Federal Deposit
Insurance Corporation

{{3-31-93 p.A-2149}}
   [¶5191] In the Matter of Bay Loan and Investment Bank, East Greenwich, Rhode Island, Docket No. FDIC-92-258j (1-5-93).

   FDIC Board dismisses as moot the notice disapproving application to acquire control of another institution because option to purchase had expired.

   [.1] Change in Bank Control Act—Notice of Disapproval—Mootness
   Proceeding concerning an institution's qualifications to acquire another bank is moot after expiration of the contractual right to acquire control. Determination of qualifications is dependent on the specific conditions of the institutions involved and cannot be decided in the abstract.

In the Matter of

BAY LOAN AND INVESTMENT
BANK
EAST GREENWICH, RHODE
ISLAND
(Insured State Nonmember Bank)
DECISION AND ORDER
FDIC-92-258j

   This proceeding is an appeal by Berwyn Holdings, Incorporated ("Berwyn") from a Notice of Disapproval of Acquisition of Control and Notice of Hearing ("Notice of Disapproval") issued August 13, 1992, by the Federal Deposit Insurance Corporation ("FDIC") pursuant to the Change in Bank Control Act ("CBCA"), section 7(j) of the Federal Deposit Insurance Act ("Act"), 12 U.S.C. §1817(j), and the FDIC's Rules of Practice and Procedure, 12 C.F.R. Part 308, concerning Bay Loan and Investment Bank, East Greenwich, Rhode Island ("Bank").¹
   Berwyn filed a Request for Hearing and for Expedited Hearing dated August 18, 1992, stating that, "[t]he terms of the acquisition agreement expire on or before August 31, after which time Berwyn may be deprived of its opportunity to acquire [the Bank]." The matter was assigned for hearing to Administrative Law Judge Walter J. Alprin ("ALJ"). At the first scheduling conference held on August 24, 1992, the parties were ordered to exchange First Witness Lists and First Exhibit Lists by September 9, 1992.
   On September 4, 1992, FDIC Enforcement Counsel filed a Motion for Summary Disposition, requesting that the proceeding be dismissed because, "[a]s the opportunity for [Berwyn] to acquire the stock of [the Bank] has expired, the issue is now moot." The Motion alleges that the Stock Purchase and Sale Agreement dated March 13, 1992, between Berwyn and FPL Holdings, Inc. ("FPLH"), owner of the Bank's parent holding company, Colonial Penn Capital Holdings, Inc., expired by its own terms on August 31, 1992, and that FPLH notified Berwyn by letter dated August 31, 1992 that the Stock Purchase and Sale Agreement was terminated, effective immediately. Copies of the FPLH letter dated August 31, 1992, to Berwyn, and the Stock Purchase and Sale Agreement dated March 13, 1992, between FPLH and Berwyn, and the Amendment thereto dated August 6, 1992, were attached to the Motion as exhibits.
   In its Response to the FDIC's Motion for Summary Disposition, Berwyn "neither consents to nor opposes that motion," asserting that the FDIC's disapproval of its notice of acquisition of control was in error but admitting that, "it is correct that the acquisition agreement expired by its own terms on August 31, 1992 while the FDIC's disapproval remained effective."
   In a Supplemental Response dated September 11, 1992, Berwyn notes that the FDIC's September 8, 1992, denial of Berwyn's August 27, 1992, request for reconsideration of the Notice of Disapproval stated that Berwyn "will be given full opportunity to present its case at the administrative hearing." Berwyn argues that "such an assurance and representation is inconsistent with the position of the FDIC in its dispositive motion."
   On September 15, 1992, the ALJ issued a Recommended Order of Summary Disposition by Dismissal for Lack of Justiciable

