Valley State Bank of Canton v. Farmers State Bank of Canton, Nos. 11238--11244

CourtSupreme Court of South Dakota
Writing for the CourtHALL; HALL, Circuit Judge, sitting for DUNN
Citation213 N.W.2d 459,87 S.D. 614
PartiesApplication of the Valley State Bank of Canton for Approval of its Articles of Incorporation and for Authority to Engage in Business. VALLEY STATE BANK OF CANTON and South Dakota State Banking Commission, Appellants, v. FARMERS STATE BANK OF CANTON, Respondent.
Decision Date20 December 1973
Docket NumberNos. 11238--11244

Page 459

213 N.W.2d 459
87 S.D. 614
Application of the Valley State Bank of Canton for Approval
of its Articles of
Incorporation and for Authority to Engage in Business.
VALLEY STATE BANK OF CANTON and South Dakota State
Banking Commission, Appellants,
v.
FARMERS STATE BANK OF CANTON, Respondent.
Nos. 11238--11244.
Supreme Court of South Dakota.
Argued Sept. 18, 1973.
Decided Dec. 20, 1973.

[87 S.D. 617]

Page 461

M. T. Woods, Woods, Fuller, Shultz & Smith, Sioux Falls, for appellant, Valley State Bank of Canton.

Michael J. McGreevy, Asst. Atty. Gen., Pierre, for appellant, South Dakota State Banking Commission; Kermit A. Sande, Atty. Gen., on the brief.

Samuel W. Masten, Canton, for respondent, Farmers State Bank of Canton.

HALL, Circuit Judge.

On September 13, 1971, a 'Notice of Intention to Organize and to File Articles of Incorporation with the State Banking Commission, for a State Bank under Chapter 51--17 SDCL' was filed with the State Banking Commission on behalf of appellant Valley State Bank of Canton, seeking a charter to open a banking service in Canton, South Dakota.

Pursuant thereto, the Banking Commission caused a 'Notice of Hearing' to be published in the legal newspaper of Lincoln County, South Dakota, and notified banks in the vicinity of [87 S.D. 618] Canton including the respondent Farmers State Bank of Canton, the sole bank in Canton, of a hearing on the application of the Valley State Bank for a state chartered bank at Canton, South Dakota.

On December 21, 1971, the Banking Commission held an adversary, adjudicative-type

Page 462

hearing to take testimony on appellant's application. Both appellant and respondent banks were allowed to present witnesses and conduct cross-examination. At the conclusion of the testimony, the respondent and appellant banks presented their proposed findings of fact and conclusions of law as required by the Banking Commission.

The Banking Commission subsequently issued its 'FINDINGS OF FACT, CONCLUSIONS OF LAW, RULING ON PROPOSED FINDINGS, AND DECISION', which showed a unanimous approval of appellant Valley State Bank of Canton's application. Copies of the findings, conclusions, ruling and decision were transmitted by letter to the attorneys of record.

The record in this case reflects that the Banking Commission at all times strictly adhered to its own rules and SDCL 1--26--1 through 1--26--40, the Administrative Procedure Act (hereinafter referred to as APA), in regard to notice, conduction of hearings and rulings. The rules of procedure utilized by the Banking Commission were specifically adopted June 30, 1971, in compliance with the APA. The Banking Commission followed its rules as to a 'contested case' and, at the time of the hearings, none of the parties objected to these procedures.

The Banking Commission's ruling of February 23, 1972, granted a charter to appellant Valley State Bank of Canton to operate a bank in Canton, and respondent Farmers State Bank of Canton filed a 'Petition For Review In Circuit Court' in Lincoln County on March 17, 1972.

On the review granted by the Circuit Court, the Farmers State Bank of Canton basically contended: The Banking Commission was bound by the APA; the application of appellant for a charter involved a "Contested case" within the meaning of [87 S.D. 619] SDCL 1--26--1(2); the respondent was a proper party to appeal under the APA; the appeal was timely; and, the Banking Commission's approval of a charter for appellant bank was not based upon 'substantial evidence' as defined by the APA and, therefore, clearly erroneous.

The appellants' resistance to the review by the Circuit Court was based on allegations that: The Banking Commission's action was not reviewable by the court because it involved a purely legislative function; the respondent was not a proper party to seek review; the Banking Commission was in no way controlled by the APA; the appeal was not timely; and, there was 'substantial evidence' to support the Banking Commission's approval of the charter.

The Circuit Court, relying on the contentions of the respondent Farmers State Bank of Canton, set forth above, reversed the Banking Commission's approval of the charter for the Valley State Bank of Canton, thus framing the questions presented on this appeal.

The activities of granting or revoking bank charters are legislative functions which have been delegated to the Banking Commission. SDCL 51--16, 51--17. The enabling legislation effective at the time of the application of appellant Valley State Bank of Canton, however, in part provided:

'The commission shall have the power to adopt all necessary rules and regulations not inconsistent with the laws of this state, for the management and administration of banks * * * over which it has jurisdiction * * * and to regulate its own procedure and practice, which Rules shall be promulgated Pursuant to chapter 1--26.' (emphasis added) SDCL 51--16--14; and

'The commission shall pass upon every application to organize a bank under the laws of this state * * * and the action of the commission on every such application shall be final, Subject to chapter 1--26 * * *.' (emphasis added) SDCL 51--16--15.

[87 S.D. 620]

Page 463

Because of these provisions in our statutes, the Banking Commission is not free to perform its functions in total disregard of the APA. The Banking Commission's rules of procedure must be adopted pursuant to the APA and, once adopted, acquire the force and effect of law. Public Utilities Commission of California v. United States, 1958, 355 U.S. 534, 78 S.Ct. 446, 2 L.Ed.2d 470; Paul v. United States, 1963, 371 U.S. 245, 255, 83 S.Ct. 426, 9 L.Ed.2d 292; Springborg v. Wilson and Company, 1955, 245 Minn. 489, 73 N.W.2d 433; Verbeten v. Huettl, 1948, 253 Wis. 510, 34 N.W.2d 803; Davis, Administrative Law Text, 126, 127 (3rd Ed. 1972).

