Moran v. Nelson

• Decision Date: 08 September 1948
• Docket Number: No. 55.,55.
• Citation: 322 Mich. 230,33 N.W.2d 772
• Parties: MORAN et al. v. NELSON, Com'r of Banking Department.
• Court: Michigan Supreme Court

322 Mich. 230

33 N.W.2d 772

MORAN et al.

v.NELSON, Com'r of Banking Department.

No. 55.

Supreme Court of Michigan.

Sept. 8, 1948.

Appeal from Circuit Court, Ingham County, in Chancery; Charles H. Hayden, Judge.

Suit by J. Bell Moran and others against E. William Nelson, Commissioner of the State Banking Department, State of Michigan, to vacate and set aside an order denying plaintiffs' application for permission to organize a state bank. From the decree, plaintiffs appeal.

Decree reversed, and decree ordered entered in the Supreme Court directing defendant to grant plaintiffs' petition.

Before the Entire Bench.

Bratton & Bratton, of Detroit (Kelly, Kelly & Kelly, A. W. Sempliner, and Lewis Brooke, all of Detroit, of counsel), for plaintiffs and appellants.

Edmund E. Shepherd, Sol. Gen., of Lansing, and James A. Greene and Elbern Parsons, Asst. Attys. Gen., for defendant and appellee.

NORTH, Justice.

Following some preliminary interviews with the defendant state banking commissioner, plaintiffs in July, 1947, made application to the banking commissioner for a state bank charter, the contemplated bank to be located in the Penobscot Building in Detroit, and to have a ‘capital of $2,500,000 or more.’ On September 18, 1947, the banking commissioner denied plaintiffs' application. Thereafter, pursuant to the statutory provision (Act No. 341, § 21, Pub.Acts 1937, Stat.Ann. § 23.739), plaintiffs brought suit in Ingham county circuit court in chancery, and sought the following relief:

‘That the action of the defendant as Commissioner of the State Banking Department be fully reviewed by this Court, and that his order denying the application for permission to organize a state bank be vacated and set aside. * * *

‘That this Court by its decree, order and determine that the application heretofore made to the defendant, Commissioner of the State Banking Department should be granted; that the defendant be required to approve plaintiffs' application * * *.'

After hearing in the chancery court wherein testimony was taken at length, the relief sought was denied and plaintiffs' bill of complaint dismissed. Plaintiffs have appealed.

The relief which courts may grant to a party who feels that the commissioner's determination is ‘unlawful or unreasonable’ is provided in the statute quoted near the close of our opinion. Upon receipt of a petition of the character here involved accompanied by the requisite information, the statute provides:

‘The commission (commissioner) shall verify the information and statements contained in the application * * *, as well as make any other or further investigation as to the persons, conditions, and circumstances surrounding or in any manner affecting or pertaining to the organization of such bank, sufficient to satisfy the commission (commissioner) as to the responsibility and fitness of the applicants, the necessity for the organization of the bank, and the likelihood of its successful operation. If the commission (commissioner) is so satisfied, it (he) shall approve such application and shall notify such applicants of its (his) approval. * * *

‘If the commission (commissioner) is not satisfied as to the responsibility and fitness of the said applicants, the necessity for such bank, or the likelihood of its successful operation, it (he) shall disapprove the application.’ Act No. 341, § 26, Pub.Acts 1937, Stat.Ann. § 23.754.

It is agreed that the defendant does not question ‘the responsibility and fitness of the applicants' in this case, but in his letter denying the application the banking commissioner said:

‘You are advised that after due and detailed consideration of the application above referred to, it is my conclusion that there is no present existing necessity for the organization and establishment of an additional bank in the City of Detroit, nor am I convinced of the likelihood of its successful operation if established.

‘Accordingly, said application is hereby denied.'

Hence, decision herein turns upon whether or not, under the record, the defendant banking commissioner was in error in denying plaintiffs' application either on the ground (1) that no necessity exists for the establishment of another bank in Detroit, or (2) because ‘the likelihood of its successful operation if established’ was not shown.

necessity. On this phase of the case both the factual situation and the proper construction to be given to the word ‘necessity’ as used in the statute must be considered. As to the need or necessity in Detroit of another bank, plaintiffs have made such an extensive showing that, within permissible bounds of our opinion, it is not possible to review it in detail. We shall note briefly only certain portions of such testimony.

