InfoComp Corp. v. Somerset Trust Co.

Citation398 A.2d 557,165 N.J.Super. 382
PartiesINFOCOMP CORPORATION, a corporation, Plaintiff-Appellant, v. SOMERSET TRUST COMPANY, Defendant-Respondent, and STC Corp., Defendant.
Decision Date30 January 1979
CourtNew Jersey Superior Court – Appellate Division

Robert B. McFarland, Camden, for plaintiff-appellant (Lee & McFarland, Camden, attorneys).

Ralph L. Straw, Jr., Somerville, for defendant-respondent (Wharton, Stewart & Davis, Somerville, attorneys).

Mark S. Rattner, Deputy Atty. Gen., as amicus curiae (John J. Degnan, Atty. Gen., attorney; Erminie L. Conley, Asst. Atty. Gen., of counsel).

Before Judges LYNCH, CRANE and HORN.

The opinion of the court was delivered by

HORN, J. A. D.

This case presents the question of whether a state-chartered bank is authorized under our law to engage in the business of providing data processing services.

Plaintiff InfoComp Corporation sought a permanent injunction to restrain defendant Somerset Trust Company and its wholly owned affiliate, STC Corp., from providing such services. 1

Defendant's motion to dismiss the complaint and cross-motions for summary judgment were denied before trial. At the trial in the Chancery Division, after plaintiff presented all its proofs, the judge entered judgment for defendant on the latter's motion pursuant to R. 4:40-1. In granting the motion the judge held that plaintiff failed to prove a cause of action. Dolson v. Anastasia, 55 N.J. 2, 258 A.2d 706 (1969). Plaintiff appealed from that judgment.

After we heard oral argument, since we deemed this cause to involve an important question of public policy and statutory interpretation, we requested the Attorney General, as representative of the public interest, to file a brief as to the issues. We also permitted the parties to file additional briefs, and scheduled the matter for reargument. Evans-Aristocrat Industries, Inc. v. Newark, 140 N.J.Super. 226, 356 A.2d 23 (App.Div.1976), aff'd 75 N.J. 84, 380 A.2d 268 (1977); Samuel Hird & Sons, Inc. v. Garfield, 87 N.J.Super. 65, 75, 208 A.2d 153 (App.Div.1965) ; Keenan v. Bd. of Chosen Freeholders, 105 N.J.Super. 271, 251 A.2d 785 (Law Div.1969). The Attorney General filed a brief and appendix in behalf of the New Jersey Department of Banking as Amicus curiae. The matter was duly reargued by all parties.

In an oral opinion the trial judge rested his determination principally upon his interpretation of N.J.S.A. 17:9A-24.1, which defines bank services, and N.J.S.A. 17:9A-25(13), which authorizes banks to act as fiscal agents, and the fact that the clerical function encompassed by the computerized record-keeping is in fact a banking function. Contrary to plaintiff's contention, we are satisfied that the motion was properly granted pursuant to R. 4:40-1 as interpreted in Dolson v. Anastasia, supra 55 N.J.Super. at 5, 258 A.2d 706. Accepting as true all the evidence which supports plaintiff's position and according plaintiff the benefit of all inferences which can reasonably and legitimately be deduced therefrom, reasonable minds could not differ in concluding that plaintiff had failed to prove any right to relief.

Plaintiff is a New Jersey corporation, having been incorporated in June 1969. Its principal place of business is located on Church Road, Mount Laurel, New Jersey. Since its incorporation plaintiff has been engaged in the general data processing business and has provided extensive services to local governmental bodies and county boards of taxation in preparation of real property tax assessment records and tax bills, and has also provided water- and sewer-assessment records and bills for local governmental bodies and municipal utility authorities, voter registration records for boards of education, jury lists and incidental reporting data to various police departments. Although plaintiff has performed some data processing services for nongovernmental entities, approximately 90% Of its annual gross income results from its data processing services to various governmental bodies.

Defendant bank, incorporated in this State under the provisions of N.J.S.A. 17:9A-1 Et seq., maintains various offices for the conduct of general banking business. These offices are located within the County of Somerset, New Jersey. Defendant admits that it solicits data processing business and provides data processing services to various municipal and county governmental bodies. These services include the preparation of real property tax assessment records, tax accounting records, and water and sewer assessments in competition with plaintiff. It claims that the providing of such records is a proper and valid banking activity under the provisions of N.J.S.A. 17:9A-1 Et seq.