The Banking Commission rules 30 and 31, adopted June 30, 1971, have the force and effect of law in the present case. These rules bind the Banking Commission as well as those coming before it. Pursuant to the command of the legislature (SDCL 51--16--14 and 51--16--15), the Commission adopted the above-cited rules to govern the process of granting new bank charters in "Contested case(s)". Following these rules, the Banking Commission caused notice to be issued to competitive financial institutions which may be thereby affected. The rules followed established an adjudicative, adversary hearing prior to the Banking Commission's ruling. In this quasi-judicial setting, proposed findings of fact and conclusions of law were required to be presented by the appellant and respondent banks, named as parties of record in the action.

The Banking Commission's final decision and rulings were based upon the above adjudicative procedure, but it is now argued that the Commission was not required to follow such procedure and the rules followed did not bind the Commission in any manner. It is then concluded that the proscriptions and results of the Commission's own rules, and those of the legislature, may be avoided because the Commission operates under delegated legislative authority.

It is illogical to say that the competing respondent bank has an interest of such importance it should be presented at a quasi-judicial, adjudicative hearing but that there was no possibility the respondent bank could be adversely affected or [87 S.D. 621] aggrieved by the decision and, thus, not entitled to appeal. Such incongruous reasoning spawns arbitrary and capricious governmental activity.

The Banking Commission is not excluded from the provisions of the APA. SDCL 1--26--1(1). It cannot be contended that the issuance of a bank charter...

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29 practice notes
  • B.K. v. 4–H, No. CIV. 12–4046–KES.
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • August 29, 2012
    ...In re Union Carbide Corp., 308 N.W.2d 753, 757 (S.D.1981) (quoting Valley State Bank of Canton v. Farmers State Bank of Canton, 87 S.D. 614, 213 N.W.2d 459, 463 (1973)). “The constitutional guaranty of due process of law applies to, and must be observed in, administrative as well as judicia......
  • Tulsa Area Hospital Council, Inc. v. Oral Roberts University, No. 53059
    • United States
    • Supreme Court of Oklahoma
    • March 24, 1981
    ...Master Conservancy Dist., 464 P.2d 748, 752-53 (Okla.1969); 75 O.S.1971 § 322(1)(e). 7 Valley State Bank of Canton v. Farmers State Bank, 87 S.D. 614, 213 N.W.2d 459 (1973); First American Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 106 8 Oklahoma Inspection Bureau v. State Bd. for Property......
  • Moulton v. State, Nos. 15373
    • United States
    • Supreme Court of South Dakota
    • September 9, 1987
    ...(2) agency rule; or (3) due process constitutional mandate. Carlson, 277 N.W.2d at 718 (citing Valley State Bank v. Farmers State Bank, 87 S.D. 614, 621, 213 N.W.2d 459, 463 We are convinced, in the present case, especially when viewed against the backdrop of unsettled facts, that Commissio......
  • B.K. v. 4-H, CIV. 12-4046-KES
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • July 12, 2012
    ...In re Union Carbide Corp., 308 N.W.2d 753, 757 (S.D. 1981) (quoting Valley State Bank of Canton v. Farmers State Bank of Canton, 213 N.W.2d 459, 463 (S.D. 1973)). "The constitutional guaranty of due process of law applies to, and must be observed in, administrative as well as judicial proce......
  • Request a trial to view additional results
29 cases
  • B.K. v. 4–H, No. CIV. 12–4046–KES.
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • August 29, 2012
    ...In re Union Carbide Corp., 308 N.W.2d 753, 757 (S.D.1981) (quoting Valley State Bank of Canton v. Farmers State Bank of Canton, 87 S.D. 614, 213 N.W.2d 459, 463 (1973)). “The constitutional guaranty of due process of law applies to, and must be observed in, administrative as well as judicia......
  • Tulsa Area Hospital Council, Inc. v. Oral Roberts University, No. 53059
    • United States
    • Supreme Court of Oklahoma
    • March 24, 1981
    ...Master Conservancy Dist., 464 P.2d 748, 752-53 (Okla.1969); 75 O.S.1971 § 322(1)(e). 7 Valley State Bank of Canton v. Farmers State Bank, 87 S.D. 614, 213 N.W.2d 459 (1973); First American Bank & Trust Co. v. Ellwein, 198 N.W.2d 84, 106 8 Oklahoma Inspection Bureau v. State Bd. for Property......
  • Moulton v. State, Nos. 15373
    • United States
    • Supreme Court of South Dakota
    • September 9, 1987
    ...(2) agency rule; or (3) due process constitutional mandate. Carlson, 277 N.W.2d at 718 (citing Valley State Bank v. Farmers State Bank, 87 S.D. 614, 621, 213 N.W.2d 459, 463 We are convinced, in the present case, especially when viewed against the backdrop of unsettled facts, that Commissio......
  • B.K. v. 4-H, CIV. 12-4046-KES
    • United States
    • United States District Courts. 8th Circuit. United States District Courts. 8th Circuit. District of South Dakota
    • July 12, 2012
    ...In re Union Carbide Corp., 308 N.W.2d 753, 757 (S.D. 1981) (quoting Valley State Bank of Canton v. Farmers State Bank of Canton, 213 N.W.2d 459, 463 (S.D. 1973)). "The constitutional guaranty of due process of law applies to, and must be observed in, administrative as well as judicial proce......
  • Request a trial to view additional results

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