First Federal Sav. & Loan Ass'n, of Lincoln v. Department of Banking

• Decision Date: 17 December 1971
• Docket Number: No. 37932,37932
• Citation: 192 N.W.2d 736,187 Neb. 562
• Parties: FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF LINCOLN, a United States Corporation, Appellant, v. DEPARTMENT OF BANKING of the State of Nebraska and Commercial Savings and Loan Association, a Nebraska Corporation, Appellees.
• Court: Nebraska Supreme Court

Page 736

192 N.W.2d 736

187 Neb. 562

FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF LINCOLN, a United States Corporation, Appellant, v. DEPARTMENT OF BANKING of the State of Nebraska and Commercial Savings and Loan Association, a Nebraska Corporation, Appellees.

No. 37932.

Supreme Court of Nebraska.

Dec. 17, 1971.

Syllabus by the Court

1. A reasonable interpretation of section 8--331, R.R.S.1943, and other statutes dealing with regulation and control of savings and loan associations necessarily implies the power of the Department of Banking to approve or disapprove the establishment and operation of branch offices of savings and loan associations chartered and operating under the laws of this State.

2. Legislative standards for the granting of an application for initial establishment of a savings and loan association operation under section 8--331, R.R.S.1943, also apply to an application to establish a branch office.

3. Approval by the Department of Banking is necessary before a savings and loan association, chartered and operating under the laws of Nebraska, may establish a branch office.

4. Properly conducted existing local savings and loan associations have interests and rights which are affected by the establishment of other local savings and loan associations or branches sufficient to make all such associations interested parties entitled to constitutional due process.

5. Due process of law requires notice and an opportunity to be heard, as a matter of right and not by the let or leave of administrative officers or agencies, when the rights, duties, or privileges of interested parties are involved by an exercise of quasi-judicial power pursuant to the terms of a statute.

6. Compliance with the mandatory provisions of section 84--913, R.R.S.1943, requiring an administrative agency to adopt appropriate rules of procedure for notice and hearing is necessary to give validity to its action when notice and hearing are essential to due process.

John W. Delehant, Robert J. Huck, Omaha, John E. Dean, Lincoln, for appellant.

Fitzgerald, Brown, Leahy, McGill & Strom, James J. Fitzgerald, Jr., Lyle E. Strom, Douglas W. Reno, Omaha, Ralph H. Gillan, Lincoln, for appellees.

Heard before SPENCER, BOSLAUGH, SMITH, McCOWN, and NEWTON, JJ.

McCOWN, Justice.

First Federal Savings and Loan Association, a federally chartered corporation, brought this action against the Department of Banking and Commercial Savings and Loan Association, a Nebraska chartered corporation. The action sought to enjoin the enforcement of an order issued by the Department of Banking allowing Commercial to establish a branch office in Omaha Nebraska; to declare the order invalid and of no effect; and to require the Department of Banking to establish procedural rules and regulations governing the establishment of a branch office by a state chartered savings and loan association. The trial court found that the statutes of Nebraska neither prohibit nor require either notice or hearing for the establishment of savings and loan branch offices and that the Administrative Procedures Act did not apply. The district court denied the request for injunction and dismissed plaintiff's petition. First Federal has appealed.

Both savings and loan associations involved here were operating in Omaha, Nebraska, in 1968. In that year, each association began to consider a new branch location in northwest Omaha. On December 19, 1968, First Federal passed a resolution to build a branch office. On January 16, 1969, Commercial passed a resolution for its new branch facility. First Federal, following adoption of its resolution, made application to the Federal Home Loan Bank Board for approval of a branch at 90th and Maple Streets in Omaha. Notice of its application was published on January 30, 1969, as required by law. Letters of notice were also sent to savings and loan associations in the area and to the Department of Banking. Commercial received notice by January 30, 1969, and the Department of Banking received written notice on January 28, 1969.

On February 10, 1969, Commercial requested a meeting with the Director of the Department of Banking and met with him on February 17, 1969. On February 18, 1969, without notice or hearing, the Department of Banking issued an order approving the application of Commercial for the establishment of a branch office at 90th and Maple Streets in Omaha.

Commercial completed the purchase of land at the location on March 21, 1969, and on the same date notified the Federal Home Loan Bank Board of its expansion. Commercial also informed the Federal Home Loan Bank Board that it would protest the application of First Federal. The Federal Home Loan Bank Board denied First Federal's application on August 13, 1969. On September 25, 1969, First Federal filed this action. Commercial's branch office was completed on January 9, 1970. The Federal Home Loan Bank Board, on April 7, 1970, reversed its former decision and granted permission for First Federal to locate its branch at 90th and Maple also. Both branches have now ben completed and are in operation.

One other fact situation needs chronological reference. On February 1, 1962, the Director of the Department of Banking notified all state chartered savings and loan associations that it was the opinion of the department that the statutory criteria which applied to the initial approval of the establishment of savings and loan associations applied to the establishing of branches as well. That notice required that immediately thereafter applications for a branch office must be submitted to the Director of the Department of Banking for approval. On August 1, 1962, a statement of policy relating to applications for certificates of approval to organize savings and loan associations and for authority to establish branch offices was issued by the Department of Banking over the signature of the Director. It contained a paragraph stating: 'As directed by a letter dated February 1, 1962, no building and loan association shall establish a branch office without prior approval from the Department of Banking. It is required that an application upon a form to be supplied by the department shall be filed with said department. After the filing of such application the Director of Banking will give due notice for a public hearing to be held at the place which he designates to hear all evidence in favor of the establishment of such branch and all evidence by those opposing the establishment of such branch office.' The evidence is very indefinite as to how fully or for what periods of time the statement of policy was adhered to. In a letter to the Federal Home Loan Bank Board dated March 13, 1969, the deputy director of the Department of Banking stated that as to the establishment of branch offices, the statement of policy was 'hearby rescinded.'

It is the position of Commercial that a state chartered savings and loan association is not required to obtain permission from the Department of Banking before opening a branch office; that even if it were, First Federal has no standing to challenge the approval order; and that notice and hearing is not a statutory or...