Citicorp Sav. and Trust Co. v. Banking Bd. of State of Okl.

• Decision Date: 23 July 1985
• Docket Number: No. 61663,61663
• Citation: 704 P.2d 490,1985 OK 63
• Parties: CITICORP SAVINGS AND TRUST COMPANY, an Oklahoma Corporation, Appellant, v. The BANKING BOARD OF the STATE OF OKLAHOMA and R.Y. Empie, Oklahoma Bank Commissioner, Appellees.
• Court: Oklahoma Supreme Court

Page 490

704 P.2d 490

1985 OK 63

CITICORP SAVINGS AND TRUST COMPANY, an Oklahoma Corporation, Appellant, v. The BANKING BOARD OF the STATE OF OKLAHOMA and R.Y. Empie Oklahoma Bank Commissioner, Appellees.

No. 61663.

Supreme Court of Oklahoma.

July 23, 1985.

James A. McCaffrey and Joseph K. Heselton, Jr., Edmond, for appellant.

Frances C. Farzley, State Banking Dept., and Laura Ann Pringle, Oklahoma Bankers' Ass'n, Oklahoma City, for appellees.

SUMMERS, Justice.

Citicorp Savings and Trust Company is the successor to Cherokee Title and Trust Company, a pre-statehood corporation originally authorized to do banking, savings and trust business. Cherokee lay dormant for years before being revived by Citicorp. Citicorp sought to qualify for permission to engage in the savings and trust business in Oklahoma and so petitioned the Oklahoma State Banking Board. At stake is the "certificate of authority," without which one may not commence such operations. The proceedings are governed by Article III of the Oklahoma Banking Code, 6 O.S.Supp.1982 §§ 301-313.

On December 21st, 1983 the Board heard Citicorp's application for certificate, at which time a protest was made by the Oklahoma Bankers' Association (OBA). The Board found that Citicorp had satisfied the requirements of 6 O.S.1982 Supp. § 313 for approval of an application for certificate of authority. The Board, however, denied the application because of the existence of a pending appeal by the OBA of an earlier order of the Federal Reserve Board approving acquisition of the trust company by Citicorp, Person to Person, Inc. The Board considered the issues of the appeal to be "inextricably intertwined" with the Board's consideration of the application. It's denial was "without prejudice to resubmit the application at the conclusion of the federal appeal...."

We are thus asked by Citicorp to review the board's denial of certificate of authority.

There are three issues before the court:

I. Does the Board have discretion to deny issuance of Certificate under Section 301 once the applicant has satisfied the requirements of Section 313?

II. If the Board has such discretion did it act arbitrarily and capriciously in excess of its statutory authority?

III. Did the Board's action deny appellant equal protection under the law?

I

The statutes under consideration in issue No. I are as follows:

Section 301.

"A. From and after the passage of the Oklahoma Banking Code no certificate of authority to engage in the banking or trust company business in this state shall be issued, and no bank or trust company shall be permitted to engage in such business within Oklahoma except on certificate issued by the Commissioner upon approval of the Board. The issuance of such certificate shall be within the sole discretion of the Board."

Section 313.

"B. The Board shall approve or deny the application for a certificate of authority within sixty (60) days after such application has been accepted. The Board shall approve the application if:

1. The Board shall have approved the managing officer;

2. The capital, surplus and undivided profits in the amounts set forth in the application have been fully paid in cash;

3. Bylaws attached to the application have been adopted;

4. Any conditions imposed by the Board in approving the application for authority to organize have been fulfilled; and

5. The requirements of this Code have been satisfied; provided, the Commissioner with the consent of the Board may deny the application for a certificate of authority if the bank's application for Federal Deposit Insurance or for membership in the Federal Reserve System has not been approved.

C. If the Board approves such application the Commissioner shall within twenty (20) days of such action issue a certificate of authority and mail the same to the corporation. If the Board denies the application the Commissioner shall, within twenty (20) days of such action, mail a notice of the denial to the corporation, stating therein the reason or reasons for the denial."

Citicorp urges that "shall" as used in Section 313 controls. Oklahoma Alcoholic Beverage Control Board v. Moss ¹ states the general rule:

"In the construction of statutes 'shall' is usually given its common meaning of 'must' and interpreted as implying a command or mandate, depending upon the construction of the statute as a whole and the intention of the legislature."

