Philadelphia Saving Fund Society v. Banking Board

Opinion Concurring in Part and Dissenting in Part by

Mr. Justice Bell:

We decided in Delaware County National Bank v. Campbell, 378 Pa. 311, 106 A. 2d 416, that an appeal in the nature of a broad certiorari may be taken to the Supreme Court from an Order of thé Pennsylvania Banking Board approving a merger of two banks, the effect of which was to establish a branch bank in a community in a county contiguous to Philadelphia. Appellees contend that this is an appeal from an Order of the Department of Banking, and since it disapproved the establishment of a branch bank the appeal is in the nature of a narrow certiorari and therefore should be quashed. There is no merit in this contention.

Section 204, F, specifically governs the present case and provides that “the decision of the Banking Board shall be binding upon the Department of Banking.” This appeal was in reality from the findings of fact and conclusions of law of the Banking Board, the named defendant in the case, and both appellants and appellees base their entire argument-on-the-merits upon the contention that the Board’s findings of fact and conclusions of law should be reversed or affirmed. The Department of Banking was a mere agency or conduit to relay the decision of the Banking Board to the Secretary of the Commonwealth and the parties interested, and the Banking Code being silent on the subject of an appeal in such a situation, an appeal in the nature of a broad certiorari is allowed therefrom. However, even if the appeal were restricted to a narrow certiorari, this would furnish no legal grounds for quashing the appeal.

The merits and the proof.

Section 204, D, of the Banking Code provides that a State Bank “may . . . establish a branch ... in any place within any county contiguous to the county in which its principal place of business is located, if the city, borough or other community in which such branch is to be established is without adequate banking facilities,¹ . . .”. Obviously the Society which.is seeking to establish a branch has the burden of proving that the community in question is “without adequate banking facilities.” The question involved may be thus accurately stated:

Where, in the community in which the proposed branch bank is to be located, there are commercial banks which the Banking Board found offer complete banking facilities including the facilities which the applicant proposes to furnish, but there are no mutual savings banks, does the Banking Board of Pennsylvania have to hold as a matter of law that the community was without adequate banking facilities?²

The Banking Board, after hearing and testimony, found as a fact that the community in question had complete and well-rounded hanking facilities including all the facilities which the Society proposes to offer to thé people in that community. No testimony or facts were presented to the contrary and, as we shall see, the Society did not offer a scintilla of evidence to prove that the community was without adequate banking facilities.

The primary business of the Saving Fund Society consists of receiving small deposits for (popularly called) savings accounts, investing the money in United States Government bonds, Corporate bonds and Municipal bonds and in making home mortgage loans. The Statement of Condition of the Philadelphia Saving Fund Society as of June 30, 1954, showed (no savings accounts but) time deposits of $717,302,858, and mortgage loans of $235,147,831. Since the majority seems confused on the subject of savings deposits and time deposits, and seems to base its decision mainly on the thesis that only a savings bank has or should have “savings deposits”, we point out (a) that savings deposits are often included in and often called time de-' posits which, although they differ slightly, are basically the same; and (b) the Society’s “Statement of Condition” contains no savings (accounts or) deposits but only “time deposits”.

The Society is not a commercial bank and does not have any checking accounts. It pays a higher rate of interest on saving accounts than do commercial banks, although not as high as its neighboring Federal Savings and Loan Association; and generally speaking withdrawals can be made in less time than most commercial banks require. These are irrelevant minutiae.

The Society based its case on (1) the argument of “convenience” to its present and future depositors, which of course is neither a factual nor a legal ground or basis to justify its application or satisfy the statutory requirement of “want of adequate banking services”; and (2) on the technical legal argument — which is the only possible basis for the present application— that a mutual savings bank (of which there are only seven in the entire Commonwealth) is in many respects different from a commercial bank; ergo the Society is entitled to establish a branch in any and every community in Pennsylvania which does not have a mutual savings institution.³ This latter was a proper legal approach and is we repeat the only ground upon which the appellant could possibly be legally granted the right to establish a branch in the community in question.

The Society says it has many customers who live in this area⁴ and it would be more convenient for them to make their deposits in a branch bank instead of by mail.⁵ Although it is entirely irrelevant and immaterial, it would probably be more accurate to say that it is more customary but not as convenient to deliver rather than to mail your deposit — instead of motoring for miles and trying to find a nearby parking space. However, the Society is correct when it says that an attractive bank building has more appeal or allure than a drab mail box, and is much more likely to attract depositors. The Society further contends that none of the four banks in the community⁶ in question furnish the same type of service as does the Society. This is diametrically contrary to the findings of fact of the Banking Board! Their findings of fact were supported not only by adequate evidence but there was absolutely no relevant evidence to the contrary. Able legal arguments by able counsel for the Society (even if they were not specious) and an understandable desire on the part of the Society to expand and to furnish additional services to its customers, present and future, do not take the place of factual evidence nor factually prove (as the Society must) that the community in question-is without adequate banldng faeilities.

