron, U.S.A.,
Inc. v. Natural Resources Defense Council, 467 U.S. 837, 842
(1984); Hawkins v. Agricultural Mktg. Serv., Dep't of Agric., 10
F.3d 1125, 1129 (5th Cir. 1993).
III. ANALYSIS AND DISCUSSION
We begin by examining our authority to continue adjudicating
this case, and we then briefly discuss the relationship between the
Amendment and our prior analysis.
A. Control Over our Mandate
"Our control over a judgment of our court continues until our
mandate has issued." Alphin v. Henson, 552 F.2d 1033, 1035 (4th
Cir.), cert. denied, 434 U.S. 823 (1977); see Gradsky v. United
States, 376 F.2d 993, 995 (5th Cir. 1967). Similarly, as the Ninth
Circuit has noted, "where the mandate has not issued the
availability of appeal has not yet been exhausted." Bryant v. Ford
Motor Co., 886 F.2d 1526, 1530 (9th Cir. 1989), cert. denied, 493
U.S. 1076 (1990). In exceptional circumstances, we may even recall
our mandate to prevent injustice. See Gradsky, 376 F.2d at 995;
Rules of the United States Court of Appeals for the Fifth Circuit,
Rule 41.2.
First Gibraltar has argued that pursuant to Federal Rule of
Appellate Procedure 41(b), our mandate should have issued as soon
as the Supreme Court denied certiorari. The Supreme Court denied
4
certiorari in this case on October 3, 1994, and its order was
received and filed on October 13, 1994. Prior to the denial of
certiorari, however, we had stayed the mandate in this case for two
independent reasons; first, to permit an en banc poll (which is now
unnecessary), and second, to allow the State to petition for
certiorari. The mandate was initially stayed well before the
October 13, 1994 receipt of the Supreme Court's order denying
certiorari. Rule 41(b) does state in relevant part that "[t]he
court of appeals must issue the mandate immediately when a copy of
a Supreme Court order denying the petition for writ of certiorari
is filed," but because our stay was in effect (for a reason
independent of the petition for certiorari) prior to the receipt of
the order, we retain discretionary control over our mandate.3 See
Bryant, 886 F.2d at 1528-31; Alphin, 552 F.2d at 1034-36.
Because the mandate is still within our control, we have the
power to alter or to modify our judgment. See Bryant, 886 F.2d at
1528-31 (vacating a prior en banc opinion in light of new
legislation, even though the Supreme Court had previously denied
certiorari, because the issuance of the mandate had been stayed for
an independent reason before the order denying certiorari was filed
in the circuit court); Alphin, 552 F.2d at 1034-36 (modifying a
3
To the extent that appellants attach any meaning to the
Supreme Court's denial of certiorari, the language of the Alphin
court is instructive: "The law is clear that the denial of
certiorari decides nothing except that the writ will not be
granted for reasons which are undisclosed." Alphin, 552 F.2d at
1035 n.6.
5
prior judgment to conform to new legislation, even though the
Supreme Court had previously denied certiorari, because the
issuance of the mandate had been stayed for an independent reason
before the denial of certiorari was filed in the circuit court).
As mentioned, we are to apply the law as it currently exists, and
we must necessarily include the effects of the Amendment in our
consideration.
B. Mootness
Despite the State's contention that the Amendment moots this
appeal, we find that the mootness framework is inapplicable to the
posture of this lawsuit. The Amendment clearly affects the
preemption analysis in this case. The Amendment does not, however,
eliminate the "actual controversy" between the parties; it informs
the decision, but it does not alter the original declaratory
posture of the case. In other words, the parties still seek the
same declaration of their rights, but such a declaration is now
affected by the language of the Amendment. An "actual
controversy," capable of being resolved by a declaratory judgment,
is still ongoing. See generally 10A Charles A. Wright & Arthur R.
Miller, Federal Practice & Procedure § 2751 (1984). Thus, the
mootness rubric is inapposite, and the Munsingwear line of cases --
a line that addresses the proper disposition of a lawsuit after a
mootness determination -- is inapplicable as well. Accordingly, we
proceed to resolve this appeal on the merits.
