In the Matter of the Application of SOUTHERN HILLS BANK OF EDGEMONT to Move its Main Office.
Nos. 13738, 13743
Supreme Court of South Dakota
Argued Nov. 18, 1982. Decided Oct. 26, 1983.
Second, the statutes provide that probationary teachers are to be evaluated once each semester in the first two years of employment (
It is unclear from the record whether the Board violated any of its teacher evaluation rules when dealing with Schaub. Yet, it is clear that even if a rule or rules were violated, Schaub knew from earlier evaluations that the Board was concerned with certain deficiencies in her teaching. The record reveals that Schaub had at least three evaluations during the period in question, and on March 18, 1982, she had a meeting with the Board after she had been told of problems with her teaching. Thus, even if the Board violated one of its evaluation rules, it did not substantially or directly impair Schaub‘s ability to improve her teaching performance in an attempt to attain continuing contract status. She had opportunities to deal with the cited deficiencies before receiving notice of termination. Accordingly, Schaub is not entitled to reinstatement to her teaching position at Chamberlain.
Finally, we are compelled to recognize the clear language of
School boards are creatures of the legislature and are a part of the legislative branch of government. Therefore, the judiciary may not invade the province of the school board‘s decision making unless such decision making is done contrary to law....
As long as the school board is legitimately and legally exercising its administrative power, the courts may not interfere with nor supplant the school board‘s decision-making process.
The decision of whether to re-hire a teacher for his or her third year of teaching is a critical one for all school boards, since that decision will determine whether the teacher in question is given the substantial rights of tenure. The South Dakota statutes and rulings of this court emphasize that it is up to the local school board to make that decision. It has not been shown that the actions of the Board in the present case were contrary to law.
The order and judgment of the circuit court are affirmed.
All the Justices concur.
Gary J. Pashby of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, for intervenor-appellant Custer County Bank; Terry N. Prendergast of Boyce, Murphy, McDowell & Greenfield, Sioux Falls, on brief.
Wallace A. McCullen of Bangs, McCullen, Butler, Foye & Simmons, Rapid City, for intervenor-appellant First Federal Sav. and Loan Ass‘n.
HENDERSON, Justice (on reassignment).
Appellee Southern Hills Bank of Edgemont (Southern Hills Bank) filed an application with the South Dakota Banking Commission (Commission) seeking permission to move its main office from Edgemont, South Dakota, to Custer, South Dakota. Appellants Custer County Bank and First Federal Savings and Loan Association of Rapid City (First Federal Savings) intervened to oppose the application. Following a two-day hearing, the Commission approved appellee Southern Hills Bank‘s application, whereupon appellants appealed to the circuit court. On February 3, 1982, the circuit court entered an order affirming the Commission‘s action. Appellants filed a notice of appeal to this Court. We affirm.
Appellants’ issues on appeal include: (1) Was the Commission‘s decision clearly erroneous or beyond statutory authority? (2) Did Southern Hills Bank‘s application attempt to establish a branch bank in Custer in violation of
A bank is an important member of a community. As Justice Story wrote during the inceptual years of the United States Supreme Court: “[A] bank, whose stock is owned by private persons, is a private corporation, although... its objects and operations partake of a public nature.” Dartmouth College v. Woodward, 17 U.S. (4 Wheat.) 518, 669, 4 L.Ed. 629, 667 (1819) (Story, J., concurring). See also, Wall v. Fenner, 76 S.D. 252, 76 N.W.2d 722 (1956); State v. Scougal, 3 S.D. 55, 75, 51 N.W. 858, 865 (1892) (for South Dakota decisions recognizing that banking is “affected with a public interest“).
During the Commission hearing, Gordon Dretsch, executive vice president of Custer County Bank, acknowledged that Custer County was one of the fastest growing counties in South Dakota. Finding of Fact four of the Commission states in part: “The 1980 census figures show that Custer County is one of the fastest growing counties in the State of South Dakota.” Mr. Dretsch also admitted that business in Custer County had not been bad during the five years prior to the hearing. Finding of Fact three of the Commission provides in part: “Custer, South Dakota, is an important shopping and business center for Custer County, and other surrounding counties and communities and other adjacent areas in all directions, and has and continues to have an excellent business development and growth.” An expanding population and solid business base were both factors in favor of Southern Hills Bank‘s application before the Commission. These factors were critical in In re Am. State Bank, Pierre, 254 N.W.2d 151 (S.D.1977) and Valley State Bank of Canton v. Farmers State Bank, 87 S.D. 614, 213 N.W.2d 459 (1973).
