Petition — First National Bank & Trust Co. in Alton v. Berke

Supreme Court, U. &

FILED

} MAY 15 1978

\

——o enh jR., CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

FF= 1620

FIRST NATIONAL BANK AND TRUST COMPANY IN ALTON

Executor of the Estate of Joseph £. Knight

Petitioner,

VS.

SAMUEL BERKE, Receiver of City Savings Association.

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

for the Seventh Circuit

J. F. SCHLAFLY

P 0. Box 190

Alton, Illinois 62002

(618) 465-7733

RAYMOND F. McNALLY, JR

611 Olive Street

St. Louis, Missouri 63101

(314) 621-1614

EDWARD S. MACIE

111 West Washington Street

Chicago, Illinois 60602

(312) 372-6242

Attorneys for Petitioner

a a

St Louis Law Printing Co. Inc... 812 Olive Street 63101 314-231-4477

.-

"

INDEX

Page

SE EN orks wes'e 4 ss a ckeWaeae es eeseueueden l

REE TE BOE DE et ee RO ey Pee 2

is Dae alia te hdl wid 2

Constitutional Provisions Involved ................... 3

EEE IE PRED eee PE an CE 3

Reasons for granting writ of certioramh .............. 9

a ERT ee eee aa ee 21

Citations

Cases:

er Oi I Eo vice y es ceews sy enie oes 11

Bush v. Babb, 23 Ill. App. 2d 285, 162 N.E. 2d 594 12, 14, 16

DeCorrevant v. Lohman, 84 Ill. App. 2d 221, 228 N. E.

RE ee Se ee tee ae ey er eer 15

Economou v. U.S. Department of Agriculture, 535 F. 2d

688, cert. granted Butz v. Economou, No. 76-709, —

en 8 NR alert near 11

Expeditions Unlimited, etc. v. Smithsonian Inst., 566 F.2d

Giri ees eae pew ee deed awes eke FECES ARERES 11

Kelly v. Ogilvie, 35 Ill. 2d 287, 220 N.E. 2d 172, affd

64 Ill. App. 2d 144, 212 N.E.2d 279 ............ 12, 16

List v. O'Connor, 21 Ill. App. 2d 399, 158 N.E. 2d 103 12

Lusietto v. King, 107 Ill. App. 2d 239, 246 N.E. 2d 24 13

McCormick v. Burt, 9S Hil. 263 ..............ccc0e, 12

Miils v. American Surety Co. of New York, 26 Idaho 652,

Thy Cat aktas bene cGivees Sac deeds cen 16

O'Connor v. Donaldson, 422 U.S. 563 ............... 11

Se EE SANG Ae Sh s waekru da wk cham acuek «ews i 14

1091

Pre errr eee rer err eres 12, 16

er rr oe er a) 1]

Procunier v. Navarette, — U.S. —, 98 S. Ct. 855, 55 L.

I Eth ya Mate ea ae 9,10

Reiter v. illinois National Casualty Co., 397 Ill. 141, 73

N.E. 2d 412, c.d. sub nom. Reiter v. Palmer, 332 USS.

og IE Rr GRR ot My ie aera abet eh ae se 15

Scheuer v. Rhodes, 416 U.S. 232 .................... 10

Stump v. Sparkman, — U.S. — (No. 76-1750) ........ 12

Tcherepnin v. Franz, 277 F. Supp. 472, reversed 371 F.

26 374, seversed 389 U.S. 332 ....................

3

Tcherepnin v. Franz, 393 F. Supp. 1197 .............. 2

Tcherepnin v. Franz, 424 F. Supp. 778 2

Tcherepnin v. Franz, 570 F. 2d 187 1

w= 2 Oe 6 6.0 2S ee) oe 6 é

Wood v. Strickland, 420 U.S. 308 .................. 11

Constitutional Provisions, Statutes, and Rules:

Amendment XIV, Section 1, United States Constitution 2, 3, 21

Coit te, f Seer errr rr ree rr er 4

, Cit a 2) ie re 3

a A Pee ee es re 11

ee A eee rr ee Re )

Rule 9(b) Federal Rules of Civil Procedure ........3, 10,17

Rule 54(b) Federal Rules of Civil Procedure .......... 7

Illinois Savings and Loan Act, Vol. 1, Ill. Rev. Stat. 1963.

ch. 32, Section 702.1-2, p. 1263 ...........---..3, 15

Illinois Savings and Loan Act, Vol. 1, Ill. Rev. Stat. 1963.

ch. 32, Article 10, Sections 921-922, pp. 1287-

a ee eg ee eee eee eee 3, 6, 8, 19. 20

Illinois Savings and Loan Act, Vol. 1, Ill. Rev. Stat. 1963,

ch. 32, Article 9, Sections 901-902, pp. 1285-

TTI rr: = ee

Sr ee re re ere ee ee eee a

Illinois Financial Code, Vol. 3, Ili. Rev. Stat. 1963, §§ 63

(b) 25, 27, 35 te Re i Oo ss to ee ae

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1977

No.

