APPEAL from the Circuit Court of Cook County; the Hon. DONALD
J. O'BRIEN, Judge, presiding.
MR. JUSTICE DEMPSEY DELIVERED THE OPINION OF THE COURT:
This is an appeal from an order approving a fourth liquidating distribution of the Apollo Savings receivership estate. The receiver, the Federal Savings and Loan Insurance Corporation (FSLIC) presented its planned distribution to the circuit court for approval and several permanent reserve shareholders of Apollo objected that the distribution should be delayed as to one creditor, the FSLIC. The court approved the distribution and the objectors appealed the order. No distribution has been made pending the completion of these proceedings.
On April 8, 1968, a cease and desist order was issued by the FSLIC to restrain Apollo (a savings and loan association) from paying a scheduled dividend because of Apollo's serious financial condition. An injunction was obtained by the FSLIC to assure Apollo's compliance with the order. (FSLIC v. Apollo Savings (N.D. Ill. 1968), 285 F. Supp. 750.) On April 26, 1968, the Commissioner of Savings and Loan Associations of the State of Illinois, acting under the power granted by section 7-8 of the Illinois Savings and Loan Act (ISLA) (Ill. Rev. Stat. 1967, ch. 32, par. 848), took custody of Apollo because the association was unable to continue operation and an emergency existed which could have resulted in loss to members or creditors. Proceedings to liquidate Apollo were begun on May 2, 1968, and a decree was entered that sufficient cause existed to dissolve the institution.
Upon the appointment of a receiver the FSLIC, which insured the withdrawable accounts of Apollo up to $15,000, began paying the holders of the insured withdrawable accounts. As of March 31, 1971, the FSLIC had paid $54,289,660 to the holders of these accounts. The FSLIC became the major creditor of Apollo through subrogation to the rights of the insured account holders. Uninsured withdrawable account holders had claims of about $1,100,000 against the receivership.
The receiver resigned on September 30, 1968, and the next day the State commissioner appointed the FSLIC as the receiver.
The receivership became involved in several legal actions. Some of the legal actions can be attributed to the fact that the receivership is producing an operating profit and that it is anticipated that there will be a substantial surplus left after all Apollo's creditors are paid in full. That surplus is being eyed speculatively by all interested parties. In the case of Lanigan v. Apollo Savings (1972), 52 Ill.2d 342, 288 N.E.2d 445, several permanent reserve shareholders objected to the FSLIC receiving interest on its claim against the receivership from the date of the default of Apollo. The court decided that 5% uncompounded interest should be paid to the FSLIC. The court said that the uninsured withdrawable account holders were also entitled to interest on their claims and that the insured withdrawable account holders were entitled to interest on their accounts for the period of time between the default of Apollo and their payment by the FSLIC. A second case is presently pending by the withdrawable account holders for the interest that would have been paid in the dividend that was cancelled by the cease and desist order of the FSLIC and the ensuing injunction.
On June 6, 1974, the receiver petitioned the court for approval of a fourth partial distribution. Three previous distributions had been made without objection. There was an objection to the fourth distribution and a hearing was held. The objectors argued that the distribution to the FSLIC should wait until such time as sufficient funds had been generated by the receivership assets to pay the FSLIC in full, principal and interest, and to pay the par value of the permanent reserve stock to the shareholders. The objectors did not seek a delay in the payment of the distribution to general creditors or to the uninsured withdrawable account holders. They distinguished between the FSLIC and the other creditors because of purported equitable considerations militating against payment to the FSLIC which did not apply to the other creditors. If payment to the FSLIC could not be delayed without also delaying payment to the other creditors, the objectors asked that the payment of the distribution be delayed to all creditors.
There is no question that the receiver proposed a proper ratable distribution under section 10-6 of the ISLA (Ill. Rev. Stat. 1971, ch. 32, par. 926), which provides:
"At any time after the expiration of the published claim date and from time to time, the receiver may make ratable distribution on all such claims as may have been proven to the satisfaction of the receiver, or adjudicated in a court of competent jurisdiction."
1 The request of the objectors that the distribution be paid to all of the creditors except the FSLIC would be contrary to the statute and also contrary to the rule that creditors of equal stature be treated equally. The FSLIC was subrogated to the rights of the insured withdrawable account holders in the assets of Apollo and has the right to be treated equally with the other creditors. See In re Farmer's Bank of Lone Rock (1946), 248 Wis. 269, 21 N.W.2d 410, where the court said that the Federal Deposit Insurance Corporation stands in the same position and is entitled to the same rights and privileges as the depositors whose claims it insured and paid regardless of the premiums which it charged for insuring depositors.
The objectors argue that their suggested procedure would not harm the FSLIC, but would benefit the permanent reserve shareholders by recognizing the "special equities" involved, namely, that the receivership is generating a surplus; that this surplus would continue to increase if the assets of the receivership were not reduced by the untimely and unnecessary distribution to the FSLIC; that by reason of the increased surplus the shareholders could receive the par value of their stock from the receivership; that a delay in distribution would not be unreasonable because the FSLIC is earning interest on its undistributed funds and termination of the receivership is unlikely for a period of years. The objectors charge that distribution is not being postponed because the receiver-FSLIC is biased in favor of its alter ego the claimant-FSLIC and that such bias is contrary to the receiver's duty to treat impartially all parties who have an interest in the receivership.
The objectors suggest that a fairer formulation of the rule to be applied in this case would be "Where it is established that an estate is solvent and that it will pay all creditors in full plus statutory interest and also produce a surplus for the benefit of the shareholders, then the court should direct the receiver to delay distribution and to continue the estate for such additional period as will allow all parties to be paid out in full." In furtherance of this suggestion they contend that section 10-6 of the ILSA does not deal adequately with the unique circumstances of this case and that it was the duty of the trial court to fill in its gaps in order to make its application fair to all parties, and in not doing this and in not making provision for their "special equities," the court abused its discretion.
2 While the plea of the objectors may evoke some sympathy, we cannot agree that the chancellor abused his discretion. First of all, the Illinois Savings and Loan Act does not provide any role for the court in the periodic distributions authorized by section 10-6. The final distribution, on the other hand, must have court approval. (Section 10-7; Ill. Rev. Stat. 1973, ch. 32, par. 927.) A court's role in an administrative receivership such as this is limited. As stated in People ex rel. Knight v. O'Brien (1968), 40 Ill.2d 354, 358, 359-60, 240 N.E.2d 686:
"The receivership herein, involving the involuntary liquidation of a savings and loan association, is created by the Illinois Savings and Loan Act. That law is patterned after the Illinois Banking Act and the Insurance Liquidation Act of 1933, which have been ...