Evidence at the hearing convincingly established that Custer County Bank made handsome returns on the assets it garnered from the public in Custer County. Rather than invest most of its nonloaned Custer County capital back into the Custer County area, this bank chose to primarily invest in government securities, federal funds, and highly rated municipal bonds. In loaned money, South Dakota banks from 1976-1980 had an average loan-to-deposit ratio of 49 to 57%. Custer County Bank had a below average loan-to-deposit ratio of 34.5% in 1976; 40.6% in 1977; 40.3% in 1978; close to 45% in 1979; and 38% in 1980. In contrast, during the same time period, South-
Custer County Bank did not make Federal Housing Administration loans to help local people get housing. Nor did Custer County Bank make Veteran‘s Administration loans for housing to aid returning veterans from the armed forces. Custer County Bank did not offer loans designed to help rural-oriented families get started in life. All applications for loans of this type were referred directly to Farmers Home Administration. Custer County Bank did not participate in State Housing Authority loans to aid local people in securing low-interest loans to build homes. Perhaps most dramatically, Custer County Bank did not cultivate the future of the youth of Custer County, as the Bank failed to offer student loans.
It was established that Custer County Bank failed to offer consistent overdraft protection for its customers. Mr. Dretsch, of Custer County Bank, candidly admitted Custer County Bank had not made any significant improvements to its physical plant over the ten-year period prior to the hearing. Examples: no drive-in or walk-up facilities to service the people. Finding of Fact twelve of the Commission expresses in part: “The evidence shows that the present financial institutions, and primarily the Custer County Bank, is not competitive in all respects of the banking industry, and in fact does not perform some of the services ordinarily performed by a full service bank.”
Mr. Robert Cullum, a twenty-year resident of Custer and president of one of Custer County‘s larger employers, Pacer Corporation, testified that he encountered numerous difficulties with Custer County Bank over Pacer‘s impress payroll account. Although Mr. Cullum had a $10,000.00 guarantee for his payroll, his employees, members of Custer County‘s public, had difficulties cashing their payroll checks at Custer County Bank. Mr. Mike Carter, who runs the Coast-to-Coast Hardware Store across the street from Custer County Bank testified:
Well, whenever somebody comes to town and doesn‘t have a checking account here, I know on Friday afternoons, I spend most of my time as a banking facility, trying to cash those checks for those people, and if they‘ve got to go out of town to do their banking, it seems to me like they‘re also going to do their shopping in the same place.
Mr. Eugene A. Erickson, of Southern Hills Bank, testified: “Our research indicates that somewhere around half of the people—half of the people in Custer bank other than at Custer County Bank.” This is expressly found in Finding of Fact thirteen by the Banking Commission: “The Commission finds that approximately one-half of the banking in Custer now goes elsewhere and that the loan to deposit ratio of the Custer County Bank is low as compared to the loan to deposit ratio of the State of South Dakota as a whole, and it has historically been lower than the South Dakota average.”
As we held in Valley State Bank, 213 N.W.2d at 465-66:
The legislature has recognized that the expertise required in some fields of legislative authority is better left to qualified administrators who have refined abilities in narrow areas, controlled only by general guidelines established by the legislature. Affiliated Distillers Brands Corp. v. Gillis, 1964, 81 S.D. 44, 130 N.W.2d 597. The administrative agency must, however, lend credence to the guidelines established in the statutes which give rise to its existence.*
A ruling or decision of an administrative agency is upheld unless we find, in light of the entire record, the decision is clearly erroneous or we are left with a definite conviction that a mistake has been made. Dakota Harvestore v. S.D. Dep‘t of Reve-
Ample evidence was introduced establishing that Custer County Bank and the Custer branch office of First Federal Savings were not adequately meeting the needs of the Custer County public. The Banking Commission so found in Finding of Fact fourteen: “The evidence further shows a lack of adequate service and dissatisfaction with the service by the Custer business community and an absence of choice of banking services in Custer under existing circumstances. The evidence further showed a past growth in bankings debits and deposits in the Custer county area.” We are convinced the Commission‘s decision to allow Southern Hills Bank‘s application was not clearly erroneous.
We are unable to adopt appellants’ position that Southern Hills Bank would be opening a branch office in Custer, South Dakota. Conclusion of Law twenty-six provides: “The public convenience and necessity justify and require the organization of such branch bank in Edgemont and the moving of the bank‘s main office to Custer and its authorization to commence, engage in and carry on the business of banking.” Our state legislature has accorded broad discretion to the Commission to recognize when a branch bank is established.
