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decided: March 18, 1971.


Appeal from order of Pennsylvania Department of Banking, May T., 1969, approving application of American Bank and Trust Co. of Pa., for letter of authority to establish a branch office at 42-44 North Prince Street, Lancaster, Lancaster County, Pennsylvania, in case of The Conestoga National Bank of Lancaster and The Fulton National Bank of Lancaster v. G. Allen Patterson, Secretary of the Pennsylvania Department of Banking and American Bank and Trust Company of Pennsylvania, Reading, Pennsylvania.


Martin P. Snyder, with him Paul A. Mueller, Jr., Harris C. Arnold, and Barley, Snyder, Cooper & Mueller, Arnold, Bricker, Beyer & Barnes, and Morgan, Lewis & Bockius, for appellants.

Harry E. Sprogell, with him Llewellyn R. Bingaman, Raymond Pearlstine and Bingaman, Hess, Coblentz & Bell, Wisler, Pearlstine, Talone & Gerber, and Saul, Ewing, Remick & Saul, for appellee.

Frederic G. Antoun, Deputy Attorney General, with him D. Joseph Snyder, Assistant Attorney General, and William C. Sennett, Attorney General, for Commonwealth, appellee.

Bell, C. J., Jones, Cohen, Eagen, O'Brien, Roberts and Pomeroy, JJ. Opinion by Mr. Justice Roberts. Mr. Justice Cohen took no part in the decision of this case. Dissenting Opinion by Mr. Chief Justice Bell.

Author: Roberts

[ 442 Pa. Page 291]

The issues in this appeal have required this Court to reconsider its holding in Cement National Bank v. Department of Banking, 425 Pa. 554, 230 A.2d 209 (1967). After considerable and careful study, we have concluded that the procedures sanctioned in Cement National Bank do not afford protesting banks in branch application situations the rights of procedural due process which are theirs by virtue of the Fourteenth Amendment to the Constitution of the United States and Article V, Section 9, of the Pennsylvania Constitution.

This case is an appeal from the order of the Department of Banking authorizing American Bank and Trust Company of Pennsylvania ("applicant") to establish a branch bank. Our jurisdiction is properly invoked under Section 905(c) of the Pennsylvania Banking Code of 1965*fn1 and Act of June 24, 1895, P. L. 212, § 7.4, as amended, Act of August 14, 1963, P. L. 819, § 2, and Act of June 30, 1967, P. L. 154, § 1, 17 P.S. § 191.4(5) (Supp. 1970).*fn2

On February 6, 1969, applicant filed an application with the Department of Banking under Section 904(b)(iv) of the 1965 Banking Code for permission to establish a branch at 42-44 North Prince Street, Lancaster, Pennsylvania. Applicant's main office is situated

[ 442 Pa. Page 292]

    in the City of Reading, Berks County. At the time of filing the 1969 application, applicant already operated two other branches in Lancaster County, one in Reamstown and one in Columbia.

Appellants are the Conestoga National Bank and the Fulton National Bank (the "protesting banks"), each of which has its principal office in Lancaster. They were notified informally of the filing by a Banking Department examiner and indicated their intention to file a formal protest.

On March 13, 1969, a Letter of Authority for establishment of the proposed branch bank was issued by the Department of Banking. The protesting banks had not filed formal protests by this time. Since the sixty-day period for allowance of protests had not yet lapsed, they requested that the Letter of Authority be withdrawn to permit them to file their protests. The Secretary of Banking agreed to request an opinion from the office of the Attorney General to determine if the Banking Department had the authority to reconsider its decision in light of the protests. The protesting banks also requested the right to have a hearing on their protests and access to the branch application and supporting data to help them in preparing their protests. These latter requests were refused.

On April 7, 1969, the Attorney General advised the Secretary of Banking that the Banking Department could properly reconsider its decision, and the Letter of Authority to establish applicant's proposed branch was rescinded two days later. The protesting banks were given twenty days within which to file their objections. Appellants filed the objections. After additional investigation, the Secretary of Banking issued a second Letter of Authority on May 19, 1969, approving the application for the branch bank. This Letter was accompanied by a formal decision and order of the Department containing

[ 442 Pa. Page 293]

    findings of fact and conclusions of law. This appeal followed.

The protesting banks contend that they were deprived of due process of law by the refusal of the Department of Banking to permit either a hearing on the bank branch application or, as a minimum, access to the contents of the branch application and other supporting data relating to the application on file with the Department. They also argue that the Department erred in not making any finding that circumstances had changed since American's petition for a branch bank was denied in 1965. They further complain that supplementary findings that circumstances had changed -- made by the Department after it learned of the protesting banks' intention to bring this appeal -- were too little and too late. Finally, appellants assert that applicant failed to meet its burden of proof necessary to establish the need for a branch bank, and that the Department erred in granting the application.