FIRST NATIONAL BANK AND TRUST COMPANY IN ALTON

Executor of the Estate of Joseph E. Knight.

Petitioner,

VS

SAMUEL BERKE, Receiver of City Savings Association.

Respondent.

PETITION FOR A WRIT OF CERTIORARI

To the United States Court of Appeals

for the Seventh Circuit

First National Bank and Trust Company in Alton, Executor

of the Estate of Joseph E. Knight, petitions for a writ of certi-

orari to review the judgment of the United States Court of Ap-

peals for the Seventh Circuit in this case entered on January

23, 1978, which affirmed the judgment of the District Court in

favor of Respondent against Petitioner.

OPINIONS BELOW

The opinion of the Court of Appeals (App. A, pp. A-1-13)

is reported at 570 F. 2d 187. The memorandum and order of

the District Court as to liability (App. B, pp. A-14-56) is re-

=—

ported at 393 F. Supp. 1197, and the District Court's memo-

randum and order which approved the Special Master's report

as to damages (App. C, pp. A-57-64) is reported at 424 F.

Supp. 778. The memorandum and order of the District Court

which denied Petitioner's motion for new trial is not reported

(App. E, A-67-69).

JURISDICTION

The judgment of the Court of Appeals (App. F, pp. A-70-71)

was entered on January 23, 1978. A timely petition for rehear-

ing with a suggestion for rehearing en banc was denied on Febru-

ary 24, 1978 (App. G, pp. 72-73). The jurisdiction of this Court

is invoked under 28 U.S.C. 1254(1).

QUESTIONS PRESENTED

1) Whether, under the Fourteenth Amendment to the Consti-

tution of the United States, the late Director of the Department

of Financial Institutions of the State of Illinois had either an

absolute or a qualified immunity from suit for damages based

upon his performance of official duties in connection with his

Statutory supervisory responsibility.

2) Whether the doctrine of official immunity may be circum-

vented by a finding upon summary judgment that the public of-

ficer “intentionally” violated official duties, ...4 thus “malici-

ously” did so, whereas in fact neither an intentional nor a

malicious violation had been alleged.

3) Whether the doctrine of official immunity may be further

circumvented by finding upon summary judgment that the public

officer violated a ministerial duty imposed by a certain statute,

when in fact the particular statute on its face had no application

to the admitted facts, which were covered by a separate and

distinct statutory provision, which was in no way violated or

alleged to have been violated.

CONSTITUTIONAL PROVISIONS, STATUTES,

REGULATIONS INVOLVED

The United States Constitution, Amendment XIV, Section |

provides in part: “. . . nor shall any State deprive any person

of life, liberty, or property, without due process of law; nor deny

to any person within its jurisdiction the equal protection of the

laws.”

The Illinois Savings and Loan Act, Vol. 1, Ill. Rev. Stat.

1963, Ch. 32. pp. 1262-1288; Article 1, Sections 701, 702, 1-2,

710(d); Article 7, Section 848, 849, 850, 854, 855; Article

9, Sections 901-909: Article 10, Sections 921-927). (Text in

Appendix H)

Rule 9 (b) of the Federal Rules of Civil Procedure (Appen-

dix K)

Illinois Financial Code, Vol. 3, Ill. Rev. Stat. 1963, Ch.

127, pp. 393-394, Sections 63 b 25, 63 b 27. 63 b 35. (Ap-

pendix L)

STATEMENT OF THE CASE

The original action from which this cause arose was filed in

1964, wherein the plaintiffs sought to have their withdrawable

capital shares in the City Savings Association held to be securi-

ties within the meaning of the Securities Exchange Act, and to

have themselves declared creditors of the Association. In 1966

the District Court for the Northern District of Illinois assumed

jurisdiction, and thereafter certified its ruling so as to make it

appealable under Title 28 U.S.C. Section 1292 (b), reported in

Tcherepnin v. Franz, 277 F. Supp. 472. This action was re-

versed by the Circuit Court of Appeals for the Seventh Circuit

in Tcherepnin v. Franz, 371 F. 2d 374, which decision was in

turn reversed in Tcherepnin v. Knight, 389 U.S. 332.

=

Inasmuch as the original action was brought under the Se-

curities Exchange Act of 1934 (Title 15 U.S.C. Section 78 a

et seq.), federal jurisdiction existed, which was retained in the

cross-complaint which the Receivers subsequently filed.