We are also unable to conclude appellants’ rights were violated by the admission of the Director‘s report or the failure to identify the new bank‘s proposed directors.
The records of the division shall be open to public inspection; provided, however:
(1) The director may withhold from public inspection any record for so long as he deems necessary for the protection of a person or bank or to be in the public interest; and
Any record of the division shall be made available upon order of a court of competent jurisdiction when cause is shown.
In Bank of Glenwood v. Arkansas State Banking Bd., 260 Ark. 677, 678-79, 543 S.W.2d 761, 763 (1976), the Arkansas Supreme Court confronted a comparable factual setting:
The Bank Commissioner later ruled, we think correctly, that certain information in that file, with respect to proposed officers of the new bank, was confidential, and that the release of certain other data would give the Bank of Glenwood an unfair competitive advantage over the
new bank. The Commissioner directed that information pertinent to those two matters be removed from the file, with the remaining contents of the file being made available to the appellant.... The appellant also argues that the limitation upon discovery prevented its attorney from adequately preparing to cross-examine ....
Justice George Rose Smith, writing for the majority, held the Commissioner had not abused his discretion. Likewise, the North Dakota Supreme Court in American State Bank v. State Banking Bd., 289 N.W.2d 222 (N.D.1980), held information can be deleted or withheld without creating reversible error. These cases illustrate this point: it is one thing to allow or require the Commission to obtain certain sensitive information helpful to the Commission‘s analysis, and it is quite another matter to require the Commission to mechanically hand over anything and everything to a bank‘s competitor. The ruinous effect of the latter position should be obvious.
Public convenience and necessity justify and require the grant of the application of Southern Hills Bank for a charter to conduct business in Custer, South Dakota, as a main office, with a branch bank at Edgemont, South Dakota. Competition is the lifeblood of the banking system and the banking regulatory laws. Banking laws are not intended to give exclusive benefits to institutions which have been granted a license to conduct banking business. Banking laws are regulatory in nature and are not to create a monopoly which stifles the growth of a community. “And the law favors competition in banking,” 1 Mitchie, Banks and Banking, ch. 1, § 4, at 19 (1973).
Affirmed.
FOSHEIM, C.J., and MORGAN, J., concur.
WOLLMAN and DUNN, JJ., dissent.
WOLLMAN, Justice (dissenting).
Within one year after the filing of an application the commission shall consider the director‘s findings and recommendations and all other available relevant information and shall in its discretion approve or disapprove the application, which action shall be subject to appeal.
At the outset of the hearing, Southern Hills Bank offered in support of its application a copy of the Director‘s report. Appellants objected to the introduction of the report for the reason that deleted from the copy that was offered into evidence were the names of the persons whom the Director had interviewed in compiling the report and recommendation required by
I agree with appellants that their due process rights to a fair hearing were impinged by the refusal of the Commission to provide them with a complete copy of the Director‘s report. We have held with respect to the procedure to be followed at hearings in contested cases under the Administrative Procedure Act that:
The requirements of the law then are that where there are adversary parties they are accorded procedural rights that are consonant with due process. “The constitutional guaranty of due process of law applies to, and must be observed in, administrative as well as judicial proceedings, particularly where such proceedings are specifically classified as judicial or quasi-judicial in nature[.]” 2 Am.Jur.2d Administrative Law § 351 (1962).
Application of Union Carbide Corp., 308 N.W.2d 753, 758 (S.D.1981).
As we pointed out in the Union Carbide case,
The records of the division shall be open to public inspection; provided, however:
(1) The director may withhold from public inspection any record for so long as he deems necessary for the protection of a person or bank or to be in the public interest; and
Any record of the division shall be made available upon order of a court of competent jurisdiction when cause is shown.
Whatever the purposes of
It is no answer to say that appellants could have called the Director as a witness and thus secured the requested information, for it cannot be presumed that the Director would have divulged more on direct examination than that which he would not vouchsafe prior to the hearing. Likewise, appellants should not have been expected to enlist the aid of the courts to view that which was an integral, essential part of the applicant‘s case. In contrast to the situation
I would hold that the Commission should not have received the expurgated version of the Director‘s report into evidence and that in doing so the Commission trammeled upon appellants’ due process rights as recognized in Union Carbide, supra.
