Bank of Shelbyville v. Peoples Bank of Bagdad

• Decision Date: 20 May 1977
• Citation: 551 S.W.2d 234
• Parties: BANK OF SHELBYVILLE, Shelbyville, Ky., et al., Appellants, v. PEOPLES BANK OF BAGDAD, Bagdad, Ky., et al., Appellees.
• Court: United States State Supreme Court — District of Kentucky

Page 234

551 S.W.2d 234

BANK OF SHELBYVILLE, Shelbyville, Ky., et al., Appellants, v. PEOPLES BANK OF BAGDAD, Bagdad, Ky., et al., Appellees.

Supreme Court of Kentucky.

May 20, 1977.

Joseph J. Leary, William M. Johnson, Frankfort, for appellants.

William A. Young, G. Lee Langston, Frankfort, for appellees.

Edward F. Prichard, Jr., Frankfort, Larry C. Allen, C. R. Luker, Jr., London, amicus curiae.

JONES, Justice.

This is an appeal from an order of the Franklin Circuit Court which affirmed an order of the Commissioner of Banking and Securities granting Peoples Bank of Bagdad a license for a branch bank under the provisions of KRS 287.180(2).

Citizens Union Bank of Shelbyville, Kentucky and the Bank of Shelbyville prosecute this appeal.

Citizens Union Bank and Bank of Shelbyville contend that the trial court erred grievously in holding the order of the Commissioner "neither arbitrary, capricious nor unreasonable. . . ." They take the position that the trial court was in serious error when he rejected their contention that the doctrine of res judicata applies to quasi judicial acts of the Commissioner of Banking and Securities. The Shelbyville banks also contend that the record fails to demonstrate that the "public convenience and advantage" would be served by the granting of a branch banking license to the Peoples Bank of Bagdad. They contend also that they were denied a due process hearing before the Commissioner.

In order to place these issues in proper perspective it is necessary to relate some of the background of the events that led to this controversy.

Peoples Bank of Bagdad first made application to the Kentucky Department of Banking and Securities for authority to establish a branch bank in Shelby County on February 10, 1971. At that time the location of the proposed bank was approximately 2,000 ft. west of the city limits of Shelbyville.

On December 6, 1971, the then Commissioner (without a hearing) granted a branch bank license to Peoples Bank of Bagdad. The Shelbyville banks filed an action in the Franklin Circuit Court in which they sought an evidentiary due process hearing. They also sought an injunction to restrain Peoples Bank of Bagdad from maintaining the branch bank and to require the Commissioner to set aside the authority issued by him on December 6, 1971. On April 13, 1972, the Franklin Circuit Court in a memo opinion directed that the order of the Commissioner was void for arbitrariness. The opinion also directed the Commissioner to entertain the application upon due notice and opportunity for hearing.

On July 10, 1972, another commissioner of banking and securities conducted a hearing.

On August 22, 1972, the then Commissioner entered findings of fact, conclusions of law and denied the application.

The findings of fact and conclusions of law purporting to support the order denying the application of the Peoples Bank were entered on August 22, 1972. Following the findings of fact the Commissioner arrived at certain conclusions of law. The only relevant conclusion was that in ascertaining whether the public convenience and advantage would be prompted by approval of the application of the Peoples Bank the Commissioner was "not limited to inquiring solely into the question of whether the additional facilities would supply physical convenience to the public but may view and consider such factors as the effect such a branch would have upon the banking entities operating in the community." It is apparent that the Commissioner was of the opinion that in determining whether opening a branch bank would be granted or withheld he was entitled to weigh and consider the effect that the competition the facility would have upon existing banking institutions. That certainly is not the test. In a case before this court many years ago the banking commissioner had denied an application for a new bank charter primarily upon the ground that the new bank would...