Seklua v. FDIC, Inc.

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
11-9-1994
Seklua v. FDIC, Inc.
Precedential or Non-Precedential:
Docket 93-3596
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
No. 93-3596
___________
RAYMOND SEKULA and L. KATHLEEN SEKULA
v.
FEDERAL DEPOSIT INSURANCE CORPORATION;
RESOLUTION TRUST CORPORATION
Raymond F. Sekula and
L. Kathleen Sekula,
Appellants
_______________________________________________
On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil Action No. 93-cv-00073)
___________________
Argued June 1, 1994
Before: SCIRICA, NYGAARD and ALDISERT, Circuit Judges
(Filed November 9, 1994)
S. MICHAEL STREIB, ESQUIRE (Argued)
Grant Building, Suite 230
Pittsburgh, Pennsylvania 15219
Attorney for Appellants
Z. SCOTT BIRDWELL, ESQUIRE (Argued)
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Attorney for Appellee,
Federal Deposit Insurance Corporation
PATRICIA A. TRUJILLO, ESQUIRE
Saul, Ewing, Remick & Saul
3800 Centre Square West
Philadelphia, Pennsylvania 19102
MITCHELL PLAVE, ESQUIRE
Resolution Trust Corporation
550 17th Street, N.W.
Washington, D.C. 20429
Attorneys for Appellee,
Resolution Trust Corporation
__________________
OPINION OF THE COURT
__________________
SCIRICA, Circuit Judge.
This is a dispute over the interpretation of a
regulation governing the amount of insurance coverage provided
for federally insured joint accounts in a failed savings and loan
association. At issue is whether the funds in joint accounts are
insured as a single unit or as multiple units and, specifically,
whether the two holders of several joint accounts are insured for
up to $100,000 or for up to $200,000. Plaintiffs, Raymond and
Kathleen Sekula, contend the regulation provides that each of
them is insured for up to $100,000 for funds held in their joint
accounts and that together they are insured for up to $200,000.
Defendants, the Federal Deposit Insurance Corporation ("FDIC")
and the Resolution Trust Corporation ("RTC"), maintain the
regulation limits the insurance to an aggregated $100,000
maximum. The district court agreed with the FDIC/RTC (hereafter
RTC), and granted summary judgment to the agency.1 The Sekulas
appealed. We will affirm the district court.
I.
1
. The district court granted summary judgment to the RTC,
holding that five of the Sekulas' six accounts should be
aggregated and insured to a total of $100,000. The court denied
summary judgment with respect to the sixth account, a certificate
of deposit, directing the appellees to hold a hearing as to the
ownership of that account. Disposition of that dispute is not
relevant to our interpretation of the regulation.
On November 15, 1991, the Office of Thrift Supervision
declared Atlantic Financial Savings, F.A. insolvent and appointed
the RTC as receiver. The RTC has the responsibility for
resolving the financial affairs of failed savings and loan
institutions. 12 U.S.C. § 1441a(b)(3) (Supp. V 1993). In
carrying out its duties, the RTC has the same powers the FDIC has
under the Federal Deposit Insurance Act ("the Act"), 12 U.S.C. §
1821 (Supp. V 1993).2 It can approve or reject claims for
insured deposits and determine the amount of insurance to which
depositors are entitled under the Act. Under that authority, the
RTC identified the eligible insured accounts at Atlantic
Financial on the date it failed and paid insurance on what it
calculated to be the insured portion of the accounts.
The Sekulas held six accounts at Atlantic Financial
when the institution was declared insolvent. Each contained a
signature card designated in the name of "Raymond F. Sekula or L.
2
. Congress enacted the Financial Institutions Reform and
Recovery Enforcement Act of 1989, Pub. L. No. 101-73, 103 Stat.
183 (1989) (codified at various locations in 12 U.S.C.) as a
response to the crisis in the savings and loan industry that drew
so much public attention in recent years. It was designed to
improve the existing regulatory scheme and one of its purposes
was to establish a new corporation, the RTC, to contain, manage,
and resolve failed savings associations. The RTC in large part
took over the former role of the FDIC which, in turn, took on new
duties, including the functions of the Federal Savings and Loan
Deposit Insurance Corporation, which was ended. See Rosa v.
