Matthews, Lora and Morgan.
This appeal concerns primarily the procedural entanglements and consequences thereof resulting from the competitive attempts of two banks to establish themselves as newly chartered home office banks serving essentially the same trade area. At issue is the concept of "priority" and the effect thereof on the disposition of competing applications for bank charters. Also involved, however, is the propriety of considering the consequences of so-called "home office protection" in determining which of two competing proposed banks, both meeting statutory criteria, should be granted its charter.
The two proposed banks are Stafford State Bank (Stafford), to be located in the commercial hub of Manahawkin, Stafford Township, on the mainland off the causeway connecting the mainland to Long Beach Island, and Bay State Bank (Bay State), to be located between 15th and 16th Streets on the northwest side of Long Beach Boulevard, Ship Bottom, on Long Beach Island, about four miles from the proposed Stafford facility. Little informational detail concerning Bay State's site is supplied in either the hearing
officer's report or the Commissioner's decision, although the memorandum after his decision, supplied us in connection with this appeal, characterizes it as "quite attractive." The Stafford site is in a 17-acre plaza accommodating a Shop Rite supermarket, Grant's department store, and many other retail facilities. The center contains 96,000 square feet of building space with parking for 900 vehicles, and the hearing officer's report disclosed an intended expansion of 36,000 additional square feet of building space.
The Borough of Ship Bottom, the municipality in which Bay State wishes to locate, is located in the geographic center of Long Beach Island, a long, narrow island paralleling the coast of southern Ocean County, and in close proximity to the causeway which connects the Island to the mainland. It has a present permanent population of 1,100, and the hearing officer's report, not rejected by the Commissioner, concluded that significant population growth in the permanent population will probably not be experienced during the years to follow in the short to intermediate term. The reason given for this less than optimistic projection of population growth rate is the Coastal Area Facility Act and the Critical Area Act; the entirety of Long Beach Island is affected by either or both of these legislative enactments. Of course, during the summer months, the Island routinely experiences a substantial summer population explosion. Nonetheless, because of these modest estimates of growth on the Island, the Commissioner concluded that Bay State's existence and success will depend upon penetration into the mainland area, "an area in which Stafford would possess an obvious locational advantage." At present the Beach Haven National Bank and Trust Company (Beach Haven), an objector to both applications, operates six offices in several of the municipalities on the Island and one branch in Manahawkin. In addition, the Jersey Shore Savings and Loan Association operates a Ship Bottom office and recently received approval to operate a branch along Route 72 in Manahawkin. First Federal Savings
and Loan Association of Hammonton also maintains a branch in or about Manahawkin.
Stafford Townhip, located on the mainland to the west of Long Beach Island, is wedged between Little Egg Harbor Township to the south and Union Township to the north. The township has experienced growth in population and economic development which outperforms, on a percentage basis, that experienced on the Island, and according to the hearing officer and the Commissioner still possesses potential for significant population and economic growth.
Following an interminable number of interim procedural steps, the significant aspects of which will be discussed below, the Commissioner, following separate hearings on each application and separate recommendations and reports from two different hearing examiners, concluded that both banks met all statutory requirements and that both, assuming the other did not exist, would be profitable and would serve the public interest. Because of his conclusion that both could not profitably coexist and Bay State had priority, the Bay State charter was ultimately granted and the Stafford charter was denied.
The only reason for the rejection of Stafford's charter was the granting of Bay State's. The Commissioner's decision stated:
Had it not been for the Bay State approval, the instant application would have been approved based upon the report of Mr. Persichilli, the evidence of record, and the exceptions and replies submitted thereafter. However, the presence of another new charter with a trade area which substantially overlaps that projected by the Stafford, requires me to find negatively on public interest grounds.
The only reason for granting the Bay State charter first, and thus being forced, on public interest grounds, to reject the Stafford application was the Commissioner's conclusion that Bay State had "priority," that is, its application for a charter had been accepted by the Department before Stafford's. Stafford, one of the appellants herein, challenges that finding, contending that it had priority, and further contends that
priority, in any event, should not be the governing consideration in deciding which of two competing charters to grant. The other appellant herein, Beach Haven, clearly seeking to preserve the virtual monopoly over the banking market it has enjoyed for years on Long Beach Island, contends, without merit, that the Commissioner erred in reopening the Bay State matter after having initially denied its charter and then reversing himself.*fn1 The circumstances of this reversal of a prior decision will be treated only tangentially in connection with the priority issue.
