Opinion ID: 2048586
Heading Depth: 1
Heading Rank: 3

Heading: Sufficiency of State banking regulations.

Text: We consider only briefly the bank's general challenge to the sufficiency of the standards applied by the superintendent in evaluating the bank's financial integrity. In essence, the bank contends that the rule-making requirements of Iowa Code section 17A.3 compel the agency to define such terms as impaired capital and conducting business in an unsafe or unsound manner in order to proceed legally under the banking statutes. In the absence of such established rules or standards, the bank contends, the agency's action can only be viewed as arbitrary and capricious and it was erroneous for the court to rule otherwise. The bank correctly asserts that agency action taken without regard to established rules or standards will be generally viewed as arbitrary and capricious. See Mathis v. State Conservation Comm'n, 369 N.W.2d 435, 437 (Iowa 1985). It misperceives, however, the purpose of the rule-making requirement in the context of the present case. In Doe v. Iowa State Bd. of Physical Therapy, 320 N.W.2d 557, 561 (Iowa 1982), we observed that the rule-making requirement of section 17A.3 is intended to prohibit undisclosed but authoritative interpretations of law or policy that are equivalent to secret rule-making. In Doe, the question was whether a licensing board unlawfully attempted to bind the petitioner with the precedential effect of the board's prior interpretation of the statute in question. We held that where, as in Doe, the board was merely applying the statute directly, [n]o `secret law' was involved ... [and] section 17A.3 does not come into play. Id. (citing Young Plumbing & Heating Co. v. Iowa Natural Resources Council, 276 N.W.2d 377, 383 (Iowa 1979)); cf. Fears v. Iowa Dep't of Human Servs., 382 N.W.2d 473, 475-76 (Iowa App.1985). The principle announced in Doe applies with equal force here. Section 524.224 enumerates nine specific grounds authorizing the superintendent to take over the property and business of a state bank. Under the statute, the superintendent can act only in certain limited circumstances. See Iowa Code section 524.224 (e.g., illegal acts, impairment of the bank's capital, or an otherwise unsound or insolvent condition). Contrary to the bank's assertion, the statutory terms applied here carry with them a commonly understood meaning in the banking industry. Fahey v. Mallonee, 332 U.S. at 250, 67 S.Ct. at 1556, 91 L.Ed. at 2037 (The provisions are regulatory. They do not deal with unprecedented economic problems of varied industries. They deal with a single type of enterprise and with the problems of insecurity and mismanagement which are as old as banking enterprise.). Nor under the record before us, can the bank support a claim that it was without notice or otherwise surprised by the superintendent's assessment of its financial instability. As we have previously noted, for over seven years the bank had been regularly apprised of the need to inject additional capital to offset its increasingly insecure loan portfolio. We conclude that where, as here, the agency has simply exercised its broad discretion in applying a statute to the specific set of facts before it, no violation of the rule-making requirement of section 17A.3 will be found. See Young, 276 N.W.2d at 383. The district court was correct in so ruling. IV. Summary. In summary, we reaffirm our recognition of a legislative intent to vest broad discretion in the superintendent of banking with respect to the supervision and control of state banks. Courts should interfere only when it appears that discretion is abused. No such abuse has been demonstrated here. Additionally, we hold that the superintendent's decision to assume management of a state bank under Iowa Code sections 524.224 and .226, though subject to judicial review, does not give rise to a contested case proceeding and the full panoply of procedures authorized under Iowa Code section 17A.12. Finally, we hold that the superintendent's enforcement of the standards of section 524.224 to the facts before him implicated no rule-making responsibility under section 17A.3. We have considered all other assignments of error raised by the bank, whether or not addressed in this opinion, and find no basis upon which to reverse the district court. Accordingly, the court's judgment is affirmed in its entirety. AFFIRMED.