   [.1] After review of the entire record in this proceeding, the Board of Directors ("Board") of the FDIC agrees with the finding and conclusion of the ALJ that Berwyn's contractual right to acquire control of the Bank having expired and, the seller having expressly refused to extend the contract term, there is no longer a justiciable issue in this proceeding. The conclusion is so clear that Respondent has not opposed it. The Board recently held, in a proceeding concerning a Notice of Disapproval of a Notification of Employment of a Senior Executive Officer of a bank in "troubled condition," under section 32 of the Act, 12 U.S.C. §1831i, that where the bank in question had ceased to exist during the course of the proceedings, the case was moot: "[a]s of May 1, 1992, the Bank no longer existed. This proceeding became nothing more than an academic exercise, an abstract inquiry into Petitioner's competence for a nonexistent position." In the Matter of Donald E. Thompson, Bank of Bellevue, Bellevue, Nebraska, Docket No. FDIC-91-246jj (September 15, 1992), at page 6. In so holding, the Board noted that, in a section 32 proceeding, an individual's competence, experience, character or integrity—the factors provided in section 32 of the Act—is evaluated in relation to the particular institution involved, the specific position in which the Applicant seeks to be employed, and any special needs of that institution, citing In the Matter of Daniel R. Cartier, Verona Exchange Bank, Verona, Illinois, Docket No. FDIC-90-153jj, 2 P-H FDIC Enf. Dec. ¶5162A (1991).
   The Board is of the view that the reasoning in the Thompson and Cartier cases is relevant to a proceeding under the CBCA. The Board has previously held that the size, condition, and nature and complexity of the operations of the bank at the time the application is filed will be considered in evaluating a CBCA application. In the Matter of Boundary Waters State Bank, Ely, Minnesota, Docket No. FDIC-89-161j, 2 P-H FDIC Enf. Dec. ¶5155 (1990). Berwyn's right to acquire control of the Bank having expired, this proceeding has also become an academic exercise, an abstract inquiry into Berwyn's competence, experience, and financial capacity to control a bank as to which it has no acquisition rights.
   In the Thompson case, the Board ordered that the Notice of Disapproval be rescinded, rather than dismissing the proceeding. The Board concludes that rescission of the Notice of Disapproval is the correct action to take in this proceeding as well, for the reasons stated in the Thompson case. That is, complete relief is thereby afforded the applicant without burdening the agency and the applicant with further proceedings which would be expensive, time-consuming, and meaningless. Should Berwyn in the future contract to acquire control of the Bank or any other depository institution subject to the CBCA, it will of course be required to file an application pursuant to section 7(j) of the Act, which will be evaluated in accordance with the statutory factors set forth in section 7(j)(7) of the Act, based upon the specific information set forth in the application and the size, condition, and nature and complexity of the operations of the bank proposed to be acquired.

   The Board concludes that this proceeding has been rendered moot by the fact that Berwyn no longer has a contractual right to acquire control of the Bank. Because its rights to acquire control of the Bank have expired, Berwyn's competence, experience, financial strength, and other factors relevant to an evaluation under the CBCA are no longer in issue; hence the proceeding should be terminated and the Notice of Disapproval rescinded.

   The Board of the FDIC, having considered the entire record in this proceeding, and having determined that this proceeding concerning Berwyn's qualifications to acquire Bay Loan and Investment Bank, East Greenwich, Rhode Island, is moot because its rights to acquire control of the Bank have expired, hereby adopts in part and modifies in part the Recommended Order of Summary Disposition of the ALJ.
   ACCORDINGLY, IT IS HEREBY ORDERED that the August 13, 1992, Notice of {{4-30-93 p.A-2151}}Disapproval of Bay Loan and Investment Bank, East Greenwich, Rhode Island by Berwyn, is hereby rescinded.
   IT IS FURTHER ORDERED, that the Executive Secretary, or his designee, is instructed to execute and serve copies of this Decision and order on all parties, the ALJ, the Bank, and the Superintendent of Banking for the State of Rhode Island.
   By direction of the Board of Directors.
   Dated at Washington, D.C. this 5th day of January, 1992.

/s/ Hoyle L. Robinson
Executive Secretary

In the Matter of
BAY LOAN AND INVESTMENT
BANK
EAST GREENWICH, RHODE
ISLAND
(Insured State Nonmember Bank)
Docket No.
FDIC-92-258j

   A hearing herein was requested by Respondent to dispute the Board's finding that it lacked the capability to permit purchase of the financial institution. During the course of the investigation and the issuance of Notice herein, the time in which Respondent was limited by contract to obtain agency approval expired, and is not being extended. Having considered the motion filed by the Federal Deposit Insurance Corporation and the response by Respondent, the undersigned recommends that the proceeding be dismissed for lack of a justiciable issue.

/s/ Walter J. Alprin
Administrative Law Judge
Office of Financial Institution
Adjudication