Citicorp cites State v. Hunt ² which elaborates as follows:

"In common, or ordinary parlance, and in its ordinary signification, the term 'shall' is a word of command, and one which has always, or which must be given a compulsory meaning; as denoting obligation. It has a preemptory meaning, and it is generally imperative or mandatory. It has the invariable significance of excluding the idea of discretion, and has the significance of operating to impose a duty which may be enforced, particularly if public policy is in favor of this meaning or when addressed to public officials, or where a public interest is involved, or where the public or persons have rights which ought to be exercised or enforced, unless a contrary intent appears; but the context ought to be very strongly persuasive before it is softened into mere permission."

Although in some cases "shall" in a statute has been held directory rather than mandatory by the courts, ³ clearly Section 313 standing alone would compel a mandatory construction of "shall" in this case.

But the Oklahoma cases in support of a mandatory construction join a host of decisions from other jurisdictions ⁴ which invariably condition a mandatory construction upon a finding that there be no contrary legislative intent apparent. Let us examine this case in terms of State v. Hunt. ⁵ To apply the Hunt standard we must inquire: (1) Does a "contrary intent" appear? (2) If so is it in a "strongly persuasive context"?

Obviously the last line in Section 301, "The issuance of such certificate shall be within the sole discretion of the Board" evidences an intent contrary to the usual meaning of "shall". What is its context? It appears in the same Article III of the Banking Code, and has existed since that Code's adoption in 1965. From then until 1982 the provisions of Section 313 appeared in Section 307. At that time Section 301 was amended in part ⁶ and the text of Section 307 was moved to Section 313. We are compelled to conclude that had the Legislature intended Section 313 to be mandatory it would have either (1) not enacted the last sentence of Section 301 in the first place, or (2) stricken it when the section was amended in 1982. Since it did neither we find the requisite "contrary intent" in a "strongly persuasive context" that allows for a directory rather than mandatory reading of "shall".

Further, to give mandatory construction to Section 313 would be to repeal by implication the last sentence of Section 301. Repeals by implication are not favored in law or by this court. ⁷ The United States Supreme Court has said:

"It is a cardinal principle of construction repeals by implication are not favored. When there are two acts upon the same subject, the rule is to give effect to both if possible. (cites omitted) The intention of the legislature to repeal must be 'clear and manifest' ". (cites omitted) ⁸

Statutes that are apparently contradictory are to be interpreted in such manner as to give effect to both of them if possible. There is certainly less than "clear and manifest" showing here of intention to repeal Section 301.

Since by a directory reading of "shall" it is possible to give effect to both Sections, we hold that Section 301 giving discretion has not been so repealed.

II

Before answering the second question we first look to the nature and extent of the discretion with which the Legislature has infused the Banking Board. K.C. Davis in his Administrative Law Treatise states:

"Every governmental and legal system in world history has involved both rules and discretion. No government has ever been a government of laws and not of men in the sense of eliminating all discretionary power. Every government has always been a government of laws and of men. A close look at the meaning of Aristotle, the first user of the phrase 'government of laws and not of men,' shows clearly that he did not mean that governments could exist without discretionary power. In his book, If Men were Angels (1942), Jerome Frank abundantly supported this conclusion at 203: 'This much we can surely say: For Aristotle, from whom Harrington derived the notion of a government of laws and not of men, that notion was not expressive of hostility to what today we call administrative discretion.' " ⁹

But, says Professor Davis, necessary discretionary power should be properly confined, structured, and checked. ¹⁰ It may be confined by the adoption of rules or statutes. It may be structured by stating findings and reasons, and following precedent, all of which are open to the public. It may be checked by administrative review or submission to the courts. Discretion which is unfettered, i.e. exercised without guiding rules in an ad hoc manner, will be stricken down. ¹¹

What of the discretion with which the Board has been vested by Section 301? It co-exists with a set of laws (rules) as spelled out in the Banking Code.

Section 301 requires a certificate of authority be issued by the Commissioner upon approval of the Board before engaging in banking or trust business in Oklahoma. The required contents of the application for certificate are clearly set forth in Section 305. Section 308 provides that the Commissioner hold a public hearing with notice to and participation by interested parties, and the procedures for conducting a hearing including the requirement that a transcript be made. Section 309 provides for a public file available to interested persons and requires the presiding officer to issue findings of facts and conclusions of law based on the material contained...