Resolution Trust Corp., 938 F.2d 383, 388 (3d Cir.), cert.
denied, 112 S. Ct. 582 (1991); 1 Gregory Pulles et al., Firrea,
Introduction (Supp. 1993). At oral argument, counsel for
appellees stated that the RTC and the FDIC spoke with one voice
on the issues in this case.
Kathleen Sekula" or "L. Kathleen Sekula or Raymond F. Sekula."
No other persons had ownership interests in the accounts. The
total amount in the six accounts was $169,717.52, distributed as
follows:
Number Balance
00000132006597 $ 2,015.48
00000357968841 32,691.51
00000354131716 12,147.83
00000357236116 15,174.67
00000357658160 50,105.82
90000356560995 57,582.21
Total 169,717.52
The RTC maintained that only $100,000 of the total $169,717.52
was insured, and that Raymond and Kathleen were therefore
entitled to $100,000 in the aggregate, which it paid them. The
Sekulas contended the entire amount was insured because they each
were entitled to receive up to $100,000 for their loss from the
insured accounts -- up to an aggregate of $200,000.3
II.
On the date Atlantic Financial was declared insolvent,
the relevant statute on aggregating deposits provided:
3
. The RTC initially treated all six accounts as joint accounts,
although the Sekulas claimed two of the accounts were actually
single ownership accounts, one belonging to Raymond Sekula and
one to Kathleen Sekula. They contended those two accounts should
have been insured separately for up to $100,000 each. The matter
was unresolved at the time of appeal, but a hearing had been
scheduled. At oral argument, counsel for the Sekulas informed
the court that the amount in dispute in this appeal had been
reduced to $13,000 as a result of the hearing. We shall proceed,
however, as if all the accounts were joint accounts; the amount
in dispute does not affect our interpretation of the regulation.
[I]n determining the amount due to any
depositor there shall be added together all
deposits in the depository institution
maintained in the same capacity and the same
right for his benefit either in his own name
or in the names of others . . . .
12 U.S.C. § 1813(m)(1) (1988).4 Congress gave the FDIC the power
to promulgate regulations governing the determination of net
amounts due to depositors for deposits in insured depository
institutions:
For the purpose of clarifying and defining
the insurance coverage under this subsection
and subsection (i) of section 1817 . . . the
[FDIC] is authorized to define, with such
classifications and exceptions as it may
prescribe, terms used in those subsections .
. . and the extent of insurance coverage
resulting therefrom.
12 U.S.C. § 1813(m)(1) (1988). Accordingly, Congress delegated
authority to the FDIC (and its successor the RTC) to define the
Act in promulgating the regulations and to apply them. The RTC's
determination of the Sekulas' deposit insurance coverage is
4
. The current version of the Federal Deposit Insurance Act
provides:
For the purpose of determining the net
amount due to any depositor under [12 U.S.C.
§ 1821(a)(1)(B)], the Corporation shall
aggregate the amounts of all deposits in the
insured depository institution which are
maintained by a depositor in the same
capacity and the same right for the benefit
of the depositor . . . .
12 U.S.C. § 1821(a)(1)(C) (Supp. V 1993).
governed by those regulations promulgated by the FDIC pursuant to
12 U.S.C. § 1813(m)(1) (1988)5 and set forth in 12 C.F.R. Part
330.
The regulation in question, 12 C.F.R. § 330.7(b)
(1991), directs how insurance is to be calculated for joint
accounts. It provides:
(b) Determination of insurance coverage. All
qualifying joint accounts owned by the same
combination of individuals shall first be
added together and insured up to $100,000 in
the aggregate. The interests of each co-
owner in all qualifying joint accounts,
whether owned by the same or different
combinations of persons, shall then be added
together and the total shall be insured up to
$100,000.
12 C.F.R. § 330.7(b) (1991).6 The RTC interpreted this
regulation to limit the Sekulas' insured aggregate to $100,000.
5
. The Sekulas suggest that because this statute has been
changed, the RTC's interpretation is entitled to no deference,
but they do not say why and cite no authority. As the district
court noted, the 1991 FDIC Improvement Act substantially
reenacted the statutory scheme regarding the aggregation of a
depositor's accounts for determining the net amount of insurance
due each depositor. 12 U.S.C. § 1821(a)(1) (as amended 1991).
