United States District Court, Northern District of Illinois, E.D
August 11, 1970
PAUL K. NEWBERG, PLAINTIFF,
FEDERAL SAVINGS AND LOAN INSURANCE CORPORATION, ETC., ET AL., DEFENDANTS.
The opinion of the court was delivered by: Decker, District Judge.
Plaintiff Paul K. Newberg brought this action against the
Federal Savings and Loan Insurance Corporation ("FSLIC"), Service
Savings and Loan Association ("Service"), and Thomas J. Garvey
and Chester Zarecki, liquidators of Service ("liquidators"),
alleging that he was fraudulently induced to buy shares in
Service from its former directors and officers. The FSLIC then
counterclaimed against Newberg, naming James B. Wilson and Sam A.
Mercurio as additional counterdefendants, alleging a conspiracy
to gain control of Service and thereafter cause Service funds to
be deposited in banks, at no interest, so that loans could be
made from these banks to counterdefendants. Counterdefendant
Mercurio then counterclaimed against FSLIC, Service, and the
liquidators, charging a conspiracy to wrongfully liquidate
Service and convert its funds to their own use, all to the damage
of Mercurio and others who were parties to a contract to purchase
a majority interest in Service. Presently before the court are
FSLIC's motion to dismiss the Mercurio counterclaim and motions
for summary judgment filed by the others named in said
The complained of liquidation of Service, and the transfer of
its assets to the FSLIC, occurred in 1965. Yet this counterclaim,
charging a fraudulent conversion of assets, was not filed until
February, 1970, it is therefore barred, as to the FSLIC, by the
provisions of 28 U.S.C. § 2401 in effect in 1965:
"(b) A tort claim against the United States shall be
forever barred unless action is begun within two
years after such claim accrues * * *."
See Federal Savings and Loan Insurance Corporation v. Quinn,
419 F.2d 1014
, 1017 (7th Cir. 1969), holding the provisions of the
Federal Tort Claims Act, 28 U.S.C. § 2671 et seq., applicable to
the FSLIC. And see Davis v. Foreman, 239 F.2d 579
1956). cert. den. 353 U.S. 930
, 77 S.Ct. 719
, 1 L.Ed.2d 724
(1957); United States v. Thrower, 267 F. Supp. 608 (M.D.Tenn.
Mercurio's contention that the statute of limitations has not
yet run, because defendants allegedly continue to withhold the
assets of Service, is without merit. That defendants are
allegedly still enjoying the fruits of their wrongful conduct
does not mean that the cause of action did not accrue when this
allegedly wrongful conduct occurred. Indeed, to so hold would
render the provisions of § 2401 meaningless and of no effect in
a great number of cases.
There are a number of other reasons why this counterclaim must
be dismissed as to the FSLIC, all of which arise from the
applicability of the Tort Claims Act. First, it is clear that
under that Act, a federal agency cannot be sued directly. Rather,
action must be brought against the United States. 28 U.S.C. § 2679(a)
and 1346(b); Holmes v. Eddy, 341 F.2d 477, 480 (4th Cir.
1965), cert. den. 382 U.S. 892, 86 S.Ct. 185, 15 L.Ed.2d 149;
Robinson v. Green (N.D.Ill. 1968, 68 C 1179).
Second, no suit may be maintained under the Tort Claims Act
when "based upon the exercise or performance * * * [of] a
discretionary function or duty on the part of a federal
agency * * * whether or not the discretion involved be abused."
28 U.S.C. § 2680(a). The purchase of the assets of Service by the
FSLIC was done pursuant to 12 U.S.C. § 1729(f), which provides:
"In order to prevent a default in an insured
institution * * * the Corporation is authorized, in
its discretion, to make loans to, purchase the assets
of, or make a contribution to, an insured
institution * * *." (Emphasis supplied.)
Mercurio's counterclaim charges, at most, an abuse of this
legislatively authorized discretion and is therefore barred by
§ 2680(a). See Dalehite v. United States, 346 U.S. 15
, 36, 73
S.Ct. 956, 97 L.Ed. 1427 (1953).
Finally 28 U.S.C. § 2680(h) excepts from the coverage of the
Tort Claims Act "[a]ny claim arising out of * * *
misrepresentation, deceit, or interference with contract rights."