C. Context of the Amendment
6
Before we begin to analyze the effects of the Amendment, it is
helpful to understand the relationship of the Amendment to our
prior analysis. In our previous opinion, we noted that the Supreme
Court's preemption analysis required us to ask two questions:
first, did the OTS intend to preempt Texas homestead law; and
second, if the OTS did intend to preempt Texas homestead law, was
the attempted preemption within the scope of the agency's delegated
authority? See First Gibraltar Bank, 19 F.3d at 1044, 1049; see
also Fidelity Fed. Sav. & Loan Ass'n v. de la Cuesta, 458 U.S. 141,
158-59 (1982). With respect to the second prong, we noted in our
prior opinion that "the best way of determining whether Congress
intended the regulations of an administrative agency to displace
state law is to examine the nature and scope of the authority
granted by Congress to the agency." First Gibraltar Bank, 19 F.3d
at 1049 (quoting Louisiana Pub. Serv. Comm'n v. FCC, 476 U.S. 355,
374 (1986)).
In this case, the Amendment clearly affects the second prong
of the preemption analysis, as the statutory language addresses the
scope of the congressional grant of authority to the OTS. As a
consequence, this second prong of the preemption analysis is now
the focus of our attention. And, answering it as we do, we need
not, and do not, address the first prong of the preemption
analysis.
D. Infringement on the Judicial Branch
First Gibraltar initially argued that the HOLA expressed no
limits on the FHLBB/OTS's authority to regulate the lending
7
practices of federal savings and loans, as the HOLA granted plenary
authority to the agency to issue regulations preempting portions of
the Texas homestead law. Following enactment of the Amendment,
First Gibraltar contends that the language of the Amendment
unconstitutionally undermines the power of the judicial branch by
mandating a different construction of the HOLA, rather than by
changing the underlying law. First Gibraltar relies on the Supreme
Court cases of United States v. Klein, 80 U.S. (13 Wall.) 128
(1871), and Pennsylvania v. The Wheeling and Belmont Bridge Co., 59
U.S. (18 How.) 421 (1855), for the proposition that Congress cannot
"prescribe a rule for the decision of a cause in a particular way";
instead, Congress can only change the underlying law. Because the
Amendment states that no provision of law "shall be construed as
superseding any homestead provision," First Gibraltar argues that
the Amendment "usurps the power of the courts by directing a
specific interpretation of unchanged statutory and regulatory
provisions." Assuming, without deciding, that First Gibraltar is
correct in its initial argument that the FHLBB/OTS had plenary
authority under the HOLA to preempt portions of the Texas homestead
law, we disagree with First Gibraltar's characterization of the
Amendment's language, as we find that the Amendment would clearly
change such plenary authority.4
4
It is important to note that we do not comment on
whether First Gibraltar's interpretation of Klein and Wheeling
Bridge is accurate. Instead, we merely determine that as
interpreted by First Gibraltar, these cases do not warrant a
finding that the Amendment is unconstitutional because the
Amendment does change the existing law (as that law is construed
by First Gibraltar). Cf. Robertson v. Seattle Audubon Soc'y, 112
8
In analyzing the effect of this language, the Supreme Court's
decision in Louisiana Pub. Serv. Comm'n is quite instructive. In
that case, the Supreme Court addressed whether the Communications
Act of 1934 granted the Federal Communications Commission ("FCC")
the authority to preempt inconsistent state regulations,
specifically those that deviated from the FCC's depreciation
practices. See Louisiana Pub. Serv. Comm'n, 476 U.S. at 358. The
Court noted that § 151 of the Communications Act gave the FCC broad
discretion "to develop a rapid and efficient national telephone
network." Id. at 368. Because of this broad mandate, the Court
observed that § 151 provided support to the position that the Act
preempts state regulation "which frustrates the ability of the FCC
to perform its statutory function of ensuring efficient, nationwide
phone service." Id. at 370.
Section 152(b) of the Act, however, asserted the following:
[N]othing in this chapter shall be construed to apply or
to give the Commission jurisdiction with respect to (1)
charges, classifications, practices, services,
facilities, or regulations for or in connection with
intrastate communication service . . . .
