West St. Paul State Bank v. Signal Hills State Bank

223 N.W.2d 793, 302 Minn. 124, 1974 Minn. LEXIS 1168

Opinions

Knutson, Justice.

Footnotes

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This is a proceeding for review by certiorari of a decision of the Minnesota Commerce Commission¹ reversing an approval by the commissioner of banks of the right of relator, West St. Paul State Bank, to move its location.

The facts are not seriously in dispute. West St. Paul State Bank (hereinafter West) has been engaged in the banking business at 918 South Robert Street, West St. Paul, since 1923. Its original charter issued in 1923, as well as a replacement charter issued in 1964, named the city of West St. Paul as the bank’s place of business but did not include any street address.

Respondent Signal Hills State Bank does business in the city of West St. Paul as well. West is located in the northern part of the city and Signal Hills State Bank (hereinafter Signal) is located in the central part of the city. The city is composed mainly of two major business areas, the southern and northern portions thereof. West presently serves the older, more-established northern portion of the city while Signal serves a rapidly growing and younger southern portion of the city. In November 1972, West filed a written application with the commissioner of banks seeking approval to move its bank to 64 East Thompson Avenue, which would place it in the southern portion of the city and, it is claimed by Signal, in competition with it.

Pursuant to the bank commissioner’s past administrative practice, a hearing was held to determine whether the proposed move would affect the solvency of West or any other bank and Signal was permitted to appear and cross-examine West’s witnesses as well as to submit evidence of its own. Eventually the commis sioner found that the proposed move would not endanger the solvency of West or Signal and gave his approval.

A request for review by the Commerce Commission was granted and resulted in a reversal of the commissioner of banks. The holding of the Commerce Commission was:

“That the Commissioner of Banks of the State of Minnesota is authorized and empowered to approve or deny the change of location of any existing bank in the State of Minnesota when such change of location is within the same municipality.

“That the burden of proof on the issue of whether the proposed change in location would endanger the solvency of the Signal Hills State Bank or any other bank in the area should properly have been on the petitioner, the West St. Paul State Bank.

“That-the issue of the existence of a reasonable public demand for the West St. Paul State Bank at 64 East Thompson Avenue, West St. Paul, was a proper issue and should have been proven by the petitioner.”

Based on these findings, the commission ordered a new hearing to determine whether there was a reasonable public demand for West’s services at the proposed new location and whether the relocation of West would endanger the solvency of it or of Signal.

Determination of these questions rests mainly on the construction of Minn. St. 45.03 and 47.10.

A brief review of the historical background of these statutory provisions may be of some help.

G. L. 1879, c. 109, established many of the rules governing banks and financial institutions. Section 27, subd. 2, which deals mainly with the right of the bank to own and hold real estate, contains the following provision:

“* * * [I]t shall be lawful for any such corporation, with the approval in writing, and under the seal of the Public Examiner, to change its location, within the limits of any city or town wherein it may be established * *

In addition to the above statement, the original provision from which it is taken also contains the following provision:

“* * * [I]n effecting such change of location, such corporation owning a banking house and lot, may purchase such additional plot under the provisions of subdivision one (1) of this section as the corporation may require; and such banking house and lot previously owned and occupied shall be sold, as provided in subdivision two (2) of this section, concerning real estate acquired in satisfaction of debts.”

Thus it seems clear that the original provision from which Minn. St. 47.10 has its roots dealt with the right of the bank to hold or acquire real estate upon a change from one location to another.

In E. L. 1905, § 2976, which also deals with the “Eight to acquire and hold real estate,” the language of the original provision was changed to read:

“* * * Any such corporation may change its location, dispose of its place of business, and acquire another, upon the written approval of the examiner.”

It is to be noted that in the 1905 revision, the language “within the limits of any city or town wherein it may be established” was eliminated.

Minn. St. 47.10 is virtually identical to the 1905 revision except that the commissioner of banks has been substituted for the examiner as the one who is to approve such move. This change came about by virtue of L. 1941, c. 37, § 1.

It would seem that after the 1905 revision, as well as under the present § 47.10, the then examiner and now commissioner may approve a change of the location of a bank whether it be within or without the same municipality where the bank is located when the application is made. There seems to be some confusion as to what the proper procedure is when a bank wishes to move its location. In the case of Plunkett v. First Nat. Bank of Austin, 262 Minn. 231, 246, 115 N. W. 2d 235, 245 (1962), in which application was made to change the name of a trust company and also to be permitted to move from Albert Lea to Austin, we said:

“* * * [D] etermination of this question appears to have been taken over by the Department of Commerce under § 45.04. The procedure for making such determination was recognized as valid by the attorney general in opinions furnished at the time the Securities Commission performed the functions now exercised by the Department of Commerce.”

As part of the reorganization act of 1925 (L. 1925, c. 426, art. 8, § 1) the Department of Commerce was created. The Commerce Commission was created under this act and consists of the commissioner of banks, the commissioner of insurance, and the commissioner of securities. It is organized in three divisions: Banking division in the charge of the commissioner of banks; insurance division in the charge of the commissioner of insurance; and a securities commission in the charge of the commissioner of securities. There is no doubt but what the commissioner of banks is given extensive authority under c. 46 of our statutes to supervise and regulate banks.

