Court Opinion

ID: 9548865
Source: CourtListenerOpinion
Date Created: 2023-08-07 18:09:54.626613+00
Date Added: 2024-06-11T15:19:31.498063
License: Public Domain

McCLINTOCK, Justice
(dissenting).
As I understand the majority opinion, it holds that while the question of overbank-ing a community may be of importance, it was not an issue in the administrative hearing held by the Examiner at the request of Bancorporation, no evidence was presented on the issue at the hearing, and evidence relating to the approval of a national charter for Bancorporation’s Bank of Wyoming, N.A., was not properly before the Examiner and did not have to be considered by him. Moreover, such evidence as was improperly presented showed only the possibility of such issuance of a national charter and the Examiner did not have to concern himself with mere possibilities.
I must dissent from this view on the principal basis that § 13-44, W.S.1957, 1973 Cum.Supp., as it existed for many years prior to the filing of Wyoming Security’s application and as it continued after the 1973 amendment requiring the holding of hearings under the Wyoming Administrative Procedure Act, §§ 9-276.19 et seq., W.S.1957, 1973 Cum.Supp., in granting him the sole and exclusive authority to issue state bank charters, specifically enjoins upon the Examiner the duty “to inquire * * * into the convenience and needs of the community to be served by the proposed corporation”. I think the record clearly and competently establishes that despite evidence adduced at the hearing showing the possibility of the issuance of a national bank charter to the contesting Wyoming Bancorporation, the Examiner failed to consider that possibility and therefore failed to comply with the statutory requirement imposed upon him.
I think that this is the case even if we hold that the Examiner, the district court, and this Court were required by niceties of administrative procedure to ignore the undisputed fact, brought to the attention of the Examiner by telephone call and by documents attached to its brief in opposition to the application of Wyoming Security, that on July 3, 1973 the Comptroller of the Currency gave preliminary approval to the issuance of a bank charter for Bank of Wyoming, N.A. I think it is the same if we are required to ignore the further undisputed fact, brought to our attention by 'counsel for the Examiner by attachment of documents to his brief in this Court, that the Federal Reserve Board had likewise approved the charter, thereby clearing the way for commencement of business by Bank of Wyoming, N.A.
If it is said that I am second guessing the Examiner on the basis of facts that he could not properly consider, my reply is that were the application by Bancorporation still pending, without action thereon by any national authority, it would nevertheless in my opinion be incumbent upon *441the Examiner to inquire into the effects upon the banking community of Sheridan of the issuance of two bank charters. Certainly the possibility that this might happen was clearly brought out in the course of the hearing. Knowing that he has no legal or practical control over the acts of the national banking authorities and knowing that those authorities similarly have no control over his acts, I think that it was still his mandatory duty in the exercise of the discretionary power vested solely in him to consider that possibility because it would bear directly and importantly upon the need of the Sheridan community for the state bank charter.
In reaching this conclusion I accept as premises that the courts may set aside action of an administrative agency only where its action is “arbitrary or fraudulent1 or where there is an illegal exercise of discretion; and the burden of proving arbitrary, illegal or fraudulent action is on the complainant”. Marathon Oil Company v. Welch (Wyo.1963), 379 P.2d 832, 836.
It is also true that the principal function of the reviewing court is “to ascertain whether the administrative board’s findings of fact are supported by substantial evidence”, Johnson v. Schrader (Wyo.1972), 502 P.2d 371, 374, although basic findings of fact will not be implied from ultimate findings, Chicago and Northwestern Ry. v. Hillard (Wyo.1972), 502 P.2d 189, 193, and cases there cited.
The concept of burden of proof has a place in an administrative proceeding, Pan American Petroleum Corporation v. Wyoming Oil & Gas Conservation Commission (Wyo.1968), 446 P.2d 550, 555, and in administrative proceedings, “as in courts, the burden of proof rests upon complainants”. Chicago and Northwestern Ry. v. Public Service Commission of Wyoming (1958), 79 Wyo. 343, 350, 334 P.2d 519, 521. This is entirely consistent with the general rule stated in First National Bank of Morrill v. Ford (1923), 30 Wyo. 110, 216 P. 691, 694 that “the burden of maintaining the affirmative of the issue involved in the action is upon the party alleging the fact which constitutes the issue * *
I do not believe that the majority intends to hold that the legislature has intended that the Examiner shall be without judicial supervision and direction in the determination of what is required of him under the law. As to whether action is to be considered arbitrary and capricious, it has been said in Marathon Oil Company v. Pan American Petroleum Corporation (Wyo.1970), 473 P.2d 575, 577 that such action is “wilful and unreasoning action, without consideration and in disregard of facts and circumstances. Bishop v. Town of Houghton, 69 Wash.2d 786, 420 P.2d 368, 373”. The agency must have before it information for the finding of those facts from which it pretends to act, Johnson, supra, Monahan v. Board of Trustees of Elementary School District No. 9, (Wyo.1971), 486 P.2d 235, 237, Pan American Petroleum Corporation, supra, and the agency may not “exclude from consideration facts and circumstances relative to its inquiry which upon due consideration may be of persuasive weight in the exercise of its discretion”. Lake DeSmet Reservoir Company v. Kaufmann (1956), 75 Wyo. 87, 292 P.2d 482, 486, quoting from Am.Jur. Public Administrative Law § 148, p. 492, n. 6.2 Arbitrary and capricious action does not arise only from action that is morally censurable but results from the failure to consider pertinent factors, J. Ray McDermott & Co., Inc. v. Hudson (Wyo.1962), 370 P. 2d 364, 370.
