Court: New Jersey Superior Court Appellate Division; April 8, 1965; New Jersey; State Appellate Court
Goldmann, S. J. A. D., delivered the court's opinion regarding First National Bank of Princeton's appeal against the Commissioner of Banking and Insurance's approval of Princeton Bank and Trust Company's (Trust Company) application to establish a new branch bank in Princeton Township. First National, a federal-chartered bank, opposed the application, along with the Comptroller of the Currency and The First National Bank of Somerset County. Trust Company, which has operated as a state bank since 1834, previously opened a branch at Princeton Shopping Center in 1957 and sought to establish a new branch on a triangular lot at the intersection of State Highway Route 206 and Mount Rose-Rocky Hill Road, with the proposed service area being primarily in Montgomery Township.
William R. Cosby, Trust Company's president, indicated that a study of the site began in March 1962, involving consultations with local residents and realtor Edmund D. Cook. Cook had been negotiating for the site since late 1961, and an option agreement for the property was secured around March 1962. During an April 11, 1962, board meeting, Cosby informed the board about recent developments, leading to the board authorizing its executive committee to address matters relating to the bank's quarters. On May 23, 1962, the executive committee resolved to change the principal office to the Princeton Shopping Center premises and maintain the prior location as a branch. This change was executed under New Jersey Statute N. J. S. A. 17:9A-23, allowing banks to relocate their principal office to a location occupied by a branch without fulfilling certain requirements.
A bank or savings bank may continue to operate a branch office at its former principal office location or cease operations there following a change. It must file a certificate of this change with the relevant department within one week. Such a change is not constrained by specific limitations outlined in subsections C or D of section 19 of N.J.S.A. 17:9A-19. According to this statute, banks can establish branch offices under board resolution, subject to certain conditions, including restrictions on locations outside the municipality of the principal office, with exceptions for offices in the same county under specific conditions (e.g., through mergers or in areas without existing banking institutions).
Following a change in office status, the Trust Company's executive committee authorized an application for a new branch office in Princeton Township, complying with N.J.S.A. 17:9A-20, which requires prior approval from the Commissioner of Banking and Insurance. The Commissioner must ensure compliance with section 19, that public interests are served, and that local conditions support successful operation before granting approval. The Trust Company's application underwent public hearings in early 1963 and was approved on November 7, 1963. The Commissioner determined that the proposed trade area was appropriate, with expected growth in specific regions, reasonable population estimates, sufficient deposit potential, and no risk to the stability of existing financial institutions in the area.
The Commissioner determined that establishing the proposed branch would enhance Trust Company's service offerings to current and potential depositors within the target area, allowing for fair competition for deposits. The chosen site was deemed favorable, expected to attract customers who utilize automobile transport and were not currently banking in the area. The branch is projected to become profitable within three years, with any initial losses not significantly impacting Trust Company's overall financial health. Consequently, the Commissioner concluded that Trust Company complied with relevant statutes, specifically N. J. S. A. 17:9A-20 and 17:9A-19, and that public interest would be served by the new branch's establishment.
The Commissioner dismissed claims from the Chief National Bank Examiner suggesting that Trust Company's change of principal office was an attempt to bypass branch banking restrictions under the Banking Act. First National's main arguments on appeal are that Trust Company's actions were merely a tactic to evade these restrictions and that the findings supporting Trust Company's compliance lack substantial evidence. Additionally, First National contended that N. J. S. A. 17:9A-23 does not allow for the interchange of offices in different municipalities, arguing that sections 19 and 23 should be interpreted together to reflect legislative intent. However, the Commissioner found this interpretation incorrect, stating that the statutory language is clear and does not prohibit such interchanges if the offices are legally established in different municipalities within the same county. Furthermore, Trust Company's branch at Princeton Shopping Center was established in compliance with the law, as no other banking institutions had offices in that municipality at that time. Section 23 allows for the interchange of principal and branch offices without needing to meet the requirements of section 22, which does not pertain to office interchange.
