Central Bank of Clayton v. State Banking Bd. of Missouri

Decision Date12 March 1974
Docket NumberNo. 34959,34959
Citation509 S.W.2d 175
PartiesCENTRAL BANK OF CLAYTON, Plaintiff-Appellant, and Duane Pemberton, Commissioner of Division of Finance, State of Missouri, Defendant-Appellant, v. STATE BANKING BOARD OF MISSOURI et al., Defendants-Respondents, and Clayton Bank et al., Intervenors-Respondents. . Louis District, Division Two
CourtMissouri Court of Appeals

Godfrey P. Padberg, Lloyd E. Boas, St. Louis, for plaintiff-appellant.

Charles A. Blackmar, St. Louis, for defendant-appellant.

Richard E. McFadin, North Kansas City, Robert F. Schlafly, John T. Murphy, Jr., St. Louis, Albert A. Michenfelder, Jr., A H. Hamel, Clayton, for intervenors-respondents.


This litigation grows out of an attempt to establish a new bank in downtown Clayton, Missouri, the commercial and governmental hub of St. Louis County and an area now served by several banking institutions. Plaintiff-Appellant, the Central Bank of Clayton (Central Bank), which has proposed the new bank, and Defendant-Appellant, the Commissioner of the Division of Finance of the State of Missouri (the Commissioner), appeal from an order of the Circuit Court of St. Louis County, affirming in part and reversing in part an order of Defendant-Respondent, the State Banking Board of Missouri (the Board). Also parties to the appeal are Intervenors-Respondents, the Clayton Bank, St. Louis County National Bank, and the First National Bank of Clayton, existing banks in downtown Clayton, and the Missouri Independent Bankers Association. The last-named party is interested solely in the question whether a multi-bank holding company violates Missouri statutes prohibiting branch banking. 1

In October, 1971, five persons filed articles of agreement for the incorporation of a new bank, to be known as the Central Bank of Clayton and to be located in a new office building in Clayton, with the Commissioner. All five incorporators were and are officers of the Bank of St. Louis, a downtown City of St. Louis bank, and of the General Bancshares Corporation, a registered holding company which owns the Bank of St. Louis. The incorporators apparently have an agreement to transfer ownership of the stock of the proposed bank to General Bancshares upon receipt of a charter from the Commissioner.

Following the application for a bank charter, the Commissioner ordered an investigation, pursuant to § 362.030, RSMo 1969, V.A.M.S., into the capital and management of the proposed bank, and into the convenience and needs of the community and the effects of the proposed bank on existing banks in the community. After a two month investigation, the Commissioner found that 'all the requirements of Sections 362.020; 362.025 and 362.030 RSMo (V.A.M.S.) have been met,' and on February 28, 1972, issued a charter for the proposed bank. The Commissioner's decision was made ex parte, without a contested hearing, but he did include in his record letters from officers of existing Clayton banks objecting to the proposed bank.

Intervenors-Respondents, the existing Clayton banks, joined by the Trust Company of St. Louis County (which is not a party to this appeal), then appealed the decision of the Commissioner to the Board. Two notices of appeal were filed with the Board. Both recited that the convenience and needs of the community would not justify the granting of a new bank charter, but neither raised the issue of branch banking and multi-bank holding companies.

The Board held a hearing on the appeal of April 5, 1972, at which the existing banks and the proponents of the new bank presented voluminous evidence relating to 'the convenience and needs of the community to be served' by the new bank. Three expert witnesses testified, and two submitted reports, directed to that issue. In addition, the Board received the Commissioner's investigation and report into evidence. Midway through the hearing, the expert witness for the existing banks, in a 'slip of the tongue,' referred to the proposed bank as a 'branch' of the Bank of St. Louis. Later, counsel for the existing banks questioned witnesses for the proposed bank about the nature of the agreement by the incorporators to sell their stock in the new bank to General Bancshares. The chairman of the Board also asked questions directed to this issue.