Louisiana Pub. Serv. Comm'n, 476 U.S. at 370 (quoting 47 U.S.C. §
152(b)) (emphasis added). The Court referred to this language as
an "express jurisdictional limitation[] on FCC power," and the
Court specifically noted that "Section 152(b) constitutes . . . a
congressional denial of power to the FCC to require state
S. Ct. 1407, 1414 (1992) ("The Court of Appeals held that [the
legislation] was unconstitutional under Klein because it directed
decisions in pending cases without amending any law. Because we
conclude that [the legislation] did amend applicable law, we need
not consider whether this reading of Klein is correct.").
9
commissions to follow FCC depreciation practices for intrastate
ratemaking purposes." Id. at 370, 374 (emphasis added). Thus, the
Court held that § 152(b) "denies the FCC the power to pre-empt
state regulation of depreciation for intrastate ratemaking
purposes." Id. at 373. We conclude, therefore, that the Supreme
Court interpreted the "shall be construed" language of § 152(b) as
a legitimate limitation on the scope of authority delegated by
Congress to the FCC.
If, as First Gibraltar argued, in enacting the HOLA, Congress
expressed no limits on the FHLBB/OTS's authority to regulate the
lending practices of federal savings and loans, the law has been
changed because the relevant language of the later Amendment
provides such a limitation. The Amendment states that "[n]o
provision of this Act or any other provision of law administered by
the Director [of the Office of Thrift Supervision] shall be
construed as superseding any homestead provision of any State
constitution." Just as this language was seen as a congressional
denial of power to the FCC in Louisiana Pub. Serv. Comm'n, we
interpret the Amendment's language as a congressional narrowing of
authority to the OTS. Because the "shall be construed" language
represents a congressional denial of power where once, arguendo,
there were "no limits," the Amendment represents a change in the
underlying law and avoids any of First Gibraltar's alleged
separation of powers problems between the legislature and the
judiciary.
10
Our conclusion is strengthened by the legislative history of
the Amendment. The Joint Explanatory Statement of the Committee of
Conference accompanying the Amendment explicitly notes that:
[t]his amendment clarifies that neither the Home Owners'
Loan Act nor any other provision of law provides the
Director of the Office of Thrift Supervision with the
authority, through regulation or otherwise, to preempt
Texas law in the area of homestead protection. By
extension, housing creditors under the Alternative
Mortgage Transaction Parity Act who were impacted by the
decision in the First Gibraltar case also continue to be
subject to Texas law in the area of homestead protection.
H.R. Conf. Rep. No. 651, 103rd Cong., 2d Sess. 57-58 (1994)
(emphasis added). Thus, it is clear that the Amendment was
designed to restrict the congressional delegation of authority to
the OTS with regard to preemption of state homestead laws. This
explicit legislative purpose is consistent with our analysis and
with our conclusions about the statutory language itself.
Finally, numerous statutory schemes use the language "shall be
construed" to describe the limitations and boundaries of a
congressional delegation of authority.5 See, e.g., McCarran-
Ferguson Insurance Regulation Act, 15 U.S.C. § 1012(b) ("No Act of
Congress shall be construed to invalidate, impair, or supersede any
law enacted by any State for the purpose of regulating the business
of insurance . . . ."); ERISA, 29 U.S.C. § 1144(b)(2)(A) ("Except
as provided in subparagraph (B), nothing in this subchapter shall
be construed to exempt or relieve any person from any law of any
State which regulates insurance, banking, or securities."); Omnibus
5
Indeed, the appendix to the State's brief indicates
that 2,020 statutory sections of the United States Code contain
the language "shall be construed."