We see no substantial change in the relevant statutory
provisions.
6
. Subsection (a) of 12 C.F.R. § 330.7 describes the insurance
coverage for qualifying joint accounts separately from that for
individually held accounts. Subsection (c) discusses how
accounts qualify, and (d) describes how joint accounts are
treated if they do not qualify. Finally, subsection (e) deems
the interests of co-owners of joint accounts to be equal unless
otherwise stated in the insured depository institution's deposit
account records.
The wording of the current edition of 12 C.F.R. § 330.7 is
identical to that of the 1991 edition.
The Sekulas raise two principal issues on appeal.
First, they contend the proper interpretation of the language of
the regulation provides each of them up to $100,000 insurance
coverage on their jointly held accounts -- and, consequently,
that the entire amount on deposit in their joint accounts was
insured. Second, they claim the RTC's interpretation of the
regulation constitutes substantive rule-making and is invalid
because it was not promulgated in accordance with the
Administrative Procedures Act, 5 U.S.C. § 553(b) and (c) (1988).
They also claim that promulgation of an alleged substantive
change affecting their rights without affording them notice and
an opportunity for comment as required by the APA denied them due
process of law.
Neither in their notice of appeal nor in their brief
have the Sekulas explicitly contested the RTC's interpretation of
the statute requiring aggregation of deposits. What the Sekulas
have expressly challenged is the fidelity of the RTC's method of
calculation to the language of its regulation. Nevertheless, it
is apparent from the thrust of their argument that they also
implicitly challenge the RTC's implementation of its statutory
directive.
III.
A. Review of Agency's Regulation.
When reviewing an agency's construction of a statute,
if the intent of Congress is clear, then we must give effect to
that intent. Chevron, U.S.A. v. Natural Resources Defense
Council, Inc., 467 U.S. 837, 842-43 (1984). If the statute is
silent or ambiguous with respect to a specific issue, then a
deference standard applies, and the question for the court
becomes whether the agency's answer is based on a reasonable
construction of the statute. Chevron, 467 U.S. at 843. In
determining whether an agency's regulation complies with its
congressional mandate, we look to see whether the regulation
harmonizes with the plain language of the statute, its origin,
and its purpose. National Muffler Dealers Ass'n v. United
States, 440 U.S. 472, 477 (1979). So long as the regulation
bears a fair relationship to the language of the statute,
reflects the views of those who sought its enactment, and matches
the purpose they articulated, it will merit deference. National
Muffler Dealers, 440 U.S. at 484.
The statute, 12 U.S.C. § 1813(m)(1), does not
explicitly provide that joint deposit account holders are to be
treated and limited as a single depositor. Accordingly, we must
examine whether the agency's regulation, and its interpretation,
comport with the general congressional directive. Because
congressional intent to aggregate jointly held deposits and limit
insurance of that aggregate is apparent from the legislative
history behind the enactment, the RTC's interpretation is based
on a reasonable construction of the statute.7
7
. Although we believe the intent of Congress is clear, it also
is true that Congress has not spoken to "the precise question at
12 U.S.C. § 1813(m)(1) directs the RTC to aggregate
deposits:
``insured deposit' [or] net amount due to any
depositor . . . shall be determined
according to such regulations as the [RTC]
may prescribe, and in determining the amount
due to any depositor there shall be added
together all deposits in the depository
institution maintained in the same capacity
and the same right for his benefit either in
his own name or in the names of others . . .
.
12 U.S.C. § 1813(m)(1) (1988). The legislative history behind
the subsection reveals that the incorporation of section
1813(m)(1) into the statute was intended to prevent a single
depositor from exceeding the statutory ceiling on insurance
coverage through other means. The notion that holders of a joint
account would be insured as a single entity was integral to the
deposit insurance scheme from the beginning.8 By the mid-1960s,
however, there were significant problems with the administration
of the federal bank deposit insurance program. Depositors were
becoming increasingly adept at evading the limits Congress had
set on deposit insurance.9 Accordingly, Congress overhauled the
(..continued)
issue." Chevron, 467 U.S. at 843. We normally grant deference
to the agency's regulation where Congress has "left a gap for the
agency to fill," by an express delegation of regulatory
authority, Chevron 467 U.S. at 843-44. The problem here,
however, as we shall see, is that the regulation itself is
ambiguous.