In 1968 receivers were appointed for the Association. In

1969 the Receivers filed their first cross-complaint and amended

first cross-complaint, consecutively. The latter contained four

counts. Count I was directed against Joseph E. Knight and three

other individuals, and charged Knight as a former Director of

Financial Institutions of the State of Illinois, with having vio-

lated his official duties in the supervision and examination of

City Savings, as a result of which its assets were depleted.

Count II was directed against Knight and one other indi-

vidual, and was predicated upon their having taken custody

of the Association's assets, and their having subsequently re-

linquished them pursuant to a two-thirds vote of the shareholders

of the Association to voluntary liquidators before the conditions

for taking the assets were corrected. Count III was dismissed

by the Receiver, and Count I was not directed against Knight.

(Counts I and II are preserved in App. I, pp. A-87-92).

On May 30, 1973, the Executor of the Knight Estate was

substituted for Mr. Knight. Thereupon the Executor moved to

dismiss the amended first cross-complaint on the following

grounds, cardinal to this petition:

(a) that as a high state official whose office required the ex-

ercise of discretion and judgment, Knight was immune from

charges of personal liability in the discharge of such respon-

sibility.

(b) that the examinations of the Association's books which

were complained of were not conducted by Knight, but by his

subordinates, for whose acts or defaults he was personally not

liable; and

—

(c) that the statutory duties which Knight allegedly violated

were duties owed to the State and not to private individuals.

On November 5, 1973, the Receiver filed a motion for sum-

mary judgment against the Executor. On April 14, 1975, the

District Court filed its memorandum and order (App. B, pp.

A-14-56), which denied the Executor’s motion to dismiss and

granted the Receiver’s motion for summary judgment on Counts

I and II against the estate.

In denying the Executor’s motion to dismiss Count I, the

Court acknowledged the established doctrine of the qualified

immunity of Illinois public officials whose acts are discretionary.

However, the Court denied the doctrine of official immunity

to Knight by implying that the duties of the Director of the

Department of Financial Institutions were ministerial, as Gis

tinguished from discretionary, and by holding that the violation

of official. duties as alleged against Knight were necessarily in-

tentional and malicious (App. B, pp. A-28-31), although there

were no allegations of malice, intent or corruption made against

Knight in the cross-complaint (App. I. pp. A-87-92). Similarly.

in granting the Receiver’s motion for a summary judgment on

Count I, the Court found that the evidence showed as a matter

of law that Knight “wilfully and maliciously disregarded his

duty to supervise City Savings” (App. B, p. 4-33). In fact, no

such charge or conduct had been alleged (App. I, pp. A-87-89).

In granting the Receiver’s motion for summary judgment on

Count II, the Court again denied to Knight the doctrine of

official immunity by adopting a “fraud theory” and finding that

the evidence showed that Knight had entered into a secret

scheme with one C. Oran Mensik, the president, board chair-

man, and chairman of the executive committee of City Savings,

and an attorney named Theodore J. Isaacs, the purpose of which

was to defraud the depositors by foisting a corruptly adopted

plan for voluntary liquidation upon the Association (App. B.

a an

pp. A-40-48). In fact, Count II contained no allegations of

fraud, corruption, or malice, nor was there any mention of

Mensik or Isaacs either by name or otherwise, nor was there

any attack made on the plan of liquidation or the method by

which it was adopted (App. I, pp. A-89-92).

Moreover, in granting a summary judgment on Count II. the

Court also adopted a “statutory violation theory,” and held that

by taking custody of the Association's assets for the causes spec-

ified in Section 848 of the Illinois Savings and Loan Act

(App. H. pp. A-75-76), and then delivering them to voluntary

liquidators, pursuant to a two-thirds vote of the shareholders

of the Association, before the causes for taking custody were

corrected, Knight violated Sections 921 and 922 of the IIli-

nois Savings and Loan Act (App. H, pp. A-83-84). Here again

the Court denied the protection of the doctrine of official immu-

nity to Knight. Sections 921 and 922 of the Act are part of

Articie 10 of the Act, which applies enly to cases of involuntary

liquidation (App. H, pp. A-83-86). The Court acknowledged

that the liquidation in this case was a voluntary one, but did not

acknowledge that voluntary liquidations are regulated by Article

9 of the Act, which permits such liquidations at any time and

which does not prohibit the relinquishment of assets by the

state officials to the liquidators, regardless of whether the causes

for taking custody have been cured (App. H. pp. A-78-83).

