McDonald v. Department of Banking and Finance, DD-375

CourtCourt of Appeal of Florida (US)
Citation346 So.2d 569
Docket NumberNo. DD-375,DD-375
PartiesRaymond O. McDONALD, Jr., et al., Petitioners, v. DEPARTMENT OF BANKING AND FINANCE, State of Florida, Respondent.
Decision Date10 May 1977

J. Riley Davis, Wilbur E. Brewton, and Clyde M. Taylor, Jr., of Taylor, Brion, Buker & Greene, Tallahassee, for petitioners.

Edward E. Kuhnel, Gen. Counsel, and William B. Corbett, Jr., Asst. Gen. Counsel, Tallahassee, for respondent.

SMITH, Judge.

Petitioners unsuccessfully applied to the Department of Banking and Finance, Division of Banking, for authority to organize and operate First Bank of Port Richey. Here they seek judicial review of the Department's final order which denied their application after formal proceedings were conducted under the Administrative Procedure

Act (APA), Section 120.57, 1 by a hearing officer of the Division of Administrative Hearings

We are required to reconcile the competing purposes of two statutes, one substantive, one procedural, which now affect awards of State banking authority. On the one hand, discretionary power to grant or deny banking authority is committed by Section 659.03 to the Department, which by rule has concentrated that power in the Comptroller as agency head. Sections 20.12, 20.05(5), Fla.Admin.Code Rule 3C-10. Section 659.03 restricts the Department's discretion only by requiring, in subsection (1), that "the department shall make an investigation" of the applicants' qualifications 2 and by directing, in subsection (2), that the Department "not approve such application until, in its opinion":

"(a) Public convenience and advantage will be promoted by the establishment of the proposed bank or trust company.

"(b) Local conditions assure reasonable promise of successful operation for the proposed bank or the principal office of the proposed trust company and those banks or trust companies already established in the community.

"(c) The proposed capital structure is adequate.

"(d) The proposed officers and directors have sufficient banking or trust experience, ability and standing to assure reasonable promise of successful operation.

"(e) The name of the proposed bank or trust company is not so similar as to cause confusion with the name of an existing bank.

"(f) Provision has been made for suitable banking house quarters in the area specified in the application." Section 659.03(2).

In counterpoise to that broad grant by Section 659.03, the APA tends to confine the Comptroller's discretion by requiring he accept and act on facts as found by the hearing officer on competent substantial evidence. 3 Here the hearing officer made detailed findings of fact tending to show that petitioners satisfy Section 659.03 standards, concluded that petitioners do satisfy those standards, and accordingly recommended they be granted authority to organize First Bank of Port Richey. The Comptroller's order discarded the hearing officer's findings of fact as not based on competent substantial evidence, substituted other and contrary findings, explained in some measure the Comptroller's policies militating against petitioners' application, and finally denied the application.

The applicants' petition for review asserts the Comptroller erroneously discarded the hearing officer's findings of fact which are supported by competent substantial evidence

and erroneously based his decision on improperly substituted findings of fact. The Department urges both that its substituted findings are proper and that a reviewing court must "not substitute its judgment for that of the agency as to the weight of the evidence on any disputed findings of fact." Section 120.68(10). The Department also declares the hearing officer's findings are of little consequence even if accurate, because the Comptroller's discretion must ultimately govern, and a reviewing court "shall not substitute its judgment for that of the agency on an issue of discretion." Section 120.68(12)

In August 1973, applicants McDonald, Blackwood (since replaced by Prentice), Clark, Boyce and Scheer petitioned the Department for authority to organize and operate First Bank of Port Richey near a shopping center on a major highway in Port Richey, Pasco County, Florida. Six banks in the vicinity protested the application on various grounds. On April 24, 1974, State banking examiner Hieronymus, after a joint investigation with a Federal Deposit Insurance Corporation examiner, reported unfavorably to Comptroller Dickinson. Notwithstanding other internal recommendations of disapproval, Comptroller Dickinson on December 20, 1974, entered an order approving petitioners' application on stated conditions. When Comptroller Lewis took office in January 1975, the Department adopted an emergency rule authorizing revocation of conditional approval orders, and Comptroller Lewis revoked the conditional approval granted petitioners. On March 22, 1975, after a further investigation, examiner Hieronymus submitted an updated report reciting need for additional field examination time but recommending Comptroller disapproval of the application on grounds "the opportunity for return on investment of an amount to meet the criteria of the Division of Banking is less than probable," proposed management is inadequate and, because of unfavorable economic conditions, local convenience and needs would not be served by the new bank.