8
. See K.E. Scott, Some Answers to Account Insurance Problems,
23 The Business Lawyer 493 (1968).
9
. In one infamous case, the FSLIC discovered four husband-wife
couples who had established 50 different accounts, each held by a
statute, directing the bank insurance agencies to develop
regulations that:
would enable the insuring agencies to bar the
use of devices such as numerous joint
accounts in various combinations . . . to
obtain insurance far in excess of the limits
established by Congress.
112 Cong. Rec. 26,472-73 (1966) (statement of Senator Robertson).
See also 112 Cong. Rec. 25,007 (1966) (statement of Congressman
Ashley) ("[T]he purpose of my amendment [subsection 1813(m)(1)]
is to clarify the power of the insuring agencies to prevent the
circumvention of the insurance limit by the device of multiple
accounts in the same institution.")
The agency implemented its statutory directive by
promulgating the regulatory scheme, establishing four categories
of accounts: single deposit, testamentary, joint, and trust
accounts. Within each of those categories, depositors' insurance
coverage was capped at the statutory maximum. The regulations
provide that in the joint account category any combination of
individuals holding joint accounts is subject to the statutory
limit and any individual participating in joint accounts with
different combinations of individuals is likewise limited by the
cap.10
(..continued)
different combination of the eight people. Because eight people
could generate 247 different combinations of joint accounts, it
would have been possible for those four couples to insure over
$3.7 million by use of joint accounts. Scott, supra, at 499.
10
. See Scott, supra, at 504-08.
Unfortunately, the RTC's regulation is marred by a
textual ambiguity. There is more than one plausible reading of
the regulation -- one offered by the RTC and another by the
Sekulas -- and neither is immediately evident from the words
themselves. Only the RTC's reading, however, is consistent with
the intent and purpose of the statute, as revealed by the text
and the legislative history.
The ambiguity arises because of the phrase "the same or
different combinations of persons," in the second sentence of
subsection (b) of the regulation. See 12 C.F.R. § 330.7(b)
(1991). According to the RTC, subsection (b) provides insurance
up to the maximum of $100,000 for the aggregate of deposits of
joint account holders. Thus, the second sentence of the
subsection recognizes that to prevent an individual exceeding the
statutory limit in the joint account category, his interests in
joint accounts held with different combinations of individuals
must be aggregated and the total must be capped at $100,000. The
Sekulas, on the other hand, contend that the use of the word
"same" in the second sentence explicitly provides insurance
coverage for their individual interests in all joint accounts in
which they participate.11
B. Interpretation of the Regulation.
11
. The Sekulas have not addressed the problems raised by the
inconsistency of their reading with the statute's mandate to
aggregate.
Generally, we defer to an agency's consistent
interpretation of its own regulation unless it is "plainly
erroneous or inconsistent with the regulation." Bowles v.
Seminole Rock and Sand Co., 325 U.S. 410, 414 (1945).
Nevertheless, "this deference does not permit us to defer to an
``interpretation' . . . that strains ``the plain and natural
meaning of words . . . ." Director, Office of Workers'
Compensation Programs v. Mangifest, 826 F.2d 1318, 1324 (3d Cir.
1987), and is "tempered by our duty to independently insure that
the agency's interpretation comports with the language it has
adopted." Director, Office of Workers' Compensation Programs v.
Gardner, 882 F.2d 67, 70 (3d Cir. 1989).
The difficulty here is that the legislative regulation
is ambiguous. If the regulation were clear and comported with
the statutory directive, then, as a legislative rule, it would be
entitled to deference. Chevron, 467 U.S. at 844. Because the
regulation is unclear, however, we will look to the agency's
interpretation of its regulation and ascertain whether it is
compatible with the intent of Congress. We also will examine the
regulation in view of the accepted standards of statutory
construction.12 In reviewing an agency's interpretation of its
12
. See Chevron, 467 U.S. at 843 n.9 ("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.")
ambiguously worded regulation, we grant less deference than
otherwise.13
1.
