) DOCKET NO. 76-1347
vs. ) CASE NO. 76-L-46K
) FLORIDA FARM BUREAU FEDERATION ) PRODUCTION CREDIT ASSOCIATIONS ) OF FLORIDA FEDERAL LAND BANK ) ASSOCIATIONS OF FLORIDA )
Intervenors. )
Pursuant to notice, a public hearing in the above styled cause was held before Delphene C. Strickland, Hearing Officer, Division of Administrative Hearings, Department of Administration, in Room 103, Collins Building, Tallahassee, Florida on the 1st day of November, 1976 at 9:30 a.m.
For Petitioner: Fred B. Karl, Esquire
For Respondent: Edward L. Kutter, Esquire
For Intervenor: E. Harper Field, Esquire Florida Farm Post Office Box 1879 Bureau Federation Tallahassee, Florida
For Intervenor: J. R. Lowry, Esquire Production Credit Bevin Ritch, Esquire Associations of Post Office Box 1025 Florida and Gainesville, Florida Federal Land Bank
For Intervenor: Joseph C. Jacobs, Esquire Production Credit Post Office Box 1170 Associations of Tallahassee, Florida Florida and
Facts stipulated by the parties on the record:
"The Petitioners, the Florida Association of Insurance Agents, representing the Association and its members individually and collectively, is a representative party in interest for these proceedings and any review thereof. And its members will be effected by any decision of the Department of Insurance in licensing insurance agents to be employed by, retained by, or associated with Production Credit Associations in the State of Florida. For the purposes of this proceeding, and any review thereof, no member of the Association may take a position contrary to or in opposition to that taken herein by the Petitioner.
"The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida and the Federal Land Bank Associations of Florida have an interest in the decisions of the Department of Insurance with respect to the licensing of insurance agents to sell insurance on their behalf. And the decisions of the Department in licensing of such insurance agents will substantially effect the interest of the Production Credit Associations and the Federal Land Bank Associations of Florida, and they are therefore proper parties to the Administrative Proceedings.
"Florida Farm Bureau Federation, L.A.A., (Limited Agricultural Association) is a
non-profit voluntary general farm membership organization comprised of approximately 65,000 member families. The Florida Farm Bureau offers comprehensive insurance services to their members, and if the Department licenses insurance agents to be employed by or associated with the Production Credit Associations of Florida, they will be offering similar services that are already offered by the Florida Farm Bureau.
"The Department of Insurance has licensed two insurance agents with type 2-20 general lines insurance licenses, which licenses since their issuance have been utilized by the holders thereof. The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida have retained such licensed agents and have entered into the insurance business through the process of having such agents solicit and sell insurance to persons, including those who borrow from either the Production Credit Associations or the Federal Land Bank Associations of Florida.
"The Intervenors, Production Credit Associations of Florida, may offer into evidence an affidavit concerning the operations of the Associations and their affiliates in Florida. The other parties hereto will not object to the form of the evidence, but reserve the right to object to its introduction on the grounds that it is irrelevant and immaterial.
". . .there are Federal rules and regulations under the Farm Credit Administration Act. The Hearing Officer may take judicial knowledge of such rules and regulations and any amendments thereto.
". . .it is stipulated that Mr. Field has witnesses that would testify to these items, and the other parties waive cross examination of such witnesses and agree to these facts without necessarily stipulating that such facts are true.
". . .Mr. Bob Taylor, Vice President for Underwriting of Farm Bureau Insurance Companies, would testify that Farm Bureau, through its related insurance companies and other competitive companies are currently offering cost, qualitatively and availability,
similar insurance services to those being sought in rural communities.
". . .Mr. Doug Oswald, President of Sun Bank, Ocala, would testify as to the availability of farm loans during the last 24 years in the Ocala, Marion County, Florida area. He would testify that such loans are currently available through current commercial sources and have been available, and such loans, including both mortgage and production type loans, are presently available in Marion County. And that insurance related services in connection with the farm type loans in his community have been available through the Farm Bureau and other companies during this period of time.
". . .Mr. Bob Taylor, Vice President of Underwriting, Farm Bureau Insurance Companies, would also testify that similar insurance services proposed to be offered to the Production Credit Association and the Land Bank are presently being and have been offered by the Farm Bureau Insurance Companies in the rural communities on a competitive form from both cost, qualitatively and availability.
The Hearing Officer further finds:
The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida are chartered by the Farm Credit Administration [a federal agency in the executive branch of the government subject to regulation and supervision by the Farm Credit Administration, Title 12, Chapter IV, United States Code] upon application of local persons eligible to borrow money from the Farm Credit System. There are nine (9) Production Credit Associations and seven
(7) Federal Land Bank Associations in Florida.
