Castle, Chief Judge, and Hastings and Swygert, Circuit Judges.
Defendants-appellants, as representatives of a class of persons similarly situated, appeal from a judgment order entered by the district court March 14, 1967 denying their motion for summary judgment and granting summary judgment in favor of plaintiff-appellee Federal Savings and Loan Insurance Corporation (FSLIC).*fn1 The class represented by appellants consists of approximately 20,000 persons who were insured members of Marshall Savings and Loan Association of Chicago, Illinois (Marshall) immediately prior to its opening for business on December 31, 1964 and who received insurance payments of less than $10,000 from the FSLIC following Marshall's default.
All relevant facts were stipulated and the stipulation was adopted by the district court as its findings of fact. Appellants were found to be proper representatives of their class within the requirements of Rule 23 of the Federal Rules of Civil Procedure, 28 U.S.C.A.
FSLIC is a corporate instrumentality of the United States Government created by the National Housing Act, 12 U.S.C.A. §§ 1701-1750jj, to insure savings accounts in eligible savings and loan associations. 12 U.S.C.A. § 1725(a). Marshall was an insured savings and loan association chartered by the State of Illinois. It was subject to the National Housing Act, supra, and the Illinois Savings and Loan Act, Ill.Rev.Stat. ch. 32, §§ 701-944 (1967).
Marshall had two basic types of withdrawable capital accounts: full-paid accounts, in which the holder made a single payment in units of $100 when the account issued, and optional accounts, in which the holder made a minimum initial payment of at least $1.00 when the account issued and thereafter made installment payments at times and in amounts of his choosing.
It was Marshall's practice to compute in advance the anticipated dividend on each account and make a memorandum entry of the anticipated dividend on the ledger card maintained for each account. The computation and memo entry of the anticipated dividend for a new quarter began as soon as the preceding quarter ended and required several weeks for completion. On optional accounts the anticipated dividend was computed and memoed at the same time the account amount of the dividend for the preceding quarter was added to the balance on each account ledger card (the process referred to as "posting"). Memo entries were changed as withdrawals or deposits were made, so that on dividend day the memo entry on each account ledger card represented the actual dividend payable to the account holder.
Dividends on full-paid accounts were paid by check. Marshall maintained a separate Dividend Account at a Chicago bank for the payment of dividends on full-paid accounts and customarily ordered the bank to transfer sufficient funds from its Regular Account to the Dividend Account on dividend day.
Dividends on optional accounts were credited to the accounts, unless the holder requested payment by check. Where payment by check was requested, the check was drawn on Marshall's Regular Account at its Chicago bank. Whether or not the holder requested payment by check, Marshall posted the dividend on each optional account ledger card, by adding the amount of the dividend to the balance of the account on the dividend day or shortly thereafter. Postings were done as of the dividend date.
Although the dividends on optional accounts might not be posted on dividend day, the holders could withdraw them. It was common for holders to present their passbooks on dividend day and have the dividend posted in the passbook by a teller. The teller noted the posting of the passbook on the account ledger card, but did not post the dividend on the ledger card.
During the period from September 29, 1964 to December 31, 1964, inclusively, Marshall's capital was impaired in that its assets were insufficient to pay its members the full balances of their withdrawable capital accounts. On October 31, 1964 and again on November 27, 1964 the Director of Financial Institutions for the State of Illinois notified representatives of Marshall that it appeared, on preliminary information, that Marshall's capital was impaired. On November 4 the Director instructed Marshall's directors to obtain approval for any distribution of funds in excess of $5,000.
On December 15, 1964, the directors of Marshall declared a December dividend to be credited and payable as of the opening of business on December 31, 1964. Marshall did not comply with the FSLIC reserve requirements nor with the Illinois statutory requirement that funds be allocated to reserves when a dividend is declared.
On December 21, 1964, the FSLIC advised Marshall that the December dividend could not properly be paid because of the serious impairment of the association's capital.
On December 29, 1964, Marshall notified the Illinois Director of Financial Institutions that it would pay the December dividend. On the same day the Director received an accountant's final report showing that Marshall's capital was impaired by approximately $6,500,000. The Director determined that an emergency existed at Marshall and issued an order to be effective at 9:00 a.m. on December 31, 1964, taking custody of Marshall's books, records, accounts and assets, pursuant to Sections 7-8 and 7-9 of the ...