The examiner concluded that the proposed bank would “serve the convenience *442and needs of the community of south Sheridan, Wyoming, Big Horn and Story and surrounding unincorporated area”, and the district court has held that the Examiner inquired into “the convenience and needs of the community to be served”. Reluctant as I am to disagree with the district court in its determination that the Examiner made adequate findings concerning the essential prerequisites to issuing a charter, I am convinced that the Examiner has failed to give proper effect to the statutory mandate that before issuing a charter he shall inquire into “the convenience and needs of the community to be served by the proposed corporation”. I believe that both the district court and the Examiner have failed to consider an essential and vital element in the issuance of bank charters, that is, the actual need of the whole community to be served by the bank, not merely the convenience of a small area, for additional banking services.
Conceding that the record may be said to justify the addition of one more bank in the Sheridan community, I believe that the Examiner has failed to consider the effect upon the economic health of the banking community of the possible addition of two banks. I would hold that this failure to consider the effect of two additional banks and the possible overbanking of the community is a direct failure to comply with the legislative mandate and constitutes arbitrary and capricious action on his part, without consideration and in disregard of facts and circumstances, Marathon Oil Company v. Pan American Petroleum, supra.
It seems fairly obvious from the record that it will be more convenient to the businessmen and residents in the south Coffeen Avenue area to have a bank at that point rather than a mile and a half further into the city. But this is not need, otherwise we might permit a bank on every street corner. The statute itself does not refer to the convenience of a small segment of the community; it refers to the need of the whole community and the record clearly shows that the community for this bank as well as the existing Bank of Commerce and First National Bank, and for the then potential Bank of Wyoming, N.A., was not and is not that little portion of the city within a few blocks of its particular location, but was and is all of Sheridan County and even into neighboring counties. Yet the Examiner refers only to a need for better service in the south Coffeen, Big Horn, and Story areas, ignoring the balance of the city and county.
I have no doubt that the danger of over-banking is what the legislature sought to protect against when it directed that the Examiner should inquire into the needs of the community. The question does not appear to have come up frequently in other jurisdictions, but pertinent decisions where need has been considered clearly indicate that bank charters should not be authorized merely on the basis of convenience without regard to the actual need therefor. Thus, in Schaake v. Dolley (1911), 85 Kan. 598, 118 P. 80, 85, where the statute directed the banking authority to investigate “the public necessity of the business in the community in which it is sought to establish the bank”, the court observed: “An unnecessary bank in a community is not a thing of passive uselessness only, and so merely of no benefit. It is an active disturber of the financial peace, to the detriment of the public welfare * * *.”3
*443In State ex rel. Dybdal v. State Securities Commission (1920), 145 Minn. 221, 176 N.W. 759, 760, the court was concerned with a statute which required a finding that there was a “reasonable public demand for a bank in the location”. It was said that the purpose of this statute was not to keep out other banks merely because the existing banks could sufficiently take care of the business. “Its purpose is not to deter competition or foster monopoly, but to guard the public and public interests against imprudent banking.”
The question appears to have arisen in connection with action of the Comptroller of the Currency in issuing certificates for branch banks, particularly in North Carolina, and the federal district courts of that state have not hesitated to interfere with the Comptroller’s action. Thus, in Bank of Haw River v. Saxon (D.C.M.D.N.C.1966), 257 F.Supp. 75, 79 the district court found that the service area of the proposed bank was served by existing banks offering a full range of services, “that no substantial public or business interest, need or necessity would be served by the establishment of the new bank; and that a new banking facility in the area would not be economically feasible”, and granted injunction against the issuance of the certificate. Similarly, in Bank of New Bern v. Wachovia Bank & Trust Company, N.A. (D.C.E.D.N.C. 1972), 353 F.Supp. 643, 654 the court considered provisions of the North Carolina law found to bear upon the Comptroller’s powers. This law required consideration of such factors as whether the establishment of the branch or teller’s window “will meet the needs and promote the convenience of the community to be served by the bank”, with the added requirement that public demand be found to be such as to assure solvency. Finding that the size and strength of the parent bank were such as to assure the solvency of the branch, so that the only real question was the need and convenience of the community, and answering the argument that the Comptroller should be permitted to apply the expertise of his office in making the determination of need, the court made this statement, most pertinent to our own problem:
“ * * * Where the choice is between conflicting evidence of future prospects, this is undoubtedly true. * * * But there should be some evidence that prospects for future economic growth are favorable. Here the evidence is at best speculative, and in the view of this court it falls short of establishing that the entry of a new bank into the New Bern market ‘will meet the needs and promote the convenience of the community’ at this time.”
It was therefore determined that the findings of the Comptroller were not supported by substantial evidence and motion for summary judgment invalidating the certificate was granted.4
*444I think that is the situation here. I agree with counsel for Bancorporation that “there is not a scintilla of evidence before the Examiner to indicate the feasibility of a fourth bank in Sheridan, Wyoming”. Competent evidence supports the thesis that an additional bank in Sheridan is needed and within three years should be in a prosperous condition, but neither an investigation report submitted by Security nor the report on the Examiner’s independent investigation consider the possibility that two banks would be added to the community and what their prospects would be. Nor do I find any oral testimony bearing upon the point. Under the circumstances I do not believe the question to be one of whether the Examiner has exercised a discretion and made an informed decision to issue a bank charter. I do not fault the Examiner’s findings so far as they go, but would hold that when it appeared that there was a distinct possibility that the federal authorities were also going to issue a bank charter it was incumbent upon the Examiner, in the discharge of his statutory obligation to determine the need for an additional bank, to give consideration to this other possibility, take evidence on the matter, and exercise his judgment upon the question whether a state charter might result in an overabundance of banks to the detriment of the Sheridan community.5
In this case Security sought the issuance of the charter so it properly follows that it had the burden of showing facts establishing the need for issuance of a charter to it. That question could not be decided without consideration of Bancorporation’s application and the probable results thereof. Therefore, it is unimportant whether the approval given to that application was final or only preliminary. Its possible issuance was a factor of the utmost importance in determining whether a state charter should also issue, and I think that in the proper exercise of his administrative discretion, at any time that information was presented to him concerning the existence of another application, even if to a different authority, the Examiner had the statutory duty to consider what effect approval of the other charter would have upon the Sheridan community should he elect to issue a state charter, and this regardless of what had been disclosed at the hearing. The issue was squarely before him whether the community could support two new banks, but the Examiner took no evidence and gave no consideration to the issue. I think it significant that there is no word of the Examiner referring to this national bank. He makes no finding with respect thereto and while it may perhaps be assumed that because he ordered the charter issued he tacitly found that it was of no importance or that the federal authorities might back away from issuing the national charter, there is nothing to show that, and the plain uncontroverted fact is that the Examiner has not made a record determination on a matter of vital importance in the exercise of his duty to protect the financial soundness of our banking system.
This dissent has already been too long, but I think that the basic difference between the majority and me is in our disagreement as to the function of the Examiner in the consideration of charter applications. I cannot accept § 9-276.26(d) and Torgeson v. Connelly (Wyo. 1959), 348 P. 2d 63, cited by the majority as dealing with the matters that an administrative agency *445may officially notice, as being determinative of what an administrative official must do in response to a specific statutory requirement that he inq%iire. I do not believe that he sits in this case merely as an arbiter to decide which of two contestants is to receive the plum. While I would concede that Bancorporation did not seem particularly eager at the hearing to press the point of overbanking, nevertheless the question was squarely raised in its memorandum filed with the Examiner prior to his decision. This would seem to me to be pretty close to the point of United States v. L. A. Tucker Truck Lines, 344 U.S. 33, 73 S.Ct. 67, 68-69, 97 L.Ed. 54, and other cases cited by the majority, that “orderly procedure and good administration require that the objections to the proceedings be made while it has opportunity for correction”, and Bancorporation’s memorandum points out that there is no evidence as to the probable success of two new banks in Sheridan. An application to reopen the proceedings for the purpose of considering evidence as to the effect of the Comptroller’s decision might have been a more technically correct procedure, and while I do not agree with Bancorporation’s statement that the application by Security was “rendered moot by the action of the Comptroller” I do think that it effectively raised a red flag which should have caused the Examiner to make further investigation. If I am correct in my interpretation of our previous decisions as placing the burden of proof upon Security, the applicant for the charter, to show the need for that particular bank, it also had an obligation to be sure to make a record that would justify a finding as to that need.
In my opinion, however, the issue is not one of mere procedure, burden of proof, or taking official notice. The statutory right of the Examiner to be the sole judge whether a charter shall issue is at all times subject to the qualification that he must act according to law and not arbitrarily. A decision reached upon a record that omits facts essential to the determination is one taken without sufficient information and is therefore arbitrary, Monahan, supra.
I would not suggest that an exercised discretion is to be reviewed as to the merits of the decision and I would not want this dissent to be taken as an indication of any belief on my part that overbanking wills, result in the Sheridan community. That would be a question for the Examiner to decide, but since I am of the opinion that he has failed to consider a vital and important element essential to the public interest and his right to issue an additional charter, I therefore believe that within the most restrictive concepts of judicial review of administrative action the matter should be remanded to him for the purpose of considering the possibility of overbanking in the Sheridan community.