The facts germane to priority, the central issue in this appeal, are as follows: Stafford's application was the first filed and accepted; its application was filed on April 17, 1973 and accepted by the Department on May 7, 1973. It is upon this undisputed fact that Stafford bases its claim to priority. The problem with this position is that on June 26, 1973 Stafford filed an amended certificate of incorporation to reflect a change in the site of the proposed bank, a site about a mile distant from the one referred to in the initial application. This amended certificate, the bank's application, was accepted by the Department on June 28, 1973. Bay State's application was, however, accepted the day before on June 27, 1973, and this one day disparity in the Department's acceptance of these two applications provides the reason for favoring Bay State. This was made clear in the Commissioner's decision and order denying Stafford's charter:
Since the time Mr. Persichilli submitted his Report and Recommendation, the Department approved a State bank charter application for the proposed Bay State Bank in Ship Bottom, Ocean County (December 1, 1975). The Stafford State filed the requisite Certificate of Incorporation and statutory affidavits on June 26, 1973.*fn2 The application was formally accepted on June 28, 1973. The Bay State Certificate of Incorporation and Statutory affidavits were accepted by the Department on June 27, 1973, one day prior to the Stafford State acceptance, thereby giving Bay State priority.
* * * In light of the priority of the Bay State application and the obvious effect that each application would have on the other, I further ordered that the instant application and the Citizens State Bank branch application be stayed pending final decision on Bay State. * * *
Hence, the Commissioner's conclusion that Bay State had priority based upon the one day disparity in acceptance dates provided the essential basis for granting Bay State its charter, thereby rendering it necessary that the Commissioner reject Stafford's in accordance with his view that both banks could not profitably coexist.
The essential chronology of significant events following the acceptances of the two applications must be referred to in order to better understand the respective positions taken by the banks and to evaluate the Commissioner's actions in regard thereto. The hearing on the Bay State application was scheduled to commence first, on September 17, 1973, and continued thereafter for a period of eight days, concluding on October 24, 1973. Stafford's hearings commenced about two weeks after the first day of the Bay State hearings, on October 1, 1973, and continued thereafter, with substantial interruptions caused in part by an unsuccessful application for leave to take an interlocutory appeal, and dilatory conduct by the objectors,*fn3 and ended after 19 days of highly [143 NJSuper Page 152] contentious proceedings on June 5, 1974. By the time the Stafford hearings finally came to a conclusion, the affirmative report and recommendations in the Bay State matter had been filed, April 1, 1974. These recommendations for granting Bay State's application were, however, rejected by the Commissioner and the charter denied on October 17, 1974, on grounds of inadequate prospects of profitability and lack of qualifications of the proposed interim directors, the latter ground predicated upon the Commissioner's distinctly negative view of the financial transactions leading to acquisition of the Bay State site. On November 18, 1974, about a month later, the affirmative report and recommendations from the hearing officer in the Stafford application were filed. About a week and half before, however, Bay State had taken the unprecedented step of filing a petition to reopen and to have the Commissioner reconsider its application, contending that the Commissioner had erred in reaching his conclusions on both grounds of profitability and qualifications of its personnel. Hence, at the time Stafford's favorable recommendations had been filed, Bay State's charter had already been denied although a petition for reconsideration had been submitted but not acted upon. Later on Bay State submitted evidence to the Commissioner of a restructuring of the financial transactions of which the Commissioner had previously expressed
disapproval.*fn4 Action on the Stafford application, and the favorable recommendation with respect thereto was deferred, however, pending disposition of Bay State's petition for reconsideration. Partial disposition of this petition was made first on May 16, 1975 when the Commissioner reversed himself on the issue of profitability and reopened the Bay State matter to reconsider the issue of the directors' qualifications.
Action on Stafford's application continued to be held in abeyance, and on June 14, 1975 Stafford and Beach Haven, both objectors to the Bay State application, sought leave to take an interlocutory appeal from the Commissioner's reopening of the Bay State matter. Leave was denied on June 23, 1975. In July Stafford and Citizens*fn5 instituted a suit in the Law Division in lieu of prerogative writs, seeking to compel the Commissioner to act upon their applications, citing primarily N.J.S.A. 17:9A-11 B requiring action within 90 days. That matter was properly transferred to the Appellate Division but was never resolved because, while pending, the Commissioner acted by (1) completely reversing himself on the Bay State application, granting it on December 1, 1975, (2) denying Stafford's application on January 27, 1976, and (3) granting Citizen's application on February 11, 1976. The action in lieu of mandamus thereby became moot. The matter was, however, retained in the Appellate Division, consolidated and accelerated for disposition on the issues of priority and the propriety of the Commissioner's action in reopening and reconsidering the Bay State application. The issue of "home office protection" was injected into the case by a memorandum by the Commissioner dated April 26, 1976, three months after the denial of Stafford's charter. The memorandum
was submitted to this court in connection with this appeal, primarily in defense of the present system of priority, but set forth "home office protection" as an additional reason for favoring Bay State and rejecting Stafford, a consideration unexpressed in either original decision.
For convenience of the reader, we set forth in tabular form, the chronology of essential events taken from the Commissioner's memorandum of April 26, 1976: