Court Opinion

ID: 7819074
Source: CourtListenerOpinion
Date Created: 2022-09-07 17:47:18.909335+00
Date Added: 2024-06-11T16:30:41.327709
License: Public Domain

John A. Fogleman, Justice, dissenting. If it were within the province of either the trial court or this court to weigh the evidence to determine where the preponderance lay, I might well agree with my brethren of the majority. I believe that the only jurisdiction of either court on the review of the board action in this case is to determine whether there was substantial evidence to support the action of the board or whether the board acted arbitrarily. Under Ark. Stat. Ann. § 67-1811 (Repl. 1966), the scope of review of the circuit court is limited to determining whether the findings of the board were supported by substantial evidence. If so, the board’s findings are conclusive. Heber Springs Savings & Loan Association v. Cleburne County Bank, 240 Ark. 759, 402 S. W. 2d 636. Under Ark. Stat. Ann. § 5-713 (h) (Supp. 1971), the circuit court may reverse or modify the decision of the board only if substantial rights of the petitioner seeking review have been prejudiced because its decision was: (1) in violation of constitutional or statutory provisions; (2) in excess of the agency’s statutory authority; (3) made upon unlawful procedure; (4) affected by other error of law; (5) not supported by substantial evidence of record; or (6) arbitrary, capricious, or characterized by abuse of discretion. Thus, in this case, the circuit court’s scope of review under this act would be limited to determining whether there was substantial evidence of record to support the board’s action or whether the action of the board was arbritrary, capricious or characterized by abuse of discretion. Under § 5-713 (g) the court was limited to a review of the record before the board. There is no specific provision for appeal to this court in the Administrative Procedures Act. Ark. Stat. Ann. § 5-701, et seq. (Supp. 1971). Under the Savings and Loan Association Act the appeal to this court may be taken as in other civil cases. Ark. Stat. Ann. § 67-1811. Whichever act is applicable, our general law on review on appeal limits us, in effect, to determining whether there was substantial evidence to support the board’s finding. It is not the function of this court, on appeal from the circuit court, to determine where the preponderance of the evidence lies. Piggott State Bank v. State Banking Board, 242 Ark. 828, 416 S.W. 2d 291. There is nothing in this record to show that the board acted arbitrarily, capriciously or in abuse of its discretion, unless there was a lack of substantial evidentiary support for its findings. Under Ark. Stat. Ann. § 67-1824 (Repl. 1966), the board, before granting a charter, was required to affirmatively find: (1) All the prerequisites for the approval of a charter set forth in this act [§§ 67-1801 — 67-1862] have been complied with. (2) The character, responsibility and general fitness of the persons named in the articles of incorporation and who will serve as directors and officers of such association are such as to command confidence and warrant belief that the business of the proposed association will be honestly and efficiently conducted in accordance with the intent and purpose of this act and the proposed association will have qualified full-time management. (3) There is a public need for the proposed association and the volume of business in the area in which the proposed association will conduct its business is such as to indicate a successful operation. (4) The operation of the proposed association will not unduly harm any other existing association or federal savings and loan association or other financial institution. The board found that requirements (1), (2) and (4) had been met, but that requirement (3) had not. The scope of inquiry of the circuit court was to determine whether there was substantial evidence in the record of thé proceedings before the board to support the board’s finding that it had not been shown that there was a public need for the proposed association or that the volume of business in the area was such as to indicate a successful operation. In regard to the board’s action the circuit judge made these findings: I. That Corning, Arkansas, is located some 25 to 30 miles from any type of financial institution, which would afford opportunity for savings deposits, the bank of Corning offering certificates of deposit, which causes difficulty in convenience and access to financial institutions for the citizenry of the area. II. The Pocahontas Federal Savings and Loan Association branch office application indicates the reason it desires to establish a branch office in Corning —that is, that there is a considerable volume of savings and loan association business transacted in Corning, and that it felt a definite need for savings and loan association service in Corning. III. All testimony in the record substantiated that every economic factor governing this type of activity was present in the Corning area, and was evidenced in this community; and that the people of the community were competent, capable, able, aggressive, and were good and honest people with ability to operate such a proposed association. IV. There is nothing in the record to substantiate the Board’s finding that there is no need for a Savings and Loan Association at Corning. Likewise, there is nothing in the record to substantiate the Board’s findings that the volume of business in the area is not such as to indicate a successful operation. Therefore, the court finds that the ruling of the Arkansas Savings and Loan Association Board, upon the question of need and adequacy of business in the area as to indicate a successful operation was not supported by substantial evidence of record. To the contrary, the Court finds that substantial evidence of record indicates a definite need for a Savings and Loan Association at Corning, and that it would be successful. The last sentence of the findings quoted clearly illustrates that the circuit court went beyond the limits of its scope of review