Two licenses have been approved by the Respondent for two employees or associates of the Production Credit Association.
The following affidavit of C. W. S. Horne, Executive Vice President of Federal Land Banks of Columbia and the Federal Land Bank of Columbia, is admissible for the purpose of describing the operations and functions of the associations and their affiliates in Florida:
"PERSONALLY APPEARED BEFORE ME C. W. S. Horne,
being duly sworn deposes and says that he is the Executive Vice President of the Federal Land Bank of Columbia, and the Federal Credit Bank of Columbia, and that if called
upon to testify in the above captioned matter he would state that according to his knowledge and belief the Farm Credit Act of 1971 does in fact provide in Section 1.4(11) as follows: "Accept deposits of securities or of current funds"; and that neither the Federal Land Bank
nor the Federal Intermediate Credit Bank accepts any deposits from members of the general public in any form such as is common with commercial banks and that it accepts no deposits either for time or checking accounts or issue certificates of deposit or other similar evidences of indebtedness; and that pursuant to Section 1.4(11) of the Farm Credit Act of 1971, the Federal Land Bank of Columbia does retain certain funds belonging to Federal land bank Associations and that it issues an advice of indebtedness to the associations and pays interest thereon based upon the cost of money to the Federal Land Bank of Columbia and that in practice these transactions amount to loans by certain associations to the Federal Land Bank of Columbia. Further the deponent sayeth not."
The Florida Farm Bureau Federation, a limited agricultural association is a non-profit, voluntary general farm membership organization. Members may, and many do, borrow from the Production Credit Associations and the Federal Land Bank Associations, associations which are a part of the Farm credit Systems.
The Florida Farm Bureau offers comprehensive insurance to its members through individual agents licensed by the Respondent Department of Insurance.
CONCLUSIONS OF LAW
The Production Credit Associations of Florida and the Federal Land Bank Associations of Florida were created under the Farm Credit Act, a part of the Federal Banking Code, Title XII, United States Code. They function as an integral Part of the Federal intermediate credit banks and the Federal land banks. The Federal land banks and the Federal credit banks have supervisory control over the Federal land bank associations and the production credit associations, which associations subscribe to the stock of the respective banks. The Federal laws, rules and regulations are the ultimate guide for the entities Federal land banks and Federal intermediate credit banks and whether the local associations which function under them follow precisely the Federal Farm Credit Board may be optional with the local organization depending on this policy- making board.
cf. Tl2 2002 "The Farm Credit System.- The Farm Credit System shall include the Federal land banks, the Federal land bank
associations, the Federal intermediate credit banks, the production credit associations, the banks for cooperatives, and such other institutions as may be made a part of the System, all of which shall be chartered by and subject to the supervision of the Farm Credit Administration. (Dec. 10, 1971, P.L. 92-181,
1.2, 85 Stat. 583.)"
The affidavit of Mr. Horne entered in evidence depicts the present operation of the banks and the associations. The powers of the creations of the federal statute are not restricted to the actual function or actions of the various entities. The operations and functions as delineated in the affidavit
of the Vice President of the Federal land bank of Columbia and the Federal Intermediate Credit Bank of Columbia do not exclude other functions granted in Title 12.
12 U.S.C Section 2012 and 12 U.S.C. Section 2072 grant extensive financial powers to the Federal land banks and the Federal intermediate credit banks including the following powers:
"(6) Make loans and commitments for credit, accept advance payments, and provide services and other assistance as authorized in this Act [12 USCS 2201-2259], and charge fees therefor."
"(10) Borrow money and issue notes, bonds, debentures, or other obligations individually, or in concert with one or more other banks of the System, of such character, terms, conditions, and rates of interested as may be determined.
"(11) Accept deposits of securities or of current funds from its Federal land bank associations and pay interest on such funds. . .
"(14) Deposit its securities and its current funds with any member bank of the Federal Reserve System and pay fees therefor and receive interest thereon as may be agreed.
When designated for that purpose by the Secretary of the Treasury, it shall be a depository of public money. . .
"(17) Delegate to Federal land bank associations such functions vested in or delegated to the bank as it may determine.
"(19) Perform any function delegated to it by the Farm Credit Administration.
"(20) Require Federal land bank associations to endorse notes and other obligations of its members to the bank."
Thus, the Federal land banks and the federal intermediate credit banks exercise many banking activities and are in fact Federal financial institutions serving agricultural and related businesses.