11
Budget Reconciliation Act, 42 U.S.C. § 1395ss(j) ("Nothing in this
section shall be construed so as to affect the right of any State
to regulate medicare supplemental policies which, under the
provisions of this section, are considered to be issued in another
State."). These statutes are not constitutionally infirm because
of their use of "shall be construed," and we see no reason to reach
a different result with regard to the Amendment in this case.6
E. Infringement on the Executive Branch
First Gibraltar also argues that the Amendment infringes on
the authority of the executive branch "because it overturns agency
action that has developed over at least fifteen years without
6
First Gibraltar attempts to distinguish these statutes
from the Amendment by noting that "[s]uch provisions . . . are
not, as in this case, enacted many years after the original
legislation with the express purpose of overturning the result of
a specific judicial decision." We conclude, however, that this
is not a meaningful distinction. Congress retains the power to
narrow the scope of its delegated authority at any time. See INS
v. Chadha, 462 U.S. 919, 955 (1983) ("Congress must abide by its
delegation of authority until that delegation is legislatively
altered or revoked.") (emphasis added); Stop H-3 Ass'n v. Dole,
870 F.2d 1419, 1437 (9th Cir. 1989) ("It is fully within
Congress' prerogative legislatively to alter the reach of the
laws it passes . . . .").
Even though the Amendment's legislative history states
that it "overturns an interpretation of [the HOLA] in First
Gibraltar Bank v. Morales," such an express purpose is not
troublesome because Congress constitutionally restricted the
scope of authority delegated to the OTS. Moreover, the simple
enactment of legislation to overturn a particular judicial
decision is not problematic in itself. See, e.g., Louisiana Pub.
Serv. Comm'n, 476 U.S. at 372 ("It is certainly true . . . that
when Congress was drafting the Communications Act, § 152(b) was
proposed and supported by the state commissions in reaction to
what they perceived to be the evil of excessive federal
regulation of intrastate service such as was sanctioned by the
Shreveport Rate Case . . . . [W]e agree that provisions in both
the Senate and House bills were designed to overrule the
Shreveport Rate Case . . . .").
12
suggesting that the agency overreached its authority or otherwise
acted improperly." Similar to its infringement on the judiciary
argument, First Gibraltar contends that "Congress cannot merely
exercise a veto power over a legitimate exercise of executive
authority without changing the agency's instructions, and without
mandating any change in the agency's future conduct or regulatory
scheme."
Once again, however, we disagree with First Gibraltar's
characterization, as Congress has narrowed the agency's authority.
As part of its legislative powers, Congress designates the scope of
agency authority, and if Congress so chooses, it can subsequently
restrict or limit that delegation of power to the agency. The
Supreme Court has noted that "Congress ultimately controls
administrative agencies in the legislation that creates them," and
more importantly, the Court has observed that "Congress must abide
by its delegation of authority until that delegation is
legislatively altered or revoked." See Chadha, 462 U.S. 919, 955
& n.19 (1983) (emphasis added); see also Stop H-3 Ass'n v. Dole,
870 F.2d 1419, 1437 (9th Cir. 1989) ("It is fully within Congress'
prerogative legislatively to alter the reach of the laws it passes
. . . ."); Office of Consumers' Counsel v. Federal Energy
Regulatory Comm'n, 655 F.2d 1132, 1149, 1153 (D.C. Cir. 1980)
(suggesting that Congress could have altered the Federal Energy
Regulatory Commission's authority by passing new legislation).
There is simply no infringement on the power of the executive
branch when Congress narrows the scope of its delegated authority.
13
Assuming arguendo that the OTS's authority was previously plenary,
the Amendment restricting the authority of the OTS represents a
classic example of a legitimate exercise of legislative power. Cf.
Louisiana Pub. Serv. Comm'n, 476 U.S. at 374 ("[A] federal agency
may pre-empt state law only when and if it is acting within the
scope of its congressionally delegated authority. . . . [A]n agency
literally has no power to act, let alone pre-empt the validly
enacted legislation of a sovereign State, unless . . . Congress
confers power upon it.").