However, § 45.03, defining the powers and duties of the Commission of Commerce, provides among other things:

“* * * The commission shall review, and may affirm, reverse, modify, amend, or abrogate all quasi-judicial acts of a single commissioner upon written request and application of the party aggrieved, this review to be held after such reasonable notice as the commission shall prescribe.”

In the case now before us, such review of the approval of the commissioner of banks was requested by Signal and the commission did reverse the commissioner of banks and ordered a new hearing as to two of the criteria involved in establishing a new bank. The crucial question in this case really comes down to a determination of whether the commissioner of banks’ approval under § 47.10 or the decision of the Commerce Commission under § 45.03 controls. Unless we are going to read out of § 45.03 the right of the commission to reverse the commissioner of banks, it would seem that upon a review a decision of the Commerce Commission is controlling. The language is clear and it would seem quite obvious that the approval of the commissioner of banks of a right to move from one location to another is a quasi-judicial act, and therefore the Commerce Commission was well within its powers when it reversed the commissioner of banks.

Thus it would seem that under § 47.10 the commissioner of banks initially has the right to approve or disapprove an application to move an existing bank to a new location. While there has been some attempt to read into the present statute the provisions which were contained in the 1879 statute that the move can be approved only if within the same municipality or township, the present statute does not contain such limitations. If there is no request for review by the Commerce Commission, the decision of the commissioner of banks would no doubt be controlling. If, however, there is a request for a review, as there was here, a decision of the Commerce Commission reversing the commissioner of banks is controlling.

The question then becomes: What are the criteria for approving or disapproving the moving of an established bank from one location to another? The criteria for permission to establish a new bank are found in § 45.07, which reads in part:

“If the applicants are of good moral character and financial integrity, if there is a reasonable public demand for this bank in this location, if the organization expenses being paid by the subscribing shareholders do not exceed the necessary legal expenses incurred in drawing incorporation papers and the publication and the recording thereof, as required by law, if the probable volume of business in this location is sufficient to insure and maintain the solvency of the new bank and the solvency of the then existing bank or banks in the locality without endangering the safety of any bank in the locality as a place of deposit of public and private money, and if the department of commerce is sat isfied that the proposed bank will be properly and safely managed, the application shall be granted otherwise it shall be denied.”

In moving an established bank to a new location, some of these criteria may already be established. Thus, from past experience, the commissioner of banks in the first instance and the Commerce Commission on review could undoubtedly take it as established that the applicants are of good moral character and financial integrity. The two crucial issues that would seem to be present under the requirements for establishing a new bank when it involves the moving of an established bank to a new location are whether the move will affect the solvency of existing financial institutions in the area to which the established bank wishes to move, and whether there is a reasonable public demand for another bank in this locality. These are the two criteria the Commerce Commission ordered a rehearing on, which it seems was entirely proper.

It must be apparent that the impact upon financial institutions already existing in a certain locality is as great when an established bank is permitted to move into that territory as if a new bank were chartered. Possibly it is even greater where, as here, the bank does not move a great distance from its former location. It may well take some of its old customers with it and acquire some of the potential customers of existing institutions. Thus it seems to us that the same inquiry into the possible effect of the move should be made as if a new bank sought a charter.

The question remains: Where does the burden of proof lie to establish these criteria? In the case of an application for a new charter, clearly the burden of proof lies on the applicant to establish the prerequisites under § 45.07. In the case of Wesely v. Min-netonka State Bank, 293 Minn. 386, 198 N. W. 2d 158 (1972), we held that the evidence sustained the commission’s conclusion that the evidence failed to satisfy three of the five expressed statutory requirements under § 45.07. We said (293 Minn. 388, 198 N. W. 2d 160):

“* * * A failure of proof with respect to any one of the essential statutory requirements, when supported by the record, justifies a denial by the commission and an affirmance by a reviewing court.”

In Application of Burrill, 262 Minn. 270, 114 N. W. 2d 688 (1962), we followed the same rule.

In view of the fact that the burden of proof lies upon the applicant for a new bank charter, we can perceive of no reason why the burden should not also rest upon the applicant who wishes to move an established bank into a new territory where there are other existing financial institutions.

Affirmed.

Retired Chief Justice acting pursuant to Minn. St. 2.724.

1

Apparently review of the action of the Commerce Commission in this court may be had by either certiorari or an appeal to the district court under Minn. St. 15.0424, the Administrative Procedure Act. In the case of Bryan v. Community State Bank of Bloomington, 285 Minn. 226, 230, 172 N. W. 2d 771, 774, 56 Minn. L. Rev. 621 (1969), we said: “* * * Thus, review under the Administrative Procedure Act is optional, and traditional methods, such as certiorari under § 45.07, are still available. In the instant case, therefore, applicants proceeded properly in appealing to the district court.”