In part the facts and circumstances bearing upon necessity, and to some extent upon successful operation, of a new bank disclosed by the record are as follows: Since 1938 no new bank, other than branch banks, has been established in Detroit, which is the fourth largest city in the United States and which in recent years has experienced a large increase in population, and also a substantial growth particularly during the last four or five years in general business, including banking business; and further there is testimony as to ‘confidence that Detroit * * * will continue to grow * * *.’ In 1940 Detroit had a population of 1,623,452 as shown by the 1940 federal census. At the present time in Detroit, which has an estimated population of 1,825,000, there are 12 separate banking institutions, but because of the limited and specialized character of the business of some of such institutions, there are in Detroit only six banks and their branch institutions which are engaged in commercial banking. There are 99 branch banks, six of which are located outside the city limits.

From statistics in the record, which are conceded to be substantially correct and which relate to banking conditions in 30 cities each of which has total deposits of $500,000,000 or more as of June 30, 1947, the following appears: Only one other of such cities has as few as six commercial banks. Chicago has 70 Commercial and savings banks. Even on the basis of its 1940 population Detroit with six commercial banking units has only one such unit to a population of approximately 270,000, and presently there is a substantially greater population per bank. This population per commercial banking unit in Detroit is much larger than in any of the other 30 cities, where the average population per bank is 41,677. Aside from two of the 30 cities where there are some exceptional attendant circumstances, Detroit has the largest deposits per bank. With one exception the percentage proportion of bank capital to deposits was lower in Detroit than in any other of these cities, where the average was 8.25%. The noted statistics give the Detroit proportion as 4.97%, but in defendant's testimony it is given as 4.67%. This capital protection for Detroit depositors, as disclosed by defendant's proofs, ‘is low compared to the average in the 7th Federal Reserve District and for the nation as a whole.’ In the year period ending October 1, 1947, the percentage of debit increase in Detroit banks was 27.8%, which was substantially higher than in any of the other 30 cities. Touching this latter item, Mr. Joseph Verhelle testified:

‘Then we took what, after all, is the real cream of the statistics, * * * bank debits, because we feel that it is proper to state that they are a measurement of business and industrial gauge; that is, bank debits are simply the total dollar value of the checks that people cash, and if those checks go up, or if they go down, you know that business is going up or down. They are a rather accurate barometer.'

The record also shows that the banking needs of Detroit and the immediate vicinity have resulted in the organization by the six chartered parent banks of 99 branch banks. In testifying, defendant admitted that in his opinion the additional organization of another bank in Detroit would not ‘affect the capital structure or the solvency of the existing banks.'

While we do not deem it of great weight as bearing upon the issue of ‘necessity,’ though it merits some consideration, the record also discloses that the proposed bank would have a long term lease on favorable conditions of existing banking quarters in the Penobscot building, centrally located in the city's financial district, which are not surpassed by those occupied by any other Detroit bank. These quarters, designed for bank occupancy, contain vaults, equipment and bank fixtures, including safety deposit boxes which are presently in use. The foregoing equipment is said to represent an investment of approximately $2,000,000; and needs only to be supplemented by necessary furnishings and equipment for banking purposes. The Penobscot building is considered an outstanding Detroit office building wherein are housed in their business activities between 4,000 and 5,000 persons, and the building is daily frequented by between 40,000 and 50,000 people. Presently no bank is located in the Penobscot building, although there are several banks in the immediate locality.

It is pertinent at this point to quote from the testimony of Mr. Walter S. McLucas, chairman of the board of the National Bank of Detroit, as follows:

‘* * * I think in Detroit it (banking business) is particularly on a sound basis, and a basis that under present conditions is profitable to the banks. The banks are all expanding in their facilities and quarters, spending vast amounts of money, in the last few years for this growth in business; and I think that they have excellent prospects of profitable-sound and profitable operations. * * *

‘Q. * * * Now, taking into consideration the answer to the two previous questions in regard to the growth of the City of Detroit during the last particularly four or five years, in population and the business growth, the banking growth, the...