Section 626.988, Florida Statutes, provides in part: "(1) For the purpose of this section the
following definitions shall apply:
"Financial institution" means any bank, bank holding company, savings and loan association, savings and loan association holding company, or savings and loan association service corporation or any subsidary, affiliate, or foundation of any of
the foregoing. This definition shall not, however, include any financial institution which has been granted an exemption by the Board of Governors of the Federal Reserve System pursuant to 4(d) of the Federal Bank Holding Company Act of 1956, as amended, or any financial institution which neither owns more than 10 percent of the capitol stock, nor exercises effective control, of a bank, savings and loan association, or entity licensed under Chapter 494 and and licensed or authorized to transact business in Florida.
Specifically excluded from this definition is any bank which is not a subsidiary or affiliate of a bank holding company and is located in a city having a population of less than 5,000 according to the last preceding census."
It is apparent from a study of the preambles to the legislature bills which resulted in Section 626.988 and from the words of the statute itself "financial institution" is a broader more comprehensive term than "bank" and the more narrow term was included in the definition and coupled with other less narrow terms "subsidiary, affiliate or foundation." Then, too, it must be presumed that the terms "bank" or "banks" as used in Federal land banks, Federal land bank associations and Federal intermediate credit banks and which are included in Federal laws, rules and regulations were considered by the legislators and were meant to be included in the term "financial institutions," especially inasmuch as these entities are and have been an integral part of the State business community for a period of years.
It must be concluded that the Federal land banks and the Federal intermediate credit banks are within the definition of "any bank" as contemplated by the statute and that the Federal Land Bank Associations and Production Credit Associations of Florida are parts of the banking system and are "financial institutions" covered by the statute.
Section 626.988, Florida Statutes, further provides:
(2) No insurance agent or solicitor licensed by the Department of Insurance under the provisions of this chapter who is associated with, under contract with, retained by, owned or controlled by, to any degree, directly or indirectly, or employed by, a financial institution shall engage in insurance agency activities as an employee, officer, director, agent, or associate of a financial institution agency."
"(4) The Department of Insurance shall not grant, renew, continue, or permit to exist any license as such agent or solicitor as to any applicant therefor or licensee thereunder if it finds that the license has been, is being, or will probably be, used by the applicant or licensee for any purpose prohibited by this
section."
Inasmuch as it has been concluded that the Production Credit Associations of Florida and the Federal Land Bank Associations of Florida are a part of the System of Federal land banks and Federal intermediate credit banks and are included in Section 626.988 as "financial institutions" the prohibition of subsection (2) and (4), supra, prohibit the Respondent Department of Insurance from issuing insurance licenses to employees and associates of Federal Land Bank Associations of Florida.
If, as stated by the Respondents, the preamble of one of the bills which became Section 626.988, Florida Statutes, indicates that the legislature was concerned with institutions which may coerce individuals into buying insurance as a condition precedent to receiving financing, it is self evident that institutions such as Production Credit Association and Federal Land Bank Association are within the definition of "financial institution." The safeguards of Title 12, Chapter VI, Part 614, Subpart M, which provide a hearing for alleged abuse of applicants who feel they were denied a loan because they refused to buy insurance through the lending institutions, are unnecessary because the provisions prohibiting such potential abuse is provided by the State legislature in Section 626.988, Florida Statutes.
The issue as to whether the Respondent Department of Insurance, in its licensing proceedings, should or must consider the Federal laws, rules and regulations becomes moot inasmuch as the legislature has prohibited the issuance of a license by the Department to "financial institutions" which includes the Production Credit Associations of Florida and the Federal Land Banks of Florida as parts of the Federal banking system known as "The Farm Credit System."
Deny applications for licensure from the Production credit Associations of Florida and for the federal Land Bank Associations of Florida and revoke any licenses that have been issued.
DONE and ORDERED this 16th day of December, 1976 in Tallahassee, Florida.
DELPHENE C. STRICKLAND
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
Filed with the Clerk of the Division of Administrative Hearings this 16th day of December, 1976.
Fred B. Karl, Esquire Post Office Drawer 229
Edward L. Kutter, Esquire Room 268 Larson Building Tallahassee, Florida 32304
E. Harper Field, Esquire Post Office Box 1879 Tallahassee, Florida
Joseph C. Jacobs, Esquire Post Office Box 1170 Tallahassee, Florida 32302
J. R. Lowry, Esquire Bevin Ritch, Esquire Post Office Box 1025 Gainesville, Florida
