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Hoffman v. Dept. of Commerce and Economic Development (5/29/92), 834 P 2d 1218
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Notice: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
HAROLD A. HOFFMAN, )
) Supreme Court No. S-4621
Appellant, )
) Trial Court No.
v. ) 3AN-90-1609 Civil
)
STATE OF ALASKA, DEPARTMENT ) O P I N I O N
OF COMMERCE AND ECONOMIC )
DEVELOPMENT, )
)
Appellee. ) [No. 3845 - May 29, 1992]
______________________________)
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Anchorage,
Karl S. Johnstone,
Judge.
Appearances: Phillip Paul Weidner,
Weidner and Associates, Anchorage, for
Appellant. Gary I. Amendola, Sarah J. Felix,
Assistant Attorneys General, Juneau, Charles
E. Cole, Attorney General, Juneau, for
Appellee.
Before: Rabinowitz, Chief Justice,
Burke, Matthews, Compton, and Moore,
Justices.
MATTHEWS, Justice.
I. INTRODUCTION AND FACTS
The present case has its genesis in the State's 1988
takeover and closure of the Alaska Continental Bank (ACB).
Appellant Harold Hoffman was a stockholder, a director, and
president of ACB. After the State seized ACB on July 7, 1988,
Hoffman applied to the State's Banking and Securities Division of
the Department of Commerce and Economic Development (Division)
for an order vacating possession pursuant to AS 06.05.470(d).1
Pursuant to AS 06.05.470(z), the State transferred
possession of ACB to the FDIC on August 3, 1988, without notice
to Hoffman. On the same day, in an ex parte proceeding, the
superior court authorized the sale of ACB's assets by the FDIC to
First Interstate Bank of Alaska.
After the FDIC sold ACB's assets, the State moved to
dismiss Hoffman's application. The Division granted the motion.
The Division's hearing officer reasoned that the only remedy
available under AS 06.05.470(d) was the return of possession of
ACB. Since that remedy was unavailable, the hearing officer
dismissed Hoffman's application as moot.
Hoffman appealed the Division's decision to the
superior court arguing that it deprived him of due process of law
and that his application was not moot. The superior court
affirmed the Division's dismissal. Hoffman appeals. We affirm.
II. DISCUSSION
Hoffman argues that he was denied due process of law
because he was denied a hearing on whether the State lawfully
seized ACB. The State argues that due process does not require a
hearing and that, in any case, Hoffman waived his right to a
hearing by postponing scheduled hearing dates.
Alaska's constitution provides: "No person shall be
deprived of life, liberty, or property, without due process of
law. The right of all persons to fair and just treatment in the
course of legislative and executive investigations shall not be
infringed." Alaska Const. art. I, 7.
We have consistently held that, except in emergencies,
due process requires the State to afford a person an opportunity
for a hearing before the State deprives that person of a
protected property interest. Graham v. State, 633 P.2d 211, 216
(Alaska 1981). Even when emergencies allow the State to seize
property before a hearing, due process requires the State to
provide an opportunity for a post-seizure hearing at a meaningful
time to minimize possible injury. F/V American Eagle v. State,
620 P.2d 657, 666-67 (Alaska 1980). While the drastic
consequences of a bank failure may often place them among the
emergencies in which the State may postpone a hearing until after
a seizure,2 in the present case, the State seized the assets and
three weeks later transferred them without notice and while a
hearing was pending. The failure to give notice of the transfer
makes it difficult for the State to argue that it afforded
Hoffman an opportunity for a post-seizure hearing at a time when
it was still possible to minimize the potential injury which may
have resulted from the seizure. On the record before us the
State has not presented any justification for its precipitate
transfer of the assets to the FDIC.
At this point we would normally remand to the Division
for a hearing on Hoffman's substantive claim. However, in the
present case, there is no need for a hearing because Hoffman's
substantive claim is barred by collateral estoppel.