The Banking Board found as a fact, “11. That the aforesaid three banking institutions and the branch office of The Pennsylvania Company for Banking and Trusts offer complete and well-rounded banking facilities, including savings account facilities, safe deposit boxes and mortgage loans and the appellant institution, The Philadelphia Saving Fund Society, propose to offer additional facilities for savings, home mortgage facilities and safe deposit boxes.” Savings account facilities and mortgage loans are we repeat the very facilities which the Society proposes to supply and which it necessarily has to prove are inadequate in that community. Appellant’s position — unlike the confusion which in my judgment permeates the majority opinion — is clear; it boils down to the basic contention that a mutual savings bank of which there are four in Philadelphia and three elsewhere in Pennsylvania — is so essentially different from a commercial bank that unless every community in every County in Pennsylvania has (at least) one mutual savings bank it does not have adequate banking facilities. Of course there is not the slightest merit in that contention; moreover, it would not have to be made sur an application for a branch in a community which the Banking Board found did not have adequate banking facilities of this nature.

Take, for example, The Pennsylvania Company, a gigantic commercial bank which has a branch in this community and which made no objection to the establishment of the Society’s proposed branch. The reason for their failure to object, which the majority opinion completely overlooks, is that The Pennsylvania Company does not seek or want the home mortgage loans nor the savings accounts (or time deposits) which the Society specializes in,⁷ and consequently if The Pennsylvania Company were the only bank in the community in question the Society would clearly be entitled to establish a branch therein since the community did not have adequate banking facilities of the nature offered by the Society.

Except for those who have specialized in the field of banking, a Judge knows just as much about banking as a banker knows about law and for this reason it seems necessary to state some of the basic fundamentals of banking in order to expose the errors into which the majority have fallen.

Deposits large and small are the lifeblood of a bank. Most country hanks owe their very existence to savings deposits and home mortgage loans. The latter situation does not prevail, or prevails only to a very limited extent in a large city. The Statement of Condition of the Bryn Mawr Trust Company, one of the banks opposing the Society’s application, as of December 31, 1953, showed total deposits of $20,505,000. composed of 5,829 savings accounts totaling $5,248,000.⁸ and 9,473 checking accounts totaling $15,257,000. It owned mortgages (home mortgage loans) totaling $4,892,000. and serviced mortgages totaling $53,635,000. Its total capital and surplus was only $1,350,000.

Every country banker knows from experience (which is why all the country banks far and near protested this proposed branch) what will almost inevitably happen to this little bank when the wonderful giant Society drains off, as it undoubtedly will, a substantial part of the future savings account business and the future home mortgage business of the so-called Ardmore community. Where, as here, the very existence of at least one of the little banks and trust companies objecting to the branch depends on their savings accounts and mortgage loans, the Bryn Mawr Trust Company’s savings and mortgage business and its net earnings will be very substantially reduced by the invasion of this community by this great savings bank, and it will undoubtedly have to successfully change its rates or the kind of business which has been its life blood, or merge with a larger bank.

Ardmore is not a city or borough or county or a political subdivision, but is a thriving community within the political subdivision known as Lower Merion Township. The Banking Board, which included the Secretary of Banking, and is composed not of inexperienced theorists but of experienced specialists, specifically and unanimously found, inter alia, the following pertinent facts:

“5. That for the purpose of determining adequacy or inadequacy of banking facilities as required by law, Ardmore shall be considered a ‘community’ and the said ‘community’ to be tested is recognized by both proponents and opponents as the territory within a radius of miles from the site of the proposed branch office.

“8. That the Ardmore community in the territory within a radius of 2% miles of the site of the proposed branch office is now serviced by the Bryn Mawr Trust Company, Bryn Mawr; Bryn Mawr National Bank, Bryn Mawr; National Bank of Narberth, Narberth and a branch office of the Pennsylvania Company for Banking and Trusts.

“11. That the aforesaid three banking institutions and the branch office of The Pennsylvania Company for Banking and Trusts offer complete and well-rounded banking facilities, including savings account facilities, safe deposit boxes and mortgage loans and the applicant institution, The Philadelphia Saving Fund Society proposes to offer additional facilities for savings, home mortgage facilities and safe deposit boxes.”

The Banking Board also made the following important finding which it mistakenly called a conclusion of law:

“3. The State Banking Board concludes that the community of Ardmore now has adequate banking facilities and it does not require additional banking faeilities at the present time.” Those findings of fact were supported not only by ample and adequate evidence, but there was, we repeat, not a scintilla of relevant evidence to the contrary. Those findings of fact are a full, complete, direct, absolute and irrefragable answer to the present application for a branch bank!