On April 24, 1975 the Executor filed its answer, in which

it pleaded official immunity and nonliability for subordinates’

acts as to Count I, and pleaded official immunity and lack of

duty to the plaintiffs and the Receiver as to Count II (App. J,

pp. A-93-95).

On May 8, 1975, the Court ordered that proceedings to

determine the amount of damages to be recovered from the

Estate be referred to a special master for hearing and report.

The Special Master recommended that damages be assessed

—

against the Estate in the amount of $14,274,304 and that

judgment be entered therefor.

The Executor’s objections to the report of the Special Master

were overruled by the Court on November 30, 1976 (App. C.

pp. A-57-64). At that time the court ordered that judgment

be entered against the Estate in the amount of $13,969,504.

On December 20, 1976, the Receiver filed a motion under

Rule 54(b) of the Federal Rules of Civil Procedure, for entry

of a final judgment, which the court entered as of that date

for $13,969,500. (App. D, pp. A-65-66).

On December 27, 1976, the Executor filed its motion for

new trial. disputing the propriety of summary judgment and

requesting trial. The motion was denied on March 1}, 1977

(App. E, pp. A-67-69).

On March 29, 1977, the Executor filed its notice of appeal

and its cost bond, to the Circuit Court of Appeals. On Janu-

ary 23, 1978, that Court affirmed the District Court (App. A,

pp. A-1-13: App. F. pp. A-70-7/1).

In its decision the Court of Appeals upheld the summary

judgment on Count I, and ruled that “. . . the allegations nec-

essarily entail malicious conduct, that is, the wanton and de-

liberate commission of a wrongful act.” The court then ex-

plained this statement as follows:

_ . Such is the case here, for to allege, as the plaintiffs

did, that Knight intentionally ignored or concealed examina-

tions indicating that City Savings was not conducting its busi-

ness in accordance with the Illinois Savings and Loan Act is

necessarily to claim that Knight wilfully and wantonly—in

short ‘maliciously —breached his official duty to supervise the

affairs of that institution. . . .” (App. A, p. A-7) (emphasis

added).

However, contrary to the Court’s express finding that the

word “intentionally” had been alleged, neither that word nor

any synonym therefor was in fact averred (App. I, pp. A-

87-89).

Moreover, in affirming the judgment of liability on Count

II, the Court of Appeals followed the District Court in apply-

ing Sections 921-922 of the Illinois Savings and Loan Act to

a voluntary liquidation, even though those sections are part of

Article 10 of that Act and pertain only to involuntary liquida-

tions and not to voluntary liquidations, which are regulated

by Article 9 of the Act, Vol. 1, Ill. Rev. Stat. 1963, Ch. 32,

$§ 901-909, pp. 1285-1286 (App. H, pp. A-78-83).

REASONS FOR GRANTING WRIT OF CERTIORARI

Part I

Denial of Official Immunity

This Petition should be grantec because the decision of the

United States Circuit Court of Appeals for the Seventh Cir-

cuit conflicts with and departs from the applicable decisions

of this Court and of other Circuit Courts of Appeals concern-

ing immunity of high state officials.

On February 22, 1978—two days before the Court of Ap-

peals for the Seventh Circuit denied the Estate's petition for

rehearing—this Court published its decision in Procunier v.

Navarette, — U.S. —. No. 76-446, 98 S. Ct. 855, 55 L. Ed.

2d 24.

In that case the director of the California Department of

Corrections, and the warden and assistant warden at Soledad

Prison, had been sued for violation of an inmate's civil rights

by allegedly having condoned the refusal by their subordinates

to mail various items of correspondence prepared by the in-

mate, and for having conspired with the subordinates to this

end. The District Court had granted summary judgment for

the defendants, and the Court of Appeals for the Ninth Cir-

cuit reversed. This Court granted certiorari.

In reversing that Court of Appeals, this Court ruled that in

cases brought under Title 42 U.S.C. Section 1983, state off-

cials, such as the petitioners before it, were entitled to a quali-

fied immunity for their official acts, but that at the time of

the alleged violations of the inmate's constitutional rights there

was no established First Amendment right as to mailing privi-

leges. so that petitioners had no reason to know that any rights

were violated. Moreover, the decision held that negligent con-

_—

duct on the part of petitioners did not constitute “intentional

and bad faith conduct,” or conduct characterized by “malicious

intention.”

The strongest allegation that was made against Knight in

Count I of the cross-cc..plaint is in paragraph 5 thereof (App.

I, p. A-88-89):

“. . Thus, during the period from 1959-1964, there were

either no meaningful examinations whatsoever by the Director

or, in the alternative, examinations were in fact made but the

truth about the institution’s dire condition was ignored or con-

cealed...”