In making its determination, the RTC applied its
regulation as follows: implementing the first sentence, it added
all the Sekulas' qualifying joint accounts and determined that
the total was $169,717.52, of which only $100,000 was insured;
there was no need to apply the second sentence because the funds
here were held by the same combination of persons as in step one
and neither co-owner had ownership interests in joint accounts
involving third parties. There was no possibility that either of
the Sekulas would exceed the statutory maximum in the joint
account category.
By contrast, the Sekulas contend the proper application
of the regulation is that, first, their joint accounts are
totaled and insured in the amount of $100,000. Then, the
interests each of them has in all joint qualifying accounts he or
13
. We noted in International Raw Materials v. Stauffer Chemical
Co., 978 F.2d 1318, 1325 n.9 (3d Cir. 1992), cert. denied, 113
S.Ct. 1588 (1993), that we had not decided whether Chevron, 467
U.S. at 843-44, which counselled judicial deference to an
agency's legislative rules, overruled General Elec. Co. v.
Gilbert, 429 U.S. 125, 141-42 (1976), which held that an agency's
interpretive decisions demanded less judicial deference. The
distinction relates to agency interpretations which are not made
in the context of legislative rule-making. See Cass R. Sunstein,
Law and Administration after Chevron, 90 Colum. L. Rev. 2071,
2093-94 (1990). Because the agency here made an interpretation
in the context of legislative rule-making, we need not decide
whether the Gilbert standard survives. Cf. Reich v. Local 30,
Int'l Bhd. of Teamsters, 6 F.3d 978 (3d Cir. 1993).
she holds are totaled and each person's cumulative interests also
are insured in the amount of $100,000. The Sekulas claim this
calculation recognizes that each of them has a half interest of
$84,858.76 in their joint accounts (or a total of $167,717.52)
and all of that amount is covered. The problem with this
approach, however, is that it requires elision of part of the
regulation and ignores the plain intent of the statutory
directive.
2.
The Sekulas claim to rely on the plain meaning rule in
order to harvest the maximum coverage from the regulation.14 To
reach their desired result they claim to give plain meaning to
every word of the regulation's second sentence, which states,
"the interests of each co-owner in all qualifying joint accounts,
whether owned by the same or different combinations of persons,"
shall be added and insured up to $100,000.15 The Sekulas
14
. The plain meaning rule is the basic principle of statutory
construction. "[T]he meaning of a statute must, in the first
instance, be sought in the language in which the act is framed,
and if that is plain, . . . the sole function of the courts is to
enforce it according to its terms." Caminetti v. United States,
242 U.S. 470, 485 (1917). While the rule is one of statutory
construction, it also has been applied to agency regulations.
See, e.g., Director, Office of Workers' Compensation Programs v.
Mangifest, 826 F.2d 1318, 1324 (3d Cir. 1987); Bethlehem Steel
Corp. v. Occupational Safety and Health Review Comm'n, 573 F.2d
157, 161 (3d Cir. 1978).
15
. The interests to be totaled in this step are not explicitly
identified as insured or uninsured interests, and the Sekulas
contend that the word "interests" must therefore be taken to mean
all the interests, without qualification, that each of them has
particularly focus on the word "same" in this sentence.
According to their reading, the word "same" compels the
conclusion that the individual's interest in all joint accounts
is insured for $100,000 and that the RTC's interpretation ignores
this word. In contrast to their rigorous reading of the second
sentence, however, the Sekulas ignore the first sentence of the
regulation, which requires that "all joint deposit accounts owned
by the same combination of individuals" shall be aggregated and
insured only up to the statutory limit.
Another fundamental rule of construction is that effect
must be given to every part of a statute or regulation, so that
no part will be meaningless. One must look at the entire
provision, rather than seize on one part in isolation.16
(..continued)
in all qualifying joint accounts. The RTC contends that we must
limit the interests included in the second step's calculation to
those interests that would qualify for insurance under the first
step. Although we believe that, in the context of the statute
and of other parts of the regulations, step two does presume that
the term "interests" means "insured interests," we need not rely
on that factor because we agree with the RTC's interpretation on
other grounds.
16
. "Words . . . have only a communal existence; . . . the
meaning of each interpenetrate[s] the other, . . ." National
Labor Relations Bd. v. Federbush Co., 121 F.2d 954, 957 (2d Cir.
