in advance nor subsequently ratified by the Board or by the Chairman.
The Bondholders' contention is not frivolous. In fact the RTC has no persuasive answer to it.
The governing statute, 12 U.S.C. § 1441a(b)(10)(J), provides that the RTC shall "prescribe through its Board of Directors bylaws that shall be consistent with law." The Board of Directors adopted bylaws for the RTC on August 9, 1989. Art. IV, Section 5 of the bylaws vests in the Board "the management of the Corporation" as well as "all the powers specifically granted by" FIRREA and other laws of the United States "and such incidental powers as shall be necessary to carry out the powers so granted." This section goes on to authorize the Board to "delegate any of its specific or incidental powers to any . . . committee . . . or to any officer or agent of the Corporation." Art. VII provides for the Officers. They are named in Section 1, and Section 2 provides that the "officers of the Corporation shall have such powers and shall perform such duties as the Chairperson or the Board of Directors may from time to time prescribe." On October 24, 1989, the Board of Directors approved delegations of authority for certain committees and officers of the RTC. The document is extremely detailed and consumes over 60 single-spaced, typed pages. Chapter IV of this document covers the "Delegations of Authority to the Executive Director and to the Director of the Resolutions and Operations Division," the latter being the officer (William Roelle) who made the repudiation decision. The delegations to these two high officers are highly specific and consume 18 pages, divided into two categories of Asset Authority and Operational Authority. Many of the delegations of authority carry limits of monetary amount (such as A(2) which provides authority to sell assets having an appraised value up to $ 50 million). The introductory language specifies as to authorizations carrying stated monetary limits that they are expected to be exercised only in the event that the pertinent "RTC Committee is unable to convene and the Executive Director is absent and the decision requires immediate action."
Nowhere among these extensive detailed delegations to the Director of Resolutions and Operations is there one relating to the repudiation of contracts, much less involving the very large amounts of money at issue in this instance.
RTC offers several ineffectual answers: First, dealing with the text of the delegations to Roelle's office, it cites the delegation numbered B(14), which confers the power "to execute powers of attorney on behalf of the Corporation, as conservator, receiver, or in its corporate capacity, for the purpose of granting such powers as may be convenient in the disposition of assets acquired or controlled by the Corporation or for the exercise of all the powers conferred upon the Corporation as receiver. . . ." (emphasis added). Through a combination of hyper-literal reading and loose interpretation, the RTC contends that this delegated power authorizes Roelle to repudiate the Bonds. Read literally, RTC argues, it authorizes Roelle to execute a power of attorney in favor of another person granting all the powers of the Corporation as receiver. Then shifting to a loose interpretation, the RTC reasons that Roelle cannot logically be empowered to delegate authority which he does not himself possess; thus he must be empowered himself to exercise all the powers of the Corporation, including repudiation without limit.
This reading makes nonsense of the elaborately crafted and carefully circumscribed delegations to Roelle's office. If it were true that this authorization conferred all the powers of the RTC as receiver, then the remainder of the 18 pages of more narrowly tailored authorizations would be reduced to a nullity. All would be subsumed in the broader, indeed global, power. It is perfectly clear in the context that, although inartfully drafted, this authorization is intended to permit the Director of the Resolutions and Operations Division to delegate any of the powers he or she possesses, and not to expand the power of that office to include all the powers of the RTC.
The RTC contends that because Roelle was in charge of all conservancy operations, he must have been authorized to order repudiations. Perhaps it would have been wise of the Board to confer that power on him. Perhaps the Board would have done so had it thought of the question. But the simple fact is, it did not do so. Furthermore, the delegations that were in fact conferred do not support the contention that the Board intended to confer such unlimited authority on Roelle's office. For the delegations actually conferred are full of restrictions at monetary amounts far below what would be involved in the repudiation of a $ 2.9 billion bond issue.
The RTC then argues that if the Director of Resolutions and Operations does not possess this power, this means that the Board of Directors must be importuned with many small issues affecting individual contract repudiations which it does not have time to deal with. There is no merit to the argument. First of all, the repudiation of a $ 2.9 billion bond issue is not a trifle. Second, if the Board wishes to delegate the authority to deal with such matters, it need only do so. Third, the inquiry here undertaken has been only to ascertain whether there had been a delegation of such authority to the Director of Resolutions and Operations, as he was the officer who acted to repudiate in this instance. The fact that no such authority was found does not necessarily mean that no such delegation was made to any other officer of committee of the Corporation. What has been established here is only that the officer who purported to repudiate on behalf of the RTC had not received a delegation of power to do so from the Board.
I conclude that the RTC did not effectively repudiate Franklin's zero coupon bonds. The fact that an unauthorized official of RTC purported to repudiate on RTC's behalf did not constitute a legally effective repudiation by the RTC.
* * *
My resolution of this issue moots the Trustee's and Bondholders' other challenges to the actions of the RTC. I accordingly need not resolve whether the purported repudiation violated the prohibition against avoiding security interests or whether the RTC employed the correct measure of damages as compensation for the repudiated bonds.
The court finds for the reasons stated above that the action of the RTC's Director of Resolutions and Operations of June 8, 1990, purporting to repudiate the Franklin zero coupon bond issue, did not effectively repudiate because that officer was not authorized under the RTC's charter by-laws and governing statute to take such action on the RTC's behalf.
Judgment is granted to the Plaintiff-Trustee and the Bondholders.
Dated: New York, N.Y.
October 13, 1992
Pierre N. Leval, U.S.D.J.