This allegation is subject to being construed as one of negli-

gence or of nonfeasance. However, it does not in the most re-

mote fashion allege any “intentional,” “malicious” or “wanton”

wrongdoing.

Moreover, even if it could be construed as alleging any of

such conditions of the mind, it would be a manifest violation of

Rule 9 (b) of the Federal Rules of Civil Procedure, which re-

quires that such conditions of mind be averred (App. K, p. A-96).

The statement in the opinion of the Court of Appeals “. . . to al-

lege, as the plaintiffs did, that Knight intentionally ignored or

concealed examinations .. .” (App. A, p. A-7) (emphasis

added), is not supported by any statement in the record and is

without foundation; no such charge was in fact alleged (App.

I, pp. A-87-89).

Accordingly, there being no element of malicious or intentional

wrongdoing presented in the charges against Knight, he was

protected by at least a qualified immunity in this suit against

him.

This immunity is further exemplified in the following cases

cited in Procunier v. Navarette and applying to state officials:

Scheuer v. Rhodes, 446 U.S. 232 (1974), regarding a governor,

uw th ws

a president of a state university, and members of a state national

guard; Wood v. Strickland, 420 U.S. 308 (1975), local school

board members; O’Connor v. Donaldson, 422 U.S. 563 (1975).

the superintendent of a state hospital; and Pierson v. Ray, 386

U.S. 547 (1967), policemen.

All of these cases were brought under Title 28 U.S.C. Section

1893 for violation of civil rights. Inasmuch as there are neither

violations of civil rights nor malice alleged in the cross-complaint

(App. I, pp. A-87-92), there is no reason to deny an absolute

immunity to Knight, as was approved by this Court in Barr v.

Matteo, 360 U.S. 564 (1959), as to a member of the executive

branch of the Federal Government, and in Doe v. McMilian,

412 U.S. 306 (1973), as to District of Columbia public school

officials and employees, members of the House of Representa-

tives Committee for the District, and federal legislative em-

ployees.

Moreover, in the case of Economou v. U.S. Department of

Agriculture, 535 F. 2d 688 (1976), the United States Court of

Appeals for the Second Circuit recognized a qualified immunity

as to the Secretary of Agriculture and other officials of that De-

partment, and this Court has granted certiorari to the former

Secretary and the other officials in the case now pending under

the style Earl J. Butz, et al. v. Arthur N. Economou, et al., No.

76-709, — U.S. —, 97 S.Ct. 1097, wherein the petitioners are

seeking a decision that their immunity is absolute.

The decision of the Court of Appeals for the Seventh Circuit

is contrary to that of the Court of Appeals for the Second

Circuit for the reason that it denied to Knight even a qualified

immunity. It is also contrary to the decisions of the Court

of Appeals for the District of Columbia in Expeditions Unlim-

ited, etc. v. Smithsonian Inst., 566 F. 2d 289 (1977), wherein

absolute immunity was found to protect an official of the

Smithsonian Institute.

—

Inasmuch as Knight was an official of the State of Illinois, the

substantive law of that State should apply. In People of State of

Illinois v. Maryland Co., 132 F. 2d 850 (1942), immunity, in

the absence of malice, was applied to the Director and officers of

the State Department of Welfare, although the plaintiffs included

legal representatives of four men who had died as a result of

drinking contaminated water while working on construction of

a state hospital. Similarly, such absolute immunity was found

in: McCormick v. Burt, 95 Ill. 263 (1880), as applied to a

teacher and the directors of a public school; Kelly v. Ogilvie, 35

Ill. 2d 287, 220 N.E. 2d 172 (1966) affg 64 Ill. App. 2d

144, 212 N.E. 2d 279, a sheriff and jail warden; Bush v. Babb,

23 Ill. App. 2d 285, 162 N.E. 2d 594 (1959), another sheriff

and jail warden; and List v. O'Connor, 21 Ill. App. 2d 399, 158

N.E. 2d 103 (1959), a park district's agent sued for wrongful

death.

Moreover, inasmuch as Knight's duties and actions in super-

vising supervisors and in taking custody of the assets of City

Savings and subsequently relinquishing them to voluntary liqui-

dators were quasi-judicial, and because his decisions were

strictly within the scope of his official authority, the reasoning

of the Court in the recent case of Stump v. Sparkman, — U.S. —

(No. 76-1750), should be applicable to the end that Knight's

immunity from personal liability was absolute.

Discretionary v. Ministerial Duties

The duties of the Director of the Department of Financial

Institutions are stated in Vol. 3, Ill. Rev. Stat. 1963, Ch. 127,

pp. 393-394, Sections 63 (b) 25, 27 (App. L, pp. A-97-100

hereof). They include the responsibilities of directing and super-

vising all department administration and technical activities,

carrying out the laws and regulations, appointing experts and

assistants, fostering and developing programs, attending meet-

ax 43 ..

ings of advisory boards, making continuous studies, and mak-

ing reports to the Governor.

