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FDIC Enforcement Decisions and Orders |
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Board adopts the recommendation of the ALJ and grants enforcement counsel's motion for summary disposition based on respondent's failure to respond to a request for admissions. Holding that the uncontested request for admissions leaves no genuine issue of material fact, the Board finds unsafe and unsound practices and issues a cease and desist order.
[.1] Practice and ProcedureSummary DispositionALJ Authority
[.2] Practice and ProcedureSummary DispositionObjection
[.3] Practice and ProcedureSummary DispositionSettlement Efforts
In the Matter of
The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC" or "Petitioner") enters this Order to Cease and Desist and fully adopts and incorporates herein the Findings of Fact, Conclusions of Law, and Recommended Decision
{{5-31-92 p.A-1886}}of Administrative Law Judge Steven M. Charno ("ALJ"), granting FDIC Enforcement Counsel's Motion for Summary Disposition based upon the failure of Respondent Capital Bank, St. Paul, Minnesota ("Respondent" or "Bank"), to respond to FDIC Enforcement Counsel's Request for Admissions.1
This case was initiated by a Notice of Charges and of Hearing ("Notice') issued by the FDIC on April 2, 1991. A timely Answer was filed by Respondent. At a Prehearing Conference held on June 17, 1991, Petitioner was ordered to file and serve a Request for Admissions in the form of Proposed Findings of Fact and Conclusions of Law, due July 15, 1991, which was timely filed. The June 17, 1991, Prehearing Order provided that a Proposed Finding submitted by Petitioner "shall be deemed uncontested if no statement of disagreement is made with respect thereto, or no description of proposed evidence or legal authority is made in support of a statement of disagreement." Respondent's response was initially due August 5, 1991, but as a result of settlement discussions between the parties, the parties stipulated that Respondent was to be given until August 12, 1991, to file its response. After a failure to bring this matter to settlement and failure to comply with the August 12 deadline, a new Prehearing Order was entered on August 30, 1991. This Prehearing Order set September 23, 1991, as the new due date for Respondent's response to Petitioner's Request for Admissions. It contained the same provision regarding the consequences of failure to respond to a Proposed Finding. No response to Petitioner's Request for Admissions has ever been filed by Respondent.
This proceeding came to the Board by way of a recommended decision issued as a result of the Respondent's failure to deny the facts upon which the action is based. In essence, the ALJ issued a default decision. Respondent alleges in its Exceptions to the ALJ's Recommended Decision that the default is improper because a settlement had been agreed to by both parties. Thus, the procedural posture of this matter is confusing at best. One party claims a settlement occurred; ordinarily, the other party has no opportunity under our regulations to respond to assertions made in Exceptions; and the record up to the date of the ALJ's Recommended Decision is unclear as to exactly what transpired and contains no signed consent cease-and-desist order. Under these circumstances, the Board would be inclined to reopen the record to order a response by FDIC Enforcement Counsel to Respondent's allegations of settlement.
Respondent makes two assertions in its Exceptions. First, it "excepts to the legal authority of the FDIC to request that Judge Charno decide a motion for summary disposition under the facts and circumstances of this case." Except. at 1. Second, Respondent claims that the FDIC "dishonored" its contract with the Bank "When [it] chose to `revoke' its offer of settlement on or after November 4, 1991, . . . this offer hav[ing] already been accepted and the Bank ha[ving] relied to its detriment upon the offer and its acceptance." Except. at 6.
A. Summary Disposition
[.1, .2] The FDIC Rules clearly establish the authority of the ALJ to recommend an order granting summary disposition. 12 C.F.R. §308.29(a).5The cases in which administrative agencies have issued summary disposition orders are too numerous to list. The United States Supreme Court has approved the summary disposition of matters before an administrative agency. Kostle v. Pacific Legal Foundation et al., 445 U.S. 198 (1980); Weinberger v. Hynson, Westcott and Dunning, Inc., 412 U.S. 609 (1973).
B. Respondent's Contract Theory
Respondent's legal theory of contract formation is incorrect.6That a settlement is not reached until there is a "meeting of the minds" and both parties have affixed their signatures to a written agreement is fundamental contract law.7In this case, both elements of the contract are missing. There has been no meeting of the minds and no
The Board of Directors ("Board") of the Federal Deposit Insurance Corporation ("FDIC"), having fully considered the record in this proceeding, hereby adopts the recommendation of the administrative law judge and GRANTS FDIC Enforcement Counsel's Motion for Summary Disposition.
/s/ Hoyle L. Robinson
APPENDIX A
In the Matter of
Jurisdiction
1.1. The above captioned matter was commenced by the issuance of a Notice of Charges and of Hearing to be served upon Capital Bank, St. Paul, Minnesota ("Bank"), issued on April 2, 1991.
Adversely Classified Loans
2.1. The FDIC Manual of Examination Policies in effect as of August 11, 1990, provides for three possible adverse classifications of loans, "Substandard," "Doubtful," and "Loss."
3.1. Citation of a loan as a "Technical Exception" indicates the FDIC Examiner's determination that there is a technical deficiency in the documentation of the loan.
Excessive Volume of Poor Quality Loans
4.1. As of August 10, 1990, the Bank's total capital, as defined by 12 C.F.R. § 325.2(a), equaled $3,414,000.
5.1. As of August 10, 1990, the Bank's allowance for loan and lease losses ("allowance") was $930,000.
6.1. As of August 10, 1990, The Bank's assets subject to interest rate adjustment within three months equaled $15,190,000.
7.1. For the calendar year 1987, the Bank had negative earnings of $389,000.
8.1. In 1989 the Bank paid its president, Richard Donohoo, a salary of $85,000.
Holding Company Receivable
9.1. At all times pertinent to this proceeding, Capital City Corporation ("CCC") was a one-bank holding company existing and doing business under the laws of the State of Minnesota.
Pentagon Park Associates Loan
9.17. On July 31, 1990, the Bank made an extension of credit in the amount of $485,000 to Pentagon Park Associates.
9.30. As of August 10, 1990, the Bank owned investments in municipal bonds with a book value of $331,000.
10.1. During the period between the Bank's last FDIC examination of August 25, 1989 through the FDIC examination as of August 10, 1990, efforts employed by the Bank's management to prevent further deterioration in the Bank's loans not previously classified have proven unsuccessful.
11.1. Based upon the contents of the Report of Examination as of August 10, 1990, the FDIC concluded that the Bank was a financial institution with severe problems and an extreme risk to the insurance fund.
12.1. The Bank is subject to the Federal Deposit Insurance Act ("Act'), 12 U.S.C. §§ 1811-1831(k), the Rules and Regulations of the FDIC, 12 C.F.R. Chapter III, and the laws, rules and regulations of the State of Minnesota.
IT IS HEREBY ORDERED, that the Bank, its institution-affiliated parties, as that term is defined in section 3(u) of the Act, 12 U.S.C. § 1813(u), and its successors and assigns cease and desist from the following unsafe and unsound banking practices and violations of law and/or regulations: |
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