Hoffman's substantive claim is that the State's seizure
of ACB was unauthorized.3 Alaska Statute 06.05.470(a)(2)
empowers the State to take possession of a bank if, among other
things, "the bank's business is being conducted in an unlawful or
unsound manner." In a related action between Hoffman and the
FDIC, the United States Court of Appeals for the Ninth Circuit
held that Hoffman's self-dealing with ACB constituted "an unsafe
or unsound practice." Hoffman v. FDIC, 912 F.2d 1172, 1174 (9th
Cir. 1990).4 Thus, Hoffman has already litigated the issue of
whether ACB's business was being conducted in an unsound manner
and received an adverse judgment. His underlying claim in the
present case (that the State's seizure was unauthorized) is
therefore barred by collateral estoppel.5
When the State seized ACB on July 7, 1988, it specif
ically noted that it had the power to seize a bank when, among
other things, "the bank's business is being conducted in an
unlawful or unsound manner." State of Alaska, Banking Order
89-1, at 10 (July 7, 1988). The State seized ACB partly for the
following reasons:
A transfer of ACB property is evident to
the benefit of certain directors of the bank
in apparent anticipation of closure of ACB on
the finding of insolvency.
. . . .
[The] FDIC has initiated action . . . in
finding of unsafe and unsound banking
practices.
Id. at 1, 3. The State further noted that one of ACB's improper
property transfers was a "May 20, 1988 cashier's check . . . in
the amount of $61,796.48, payable to H. A. Hoffman, President, as
a prepaid expense item for contract payment for the period June
1, 1988 through December 1, 1988." Id. at 4.
Thus, the State seized ACB because, among other
reasons, ACB's purchase of Hoffman's employment contract amounted
to an unsound practice. As mentioned above, AS 06.05.470(a)(2)
authorizes the State to seize a bank for that reason. Since
Hoffman has litigated this issue in federal court and lost, he is
collaterally estopped from claiming that ACB's business was being
conducted in a sound manner. It follows that Hoffman is
collaterally estopped from claiming that the State's seizure was
unauthorized.
We need not decide whether Hoffman's claim is moot. As
previously discussed, Hoffman's claim is barred by collateral
estoppel. Thus, the hearing officer correctly dismissed
Hoffman's administrative challenge to the State's authority to
make the seizure regardless of whether it was moot.
AFFIRMED.
_______________________________
1 AS 06.05.470(d) provides in relevant part:
If . . . an emergency exists which will
result in serious losses to the depositors,
[the department] may take possession of a
bank without prior hearing. . . . [A]ny
interested party may file with [the
department] an application for an order
vacating the possession. The department
shall grant the application if it finds that
its action was unauthorized under this
chapter.
2 For example, the federal due process clause does not
require a pre-seizure hearing when a state seizes a bank. Fahey
v. Mallonee, 332 U.S. 245, 253-54 (1947). As the First Circuit
explained:
The drastic consequences of bank failure
or mismanagement and "the impossibility of
preserving credit during an investigation"
call for prompt and decisive action and place
this proceeding among the "extraordinary
situations" in which notice and hearing may
be postponed until after seizure.
Roslindale Co-op. Bank v. Greenwald, 638 F.2d 258, 260 (1st Cir.
1981) (quoting Fahey, 332 U.S. at 253).
3 See supra note 1.
4 On the eve of ACB's closure, ACB purchased the balance of
Hoffman's employment contract for approximately $61,000. Hoffman
v. FDIC, 912 F.2d at 1173. The FDIC ordered Hoffman to repay the
$61,000 because ACB's purchase of his employment contract
constituted "an unsafe or unsound banking practice." Id. at
1174. The Ninth Circuit confirmed the FDIC's authority to take
such action. Id. at 1176.
5 We have held that use of non-mutual collateral estoppel is
appropriate "so long as there were no `unusual or exceptional
factors in the prior adjudication which would warrant the
application of the mutuality requirement.'" Murray v. Feight,
741 P.2d 1148, 1153 (Alaska 1987) (quoting Pennington v. Snow,
471 P.2d 370, 377 (Alaska 1970)). In the present case Hoffman
did not argue, and the record does not indicate, that there were
any factors in the federal litigation which would warrant the
application of the mutuality requirement.
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