Moreover, the statute further provides (Vol. 3, Ill. Rev. Stat.

1963, Ch. 127, p. 394, Section 63 b 35; App. L, p. A-100) that

under the Director are a Supervisor of Banks, a Supervisor of

Savings and Loan Associations, a Supervisor of Consumer Fi-

nance Businesses, a Supervisor of Currency Exchanges, and a

Supervisor of Credit Unions. All of them are appointed by

and responsible to the Director, and they are administratively

responsible for the financial institutions to which their appoint-

ments relate.

In its decision the Court of Appeals indicated that Knight's

duties were of a ministerial nature, as distinguished from discre-

tionary, as to Count I (App. A, p. 5). In support of its statement,

the court cited People ex rel. Munson v. Bartels, 138 Ill. 322,

27 N.E. 1091 (1891). However, that case determined the li-

ability of a probate court clerk who had certified a false ac-

knowledgment on a mortgage and was held to be personaily re-

sponsible therefor. The facts upon which that decision was made

do not compare with the statutory duties of supervision which

were imposed on Knight.

Far more appropriate is Lusietto v. King, 107 Ill. App. 2d

239, 246 N.E. 2d 24 (1969), where the plaintiff's deceased was

killed when his automobile hit a hole on a state highway. The

defendant was maintenance supervisor for state highways in that

district, and in reversing the judgment against him the court

said (p. 27):

“Additionally, the defendant’s duties were not ministerial, they

were governmental in character and required the use of discre-

tion and judgment. With. regards to holes in the highway, the

defendant must exercise discretion and judgment as to which

holes to fill and which holes not to fill. Of the holes to fill, which

holes are to be nilled first. . .”

—_—

Similar in point is Bush v. Babb, 23 Ill. App. 2d 285, 162

N.E. 2d 594, 597 (1959), which was a suit against the sheriff

and the jail warden by a man who had contracted tuberculosis

while a jail inmate. A motion to dismiss was sustained by the

trial court, which action was affirmed on appeal. The court

noted that the statute provides that the warden shall furnish

necessary bedding, clothing, fuel and medical aid for all his

prisoners, and keep an accurate account of it, but held that these

duties were not ministerial, and were “quasi-judicial . . . and

carry with them the immunity from liability for mere negligent

omission to provide proper and adequate medical care. . .”

The distinction between official acts which are ministerial and

non-ministerial is set forth in Peabody v. Sanitary District of

Chicago, 330 Ill. 250, 161 N.E. 519 (1928). This cause origi-

nated as a taxpayer's bill for an accounting in which the chan-

cellor entered a decree dismissing the suit for want of equity.

The Appellate Court reversed, and remanded with directions to

order an accounting. The Supreme Court affirmed the Appellate

Court. In doing so, the court said of the Treasurer of the Sani-

tary District, who also had an interest in the contractors and in

the bank that financed them (p. 522): “. . . Official action is

judicial where it is the result of judgment or discretion. It is

ministerial when it is absolute, certain, and imperative, involving

merely the execution of a set task, and when the law which im-

poses it prescribes and defines the time, manner, and occasion

of its performance with such certainty that nothing remains for

judgment or discretion . . .” Thus, Knight's duties of super-

vision were manifestly discretionary, and not ministerial.

Non-Liability for Acts or Omissions

of Subordinates

A subsidiary question to that of official immunity is whether

Knight might properly be heid liable for acts or defaults of his

subordinates. As has been previously demonstrated, the duties

— =

of the Director of the Department of Financial Institutions were

supervisory. Count I of the Receiver’s First Amended Cross-

Complaint in paragraph 5 (App. I, p. A-89) charges in part:

“. . . Nor was there any proper supervision by Cross-Defendants

Stulta, Swope, and Hulman of the affairs of the City Savings

from 1959-1964 . . .” (These individuals were successively

Supervisors of the Department of Savin». and Loan Associs-

tions under Knight.)

Specifically, Knight and his Estate are charged in Count I

with liability for the alleged nonfeasance of his subordinates.

Under established Illinois law there is no such liability. This

was decided conclusively in the case of the Director of Insur-

ance in Reiter v. illinois National Casualty Co., 397 Ill. 141,

73 N.E. 2d 412, c.d. sub. nom., Reiter v. Palmer, 332 US.

791 (1947), and in the case of the Sheriff of Cook County in

DeCorrevant v. Lohman, 84 Ill. App. 2d 221, 228 N.E. 2d

592 (1967).