1941); see also King v. St. Vincent's Hosp., 112 S. Ct. 570, 574
(1991) ("the meaning of statutory language, plain or not, depends
on context"); Pennsylvania Dep't of Public Welfare v. United
States Dep't of Health and Human Services, 928 F.2d 1378, 1385
(3d Cir. 1991) (courts should avoid a construction that renders
any provision superfluous) (citing United States v. Menasche, 348
U.S. 528, 538-39 (1955)). When possible, every word should be
given effect "so that no part will be inoperative or superfluous,
void or insignificant." Pennsylvania Dep't of Public Welfare,
928 F.2d at 1385 (quoting Norman J. Singer, 2A Sutherland
Statutory Construction, § 46.06 (5th Ed. 1992)).
Our task is to give effect to all parts of the regulation,
without trampling on the plain meaning of the words. Under the
Sekulas' interpretation, the first sentence of the regulation
would serve no purpose and the determination under that sentence
that all joint accounts owned by them are aggregated and insured
up to $100,000 would be inconsequential. According to the
Sekulas, the second sentence requires the RTC to insure each of
them for $100,000 for their individual interests in their joint
accounts. By that reading, either the second sentence supplants
insurance coverage calculated under the first sentence or it
gives holders of joint accounts multiple insurance coverage on
those accounts. Neither alternative is reasonable. The first
alternative would collapse into one step what is clearly meant to
be a two-step process under the regulation. The second
alternative would violate the clear intent of the regulatory
scheme: to limit the insurable interests of holders of joint
accounts. We cannot find a way to give meaning to the first step
of the regulation other than by limiting the application of step
two to individuals who hold joint accounts with different
combinations of persons.
In fact, the word "same," in the second sentence, was
only inserted in the 1991 edition of the regulation. The second
sentence of the prior regulation referred only to accounts owned
by "different combinations of individuals."17 The RTC points out
17
. The pre-1991 regulation, 12 C.F.R. § 330.9, which first
appeared in the 1988 C.F.R., used two sub-sections to describe
the word was inserted merely to state the existing rule more
clearly -- that a person's insured interests in joint accounts
owned with the "same" combination of persons as in step one are,
in step two, aggregated with the insured interests in any joint
accounts he or she holds with different combinations of persons.
The individual's insurable interest in this aggregate is likewise
limited by the statutory cap. Thus, no individual may receive
more than $100,000 of insurance coverage in the joint account
category. Although we recognize the ambiguity the word "same"
creates, we believe that the addition was a technical change that
clarified the existing rule, but did not change insurance
coverage.18 We are convinced that rather than change the meaning
(..continued)
the two-step process that is described in one sub-section in the
later version of the regulation. Subsections (d) and (e) state:
(d) Same combination of individuals.
All joint deposit accounts owned by the same
combination of individuals shall first be
added together and insured up to $100,000 in
the aggregate.
(e) Interest of each coowner. The
interest of each coowner in all joint deposit
accounts owned by different combinations of
individuals shall then be added together and
insured up to $100,000 in the aggregate.
12 C.F.R. § 330.9(d) and (e) (1990).
18
. The RTC's interpretation was promulgated under the prior
version. Thus, the Sekulas argue that the interpretation is now
invalid. Because we do not believe that the addition of the word
"same" changed the meaning of the regulation, we do not find that
it compromises the RTC's interpretation.
of the regulation, the addition of the word "same" was meant to
cause the wording of the regulation to reflect more clearly the
RTC's longstanding interpretation of the way the insurance on
joint accounts is to be calculated.
3.
The FDIC and RTC have consistently applied the joint
account regulation in the manner they describe. Since
promulgation of the regulatory scheme, the RTC and its
predecessors have interpreted the regulations to require the
aggregate of all accounts held jointly by the same two persons to
be insured to the same extent as the aggregate of all accounts
held by a single person. See Mahoney v. Federal Sav. and Loan
Ins. Corp., 393 F.2d 156 (7th Cir.), cert. denied, 393 U.S. 837(1968). Indeed, all the published cases, advisory opinions, and
published examples are in accord with the RTC's interpretation
and demonstrate a consistent application of the joint account
regulation.