The importance of this case to the small country banks located near Philadelphia makes it wise to examine the reasons given in the majority opinion for their decision, although frankly it is not clear to me on what ground the decision is basically placed.

The majority opinion says “The Banking Board did not find, however, that the banking facilities in the Ardmore community were adequate”. In the light of the above quoted findings of the Banking Board— especially number 11 and number 3 — could any statement be more specious or more absolutely and completely wrong? Could any findings be clearer or more all-embracing or more complete or more directly rule the instant case than the Board’s aforesaid finding of fact, viz., number 11: “That the aforesaid three banking institutions and the branch office of The Pennsylvania Company for Banking and Trusts offers complete and well-rounded banking facilities, including savings account facilities, safe deposit boxes and mortgage loans and the applicant institution, The Philadelphia Saving Fund Society, proposes to offer additional facilities for savings, home mortgage facilities and safe deposit boxes.” “3. The State Banking Board concludes that the community of Ardmore noto has adequate banking facilities and it does not require additional banking facilities at the present time.”

The majority opinion further states that there was no evidence before the Banking Board from which a finding of adequacy could have been made. They have put the shoe on the wrong foot and the cart before the lxorse. The burden of proof was of course on the applicant to establish by testimony or factual evidence that the community in question was “without adequate banking facilities”. The Society offered not an iota or scintilla of relevant testimony or factual evidence to factually meet the standard which the Legislature established and required. The Bryn Mawr Trust Company, on the other hand, proved (though it did not have to) exactly the opposite, namely, that it (and other banks in the community) furnished adequate savings account facilities and mortgage loans which the Society proposed to supplement. To say, as does the majority, that “the Banking Board’s findings that the community in question now has adequate banking facilities, was a bald and capricious conclusion without a single finding of fact to support it” must, on this record, be shocking and appalling to every banker, and is to me incomprehensible.

Upon what else does the majority opinion rely? A substantial part of the majority opinion is devoted to proving the obvious, i.e., a savings bank is different from a commercial bank in a number of important respects. That is undoubtedly a fact, but as far as this case is concerned it proves absolutely nothing! Likewise, the statement in the majority opinion that certain income over expenses is distributed proportionately among the various depositors by way of a dividend is not only inaccurate, no dividends having ever been paid, but what relevant difference does it make so far as adequate banking facilities are concerned, whether a dividend is payable to shareholders or to depositors?

The majority opinion also states that no harmful competition is to be “anticipated” since “The four of Pennsylvania’s seven mutual savings banks which are located in Philadelphia have for years lived side by side with commercial banks without detriment to either type of banking.” This well illustrates the flimsiness upon which the majority opinion is built. Philadelphia has a population of over two million people in an area of over 129 square miles — what a non sequitur.

In Delaware County National Bank v. Campbell, 378 Pa. 311, 327, 106 A. 2d 416, this Court said: “We will not overrule or reverse the Banking Board if there is adequate evidence to support its findings of fact and the proceeding is free from error of law and there has been no clear abuse of discretion. Cf. Rolling Green Golf Club Case, 374 Pa. 450, 458, 97. A. 2d 523.” We further said (pages 315, 328) : “The Board is composed of experienced. and able bankers who should know, if anyone knows, the banking needs of the various communities in Pennsylvania and whether adequate banking facilities do or do not exist. . . . Where a Board is composed of able and experienced experts who are dealing with technical questions, a Court should be loath to find a clear abuse of discretion upon a subject or subjects as to which they are far better qualified than any Court.” That language is equally applicable, indeed even more applicable, to the present case. We may appropriately ask: What is the use of having a Banking Board composed of experienced specialists, if a Court inexperienced in the field of banking takes the position that the Banking Board in determining purely banking matters did not know what they were talking about?

The Banking Board’s findings of fact were not only supported by adequate evidence but, we repeat, there was.no relevant evidence to the contrary. Certainly it is clear and indisputable that there was no . abuse of discretion and no error of law. I would affirm the Board’s Order.

Mr. Justice Musmanno joins in this opinion.

1 Italics throughout, ours.

2 This is substantially the question as appellant properly propounds it, but it is a question which the majority opinion has evaded or confused.

3 or one that is “adequate to serve the people of the city or borough or community.”

4 Apparently almost all of them work or shop in Philadelphia.

5 Only 4% make deposits by mail.

6 Eight other banking institutions and associations which were in this geographical area and in this or a neighboring county protested the proposed branch.

7 It is not necessary to consider the additional contention of the Bryn Mawr Trust Company that The Pennsylvania Company had another reason for not objecting to the proposed branch in that its public history shows it wants to greatly expand not only throughout Philadelphia but in neighboring counties.

8 On January 1, 1955, the Bryn Mawr Trust Company, after merger, held approximately 33% of all its deposit funds as savings deposits.