Therefore, the Court of Appeals for the Seventh Circuit has

decided an important state question in a way in conflict with

applicable law of the State of Illinois.

Non-liability for Breach of Duties Owed the State of Illinois,

and Not to Individuals

Another question related to that of official immunity is

whether Knight's duties (assuming that he had no immunity)

were owed to the State, as distinguished from the Association's

depositors.

The policy of the Illinois Savings and Loan Act is set forth

in Vol. 1, Ul. Rev. Stat. 1963, Ch. 32, Section 702.1-2 p.

1263 (App. H. p. A-74), where it is stated in substance that

the business is affected with a public interest and should “be

supervised as a business affecting the economic security and

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general welfare of the people in this State; . . .” The state-

ment of policy contains no clause insuring depositors that,

should an association fail, they will be reimbursed at the ex-

pense of state officials.

The Court of Appeals, in finding that the depositors in ef-

fect were provided such insurance (App. A, p. A-6), cites

the case of Mills v. American Surety Co. of New York, 26

Idaho 652, 145 P. 1097 (1914), presumably because in that

case individual depositors were entitled to sue on the official

bond of the state banking commissioner. However, their rights

in this respect grew out of the statutory requirement that (p.

1098): “. . . any person so injured or aggrieved may bring

suit on such bond, in his own name, without an assignmeni

thereof.” Absent such a provision, there is no reason to believe

the individuals would have had standing to sue.

That Illinois law has adopted a principle of non-liability to

third parties is shown by People of the State of Illinois v. Mary-

land Casualty Co., 132 F. 2d 850, 852 (7th Cir. 1942), which

involved four wrongful death cases and multiple personal in-

jury actions. There the Circuit Court of Appeals affirmed dis-

missal on the ground that the duty to furnish uncontaminated

water to construction workers on state projects was a public duty

and not one owed to any particular person and that for their

. negligence or wanton or wilful omission in the perform-

ance of this public duty, the officers are not liable, except to

the State. . . .” In Kelly v. Ogilvie, 35 Ill. 2d 287, 220 N.E.

2d 172 (1966), affg 64 Ill. App. 2d 144, 212 N.E. 2d 279,

the same doctrine was upheld in defense of the sheriff, the

jail warden, a jail officer, and the surety on the sheriff's bond

in a suit by a jail inmate who had been attacked by another

inmate, who had been permitted to enter the piaintiffs cell.

Similarly in Bush v. Babb, 23 Ill. App. 2d 285, 162 N.E. 2d

594, 597 (1959), where the sheriff and jail warden were sued

by a man who had become tubercular while an inmate, charg-

ing that defendant's negligence in caring for his health had

—_

caused his illness, the dismissal of suit was affirmed because

the officers’ duties were owed to the state “. . . and not to the

individuals who are the inmates... .~

Again, in this respect. the Court of Appeals for the Seventh

Circuit has decided an important state question in a way in

conflict with applicable law of the State of Illinois.

Summation as to Part I

The decision of the Court of Appeals in this case is in con-

flict with the decisions of this Court and with the decisions of

the Court of Appeals for the Second Circuit and for the Dis-

trict of Columbia, respectively. Further, because the Court of

Appeals in its decision found that Knight had “intentionally

disregarded his official duties” had been alleged, whereas in

fact it had not been alleged, the record in this case has been

misquoted; and because the Receivers’ First Amended Cross-

Complaint failed to allege “malice,” “intention,” or “wanton,”

Rule 9 (b) of the Federal Rules of Civil Procedure was man-

ifestly violated. and the exercise of power of supervision of

this Court is called for. For the stated reasons, certiorari

should be granted. The end results of these conflicts has been

the denial to Knight—and to his Executor—of the immunity

froin personal iiability that is accorded high state officials, which

is a violation of his rights to due process guaranteed by the

Fourteenth Amendment.

Part Il

Denial of Official Immunity.

The District Court and the Court of Appeals again denied

to Knight the doctrine of immunity of high state officials by

holding his estate liable under the averments of Count I of

the Receivers’ First Amended Cross-Complaint. Count Il al-

2

leges that on June 26, 1964, Knight and his Supervisor of Sav-

ings and Loan Associations took custody of the assets of City

Savings upon a determination that it was their statutory duty

to do so. The pleading then charged that Knight, in less than

three months, delivered custody of the assets to voluntary liqui-

dators while the causes for taking custody had not been cor-

rected. At no place in the cross-complaint was the voluntary

liquidation attacked as fraudulent, improperly adopted, or in

any way inspired by Mr. C. Oran Mensik, or by any other

person. Indeed, the plan of voluntary liquidation had been pre-

pared by the Attorney General of Illinois, as pleaded in the

Executor’s answer (App. J, p. A-94), and as found by the

District Court (App. B, pp. A-50-51).

