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In re Application of Summit and Elizabeth Trust Co.

Decided: July 14, 1970.


Goldmann, Lewis and Matthews. The opinion of the court was delivered by Lewis, J.A.D.


Springfield State Bank (Springfield) appeals from an order of the Commissioner of Banking and Insurance (Commissioner) approving the application of the Summit and Elizabeth Trust Company (Summit) for a branch office in the Township of Springfield (township).

Springfield contends in substance that (1) Summit is prohibited from establishing a branch bank in the township by virtue of the grant of "home office protection" by N.J.S.A. 17:9A-19(B)(3); (2) in any event Springfield, as a newly chartered bank in the township, is entitled to that protection because it would have been the first of the two to open for business "but for the entanglements of the legal processes"; (3) Commissioner Horace J. Bryant, Jr., about to be replaced by Commissioner Robert L. Clifford on the Governor's inauguration day (January 20, 1970), was without authority to grant the Summit application, and (4) the Commissioner's decision is not supported by the evidence, he abused his administrative discretion and failed to exercise his presumed expertise.

The National State Bank (National State), also an objector to the Summit application, appeals from the same order of the Commissioner, advancing in essence point (4) raised by Springfield. These appeals were consolidated for our review.

This protracted controversy focuses upon the Branch Banking Act, L. 1968, c. 415, ยง 1 et seq. , which was adopted on January 17, 1969 to take effect on July 17, 1969. N.J.S.A. 17:9A-3.1 et seq. That statute divided the State into three banking districts and authorized branch banking within those districts subject to certain requirements. By its terms the act precluded the prospective granting of charters (after July 17, 1969) to "affiliate" or "chain" banks, theretofore permissible entities in the State, see, e.g., In re Kenilworth State Bank , 49 N.J. 330, 339-340 (1967), since N.J.S.A. 17:9A-3.1 provides, "No officer, director or employee of any bank may be, directly or indirectly, an incorporator of

another bank." It is clear, however, that the new enactment granted so-called "home office protection" to pre-existing affiliate banks. It declares in pertinent part that no bank may establish a branch, outside of the municipality in which it maintains its principal office, in any other municipality in which another banking institution "has its principal office." N.J.S.A. 17:9A-19(B)(3). The crux of the instant controversy is whether Springfield, within the intent and meaning of the act, has home office protection to the exclusion of a Summit branch office.


In December 1967 Springfield (an affiliate bank with interlocking directors in common with The First State Bank of Union) applied to the Commissioner for charter approval of a home office bank in the township. Statutory hearings were held on February 1, May 2 and July 23, 1968. National State was the only objector that participated in the proceedings. The Commissioner was aware of the imminence of probable adoption of a Branch Banking Act, which was a foreshadowed event, as indicated by letter from Summit to the Commissioner requesting that consideration of the Springfield application be deferred awaiting anticipated legislation amending the Banking Act. This request was rejected by the Commissioner, who expressed the view that a refusal to consider pending applications would be unfair.

On February 20, 1969 the Commissioner approved a charter grant to Springfield conditioned only upon the bank's engaging an acceptable executive officer prior to the issuance of a certificate of authority to commence business and that the bank become a member of the Federal Deposit Insurance Corporation. In reaching his decision the Commissioner found that the trade area was in excess of 24,000 and that the proposed bank office on heavily trafficked Route 22 would "serve the public interest" and afford "reasonable promise of successful operation."

Summit, National State and Union Center National Bank (Union Center) appealed, and a stay of the operation of the Commissioner's decision was obtained from this court. Subsequently, National State and Union Center, both national banks, were granted branch bank approval by the Comptroller of Currency. Springfield then sought to vacate the stay, which was denied. Summit not only opposed the motion, but affirmatively and successfully moved for a continuance of the stay pending the appeal.

In short, Springfield was involuntarily and effectively precluded from completing the procedures which were necessary before obtaining a certificate of authority to conduct business. At this juncture we note that under N.J.S.A. 17:9A-17 a bank charter may be forfeited by the Commissioner upon failure to obtain a certificate of authority within six months from the date of the Commissioner's approval of its certificate of incorporation or upon failure to commence business within six months after the issuance of such certificate of authority. These periods are subject to extension by the Commissioner for periods not to exceed a total of 12 months.

Argument on those appeals was heard before this court on October 14, 1969 and, within a week thereafter, we affirmed the grant of the charter to Springfield, In re Springfield State Bank , 107 N.J. Super. 230 (App. Div. 1969), making this observation.

The Supreme Court denied certification on January 13, 1970. In re Springfield State Bank , 55 N.J. 312 (1970). Accord, In re Peoples Bank of Montvale , 111 N.J. Super. 141 (App. Div. July 14, 1970).


On May 5, 1969, after the adoption of the Branch Banking Act and while the charter grant to ...

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