First State Bank of Atmore v. Thompson

Citation538 So.2d 25
PartiesFIRST STATE BANK OF ATMORE, a state banking corporation v. Zack THOMPSON, Superintendent of Banks, State of Alabama Banking Department; Federal Deposit Insurance Corporation; and First National Bank of Atmore. Civ. 6245.
Decision Date23 December 1987
CourtAlabama Court of Civil Appeals

Charles R. Godwin, Atmore, for appellant.

Terry R. Smyly, Gen. Counsel, State of Alabama Banking Dept., Montgomery, for appellee Zack Thompson, Superintendent of Banks.

Charles M. Crook of Balch & Bingham, Montgomery, for appellees Federal Deposit Ins. Corp. and First Nat. Bank of Atmore.

HOLMES, Judge.

This is a case involving the application and interpretation of certain provisions of the Alabama Banking Code, Chapters 1A through 12A of Title 5 of the 1975 Alabama Code (1981 Repl. Vol.).

This suit is the result of proceedings initiated by the superintendent of the State Banking Department (SBD) to take possession of the First State Bank of Atmore (bank) under the authority of Ala.Code (1975), § 5-8A-20. The bank filed suit pursuant to Ala.Code (1975), § 5-8A-27, to enjoin those proceedings, naming as defendants the superintendent, the Federal Deposit Insurance Corporation (FDIC), and the First National Bank of Atmore, which, as the highest bidder, assumed the bank's deposit liabilities and certain of its assets.

Following ore tenus proceedings, the trial court denied the relief sought by the bank and entered a judgment for the defendants.

The bank appeals. We affirm.

Viewing the record with the attendant presumptions, we find that the following is revealed. The bank, which commenced business on February 22, 1984, has had a troubled existence during the few years that it has been in business. When the SBD first examined the bank in June 1985, it was apparently already operating under certain unsatisfactory conditions. A joint examination by the SBD and the FDIC approximately six months later indicated that the unsatisfactory conditions had worsened. During that six-month period the bank's capital had decreased sharply.

In May 1986 the bank entered into a "stipulation and consent" agreement with the FDIC, whereby it consented to the FDIC's issuance of a cease and desist order (C & D) against it without first receiving a notice of the charges against it and a hearing on those charges. The superintendent approved the stipulation and consent and agreed that the C & D issued by the FDIC would be binding upon him and the bank to the same extent as a C & D issued under Ala.Code (1975), § 5-2A-12. Thereafter, on July 9, 1986, the FDIC issued the C & D, wherein it made many specific requirements of the bank aimed at improving or correcting the bank's financial condition.

In January 1987, approximately six months after the issuance of the C & D, the SBD and the FDIC again conducted a joint examination of the bank. They discovered that the bank still had a deficit capital situation and that it was, therefore, illegally making loans.

One month later the State Banking Board, based upon the superintendent's recommendation and following a meeting in which the bank's directors had the opportunity to be heard, directed the superintendent to take possession of the bank, and he initiated proceedings to do so. This suit followed.

I

On appeal the bank contends that the superintendent had no right to take possession of the bank because he was bound by the terms, including the enforcement provisions, of the C & D. The bank further contends that, because it relied in good faith on the rehabilitation plan set forth in the C & D, it should be protected from enforcement action by the superintendent which is contrary to the terms of the C & D.

The bank apparently believes and takes the position that the C & D issued by the FDIC and joined in by the superintendent was a bargained-for agreement which was mutually binding upon the bank and the superintendent. We find the bank's position to be without merit.

The only possible agreement entered into by the superintendent and the bank was the stipulation and consent. Under the terms thereof the superintendent agreed that the C & D issued by the FDIC would be binding upon him and the bank as if he had issued a separate C & D under Ala.Code (1975), § 5-2A-12. There is nothing in the stipulation and consent, however, which in any way makes the terms and provisions of the C & D itself a mutually binding obligation or contract.

Moreover, there is nothing within the provisions of the C & D which indicates that that document was intended in any way to be an agreement between the bank and the FDIC or the superintendent. Indeed, the C & D does not require either the superintendent or the FDIC to do anything vis-a-vis the bank. Rather, it sets forth sixteen pages of specific requirements of the bank.

The bank, however, apparently also contends that the superintendent is bound by the enforcement provisions of Ala.Code (1975), § 5-2A-12, because he agreed in the stipulation and consent that the C & D would be binding as an order issued pursuant to that statute.

Section 5-2A-12 authorizes the superintendent to order the board of directors of any bank to correct any matters in the conduct of the affairs of the bank which are, in his opinion, unsafe and unsound. The statute provides that the State Banking Board may remove any bank director or officer who does not comply with the superintendent's order if it determines, for example, that the bank has suffered a substantial financial loss or that personal dishonesty on the part of such director or officer is involved.

The bank contends that the superintendent, having in effect issued a C & D under § 5-2A-12, is now limited to the sole enforcement mechanism contained in the statute--the removal of the bank's officers and directors.

The bank's contention basically presents a question of statutory interpretation. The cardinal rule governing the construction of a statute is to ascertain the legislative intent, and that intent is determined by examining the language of the legislation as a whole in light of its general purpose. Gulf Coast Media, Inc. v. Mobile Press Register, Inc., 470 So.2d 1211 (Ala.1985); Mitchell v. State Child Abuse & Neglect Prevention Board, 512 So.2d 778 (Ala.Civ.App.1987). The words used in the statute should be given their natural, plain, ordinary and commonly understood meaning. See Alabama Farm Bureau Mutual Casualty Insurance Co. v. City of Hartselle, 460 So.2d 1219 (Ala.1984); Mitchell, 512 So.2d 778.

Applying these rules to the construction of § 5-2A-12, we can conclude not only that the statute does not make a C & D issued thereunder a mutually binding obligation as between a bank and the superintendent, but also that the statute does not limit the superintendent's enforcement options to the removal of bank directors or officers once he has issued a C & D.

The determination of whether the superintendent had the right to take possession of the bank, however, requires more than simply an interpretation of § 5-2A-12 standing alone. Rather, the entire statutory scheme relative to unsound or unsafe banks and the powers of the superintendent with regard thereto must be examined. See City of Hartselle, 460 So.2d 1219; Mitchell, 512 So.2d 778.

Ala.Code (1975), § 5-8A-20, is the statute...

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