On May 1, 1972, the Board issued a brief order revoking the charter of the Central Bank of Clayton. The findings of fact and conclusions of law were as follows:

'1. That the record and evidence adduced by applicant does not support a finding that the convenience and needs of the community to be served justify and warrant the issue of a charter to the applicant Central Bank of Clayton. There was no evidence adduced by any public witness to indicate or show public need for the proposed bank and the examiner's report of the investigation of the proposed charter fails to disclose any complaint or inadequacy with presently authorized banking services, or more than a token need for the proposed bank.

'2. That the Board further finds and concludes that the application by officers or agents of a bank holding company and their express agreement to sell all shares of stock, except qualifying shares, to said holding company upon receiving the charter is contrary to the intent and express restrictions against branch banking and other prohibitions contained in Sections 362.105; 362.107; 362.170; 362.415; 362.420 and 362.425, RSMo 1969 (V.A.M.S.) as amended.'

A petition to review the decision of the Board was filed with the St. Louis County Circuit Court on May 10, 1972. After a hearing and submission of the entire record into evidence, the court found that the Board's first finding--that the convenience and needs of the community did not justify the granting of a new bank charter--was supported by competent and substantial evidence on the record as a whole. However, the court reversed the second finding of the Board--that the proposed bank plan was contrary to Missouri branch banking laws--on the ground that this finding was not supported by competent and substantial evidence. An appeal from the judgment of the Circuit Court was taken to this court by the Central Bank and the Commissioner, and this opinion follows a rehearing of several issues presented by the case.

Since we are asked to determine whether there is 'competent and substantial evidence upon the whole record' to support the Board's findings, Missouri Administrative Procedure Act, § 536.140 RSMo 1969, V.A.M.S., we will precis the evidence presented to the Board.

Evidence presented by appellants, the Central Bank and the Commissioner, showed that the City of Clayton has experienced dramatic growth since 1960 and may soon rival downtown St. Louis as the regional commercial and financial center. Since 1959, when the last bank was chartered in the Clayton downtown area, thirteen high-rise buildings and sixteen medium and low-rise buildings have been built there. Clayton office space has grown from 1.3 million square feet in 1959 to 3.7 million square feet in 1971, and was estimated to climb to 4.4 million square feet in 1972. Further, 102 of the nation's 500 largest industrial corporations listed by Fortune Magazine have one or more divisions in Clayton, and Twenty-five of the fifty largest insurance firms have offices there. It was estimated that two percent of the nation's effective buying power is concentrated in Clayton.

Appellants' evidence bearing more directly on the banking business showed that total bank deposits in Clayton grew from $95.4 million in 1959 to $280 million in 1971. Between 1966 and 1970, all existing banks in the Clayton area experienced a deposit growth rate of fifty-four percent, or 13.6 percent a year. In the single year between 1970 and 1971, deposits in the three existing banks, Respondents, grew approximately seventeen percent (St. Louis County National Bank), twenty percent (Clayton Bank), and thirty percent (First National Bank). Using these growth statistics, the senior examiner for the Commissioner estimated that the new bank would capture $9.25 million in deposits in its first year of operation, $15.5 million in its second, and $21.5 in its third. The examiner also estimated that he new bank would show a profit from its second year of operation. His estimates were supported by deposit projections made by another expert witness and by the Federal Deposit Insurance Corporation. It was stipulated that the establishment of the new bank would not affect the solvency of the existing banks. The examiner further testified that the new bank would be convenient both to the residents of Clayton and to persons who work in Clayton but live elsewhere (a work estimated at 35,000-40,000 people). The proposed location for the new bank is in the immediate downtown area of Clayton, within two and one half blocks of the three existing banks.

In opposing the new bank, Respondents, the three existing banks in Clayton, presented a report and testimony by an expert witness. To measure 'convenience,' respondents' expert employed what is called 'isochronal analysis' of the Clayton area. This analysis is based on measurement of automobile driving time/distances to determine what area will be served by the new bank; the analysis is grounded in an assumption that the volume of business a new bank attracts will vary proportionately with the amount of driving time customers must expend to reach the new bank. The expert found, not surprisingly, that the 'isochron,' or area within five minutes driving time, of the new bank was overlapped by isochrons of at least three, and in some places four, other existing banks. The expert concluded that the Clayton area was saturated with adequate banking services offered by the existing banks, and that the new bank would add little or nothing to public convenience since seventy-five...

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