and weighed the evidence. I feel that this is the reason that the circuit judge fell into error. The majority does nothing more than point out that there was substantial evidence to support a contrary finding by the board and, thus, justify the trial court’s finding in that respect. On the question of public need, Dr. Barton Westerlund, gn economist called by the applicant, testified that he had prepared a report on the area at the applicant’s request. On cross-examination, he testified that the increase in per capita income during 1960-1969 was less than that of Clay County in only five counties in Arkansas, that the population of the county had decreased by 11%, and that Corning had a high percentage of homes with low income. Lowell Poyner, a proposed stockholder of the applicant, who was in the real estate business, testified that, in his experience, there had been sufficient funds for home loans, even though there had been from time to time a shortage in commercial funds. Ben Williams, also in the real estate business in Corning, admitted that, in a sense, the needs of the area were being served at the present time, even though he thought that estimates of future housing needs that had been given were conservative. Sam L. Mannatt, Jr., Éxecutive Vice-President of the Bank of Corning, could not think of anyone who had been denied a home loan because of lack of money available for loans. Joe R. Martin, President of Pocahontas Federal Savings and Loan Association, which had been active in the Corning area, stated that his association had ygcently reduced their loan interest rates because of a surplus of funds available for making loans. He added that there were four savings and loan associations servicing the area around Corning. He stated that his association had never refused a Joan because of lack of funds. No further elaboration is necessary to show that there was substantial evidence to support a finding that there was not a public need for the proposed institution. There was also evidence indicating that the volume of business which might be anticipated by the applicant was not sufficient to insure its success. Carl Lacy, a certified public accountant, had considerable experience in accounting work for savings and loan associations. He studied the data submitted in support of the application and found that it was premised on an excessive interest rate of 814%, and that there was money available for loans of the type that would be made by the new association at 714%, and that it must be assumed that the applicant would have to meet competition. He also testified that the supporting data was based on prospective interest of 6% on the applicant’s funds which would be deposited with the Federal Home Loan Bank when the current rate of interest was only 314%. He also pointed out that the association would have to pay 754% interest on money borrowed from the Home Loan Bank rather than 6%, as they had set out in the date submitted with the application. He stated that all the changes necessary to conform this data to the actual conditions would convert the applicant’s prediction of a first-year profit of $3,000 to a loss of $6,000. In addition, his experience indicated that estimates of expenses of operation made by the applicant were very conservative and that actual expenses, particularly in an effort to attract deposits, would exceed the estimates, Vernon King, attorney for and vice-president of Pocahontas Federal Savings and ' Loan Association, stated that he had made a study of mortgages recorded in the Western District of Clay County. From this and other matters in the record pertaining to deposits and loans related to that district, King made projections of the volume of savings and loans that might be anticipated by a Corning branch of his association. He anticipated a first-year increase of approximately 50% over those currently held by his association and an additional $200,000 in the second year, and a total of $1,000,000 by the third year. He pointed out that the application was based upon a potential $1,100,000 in loans in the first year, of which not more than 20% would be commercial. King testified that it would take three years to reach the anticipated figure, and that would be upon the assumption that such a lending agency already had loans in effect for a part of that total. King anticipated an increase in deposits to his association of $500,000 after a Corning branch was opened. The association already had $897,831 in deposits in the area. The suggestion that it was inconsistent for Pocahontas Federal Savings and Loan Association to forecast a profitable operation of a branch and simultaneously predict an unsuccessful operation by a new organization will not bear scrutiny. If it is not obvious, there was testimony by Lacy, the accountant, that a branch starts with trained personnel, an established bookkeeping system, lower auditing and management costs, as contrasted with a new organization which must not only establish management and a bookkeeping system, but train personnel and buy supplies and equipment. Furthermore, the record discloses that the application' of Pocahontas for a branch was withdrawn between the original board hearing on this application and a rehearing. I do not know wherein this testimony lacks substantiality. The interest of the witnesses goes only to the question of weight to be given their testimony, a matter solely for determination by the board. The board before which the hearing was had con-sited of five members, at least three of whom had not less than two years’ experience as an officer or director of a savings and loan association. Ark. Stat. Ann. § 67-1805 (Repl. 1966). In view of the evidence above mentioned and other testimony mentioned in the majority opinion, I submit that both the circuit court and this court have not only weighed the evidence, but have substituted their respective judgments in the matter for the expertise of the members of the board. I would reverse the judgment and affirm the board. I am authorized to state that the Chief Justice joins in this dissent.