July 11, 1994
Mr. Stephen E. Eubanks Administrator Savings Institutions Division North Carolina Department of Commerce 1110 Navaho, Suite 301 Raleigh, NC 27609
Re: Advisory Opinion -- Authority to Reverse Administrative Decision under Chapter 54B
Dear Mr. Eubanks:
You asked our opinion whether the Administrator or Deputy Administrator of the Savings Institution Division (SID) has the authority to order directors of mutual savings institutions, which have since converted to stock organizations and merged into a bank holding company, to refund the benefits they received from these transactions and to distribute those benefits to the depositors. For the reasons set forth below, we are of the opinion that North Carolina statutory law does not provide such authority.
DISCUSSION OF THE LEGAL ISSUE
The legal issue is whether an administrative agency, in the absence of a specific statutory grant of authority, and in the absence of fraud, illegality or failure by a party to disclose material information, has the power to rehear, reopen, and reconsider a matter previously determined by a final decision.
A. Savings Institution Division Administrative Action
The SID, under Chapter 54B, Article 4 of the North Carolina General Statutes, is clearly an administrative agency which, through its officers, the Administrator and Deputy Administrator, and its governing body, the Savings Institution Commission ("Commission"), administers the North Carolina savings institutions laws and supervises those institutions which operate under such laws. It exercises quasi-judicial functions and, pursuant to N. C. Gen. Stat. §150B-39(a)(3), is subject to the Administrative Procedures Act ("APA"), Chapter 150B of the General Statutes.
Before a savings institution may convert from a mutual to a stock form of organization, N. C. Gen. Stat. §54B-33 requires the mutual to apply to the Administrator for authority to do so. As part of the application process, the mutual must submit a plan of conversion. The Administrator may approve the application, with or without amendment, after making certain findings prescribed at subsections (c)(1) through (9). These requirements include, among other things, a finding that the conversion is fair and equitable to the members and that neither employees, members or any other persons "... receive any inequitable gain or advantage by reason of the conversion." N. C. Gen. Stat. §54B-33(c)(3). If the plan of conversion is approved by the Administrator, the terms of the proposed conversion must be fully disclosed to the members who then have a right to approve or reject the transaction.
It is our understanding that the merger/conversions to which you refer were each approved by the Administrator and, although pursuant to N.C. Gen. Stat. §54B-53(g), the Commission had the authority to review, approve, disapprove, or modify the decision by the Administrator, it took no action on these matters. The Administrator's decision, therefore, became final agency action. Generally, "... to be final, an administrative order must leave nothing further for the agency to do." 2 Am. Jur. 2d, Administrative Law, §382 (1994).
Finally, we also understand that the applicants, in reliance on the Administrator's decision, solicited and obtained the approval of the respective memberships and thereafter consummated the transactions.
The question you now ask is whether you may in effect reverse that part of the approval which included the payment of certain benefits to officers and directors -- those to whom you refer as insiders.
B. Power to Reverse Administrative Orders
It has been said that so long as an agency retains jurisdiction over a controversy, it may reverse its orders. "While the power of reconsideration is inherit in the power to decide, most agencies rely on an express or implied statutory grant of authority." Id. at §392. We examined both Chapters 54B and Chapter 150B and did not find any statutory authority which gives the Administrator (or the Deputy Administrator, who may, pursuant to N. C. Gen. Stat. §54B-54(a), act in the absence of the Administrator) the power to revise an otherwise final agency decision. Also, we were unable to locate any North Carolina decisions on this point of law.
This question was, however, the subject of a discussion in the American Law Reports. See, E. H. Scholper, Annotation, Power of Administrative Agency to Reopen and Reconsider Final Decision as Affected by Lack of Statutory Authority, 73 A.L.R. 2d (1960). The commentators concede that "[i]t is not possible to state a general rule governing all administrative agencies in all situations..." with respect to their power, absent an express statutory authority, to reconsider or modify their own final decision. 73 A.L.R. 2d at p. 942. A few courts have taken the view that an agency exercises functions of a judicial nature and, like a court of general jurisdiction, has the inherent power to grant a rehearing or otherwise reconsider a previous decision. On the other hand, the majority of appellate courts addressing this issue deny such power absent an express statutory grant of authority.