Furthermore, and perhaps most importantly, this circuit has
accorded deference to an agency's determination of its own
statutory authority.7 See NCNB Tex. Nat'l Bank v. Cowden, 895 F.2d
1488, 1494 (5th Cir. 1990) ("As the cases dealing with the pre-
emptive effect of agency actions suggest, substantial deference to
an agency's determination of its authority may be appropriate.");
Western Coal Traffic League v. United States, 719 F.2d 772, 777
(5th Cir. 1983) ("We begin, as we must, with a recognition of the
limited role this Court plays in reviewing an administrative
agency's construction of its statutory authority . . . ."), cert.
denied, 466 U.S. 953 (1984). With regard to the effect of the
Amendment, in an amicus brief filed at our request, the OTS made
the following observations:
7
We follow our own case law, recognizing that, at least in
one context, there is some debate on this subject. Compare
Mississippi Power & Light Co. v. Mississippi, 487 U.S. 354, 377
(1988) (Scalia, J., concurring) with id. at 383 (Brennan, J.,
dissenting).
14
OTS understands the Gonzalez Amendment to preclude the
agency, as of the date of enactment of the provision,
from construing any provision of law administered by the
Director as superseding the homestead provisions of Texas
law that are at issue in this case. . . . OTS reads the
amendment to change the applicable law and now to subject
federal savings associations and certain other financial
services institutions to the conditions of the Texas
homestead laws.
According deference to the OTS's interpretation of its statutory
authority, as we must, it is clear that even the agency in question
construes the Amendment as a limitation on its authority. Finding
no constitutional infirmity to dissuade us from this construction,
we disagree with First Gibraltar's assertions, and we find that the
Amendment is constitutionally valid. Cf. Louisiana Pub. Serv.
Comm'n, 476 U.S. at 374 ("An agency may not confer power upon
itself. To permit an agency to expand its power in the face of a
congressional limitation on its jurisdiction would be to grant to
the agency power to override Congress. This we are both unwilling
and unable to do.").
F. Effectiveness of the Amendment
First Gibraltar also contends that the Amendment is
ineffective because the OTS regulations had already preempted the
state homestead provisions before the Amendment was passed. Thus,
First Gibraltar argues that "the conflicting provisions of the
Texas homestead laws were not in effect on the date that Congress
enacted the . . . Amendment, and the Amendment cannot, and does not
attempt to resurrect previously preempted state law."
Assuming arguendo that portions of the Texas homestead law
were preempted prior to the enactment of the Amendment, we cannot
15
agree with First Gibraltar's apparent assumption that once a law is
preempted, it forever remains preempted and ineffective. First of
all, we note that First Gibraltar fails to cite any authority in
support of this proposition. Second, and more importantly, state
law can be preempted by federal legislation and by regulations
promulgated by federal agencies acting within the scope of their
congressionally delegated authority. See Louisiana Pub. Serv.
Comm'n, 476 U.S. at 369; de la Cuesta, 458 U.S. at 154. On the
date of the Amendment's enactment, the OTS's preemption of state
homestead law was no longer within the scope of its authority --
assuming that it ever was -- and consequently, there was no longer
any preemptive mechanism. Because the Texas homestead laws had not
been repealed, they were in effect on the date of the Amendment,
although they were arguably impotent in the context of federal bank
regulation. Once the preemptive mechanism was removed, however,
the state homestead provisions -- already effective in all other
areas -- were also effective in the area of federal bank
regulation.
Similarly, we took great pains to make clear in our earlier
decision that this lawsuit deals only with two types of alternative
mortgage instruments -- the reverse annuity mortgage ("RAM") and
the line of credit conversion mortgage. See First Gibraltar Bank,
19 F.3d at 1037. We specifically emphasized "that the question
before us is not whether federal law has preempted Texas homestead
law in its entirety, but only whether Texas homestead law has been
preempted with respect to RAMs and line of credit conversion
16
mortgages." Id. at 1039. Thus, any preemptive force of the OTS
regulations would not have completely "invalidated" the Texas
homestead laws. Instead, the Texas homestead exemptions remained
very much "in effect" as to many lenders, excepting, at most, the
two types of alternative mortgage transactions at issue in this
case. Simply put, First Gibraltar's logic is puzzling, and without
any supporting citations, we decline to accept its position.
IV. CONCLUSION
For the foregoing reasons, the judgment of the district court
is AFFIRMED. The mandate shall issue forthwith.
17