Gilbert Hahn, Jr. and Margot H. Hahn - Page 3

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          annum in excess of the aforementioned interest rate; and (4) in             
          the event petitioner defaults and the bank institutes a suit to             
          collect on the note, the bank shall be entitled to recover as               
          attorney’s fees 15 percent of the unpaid principal and interest,            
          and costs of suit.                                                          
               During August 1990, the Office of the Comptroller of the               
          Currency declared the bank insolvent and appointed the Federal              
          Deposit Insurance Corporation (FDIC) as its receiver.  The FDIC             
          later claimed that petitioner had defaulted under the terms and             
          conditions of the note by failing to repay principal and                    
               During January 1994, the FDIC filed suit against petitioner            
          in U.S. District Court.  The FDIC complaint alleged that                    
          petitioner owed the following amounts with respect to the note:             
          (1) $1,752,384 in principal; (2) $381,934 in prejudgment interest           
          accrued as of February 15, 1993, with interest continuing to                
          accrue at a daily rate of $312 until paid; (3) a late charge of 2           
          percent per annum on the unpaid principal; and (4) attorney’s               
          fees in the amount of 15 percent of the unpaid balance of the               
          loan.2  The complaint alleged that, except for a $25,000 payment            
          by petitioner in November 1993, none of the above-described                 
          amounts had been paid.  The complaint also sought costs of suit.            

               2 All amounts are rounded to the nearest dollar.                       

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