Under section 22, banks are permitted to change the location of their principal or branch offices within the same municipality, provided they submit an application to the Department of Banking and Insurance and receive the Commissioner’s approval. Approval is granted if the new location is not substantially different from the current area served. If the new location is substantially different, approval requires an investigation or hearing to determine if public interest will be served and if the new location promises successful operation. The Banking Act of 1948 indicates that when the Legislature intended to restrict office locations to the same municipality, it explicitly stated so. Section 23 does not impose such limitations, suggesting that interchanging principal and branch offices between different municipalities is permissible.
First National contended that Trust Company’s actions constituted a subterfuge to evade banking laws and questioned the bona fides of the principal office transfer to Princeton Township. However, the planned interchange of offices appeared legally valid as Trust Company's executive committee authorized the move from Nassau Street in Princeton Borough to Princeton Shopping Center in Princeton Township, with the necessary certificate filed shortly thereafter. This interchange was part of a larger strategy to apply for a new branch office in northeastern Princeton Township, with prior investigations and negotiations for potential sites already underway by Trust Company's representatives.
On April 11, 1962, the bank's board directed its executive committee to expedite the resolution of relocating the bank's principal office. Subsequently, on May 23, 1962, the committee authorized relocating the principal office from Princeton Borough to a shopping center in Princeton Township, which facilitated an application to establish a new branch office in the township's northeastern section.
During hearings, President Cosby admitted that the relocation was intended to circumvent New Jersey law, which required moving the principal office to establish a second branch. He acknowledged that the change was motivated by expectations of population growth in the township and aimed to better serve the community.
However, it was unclear whether the principal office had genuinely moved to the shopping center. The Commissioner did not definitively address the actual location of the principal office post-relocation attempt. Evidence suggested that the principal office remained on Nassau Street in the borough, as the only actions taken involved passing a resolution and notifying relevant authorities. Key operational functions, including lending and administration, continued at the Nassau Street office, which housed most of the bank's officers and departments. The shopping center office was smaller, with limited staff and operations, and held only one-eighth of the total deposits compared to the principal office.
The 1963 Princeton Community Directory and telephone directory indicated that Trust Company's main office was at 12 Nassau Street, with a branch located at a shopping center. A sign at the Nassau Street office confirmed it as the main office, and this was consistent throughout the hearings. President Cosby noted that stockholders were never informed of any change in the principal office, which was referenced in the bank's notice for its annual meeting. Legal documents, including the bank subscription warrant, identified Nassau Street as the main office. Cosby consistently referred to the Nassau Street location as the main and chief office.
Trust Company argued that 'principal office' need not equate to 'main office,' suggesting the shopping center location might be considered the principal office despite significant operations occurring at Nassau Street. This interpretation was challenged, as it could undermine the Banking Act's intent to regulate branch banking for public interest and competition. The Banking Act was revised in 1948 based on various recommendations and contains no equivalent to the specific provisions cited by Trust Company. It allows a state bank to apply for changes in office locations. Historical references clarify that a trust company can change its principal or main office location with the Banking Commissioner's approval through a board resolution requiring a two-thirds majority. The approved changes become effective upon filing.
The Revised Statutes did not previously allow for the interchange of a trust company's principal and branch offices, a provision first introduced in the 1948 revision. R. S. 17:4-16 refers to 'principal or main office' interchangeably, and the term 'principal' was adopted in the 1948 Banking Act. The interpretation of 'principal office' as synonymous with 'main office' is backed by dictionary definitions. Trust Company argues that First National cannot challenge the May 23, 1962, interchange and should have acted at that time; however, First National had no prior knowledge of the interchange, which required no public notice beyond the resolution and certificate filed with the Commissioner. First National’s challenge arose when Trust Company applied for a new branch immediately after the interchange, questioning the legitimacy of the principal office's location at the Princeton Shopping Center. First National maintains that Trust Company’s actions were an attempt to evade regulations against establishing two branches in the same municipality. The testimony presented indicated serious doubts about the authenticity of the office relocation. Additionally, a letter from the Chief National Bank Examiner described the move as a deceptive tactic to bypass banking restrictions. Ultimately, it was concluded that there was no genuine transfer of the principal office to Princeton Township, preventing Trust Company from opening a second branch there. This finding negates the need to evaluate First National’s other arguments regarding the Commissioner’s findings, resulting in a reversal of the Commissioner’s decision.