Furthermore, this interpretation is consistent with the
general principle that joint accounts are considered to be owned
collectively and insured as a single unit. This principle is
enunciated in the regulations, at 12 C.F.R. § 330.3(a) (1991):
The insurance coverage provided by the Act
and the regulations in this part is based
upon the ownership rights and capacities in
which deposit accounts are maintained at
insured depository institutions. All
deposits in an insured depository institution
which are maintained in the same right and
capacity (by or for the benefit of a
particular depositor or depositors) shall be
added together and insured in accordance with
the regulations in this part. Deposits
maintained in different rights and
capacities, as recognized under this part,
shall be insured separately from each other.
Indeed, since the inception of the deposit insurance program,
joint accounts have been considered to be owned collectively and
insured as a single unit.19 Other federal courts have recognized
and upheld the principle as axiomatic to the federal deposit
insurance scheme. See, e.g., Kershaw v. Resolution Trust Corp.,
987 F.2d 1206, 1208-09 (5th Cir. 1993) (rejecting as unsupported
by 12 C.F.R. § 330.7 argument of husband and wife jointly holding
three CD's totalling more than $150,000 that regulation should be
construed to insure interests of each spouse up to $100,000);
Mahoney, 393 F.2d at 158 (joint accounts "constituted a single
'member' entity, so that the $10,000 maximum applied to the
aggregate of the three accounts.").
We find it particularly significant that the agency's
interpretation of the regulation is contained in a question-and-
answer booklet they disseminated to financial institutions for
19
. See, e.g., testimony of Judge L.E. Birdzell, General Counsel
for the FDIC, testifying before the House Banking and Currency
Committee in 1935: "as long as the account is in the name of the
husband and wife, no matter what the amount is, it is treated as
one deposit . . . ." Hearings on the Banking Act of 1935, H.R.
5357: A Bill to Provide for the Sound, Effective, and
Uninterrupted Operation of the Banking System, and for Other
Purposes, Before the Committee on Banking and Currency, House of
Representatives, 74th Cong., 1st Sess. 26-27 (1935). See also
Scott, supra.
distribution to the public.20 The passage quoted below dates
prior to the 1991 insertion of the word "same." It was used by
the FDIC's predecessor, the Federal Savings and Loan Insurance
Corporation, to explain a prior regulation on joint accounts, 12
C.F.R. § 564.9(d) and (e) (1987); it was used to explain the 1988
version, quoted above; and it is used today to explain the
version that appeared in the 1991 edition of the C.F.R. The RTC
claims the booklet passage has not changed because the prior
versions of the regulation are identical in meaning to the
present version.
The passage paraphrases the steps for determining
deposit insurance for multiple joint accounts in answer to the
question "How are joint accounts insured?":
1. First, all joint accounts that are
identically owned (i.e. held by the same
combination of individuals) are added
together and the combined total is insurable
up to the $100,000 maximum.
2. After step one has been completed, joint
accounts involving different combinations of
individuals are reviewed to determine the
amount of each person's insurable interest
(or share) in all joint accounts. Each
owner's insurable interest in all joint
accounts is added together and the total is
20
. The booklet, which has appeared under various titles,
including "Your Insured Deposit," answers the question "How are
joint accounts insured?" It states the two steps are applied so
that "(1) no one joint account can be insured for over $100,000,
(2) multiple joint accounts with identical ownership cannot be
insured for over $100,000 in the aggregate, and (3) no one
person's insured interest in the joint account category can
exceed $100,000." Federal Deposit Insurance Corporation, Your
Insured Deposit (1993) (emphasis added).
insured up to the $100,000 maximum. Each
person's interest in a joint account is
deemed equal unless otherwise stated on the
deposit account records.
Federal Deposit Insurance Corporation, Your Insured Deposit
(1993). In the booklet's example, A and B share joint accounts
with each other and separately have interests in joint accounts
held with other individuals. Step one regards A and B as one
depositor, entitled to a maximum of $100,000 insurance on
deposits held in those joint accounts. Then, in step two, A's
and B's individual interests in that insured amount are broken
out. These interests -- which may total $50,000 apiece -- are
added to A's and B's insured interests in joint accounts held
with other people. This step assures that for each individual
that aggregate of insured interests may not exceed the $100,000
maximum.