Nevertheless the District Court and the Court of Appeals

held Knight liable for his decision as Director of the Department

of Financial Institutions, to approve the plan of voluntary liqui-

dation and to deliver the assets to the liquidators (App. B, p.

A-52; App. pp. A-10-13). In doing so, both courts refused to

uphold the doctrine of official immunity and thereby denied

due process to Knight and his Executor.

Under Article 9, Sections 901-902 of the Illinois Savings and

Loan Act, Vol. 1, Il. Rev. Stat. 1963, Ch. 32, pp. 1285-1286

(App. H, pp. A-78-83), an association may liquidate voluntarily

upon approval of two-thirds or more of the total number of

votes which all members of the association are entitled to cast.

This may be done at any time, regardless of whether the Direc-

tor of Financial Institutions had taken custody of the associ-

ation’s assets, and regardless of whether the causes for having

done so have been corrected.

The court circumvented the doctrine of official immunity as

applied to Count II by holding that Knight's failure to appoint

a receiver for the Association and his failure to direct the At-

torney General of Illinois to initiate court action for liquidation

=

and dissolution, and for an injunction restraining the manage-

ment for continuing operations, was a breach of a ministerial

duty, (App. B, pp. A-52-53). In taknig this position, the court

expressly relied upon and quoted Sections 921 and 922 of the

Illinois Savings and Loan Act, Vol. 1, Ill. Rev. Stat. 1963, Ch.

32 § 921-922, p. 1287 (App. H, pp. A-83-84).

These sections are a part of Article 10 of the Act, which on

its face applies exclusively to involuntary liquidations. However,

both the District Court and the Circuit Court of Appeals found

this liquidation to have been a voluntary one (App. A, pp. A-10-

11; App. B. pp. A-50-52). As previously stated, the part of the

Illinois Savings and Loan Act which applies to voluntary liqui-

dations is Article 9 thereof (App. H. pp. A-78-83). In Section

904 of that Article it is stated in part:

“(b) If the Director finds that the plan and proceedings are

in accordance with this Act, that the bonds of the liquidators

are sufficient, and that the plan is not unfair to any person

affected, he shall attach his certificate of approval to the plan

as I shall forward one copy to the liquidators, and in the

case of an insured association, one copy to the insurance cor-

poration.”

The statute then provides that the plan becomes effective

upon the recording of the Director's certificate of approval.

This decision by the Director is necessarily a discretionary

one, manifestly excluding any aspect of being ministerial. More-

over, the plan of liquidation was prepared and approved by the

Attorney General of Illinois, as above stated, and no corrup-

tion, negligence, or ineptitude was alleged as to him or as to

any other person at any time. (App. I, pp. A-89-92).

Therefore, the refusal of the District Court to follow the

doctrine of official immunity—which had been pleaded with

——

particularity—and the approval by the Court of Appeals of

this refusal was founded upon a misapplication of statutory pro-

visions, resulting in the denial of due process to Knight, con-

trary to the provision of the Fourteenth Amendment to the

Constitution.

Summation as to Part I

Because of the manifest misapplication of Article 10 of the

Illinois Savings and Loan Act (which pertained only to involun-

tary liquidations), to what was acknowledged to be a voluntary

liquidation of a savings and loan association (regulated by Article

9 of the Act), the exercise of the power of supervision of this

Court is called for. Moreover, in misapplying the statute, the

Court of Appeals and the District Court erroneously charged

Knight with having violated a ministerial duty and thereby denied

him and his Executor any of the immunity to which he was

entitled by due process. Therefore, certiorari should be granted.

| momo meer

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C@NCLUSION

Inasmuch as the denial of the doctrine of official immunity—

whether it be absolute or qualified—to Knight and his Estate,

as set forth under Part I hereof, and the further denial of im-

munity which was affected by the statutory misapplication set

forth in Part II hereof, would deny due process to Knight and

to his Estate, contrary to the Fourteenth Amendment to the

Constitution, and because of the impact of the decision of the

Court of Appeals upon the hundreds of thousands of govern-

ment officials and employees at federal, state, and local levels,

whose duties are discretionary, the writ of certiorari should be

granted.

Respectfully submitted,

J. F. SCHLAFLY

Post Office Box 190

Alton, Illinois 62002

(618) 465-7733

RAYMOND F. McNALLY, JR.

611 Olive Street

St. Louis, Missouri 62101

(314) 621-1614

EDWARD S. MACIE

111 West Washington Street

Chicago, Illinois 60603

(312) 372-6242

Attorneys for Petitioner