No. 6 January Term, 1978, Appeal From the Order of the Commonwealth Court Denying Motion for Summary Judgment by Appellants, Granting Motions for Summary Judgment by Appellees and Dismissing Petition for Review at No. 526 C. D. 1977.
Dechert, Price & Rhoads, John J. Brennan, Gordon W. Gerber, Philadelphia, for appellants.
Drinker, Biddle & Reath, Robert S. Ryan, Edward M. Posner, Philadelphia, for appellee, P. S. F. S.
Vincent X. Yakowicz, Sol. Gen., Harrisburg, for appellee, Secretary of Banking.
Eagen, C. J., and O'Brien, Roberts, Pomeroy, Nix, Manderino and Larsen, JJ.
In this case of first impression in Pennsylvania, we must decide whether the Department of Banking exceeded its rule-making authority in promulgating a regulation which allows mutual savings banks to offer depositors a noninterest bearing account from which money can be withdrawn by means of a negotiable order of withdrawal payable to a named third party. The relevant factual background, in no way disputed, is as follows.
Some time before December 27, 1976, the Secretary of Banking sought the legal opinion of the Attorney General of Pennsylvania as to whether savings banks operating under the Banking Code of 1965, as amended, 7 P.S. §§ 101-2202 (1967 & Supp.1978-79), could offer these notice of withdrawal accounts to their depositors. Under the terms of a typical NOW account, money may be withdrawn by means of a negotiable order of withdrawal which requires the bank to pay the specified sum to a named third party. These sight drafts are "payable through" drafts, naming a commercial bank at which the draft can be presented for payment. The drafts then clear through the banking system much the same as other drafts. The similarity of a NOW draft to the traditional check, at least from a functional viewpoint, is self-apparent.
After a review of the pertinent Banking Code sections, including those delineating the Department's regulatory and
rule-making authority, the Attorney General advised the Secretary that it was the view of the attorney general's office that the Banking Code empowered the Department to allow NOW accounts, if done by proper regulation. Official Opinion No. 76-33, 7 Pa.Bull. 172, reprinted in 1 Pa.D. & C.3d 123 (1977). The Attorney General did add the caveat that because of § 503(a) of the Code, any such regulation must require each NOW account draft to contain language which indicates that the bank may require 14 days notice before making payment.
On January 15, 1977, the Department of Banking published notice of proposed rule-making in the Pennsylvania Bulletin. The Department invited interested parties to submit comments, in response to which comments were received both in favor of, and in opposition to, a regulation permitting savings banks to offer NOW accounts. The Pennsylvania Bankers Association, one of the appellants in this case, submitted comments in opposition to such a regulation. On March 12, the Department of Banking adopted regulations allowing savings banks to offer NOW accounts, provided each draft bore the legend reserving to the bank the right to require 14 days notice before paying NOW drafts. See 7 Pa.Bulletin 699 (March 12, 1977).
On March 14, 1977, appellants, the Pennsylvania Bankers Association and four commercial banks, filed a petition for review in the Commonwealth Court challenging the validity of the regulations. Appellants also sought to stay the effective date of the regulations. Appellee, Philadelphia Savings Fund Society (PSFS), a mutual savings bank, was permitted to intervene. After a hearing before Judge Blatt, appellants' application for a stay was denied.
Appellants then filed in the same court a motion for summary judgment. Appellees PSFS and the Secretary of Banking filed cross-motions for summary judgment. A unanimous Commonwealth Court granted appellees' cross-motions for summary judgment and denied appellants' motion. Pennsylvania Bankers ...