As the district court found, these pamphlets were made
available to the public. We agree that a person "proceeding in
good faith should not be subjected to a trap brought about by an
interpretation of a regulation hidden in the bosom of the
agency." Gardner, 882 F.2d at 71 (quoting Mangifest, 826 F.2d at
1325). But there is no "trap" when the agency's interpretation
of a regulation is public and long-standing.
4.
We have consistently recognized that:
The responsibility to promulgate clear and
unambiguous standards is upon the Secretary.
The test is not what he might possibly have
intended, but what he said. If the language
is faulty, the Secretary has the means and
the obligation to amend.
Bethlehem Steel v. Occupational Safety and Health Review Comm'n,
573 F.2d 157, 161 (3d Cir. 1978); See also Mangifest, 826 F.2d
at 1324. We agree the language of the regulation is ambiguous.
Nevertheless, it has posed no trap for the unwary. The agency's
interpretation and application have been consistent with the
statute and the legislative purpose and joint account holders
have not been misled about the impact of the regulation on their
deposit insurance. Accordingly, because the regulation's meaning
can be satisfactorily established by applying standard principles
of statutory construction and by referring to the agency's
interpretation, which is long-standing and consistent, we
conclude that the regulation limits insurance for joint account
deposits to a maximum of $100,000.21
IV.
A. Rule-Making Procedures.
The Sekulas contend the agency's interpretation of 12
C.F.R. § 330.7(b) is itself a legislative or substantive rule and
therefore is invalid because it was not promulgated in accordance
with provisions of the APA requiring notice and an opportunity to
comment, 5 U.S.C. § 553 (1988). But those procedures are
21
. While the meaning of the regulation is satisfactorily
established by textual analysis and the agencies' long-standing
application and interpretation of it, we hope in the future the
RTC will be more careful in the language it adopts in its
regulations.
required only if a substantive change is proposed and do not
apply to "interpretative rules, general statements of policy, or
rules of agency organization, procedure, or practice." 5 U.S.C.
§ 553(b)(A) (1988). Interpretive rules constitute a body of
experience and informed judgment to which courts and litigants
may properly resort for guidance. Interpretive rules are not
intended to alter legal rights, but to state the agency's view of
what existing law requires. Such rules "merely clarify or
explain existing law or regulations." Southern California Edison
Co. v. Federal Energy Regulatory Comm'n, 770 F.2d 779, 783 (9th
Cir. 1985). "If the rule in question merely clarifies or
explains existing law or regulations, it will be deemed
interpretive." Bailey v. Sullivan, 885 F.2d 52, 62 (3d Cir.
1989).
Section 330.7(b) was published by the FDIC pursuant to
the notice and comment procedure. See 54 Fed. Reg. 52,399 (Dec.
21, 1989); 55 Fed. Reg. 20,111 (May 15, 1990). The RTC contends
its interpretation of the regulation merely clarified and
explained it. The Sekulas claim the regulation was so changed by
the RTC's interpretation that it amounted to a new rule and that
the RTC engaged in rule-making. But we have found the
interpretation did not change the meaning of the regulation:
rather it merely explained and clarified it. Furthermore, agency
manuals, guidelines, and memoranda are interpretive rules not
subject to the APA. See Creighton Omaha Regional Health Care
Corp. v. Bowen, 822 F.2d 785, 791 (8th Cir. 1987). The RTC's
predecessor's publication of pamphlets describing its procedures
for calculating insurance for joint accounts was clearly meant to
interpret and clarify the insurance regulations, which have been
applied consistently in accordance with the publications'
descriptions. Because we find the RTC's interpretation of the
regulation was not substantive rule-making, this claim must fail
also.
B. Deprivation of Property Interest.
The Sekulas' argument that they are being deprived of a
protected property interest without due process is without merit.
Congress gave the agency the authority to promulgate regulations
defining the scope of its insurance coverage. 12 U.S.C. §
1813(m)(1) (1988); Nimon v. Resolution Trust Corp., 975 F.2d 240,
245 (5th Cir. 1992). The agency did so and provided notice to
depositors.
V.
For the foregoing reasons, we will affirm the judgment
of the district court.