Summit & Elizabeth Trust Co., Application of

• Decision Date: 14 July 1970
• Citation: 111 N.J.Super. 154,268 A.2d 21
• Parties: Application of the SUMMIT AND ELIZABETH TRUST COMPANY for a branch bank to be located at the intersection of Mountain Avenue and the Rahway Valley Railroad, Springfield Township, Union County, New Jersey.
• Court: New Jersey Superior Court — Appellate Division

Page 154

111 N.J.Super. 154

268 A.2d 21

Application of the SUMMIT AND ELIZABETH TRUST COMPANY for a

branch bank to be located at the intersection of Mountain

Avenue and the Rahway Valley Railroad, Springfield Township,

Union County, New Jersey.

Superior Court of New Jersey Appellate Division.

Argued June 15, 1970.

Decided July 14, 1970.

Stuart L. Pachman and Jerome C. Eisenberg, Newark, for appellant Springfield State Bank (Clapp & Eisenberg, Newark, attorneys).

Wilentz, Goldman & Spitzer, Perth Amboy, for appellant The National State Bank did not argue but filed a brief (Barry D. Maurer, Perth Amboy, of counsel).

Hugo M. Pfaltz, Jr., Summit, for respondent Summit & Elizabeth Trust Co. (Bourne & Noll, Summit, attorneys).

George F. Kugler, Jr., Atty. Gen., for the Commissioner of Banking and Insurance, did not argue but filed a statement in lieu of brief (T. Robert Zochowski, Deputy Atty. Gen., of counsel).

Before Judges GOLDMANN, LEWIS and MATTHEWS.

The opinion of the court was delivered by

LEWIS, J.A.D.

Springfield State Bank (Springfield) appeals from an order of the Commissioner of Banking and Insurance (Commissioner) approving the application of the Summit and Elizabeth Trust Compny (Summit) for a branch office in the Township of Springfield (township).

Springfield contends in substance that (1) Summit is prohibited from establishing a branch bank in the township by virtue of the grant of 'home office protection' by N.J.S.A. 17:9A--19(B)(3); (2) in any event Springfield, as a newly chartered bank in the township, is entitled to that protection because it would have been the first of the two to open for business 'but for the entanglements of the legal processes'; (3) Commissioner Horace J. Bryant, Jr., about to be replaced by Commissioner Robert L. Clifford on the Governor's inauguration day (January 20, 1970), was without authority to grant the Summit application, and (4) the Commissioner's decision is not supported by the evidence, he abused his administrative discretion and failed to exercise his presumed expertise.

The National State Bank (National State), also an objector to the Summit application, appeals from the same order of the Commissioner, advancing in essence point (4) raised by Springfield. These appeals were consolidated for our review.

This protracted controversy focuses upon the Branch Banking Act, L.1968, c. 415, § 1 et seq., which ws adopted on January 17, 1969 to take effect on July 17, 1969. N.J.S.A. 17:9A--3.1 et seq. That statute divided the State into three banking districts and authorized branch banking within those districts subject to certain requirements. By its terms the act precluded the prospective granting of charters (after July 17, 1969) to 'affiliate' or 'chain' banks, theretofore permissible entities in the State, see, E.g., In re Kenilworth State Bank, 49 N.J. 330, 339--340, 230 A.2d 377 (1967), since N.J.S.A. 17:9A--3.1 provides, 'No officer, director or employee of any bank may be, directly or indirectly, an incorporator of another bank.' It is clear, however, that the new enactment granted so-called 'home office protection' to pre-existing affiliate banks. It declares in pertinent part that no bank may establish a branch, outside of the municipality in which it maintains its principal office, in any other municipality in which another banking institution 'has its principal office.' N.J.S.A. 17:9A--19(B)(3). The crux of the instant controversy is whether Springfield, within the intent and meaning of the act, has home office protection to the exclusion of a Summit branch office.

Springfield's Position

In December 1967 Springfield (an affiliate bank with interlocking directors in common with The First State Bank of Union) applied to the Commissioner for charter approval of a home office bank in the township. Statutory hearings were held on February 1, May 2 and July 23, 1968. National State was the only objector that participated in the proceedings. The Commissioner was aware of the imminence of probable adoption of a Branch Banking Act, which was a foreshadowed event, as indicated by letter from Summit to the Commissioner requesting that consideration of the Springfield application be deferred awaiting anticipated legislation amending the Banking Act. This request was rejected by the Commissioner, who expressed the view that a refusal to consider pending applications would be unfair.

