Appeal, No. 21, May T., 1957 from order of Secretary of Banking and Department of Banking of Commonwealth of Pennsylvania, dated September 12, 1956, disapproving merger of banking institutions. Order reversed.
Arthur Littleton, with him F. Eugene Reader, Alton W. Lick, and Morgan, Lewis & Bockius, for appellants.
Edward L. Springer, Deputy Attorney General, with him Frederick G. Antoun, Deputy Attorney General, and Thomas D. McBride, Attorney General for Secretary of Banking and Department of Banking, appellees.
Arthur H. Hull, Robert L. Rubendall, and Hull, Leiby & Metzger, for interested parties, appellees.
Before Jones, C.j., Bell, Chidsey, Musmanno, Arnold and Jones, JJ.
OPINION BY MR. JUSTICE BELL
Articles of Merger of Dauphin Deposit Trust Company and Carlisle Trust Company were filed by the Banks and approved by the Department of State; thereafter the Articles were transmitted to the Department of Banking for approval or disapproval in accordance with the Banking Code. Both banking institutions are chartered under the law of Pennsylvania. Carlisle Trust Company has its principal and sole place of business in the Borough of Carlisle, Cumberland County. It has no branches. Dauphin Deposit Trust Company has its principal place of business, together with three branches, in Harrisburg, Dauphin County. Cumberland County and Dauphin County are contiguous counties. The plan of merger provided for the retention and operation of the banking office of Carlisle Trust Company in Carlisle as a branch of the surviving institution which was to be known as Dauphin Deposit Trust Company.
The proposed merger was disapproved by the Department of Banking in a comprehensive opinion. The basic reason given by the Secretary of Banking for disapproving the proposed merger was that there was no need for the merger since the banking facilities and services in Carlisle were adequate, and the merger would result in over-banking the community which would be detrimental and possibly disastrous to the community. From this Order of the Department of Banking, Dauphin Deposit Trust Company and Carlisle Trust Company appealed to this Court.
Section 204 of the Act of May 15, 1933,*fn1 known as the Banking Code, was repealed by the Act of December 30, 1955.*fn2 Section 204, was composed of numerous paragraphs, seven of which were lettered ABCDEFG. In lieu of § 204, the Act of 1955 added a new and different section to the Banking Code, namely, 204.1. Section 204.1 was divided physically into many paragraphs, six of which were lettered ABCDEF. Subsections A and B of § 204.1 are the only subsections that are relevant to this case.
Section 204.1, subsection A, provides in material part as follows: "Branches. A. Any institution may continue to maintain and operate any branch heretofore lawfully established by such institution. If an institution is hereafter merged or consolidated with another institution or national banking association, the surviving institution, in case of merger, or the newly consolidated institution, with the approval of the department,*fn3 with respect to any such institutions or national banking associations, may retain and operate as branches any of their principal places of business
and branches which may have been in lawful operation in the same county or in a county contiguous to the county in which the principal place of business of the institution resulting from the merger or consolidation is located on the effective date of such merger or consolidation."
The key words on which this case turns are "with the approval of the department".
Section 204.1, subsection B, covers the establishment and maintenance of branch banks without merger in the same city, borough or village in which the principal place of business of the large bank is located, and in the same or in a contiguous county. Under subsection B, a bank may establish a branch with the prior written approval of the Department of Banking, except that if the branch is to be located in any other city, etc. in the same county, or in a county contiguous to the county in which the principal place of business of the large bank is located, the application must be approved by both the Department and the Banking Board. This subsection further provides, clearly and specifically, that when a bank files an application for the establishment of a branch in the same city, etc., the Department shall approve the application "if it finds upon investigation that there is a need for banking services or facilities such as are contemplated by the establishment of such branch and that all requirements of this section have been complied with ...". If the Department finds, after investigation, that the bank has not met all the requirements of the section, or that there is not a need for banking services or facilities such as are contemplated by the establishment of such branch, it shall disapprove the application.*fn4
Notwithstanding the fact that the requirements of subsection A and of subsection B are obviously very different, the Department of Banking interpreted each of them alike, i.e. each required approval of the Department if and only if the Department found that there was a need for banking services or facilities such as are contemplated (1) by the merger or (2) by the establishment of a branch bank without a merger. If this was the standard which the Legislature intended to prescribe in each case, it is regrettable that it did not clearly and specifically so provide in subsection A.
The language of subsection A "with the approval of the Department" is at first blush sufficiently broad to give the Department the sole discretion, without any reasonable standards or indeed without any standards whatever, to approve or disapprove a merger, the effect of which is to establish a branch in a contiguous County. Where the standard fixed by the Legislature is not arbitrary or unlimited, but is definite and reasonable, the delegation of power or discretion will be sustained as constitutional. In considering the standard, regard must be had to the purpose and scope of the Act, the subject matters covered therein, the duties prescribed and the broad or narrow powers granted, because those factors will often determine whether or not a sufficiently clear, definite and reasonable standard has been established. A grant of power to ...