I also agree with appellants’ contention that the evidence submitted by Southern Hills Bank belies its contention that it intends to move its main office to Custer. The Custer office will in fact constitute a branch bank, in violation of
in a municipality of less than three thousand population where there is an existing national or state bank regularly transacting banking business, or in any municipality of three thousand population or more and less than ten thousand population where there are two or more existing national or state banks regularly transacting banking business; ...
(The 1980 census lists the population of Custer as 1,830.).
The state banking statutes do not define the term “main office.” In Application of Live Stock State Bank, Artesian, 252 N.W.2d 227 (S.D.1977), we affirmed the Commission‘s finding that the applicant bank did intend in fact to move its main office from Artesian to Mitchell and to establish a branch bank in Artesian, although we did not explicate the evidence in support of that finding or outline any standards by which the term “main office” should be measured. Although Southern Hills Bank contends that “main office” means whatev-
In Application of Berkeley Savings & Loan Ass‘n, 115 N.J.Super. 302, 279 A.2d 718 (1971), the state commissioner of banking considered the following criteria in determining whether the proposed site of the financial institution would constitute the “principal” office:
(a) The office with the highest volume of accounts; (b) the office with the highest volume of loans; (c) the office at which the board of directors regularly meet; (d) the office where the greatest number of senior officers are permanently located; (e) the office to which reports are made and orders emanate; (f) the office which is officially designated as the principal office; (g) the office which is known to the public as the principal office; (h) the office where a majority of the key departments are; (i) the office where the payroll and bookkeeping records are kept. 279 A.2d at 722.
The Berkeley Savings criteria, although perhaps not all inclusive, do provide at least some guidelines by which to measure the proposed move in the instant case. When so measured, the proposed bank in Custer fails to meet the definition of “main office.” The Edgemont office would have the highest volume of accounts and loans. The greatest number of senior officers would be permanently located in Edgemont. The computer department would remain at Edgemont, servicing the Custer office through telephone lines, just as the Buffalo Gap branch office of the Southern Hills Bank is presently being serviced. The Edgemont bank presently has sixteen employees, and the evidence does not reveal how many, if any, would be transferred to the Custer office or how many employees there would be in the Custer office. In sum, the evidence does not support a finding that the proposed new location would constitute the main office of Southern Hills Bank.
I also agree with appellants that the Commission erred in not requiring Southern Hills Bank to disclose the identity of the proposed directors of the new bank.
The order appealed from should be reversed, and the case should be remanded to the circuit court with directions to set aside the Commission‘s decision.
DUNN, Justice (dissenting).
An analysis of this case must begin with words of
Because of this policy, the focus of this court‘s inquiry should be on whether Southern Hills Bank intends to make a bona fide interchange of main offices, or merely a “paper change” to circumvent the branch banking statute. See Ramapo Bank v. Camp, 425 F.2d 333 (1970), cert. den. 400 U.S. 828, 91 S.Ct. 57, 27 L.Ed.2d 58 (1971). The majority opinion, on the other hand, focuses on the ills of the present Custer bank, rather than on whether Southern Hills’ move is actually a branch bank disguised as a main office.
The state banking statutes do not define the term “main office,” and a branch bank is simply defined as “a branch place of business maintained by a bank for conduct of banking[.]”
The criteria used in Application of Berkeley Savings & Loan Ass‘n, 115 N.J.Super. 302, 279 A.2d 718, 722 (1971), are quite helpful in defining a “main office“:
(a) The office with the highest volume of accounts; (b) the office with the highest volume of loans; (c) the office at which the board of directors regularly meet; (d) the office where the greatest number of senior officers are permanently located; (e) the office to which reports are made and orders emanate; (f) the office which is officially designated as the principal office; (g) the office which is known to the public as the principal office; (h) the office where a majority of the key departments are; (i) the office where the payroll and bookkeeping records are kept.
The facts of the present case indicate that the office in Custer will not actually be a “main office.” Only one bank officer will move to Custer; all the other officers and directors will stay in Edgemont. The Edgemont office will have the highest volume of accounts and loans. The important computer department will remain in Edgemont; the Custer office will be serviced by the computer over telephone lines, just as the Southern Hills Bank branch in Buffalo Gap is being serviced. In light of these facts, it appears that there will be no bona fide interchange of main offices from Edgemont to Custer. There will be the opening of a branch, similar to the one in Buffalo Gap, thus circumventing the legislative policy set forth in
For this reason I would find that the Commission‘s decision allowing Southern Hills Bank to move its “main office” to Custer is clearly erroneous.