On February 20, 1969 the Commissioner approved a charter grant to Springfield conditioned only upon the bank's engaging an acceptable executive officer prior to the issuance of a certificate of authority to commence business and that the bank become a member of the Federal Deposit Insurance Corporation. In reaching his decision the Commissioner found that the trade area was in excess of 24,000 and that the proposed bank office on heavily trafficked Route 22 would 'serve the public interest' and afford 'reasonable promise of successful operation.'

Summit, National State and Union Center National Bank (Union Center) appealed, and a stay of the operation of the Commissioner's decision was obtained from this court. Subsequently, National State and Union Center, both national banks, were granted branch bank approval by the Comptroller of Currency. Springfield then sought to vacate the stay, which was denied. Summit not only opposed the motion, but affirmatively and successfully moved for a continuance of the stay pending the appeal.

In short, Springfield was involuntarily and effectively precluded from completing the procedures which were necessary before obtaining a certificate of authority to conduct business. At this juncture we note that under N.J.S.A. 17:9A--17 a bank charter may be forfeited by the Commissioner upon failure to obtain a certificate of authority within six months from the date of the Commissioner's approval of its certificate of incorporation or upon failure to commence business within six months after the issuance of such certificate of authority. These periods are subject to extensions by the Commissioner for periods not to exceed a total of 12 months.

Argument on those appeals was heard before this court on October 14, 1969 and, within a week thereafter, we affirmed the grant of the charter to Springfield, In re Springfield State Bank, 107 N.J.Super. 230, 258 A.2d 24 (App.Div.1969), making this observation.

* * * the six-month delay in the effective date of the legislation could have had no other purpose than to permit the Commissioner to dispose of matters then pending, on the merits and in light of then existing law. (at 234, 258 A.2d at 26)

The Supreme Court denied certification on January 13, 1970. In re Springfield State Bank, 55 N.J. 312, 261 A.2d 356 (1970). Accord, In re Peoples Bank of Montvale, 110 N.J.Super. 141, --- A.2d --- (App.Div. July 14, 1970).

Summit's Position

On May 5, 1969, after the adoption of the Branch Banking Act and while the charter grant to Springfield was under appellate review, Summit formally applied to the Commissioner for the approval of a branch bank in the township. Hearings on its application were conducted on November 14 and December 4, 1969, during which objections were made by Springfield, National State and Union Center. The hearing examiner's report was filed January 8, 1970. He recommended approval of the application, for in his view the requirements of N.J.S.A. 17:9A--20(2) and (3) were met, I.e., the interest of the public would be served to advantage, and the local conditions afforded reasonable promise of successful operation. Ten days were allowed to the objectors to file exceptions. Springfield and National State filed written objections with the Commissioner on January 19, 1970; Union Center mailed objections on that date, but they were not received within the specified time.

On the morning of January 20, 1970, inauguration day, Commissioner Bryant, whose term of office was about to expire, was reluctant to act on the Summit matter. Counsel for Summit personally visited and requested Commissioner-designate Clifford to advise Bryant that he had no objection to his acting on the application on his last day in office. This Clifford did by telephone, and Bryant thereupon signed an order in Summit's favor. The operative effect of this aggregation of maneuvering was that both the principal office of Springfield and a branch of Summit were approved by the Commissioner. Springfield pursued the instant appeal on January 20.

The Commissioner's Action

Preliminarily, we dispose of the argument that Commissioner Bryant was without authority to act on January 20. The Commissioner is required to serve 'at the pleasure of the Governor during the Governor's term of office and until the appointment and qualification of the commissioner's successor.' N.J.S.A. 17:1--2. Since Commissioner Clifford took the oath of office on January 21 and then again on January 22, it is manifest that Commissioner Bryant had authority to act on January 20. Cf. Skladzien v. Board of Education of Bayonne, 12 N.J.Misc. 602, 605, 173 A. 600, 602 (Sup.Ct.1934), aff'd o.b. 115 N.J.L. 203, 178 A. 793 (E. & A.1935).

The decision of the outgoing Commissioner was brief; he stated that he had reviewed the entire record, adopted the report and recommendations of the hearing examiner and approved the Summit application.

Although the hearing officer found from the testimony and exhibits that Summit's proofs sufficiently complied with N.J.S.A. 17:9A--20, he demonstrated only casual concern with respect to the application of the provisions of the recent Branch Banking Act, in particular N.J.S.A. 17:9A--19(B)(3), other than to recognize that that section prohibits the establishment of a branch office in a municipality wherein a 'banking institution has its principal office.' He concluded:

* * * Whether home-office protection attaches upon charter approval or upon the actual opening for business of a bank is a legal question difficult to...