In April 1975, in accordance with Department rules, a "Comptroller's conference" was held where applicants, protestants and others presented evidence and argument. In October 1975, the Comptroller entered an order denying the application on the ground local conditions did not assure reasonable promise of successful operation for the proposed bank, as required by Section 659.03(2)(b). The Comptroller found "the establishment of the proposed bank would promote, to some degree, the public convenience in the area," as required by subsection 2(a), but expressed no conclusion concerning petitioners' satisfaction of subsections 659.03(2)(c) through (f).

Petitioners thereupon requested that formal proceedings be conducted as required by the APA when a party's substantial interests are to be determined and there is a disputed issue of material fact. Section 120.57(1). Litigation ensued in the Leon County circuit court, as a result of which, on January 6, 1976, the court found Comptroller Lewis had agreed to process bank charter applications in accordance with the newly effective APA 4 and ordered formal proceedings under Section 120.57(1).

Comptroller Lewis, though authorized as agency head to conduct formal proceedings under Section 120.57(1), referred the matter to the Division of Administrative Hearings, whose assigned hearing officer, Diane D. Tremor, conducted hearings in April 1976 and entered a recommended order in June.

That order made "findings of fact" which we summarize here in the same order that Section 659.03(2) lists the essential standards for granting banking authority

(a) Public convenience and advantage. The proposed bank is to be located on a busy corner of Ridge Road and U. S. Highway 19 at the Port Richey Shopping Village, near large residential areas and a junior college site. Though the owners of the shopping center are experiencing financial difficulty, the center is 93 percent occupied. Three savings and loan institutions are nearby, but the nearest banks are 2.3 and 3.5 miles from the proposed location. Most of the seven existing banks in the area are closer to each other than the proposed bank would be to them.

(b) Reasonable promise of success. Pasco County is one of Florida's faster growing areas. More than 16,000 persons reside in the 14 square miles constituting the proposed bank's trade area, as compared with the average of 12,000 residents in a typical trade area. Although existing Pasco County banks suffered substantially from the effects of inflation and recession for two years before the April 1975 hearing, economic conditions are "now beginning to pick up" and area banks gained substantial deposits in 1975. Pasco County banks increased deposits 8.1 percent in 1975, as contrasted to substantially poorer performances by banks in Duval, Polk and Hillsborough counties, where the Department nevertheless granted banking authority in 1975. While the proposed bank might operate at a loss in its first year, as is the common experience, projections of both deposits and profits for the second and third years indicate, as former examiner Hieronymus stated on petitioners' cross-examination, a reasonable promise of a profitable operation. No existing bank apprehended adverse effects other than normal competition.

(c) Capitalization. $1,500,000 is adequate, as found by examiner Hieronymus in his reports and testimony.

(d) Management. The proposed officers and directors represent a cross section of the community. Each has prior business experience and three have banking experience with new and established banks. Mr. McDonald, the proposed president and chief executive officer, was executive vice president of a Tampa bank and director of a Lakeland bank and thus was not without experience, as erroneously reported in the Department's original and updated examiner's reports.

(e) Name confusion. Although numerous banks in Florida use the word "First" in their names, the proposed name of First Bank of Port Richey should cause no conflict or confusion with any existing bank.

(f) Facilities. The applicants propose a 14,000 square foot building as a permanent banking facility, built at a reasonable cost, and temporary facilities in a modular unit adjacent to the construction site. "The temporary unit will be leased and will comply with federal security and bonding requirements."

In stating the above "findings of fact," the recommended order also recorded the hearing officer's reason for overruling the Department's objection to admission of...

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