In Murdock v. Perkins, 219 Ga. 756, 135 S.E.2d 869 (1964), the Georgia Supreme Court ruled that in the absence of specific authority, an administrative agency, once having made a judicial determination, has no lawful authority to reverse that decision. 135 S.E.2d at 874, citing 73
A.L.R. 2d 938 at 944. The Court concluded that without such a limitation, the power could be invoked at any time after the original decision had been made and as many times as an agency wished and that there would be no end to litigation. See also, 73 A.L.R. 2d at 943.
This same conclusion has been reached as recently as 1989 by the Illinois Court of Appeals which determined that "[a]n agency being a creation of statute, has only those powers specifically conferred upon it [and that] ... [i]t has no inherent authority to amend or change a decision it has made. Board of Education v. Illinois Educational Labor Relations Board, 179 Ill. App.3d 696, 128 Ill.Dec. 577, 534 N.E.2d 1022 at 1026 (1989). Also in recent years, many other states have adopted or recited the rule that an administrative agency does not have the inherent or implied power to reopen or reconsider its final decisions. See, 73 A.L.R. 2d at §3 (Later Case Service 1986 & Supp. 1994).
Finally, when determining the power of an agency to revisit an administrative decision in the absence of a specific grant of authority, courts will consider not only the function of the agency and the necessity of its continuing jurisdiction, they will look to see if by an administrative order a party obtained a vested right, expended money or changed its position in reliance on the order. 73 A.L.R. 2d at 952. From the facts known to us, it is clear that in reliance on the Administrator's approval decisions, the applicants proceeded to print and distribute proxy materials, and, following approval by the required vote of the respective memberships, consummated the transactions. In our view, these factors weigh heavily against the power to revise these final decisions in the absence of a statutory grant of authority.
C. Collateral Attacks
Absent evidence to the contrary, administrative decisions or orders are presumed valid and correct. Those who seek to have them reviewed bear the burden of demonstrating the error. Also as a general rule, "[a]n agency is bound by its own decision or order." 2 Am. Jur.2d, Administrative Law, §380 (1994). See also, Board of Education v. Illinois Educational Labor Relations Board, supra.
The common law doctrines of collateral estoppel and res judicata may, in certain instances, apply to final agency action. "[O]nce an administrative order becomes final, the administrative decision of an adjudicatory character binds the parties to the proceeding and is res judicata, thereby precluding a subsequent judicial proceeding between the same parties regarding the matters litigated in the administrative actions." Id. at §381.
Although the decisions of the Administrator were not the result of administrative litigation, nevertheless, final agency decisions were made and the Commission elected not to hear those matters. As a general rule, the agency is bound by those decisions and there is significant legal precedent that the agency would be estopped to now revise or revisit those orders. Also, there is the potential that res judicata would bar an action to recover benefits previously approved.
The SID possesses substantial regulatory supervision over savings institutions doing business under Chapter 54B, and, during the various merger/conversion application proceedings it retained continuing jurisdiction over those matters. We are of the opinion, however, that when the final agency decisions were reached and the transactions were thereafter consummated, jurisdiction was exhausted, absent a specific grant of statutory authority to the contrary. Neither Chapters 54B or 150B provides for such authority.
Even in those instances where courts have allowed an agency to revisit a previous decision, absent a grant of authority to do so, the courts concluded that (i) the agency must have retained jurisdiction over the matter and (ii) must have acted with reasonable diligence to reconsider. As we have indicated above, in our view, jurisdiction has been exhausted and it appears that an extended period of time has passed before the question of officers and directors benefits was
raised. More importantly, it can be said that the applicants obtained the right to proceed and,
acting in reliance on this right, proceeded to consummate the transactions.
Finally, there is a substantial argument that the agency is bound by its decisions and would be
estopped to now revise those decisions or could be barred, under res judicata, from maintaining
an action to recover benefits it approved.
Based on the foregoing, we are of the opinion that you do not have the statutory authority to
require former mutual savings institutions officers and directors to refund benefits received as the
result of a conversion and merger of the institution. In the absence of this authority and any
allegations of fraud, illegality or failure of the applicant to disclose material information, it is also
our opinion that you would encounter significant legal precedent against the power to revisit the
decisions previously reached by the SID Administrator.
We trust that this adequately addresses your questions to us. Please let us know if we may be of
Andrew A. Vanore, Jr.
Chief Deputy Attorney General
L. McNeil Chestnut
Assistant Attorney General