For affirmance -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Schettino and Haneman. For reversal -- Justice Hall. The opinion of the court was delivered by Jacobs, J.
An application for a charter for Kenilworth State Bank was filed with the Commissioner of Banking and Insurance pursuant to N.J.S.A. 17:9A-1 et seq. He granted the application above the objection of The National State Bank of Elizabeth, which appealed under R.R. 4:88-8 to the Appellate Division. We certified before argument there. R.R. 1:10-1(a).
The Borough of Kenilworth is in central Union County and is surrounded by the Townships of Union, Cranford and Springfield and the Borough of Roselle Park. Although there was an established branch of The National State Bank of Elizabeth in Kenilworth, some citizens of the community felt the need for a new bank to be run by local people with local interests primarily in mind. They discussed the matter among themselves and soon concluded that they ought to have assistance from people already in the banking field. They consulted Mr. Raymond Bauer, President of the Union County Trust Company, who joined with them in obtaining a preliminary feasibility study. Copies of the study were sent to the Department of Banking and Insurance and conferences were held thereafter with the Commissioner and his deputy.
At the initial meeting of the incorporators of the Kenilworth State Bank, Mr. Bauer explained that "if any director
or officer of Union County Trust Company were to become actively associated with the official family of this new bank it would be necessary under the regulations of the Federal Reserve Bank to have 51% of the issued Kenilworth State Bank stock owned by a group of stockholders who own 51% or more of the Union County Trust Company." He presumably had reference to federal legislation which prohibits any director, officer or employee of a member bank of the Federal Reserve system from being a director, officer or employee of any other bank, apart from stated exceptions including one where more than 50% of the common stock of both banks is owned by the same shareholders. See 15 U.S.C.A. § 19. All those at the meeting indicated their agreement that the Union County Trust Company shareholders should be offered 51% of the stock of the Kenilworth State Bank. At a later meeting of the incorporators, a nine-member board of directors was elected; five members of this board were also directors of the Union County Trust Company.
During the hearing before the Commissioner, it appeared that there would be common directorships to the extent aforestated and that more than 50% of the Kenilworth stock would be owned by individuals who owned more than 50% of the Trust Company's stock. It also appeared that the proposed chief executive of Kenilworth was a vice president of the Union County Trust Company. He was to resign his position with the Trust Company before undertaking his duties with Kenilworth. Kenilworth's plan was to hire only full-time executives and it was not contemplated that there would be any employees splitting their time between the two banks. There had been no discussion between the banks with respect to the transfer of any subordinate employees. It was anticipated that the Trust Company's computer system would be available to Kenilworth on the same basis as to other banks. Similarly, loan participation by the Trust Company would be available to Kenilworth on the same basis as to others.
In his decision on the application, the Commissioner dealt extensively with the evidence in the record supporting the findings required of him under paragraph D of N.J.S.A. 17:9A-11. He found that "the proposed institution will serve the public interest and that it affords reasonable promise of successful operation." He also found that the individuals who are to act as directors "possess capacity and fitness for their duties and responsibilities," and he made the other determinations called for by the statute. He formally approved the application for a charter for Kenilworth, stating that his action was predicated "on the premise that the bank will not merge, consolidate or sell to any other banking institution for the next five years, unless the Commissioner of Banking and Insurance, as the result of unusual circumstances, deems it so advisable." After the Commissioner had rendered his decision, the appellant requested reconsideration on the ground that, in view of the director and stockholder relationships between Kenilworth and the Trust Company, the granting of the application would be contrary to N.J.S.A. 17:9A-19. The Commissioner declined reconsideration, pointing out that the hearing before him had fully disclosed the extent of the common directorships and common stockholdings and that he had already considered those facts in reaching his determination that Kenilworth's application should be approved.
The appellant does not question the Commissioner's finding that a new bank in Kenilworth is economically feasible and in the public interest. As expressed in its brief, it "does not seek review of the Commissioner's decision in this regard, because it is recognized that the factual determination as to economic feasibility of a proposed bank is a matter properly left to the expertise of the administrative agency." See Application of Howard Savings Institution of Newark, 32 N.J. 29, 54 (1960); Re Application of State Bank of Plainfield, 61 N.J. Super. 150, 158 (App. Div. 1960). Its sole contention is that the establishment of Kenilworth as a so-called affiliate of the Union County Trust Company
was "a patent evasion of N.J.S.A. 17:9A-19" which prohibits a bank from opening a branch in another municipality where, as here, some other banking institution was already established there. See In re Princeton Bank and Trust Co., 87 N.J. Super. 247 (App. Div.), certif. denied 45 N.J. 32 (1965); but see Camden Trust Company v. Gidney, 112 U.S. App. D.C. 197, 301 F.2d 521 (D.C. Cir.), certiorari denied 369 U.S. 886, 82 S. Ct. 1158, 8 L. Ed. 2 d 287 (1962); First National Bank in Billings v. First Bank Stock Corporation, 306 F.2d 937, 942 (9 Cir. 1962); cf. Whitney National Bank v. Bank of New Orleans & Trust Co., 116 U.S. App. D.C. 285, 323 F.2d 290, 304 (D.C. Cir. 1963), reversed 379 U.S. 411, 85 S. Ct. 551, 13 L. Ed. 2 d 386 (1965); see also 39 N.Y.U.L. Rev. 686 (1964); 16 Stan. L. Rev. 983 (1964); 8 Vill. L. Rev. 209 (1963); 110 U. Pa. L. Rev. 1158 (1962); cf. Handler, "Jurisdictional Abstention in Federal-State Branch Bank Conflicts," 19 Rutgers L. Rev. 445 (1965).
Branch, chain and group banking have long been the subject of discussion and controversy throughout the country. See Chapman and Westerfield, Branch Banking, Chapters 1 and 13 (1942); Note, "Branch, Chain, and Group Banking," 48 Harv. L. Rev. 659 (1935); cf. Guttentag and Herman, Banking Structure and Performance, The Bulletin (N.Y.U. Inst. of Fin.) February 1967; Darnell, Chain Banking, 3 The National Banking Review 307 (1966); Note, "Branch Banking in Utah," 9 Utah L. Rev. 372 (1964); Note, "Branch Banking: The Current Controversy," 16 Stan. L. Rev. 983 (1964). In our own State, various reports have been submitted by study committees to the Commissioner of Banking and Insurance and there has been much legislative activity including the introduction of many bills during the current legislative session. Before New Jersey's Banking Act of 1948 ...