The principal activity in which the parties compete is the preparation of real property tax assessment records for either local tax assessors or county boards of taxation. Contracts are generally awarded by competitive bidding. The local assessor supplies the raw real property assessment information. The data processor places the information into a computer. The stored information is updated whenever the local assessor reports changes. Three times a year the data is evaluated and compiled in lists by the data processor. The local assessor is thus provided with an alphabetical index of all property owners in the municipality; a listing of each block and lot setting forth the names and addresses of the owners; a description of the property, and its classification and assessed value. Data are also compiled on the value of property by district and also by classification (E. g., residential, farm or industrial).

A draft or proof copy of the real property tax assessment records is prepared in December of each year. The official list is prepared by January 10. A copy is provided to the county board of taxation, the local assessor for use as his field book and the tax collector so that he may prepare tax bills. Finally, in April a real property extended tax duplicate is prepared, which is the same as the official tax list but also shows the actual amount of taxes assessed. This list is provided only to the tax collector. With this service the data processor's functions with regard to record compilation are complete. Data processing services provided to municipal water and sewer utilities are very similar. The utility provides the data processor with the raw information. It is then stored, compiled and analyzed by the data processor.

The respective parties have also contracted to prepare tax bills for a number of tax collectors. Accounting services have also been supplied to tax collectors, whereby tax-payment records have been maintained. These services are a relatively small portion of the overall business. Neither party ever handles tax funds in connection with this work.

Defendant has been providing such data processing services since approximately 1966. Forty-seven percent of its data processing work is devoted to internal banking matters, with the remainder applied to these outside services. Plaintiff's expert in data processing equipment verified that defendant maintains data processing equipment greatly in excess of its internal banking requirements.

The aforementioned services are provided by other competitors in addition to the parties to this case. These competitors include two or three banks and at least seven nonbanking corporations. With the exception of certain municipalities in the Somerville area, defendant does not have any relationship or other business dealings with the various municipalities for which it provides the stated services. It operates in about 14 counties of the State. It does not receive payments of taxes.

The present action was preceded by efforts by plaintiff to have the federal Comptroller of the Currency prevent one of the competitor banks from engaging in the activities in question. The Comptroller refused to take any action. Plaintiff also sought the assistance of the Commissioner of Banking in ending defendant's participation in this field. The Commissioner took no action other than having a Deputy Commissioner respond by referring plaintiff to "Chapter 160, Laws of 1964 (Sections 24.1 through 24.6 of The Banking Act of 1948, as amended). This chapter refers to the services which may be provided by New Jersey banks. No regulations have been promulgated pursuant to the statute." 2

The powers of the state banks in general are codified in N.J.S.A. 17: 9A-24 through 26.1. In 1964 the Legislature enacted a series of provisions encoded in N.J.S.A. 17:9A-24.1 through 24.6, sometimes unofficially referred to as the Bank Services Act. The thrust of this act is to enable banks and savings banks to avail themselves of, and invest in, bank service corporations, which are limited to the performing of "bank services" for banking institutions. N.J.S.A. 17:9A-24.2. "Bank services" are defined as "services such as check and deposit sorting and posting, computation and posting of interest and other credits and charges, preparation and mailing of checks, statements, notices, and similar items, or Any other clerical, bookkeeping, accounting, statistical, or similar functions " (emphasis added). N.J.S.A. 17: 9A-24.1(a). The resolution of the issue in this case is largely dependent upon the interpretation of this section of the law, and particularly the phrase "or any other clerical, bookkeeping, accounting, statistical, or similar functions."

It is not suggested that defendant is a bank service corporation. However, N.J.S.A. 17:9A-24.3 provides: "Banks and savings banks may perform for other banking institutions And others than banking institutions any service or services which may be rendered by bank service corporations to banking institutions" (emphasis supplied). Supplementing the foregoing is N.J.S.A. 17:9A-24.4, empowering the Commissioner to broaden the scope of the definition of "bank services" and to prescribe the...

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