Under our view of this case, we need not presently reach the merits of whether the Department erred in granting the application, because we believe appellants' procedural due process rights require the remand of the case for a hearing before the Department of Banking, at which they shall have the opportunity to present evidence and prior to which the protesting banks should have access to the application and supporting data.*fn3 A record should be made of the hearing to enable appellants

[ 442 Pa. Page 294]

    to avail themselves of their right to effective judicial review, if they should so desire. The above requirements are necessary to preserve the constitutionality of Section 905 of the Banking Code under both the Fourteenth Amendment and Article V, § 9 of the Pennsylvania Constitution.

I. Procedural Due Process

     a. In General

There is no general definition of procedural due process applicable to every situation, and courts have deliberately refrained from formulating one. As one court has noted: "Procedural Due Process, as this court understands it, is not susceptible of advance definition. In the administrative field the desiderata are notice and opportunity to be heard . . . ." Webb v. United States, 21 F.R.D. 251 (E.D. Pa. 1957).

One of the more extensive discussions of the subject occurred in Cafeteria and Restaurant Workers Union, Local 473, AFL-CIO v. McElroy, 367 U.S. 886, 81 S. Ct. 1743 (1961). Speaking for the Court, Mr. Justice Stewart observed that: "As these and other cases make clear, consideration of what procedures due process may require under any given set of circumstances must begin with a determination of the precise nature of the government function involved as well as of the private interest that has been affected by governmental action. Where it has been possible to characterize that private interest (perhaps in oversimplication) as a mere privilege subject to the Executive's plenary power, it has traditionally been held that notice and hearing are not constitutionally required . . . Moreover, the governmental function operating here was not the power to regulate or license, as lawmaker, an entire trade or profession, or to control an entire branch of private

[ 442 Pa. Page 295]

    business, but, rather, as proprietor, to manage the internal operation of an important federal military establishment." Id. at 895-96, 81 S. Ct. at 1148-49 (holding commander of naval institution could summarily withdraw permission of civilian employee to enter base for security reasons) (footnote and citations omitted).

Certain other principles articulated in the past are also relevant. This Court's most comprehensive treatment of the matter is set forth in Wiley v. Woods, 393 Pa. 341, 141 A.2d 844 (1958): "'Due process of law', while incapable of exact definition, generally means 'law in the regular course of administration through courts of justice, according to those rules and forms which have been established for the protection of human rights': 12 Am. Jur. § 571, p. 264, and cases therein cited. Its essential elements are 'notice and opportunity to be heard and to defend in an orderly proceeding adapted to the nature of the case before a tribunal having jurisdiction of the cause': 12 Am. Jur. § 573, pp. 267, 268; Com. ex rel. Chidsey v. Keystone Mut. Cas. Co., 373 Pa. 105, 109, 95 A.2d 664; Carter v. Kubler, 320 U.S. 243, 88 L. Ed. 26, 64 S. Ct. 1; Ohio Bell Telephone v. Public Utilities Commission of Ohio, 301 U.S. 292, 81 L. Ed. 1093, 57 S. Ct. 724; Interstate Commerce Commission v. Louisville & Nashville Ry. Co., 227 U.S. 88, 57 L. Ed. 431, 33 S. Ct. 185; Jordan v. American Eagle Fire Insurance Company, 169 F. 2d 281, 288. That the principle of due process is fully applicable to hearings before administrative tribunals is well established: Commonwealth ex rel. Chidsey v. Mallen et al., 360 Pa. 606, 63 A.2d 49; Pittsburgh v. Pennsylvania Public Utility Commission, 171 Pa. Superior Ct. 391, 90 A.2d 850." Id. at 350-51, 141 A.2d at 849-50.

With these principles in mind, we proceed to a consideration of the applicability of procedural due process to this case.

[ 442 Pa. Page 296]

    b. Applicability

Procedural due process does not require notice and a hearing in every conceivable situation involving administrative action. E.g., Cafeteria and Restaurant Workers Union, Local 473, AFL-CIO v. McElroy, supra. However, these procedural safeguards should accompany a situation where the administrative action is adjudicatory in nature and involves substantial property rights. Pennsylvania State Athletic Comm. v. Bratton, 177 Pa. Superior Ct. 598, 604-05, 112 A.2d 422, 425 (1955).*fn4 ...

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