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Bridgeport Federal Savings and Loan Association v. Federal Home Loan Bank Board and Quaker City Federal Savings and Loan Association.

August 1, 1962


Author: Mclaughlin

Before McLAUGHLIN, STALEY and GANEY, Circuit Judges.

McLAUGHLIN, Circuit Judge.

The Federal Home Loan Bank Board approved the application of Quaker City Federal Savings and Loan Association for permission to establish a branch office in King of Prussia, Upper Merion Township, Montgomery County, Pennsylvania.*fn1 Bridgeport Federal Savings and Loan Association, complaining of the decision, filed a complaint in the district court against the Board and Quaker City, seeking declaratory and injunctive relief. The district judge granted the defense motions to dismiss the complaint on the ground that it failed to state a claim upon which relief can be granted. Bridgeport appeals.

Preliminarily, Bridgeport, under the facts, has standing to complain of the Board's action. North Arlington Nat. Bank v. Kearny Fed. Sav. & L. Ass'n, 187 F.2d 564, 565 (3 Cir. 1951). And the Board's authority to permit branch offices for chartered Federal savings and loan associations is soundly established. North Arlington Nat. Bank v. Kearny Fed. Sav. & L. Ass'n, supra; First National Bank v. First Federal Savings and Loan Association, 225 F.2d 33 (D.C.Cir. 1955). Springfield Institution v. Worcester Federal Savings and Loan Association, 329 Mass. 184, 107 N.E.2d 315 (1952), cert. den. 344 U.S. 884, 73 S. Ct. 184, 97 L. Ed. 684 (1952); 12 C.F.R. 545.14.

It seems to us also that the district judge was right in concluding that in the first instance there would have been no necessity for a Board hearing on the Quaker City application for the branch involved.*fn2 That is the specific holding in the First National Bank opinion, supra, where the court said page 36: "Section 5 of the Administrative Procedure Act, 5 U.S.C.A. § 1004, requires that 'in every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing' (except in six listed circumstances not here applicable), an agency shall observe certain procedures specified in subsequent sections of that act. Neither the Home Owners' Loan Act of 1933, as amended, nor the regulations thereunder, contains any provision that an application for a branch must be 'determined on the record after opportunity for an agency hearing.'" See also Federal Home Loan Bank Board v. Rowe, 109 U.S.App.D.C. 140, 284 F.2d 274 (1960); 12 C.F.R. 542.2.*fn3

This brings us to the main issue in the appeal. After the present Quaker City application was filed with it, the Board fixed a hearing date for the application as June 20, 1960. A hearing was held June 20, 21, 22, 1960. There was testimony for the applicant and for Bridgeport and two other protesting Federal savings and loan associations. Bridgeport complains that he hearing was not full and fair. Prior to the hearing it asked the Board for subpoenas duces tecum to be served on Quaker City and Upper Merion Township. The Board notified Bridgeport it had no subpoena power and could not issue the requested subpoenas. Bridgeport also requested the Board to produce at the hearing its correspondence and minutes and reports relating to the application. The Board denied the request because the matters requested were intra office and not subject to public inspection.

We see no argument in appellant's brief regarding the subpoena duces tecum point; in any event we are not referred to or have we found anything to contradict the Board's statement that it does not possess subpoena power in application proceedings. However, refusal of the request to the Board for its data regarding the Quaker City branch application and the circumscription of Bridgeport's cross-examination are more than sufficient to bring up the question of whether the kind of hearing which was held satisfied procedural due process.

The hearing was designedly limited in scope. The Board states it was called "to help the Board get external economic facts and the view of interested parties to aid in its decision * * *." Admittedly, confidential financial information concerning the applicant was not permitted to be made available to the objectors at the hearing; for example, the hearing examiner ruled:

"There is a division of supervision which has authority over the associations and goes into their reserve position. Now, the Board requested an opinion from this division as to their reserve position. * * * If a protestant feels there is an association engaging in unsound practices, and not a proper association, the Board will not allow these matters to be gone into at this hearing. A communication can be sent to the Board or to the supervising authorities, if you feel you want to take it up. But I will not allow you to take it up at this hearing."

It is that sort of restriction that is protested, appellant stating that "once those records became material to this application and were, in fact, considered by the Board in arriving at its decision, those records lost their confidential nature as among the Board, the Applicant and the Protestants." In connection with this appellant contends that the Board must follow the Administrative Procedure Act in allowing association branches but, as we have seen, this particular agency is not one of those tied into the adjudication procedures of that Act. Nor does the original question concerning the competition from the new Quaker City branch to the complaining associations of itself produce a constitutional question and thus create the necessity of a hearing initially. With that background, the Board held a hearing for its specific purpose of obtaining certain particular information it desired in connection with its appraisal of the application before it. This seems generally akin to the problem passed on in Ludecke v. Watkins, 335 U.S. 160, pp. 171, 172, 68 S. Ct. 1429, pp. 1434, 1435, 92 L. Ed. 1881 (1948), where the Court held:

"The fact that hearings are utilized by the Executive to secure an informed basis for the exercise of summary power does not argue the right of courts to retrysuch hearings, nor bespeak denial of due process to withhold such power from the courts."

The non-disclosure of information was in complete accord with the controlling regulation in 12 C.F.R. § 505.12 which provides that:

"The giving out of any such records or information, or documents relative thereto * * * is held to be contrary to public policy by reason of its privileged and confidential character involving delicate and sensitive matters relating to the condition and affairs of financial institutions and not to be permitted."

The use and non-disclosure of confidential information is common practice in the banking field and has been so recognized and sanctioned by Congress. In Monograph No. 13, Senate Document No. 186, ...

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