. I categorically exclude the suggestion that there was anything actually or constructively fraudulent in the Examiner’s action.

. Substantially the same statement is found in 2 Ain.Jur.2d"Administrative Law § 442, p. 250: “A failure to consider factors which the statute requires to be considered will avoid the determination, but the weight to be given particular factors usually rests in the discretion of the administrative agency * *

. This case is cited by Security as authority that where two applications of equal merit are filed the charter should be awarded to the one first filed. However, those two applications were filed with the same authority. Notwithstanding citation of this case, Security, as well as the Examiner, appears primarily to argue that priority is of no pertinence in the case, while Bancorporation strongly asserts that it was entitled to priority because it had the first perfected application. The majority opinion appears to award priority to Security —to which I do not object — but we have been referred to no state or federal legislation, decisions, or administrative rulings requiring abstention by either the state or the national authority in the case of multiple apjjlications. The practical fact is that at the time the Examiner decided to issue the state charter he was well aware that, because of the duality *443of banking systems permitting each agency to reach its own decision as to need for additional banking, his decision to issue a state charter might result in overbanking. Argument as to the priority of the applications, or whether the national authority should have abstained, is an exercise in futility. The fact is that it did not do so.

. Notes and Comments, Bank Charter, Brandling, Holding Company and Merger Laws: Competition Frustrated, 71 Tale L.J. 502 (1962) discusses at some length the factors bearing upon overcompetition and the denial of bank charters. It is pointed out that overzealous attempts at profit maximization lead to making loans to undependable borrowers to obtain higher interest rates because of the greater risks. Too many risks lead to insolvencies and since the capital structure represents only a small portion of the assets of the bank the great burden of the insolvencies falls upon the depositors. “Since solvency is a function of profitability, and profitability a function of business transacted, both state and federal statutes permit entry only when a bank can develop sufficient business to cover costs plus a reasonable profit.” I hasten to point out that I do not want this dissent in any way to indicate a view on my part that Security Bank, even with Bank of Wyoming, N.A. also in competition, would not be profitable and add to the banking needs of the community. All I say is that that question has not been considered.

. Attorney for the Examiner in this Court in part defends the issuance of the charter on the basis that after the matter was heard in the district court the Federal Reserve Board approved the issuance of the national charter. A letter from the board attached to his brief states: “It appears from the record that the addition of two banks to the area may create a temporary condition of overbanking. However, the market’s rate of growth suggests that such condition will not be serious and will be of relatively short duration. In the Board’s judgment, Applicant’s [Bancorporation’s] de novo entry may be expected to serve the longer-run competitive interest of the market.” This information, of course, may be of importance, but it is not the finding of the Examiner and only he, under state law, may make that determination to protect the state interest.