The counterclaim alleges a conspiracy to defraud Mercurio and
other contract purchasers of the shares of Service, and thus
comes within these exceptions. Thompson v. United States,
408 F.2d 1075, 1081 (8th Cir. 1969); Tapia v. United States,
338 F.2d 416, 417 (2d Cir. 1964), cert. den. 380 U.S. 957, 85 S.Ct. 1096,
13 L.Ed.2d 974 (1965); Covington v. United States, Department of
Air Force, 303 F. Supp. 1145, 1149 (N.D.Miss. 1969); Pargament v.
Fitzgerald, 272 F. Supp. 553, 556 (S.D.N.Y. 1967), aff'd.
391 F.2d 934 (2d Cir. 1968).
For all of the aforementioned reasons, the FSLIC must be
dismissed from the Mercurio counterclaim.
Service and its liquidators have moved for summary judgment on
the Mercurio counterclaim, alleging that this claim is barred by
32 Ill.Rev.Stat. § 906. That statute provides:
"The liquidators shall fix a time for all persons
having claims against the association, other than as
members thereof, to present such claims, and shall
cause notice to be published, requiring all persons
to present the claims on or before such date * * *. A
claim may be presented at any time on or before the
date fixed * * * but any claim not so presented shall
be barred. Upon the disallowance of any claim, the
liquidators immediately shall notify the claimant of
such fact, and the claimant may institute suit to
establish such claim at any time before the final
It is undisputed that the Service shareholders adopted a plan
of voluntary liquidation in September, 1965 and that January 1,
1966 was the deadline set for the filing of claims. It is also
established that counterplaintiff Mercurio never filed a claim
with the liquidators with respect to the matters asserted in the
counterclaim. Under these circumstances, I agree that 32
Ill.Rev.Stat. § 906 bars this counterclaim.
The Illinois legislature has established a systematic avenue of
challenge for those who claim to be aggrieved by the liquidation
of a Savings and Loan Institution. Had Mercurio filed his claim
with the liquidators, and had it been disallowed, he would then
have been authorized by § 906 to file suit in state court.
Moreover, anyone "aggrieved" by approval of a plan of liquidation
is entitled to a hearing before the Illinois Savings and Loan
Board pursuant to 32 Ill.Rev.Stat. § 860. Judicial review from an
adverse decision of that Board is then provided by 32
Ill.Rev.Stat. § 864, which incorporates the mechanisms of the
Administrative Review Act, 110 Ill.Rev.Stat. § 264 et seq.
By failing to follow the legislatively established channels for
challenge of the plan of liquidation, counterplaintiff has waived
his right to state court review. To allow a collateral attack in
federal court at this late date would be contrary to Illinois
law, and cannot be permitted. As stated in People ex rel. Chicago
& N.W. Ry. Co. v. Hulman, 31 Ill.2d 166, 169, 201 N.E.2d 103, 105
"[I]t has become firmly established that where an act
creating or conferring power on an administrative
agency expressly designates that judicial review will
be accomplished under the Administrative Review Act,
the employment of pre-existing methods of securing
judicial review is prohibited."
See also Hulman v. Lawn Sav. & Loan Ass'n., 122 Ill.App.2d 363,
259 N.E.2d 324
(1st Dist. 1970), and People ex rel. Barrett v.
Logan County Building and Loan Ass'n., 369 Ill. 518, 530,
17 N.E.2d 4 (1938), barring collateral attacks on actions taken in
Counterclaimant Mercurio contends that he is suing the
liquidators individually, as well as in their official
capacities. But no matter how the counterclaim is characterized,
it is still an impermissible collateral attack on the liquidation
proceedings. And in any event, each liquidator has denied the
essential averments of the counterclaim, and these denials are
uncontroverted. For example, both liquidators state by affidavit
that "[a]t no time, either before or after my election as one of
the liquidators of Service Savings, did I have knowledge of any
facts which caused me to believe that there was no need,
requirement or right in law for the closing of Service Savings or
for its voluntary liquidation." Absent such knowledge, of course,
these defendants could not be held liable for the allegedly
wrongful liquidation of Service. Tribune Co. v. Thompson,
342 Ill. 503, 530, 174 N.E. 561 (1930).
For the reasons heretofore assigned, the counterclaim filed by
Sam A. Mercurio in case number 69 C 1043 is dismissed as to the
Federal Savings and Loan Insurance Corporation and summary
judgment thereon is entered in favor of Service Savings and Loan
Association, Thomas J. Garvey and Chester Zarecki. Case number 70
C 518 is dismissed.