Walker Bank & Trust Co. v. Taylor

• Decision Date: 25 March 1964
• Docket Number: No. 9947,9947
• Citation: 15 Utah 2d 234,390 P.2d 592
• Court: Utah Supreme Court
• Parties: d 234 WALKER BANK & TRUST COMPANY, a Utah corporation, Plaintiff and Respondent, v. Spencer C. TAYLOR, Bank Commissioner of the State of Utah, and State Bank of Provo, a Utah corporation, Defendants and Appellants.

Page 592

390 P.2d 592

15 Utah 2d 234

WALKER BANK & TRUST COMPANY, a Utah corporation, Plaintiff and Respondent, v. Spencer C. TAYLOR, Bank Commissioner of the State of Utah and State Bank of Provo, a Utah corporation Defendants and Appellants.

No. 9947.

Supreme Court of Utah.

March 25, 1964.

A. Pratt Kesler, Atty. Gen., H. Wright Volker, Asst. Atty. Gen., Fabian & Clendenin, Peter W. Billings, John F. Lee, Salt Lake City, for defendants and appellants.

Ray, Rawlins, Jones & Henderson, Salt Lake City, for plaintiff and respondent.

L. Tom Perry, Logan, amicus curiae.

CALLISTER, Justice.

This is a declaratory judgment action wherein Walker Bank & Trust Company seeks to have declared illegal and void an order of the Utah State Bank Commissioner granting State Bank of Provo the right to establish a branch bank in the city of Provo. The lower court ruled in favor of Walker and the Commissioner and State Bank of Provo now appeal therefrom.

Provo City is a city of the second class. State Bank of Provo is a unit bank and, at the time it made its application for the establishment of the branch, had only one banking house located in Provo. Prior to the granting of the application, which occurred on October 25, 1962, there were in existence two other banking institutions in Provo--a branch of Walker's and a branch of First Security of Utah, N. A. Walker had established its branch by taking over, by way of a merger in 1955, and Farmers' and Merchants' Bank, an existing unit bank. The record does not disclose in what manner First Security established its branch.

It is acknowledged that the State has the right and prerogative to regulate banks and banking within its jurisdiction. Therefore, the disposition of the problem here presented must be resolved by the interpretation of the applicable statutory law relating thereto. This law is found in Section 7-3-6, U.C.A.1953, as amended. The pertinent provisions are as follows:

'The business of every bank shall be conducted only at its banking house and every bank shall receive deposits and pay checks only at its banking house except as hereinafter provided. * * *'

'Except in cities of the first class, or with unincorporated areas of a county in which a city of the first class is located, no branch bank shall be established in any city or town in which is located a bank or banks, state or national, regularly transacting a customary banking business, unless the bank seeking to establish such branch shall take over an existing bank.' (Emphasis added.)

At the outset, it should be stated that we agree with the defendants' (Commissioner and State Bank of Provo) position that the words 'bank or banks' as used in the foregoing quoted statutory provisions refer to unit banks and do not include branch banks. Thus, the mere presence of a branch bank in a city of the second class, which had no unit bank in existence, would not preclude the Commissioner from authorizing the establishment of a branch by another bank. The existence of the two branch banks in Provo would not prohibit the Commissioner from granting the application of State Bank of Provo for a branch in that city. However, there is a more difficult, and determinative, question as to whether the existence of State Bank of Provo, itself as a unit bank, precludes it from establishing a branch in Provo City. Defendants assert that an affirmative answer to this question would produce an absurd result.

Defendants urge that it was the intention of the legislature, in enacting the present law, to protect unit banks in the smaller communities from possible competition of large banking institutions establishing branches therein. Their argument is to the effect that the legislature could not have intended to protect a bank from its own competition. In other words, if there were only one banking institution in a city of less than the first class that bank, being a unit bank, would have the right to establish a branch in that municipality without first 'taking over' an existing unit bank--when there was none. They point out that the statute does not expressly prohibit branching under the instant circumstances and, therefore, the granting of such a privilege is permissive within the discretion of the Commissioner.

We are of the opinion that our statute is restrictive and, what it does not expressly permit, it prohibits. There is but one method of establishing a branch bank in a city of less than the first class having an existing unit bank and that is by 'taking over' such bank. ¹ The legislative history of branch banking is of great significance. In 1911, the legislature enacted a statute which absolutely prohibited branch banking. ² It was not until 1933 that the legislature relaxed this prohibition and permitted branching under certain conditions and circumstances. ³ During the period between 1911 and 1933 the legislature evidently was of the opinion that branch banking was not in the public interest, possibly because it might impair the stability of the existing banks. This reasoning could well have influenced the law makers when they saw fit to allow branch banking, but only under certain restrictive conditions. This legislative history lends support to the proposition that what our branch banking laws do not permit they prohibit.

The legislative history also lends support to the proposition that a literal interpretation of the statute does not necessarily reach an absurd result. If the legislature has the power to prohibit branch banking entirely, ⁴ it necessarily follows that it may reasonably...