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Northtown Bank of Decatur v. Becker

JANUARY 9, 1964.

NORTHTOWN BANK OF DECATUR, AN ILLINOIS BANKING CORPORATION, AND THE MILLIKIN NATIONAL BANK OF DECATUR, A NATIONAL BANKING ASSOCIATION, PLAINTIFFS-APPELLANTS,

v.

CONRAD F. BECKER, DIRECTOR OF FINANCIAL INSTITUTIONS OF THE STATE OF ILLINOIS, AND THE CITIZENS NATIONAL BANK OF DECATUR, A NATIONAL BANKING ASSOCIATION, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Sangamon County; the Hon. DEWITT S. CROW, Judge, presiding. Appeal dismissed.

CARROLL, PRESIDING JUSTICE.

On July 21, 1961, applications for permits to organize three state banks in Decatur, Illinois were filed with the Director of the Department of Financial Institutions of Illinois (referred to herein as the Director). Each of the signers of the applications was a director, officer, or employee of Defendant, The Citizens National Bank of Decatur, Illinois (referred to hereinafter as Citizens) which was then engaged in the banking business in Decatur. The applicants included every major officer of Citizens, each of its eleven directors, and each of its fourteen officers. These applications contained the following information: name of proposed bank, location, amount of capital stock, surplus and reserves, number and value of shares, financial worth of applicants and references as to their personal character. On September 20, 1961, the chairman of the board and president of Citizens wrote a letter on the bank's stationery to each of its 18,000 depositors, informing them that certain officers and directors of Citizens had filed applications to organize three new banks at certain locations in Decatur; that the names of the new banks would be Citizens North Decatur Bank, Citizens East Decatur Bank and Citizens South Decatur Bank; and that the new banks would be under the management of three of the vice-presidents of Citizens. The letter further stated in substance that a study of the needs for additional banking facilities in Decatur had been made by the directors and officers of Citizens; that as affiliates of Citizens, the new banks would have advantages such as experienced bank management and operating officers not available to most such new institutions; and that when the charters were granted the general public would have an opportunity to purchase stock in these new banks. Under date of September 20, 1961, plaintiff, Northtown Bank of Decatur, filed with the director written objections to the granting of permits to organize and to the issuance of charters to the three proposed banks. The objections urged were that the banking needs of Decatur are adequately served; that if the requested charters were granted it would result in branch banking in violation of section 6 of the Banking Act; that if granted, such charters would violate the Bank Holding Company Act of 1957; and that each of the names proposed for the new banks is deceptively similar to an existing bank in Decatur. The Director, by letter dated October 2, 1961, advised plaintiff Northtown that its objections had been considered; that it was the opinion of his department that the Bank Holding Company Act did not apply; that from a supervisory standpoint the department found nothing that "would even sound like branch banking"; that before any of the charters were granted a thorough investigation would be made; that at the most he could not say what the position of the department would be following such investigation; that the result of such investigation would be the basis on which permits would either be granted or refused.

One of the applications was processed by the Department and approved by the Director. However, as the result of this litigation, and issuance of a temporary injunction, the permits were not delivered and any further action thereon was suspended.

The plaintiffs, Northtown Bank of Decatur, and Millikin National Bank of Decatur are engaged in the banking business in the City of Decatur and are competitors of defendant Citizens. The allegations of the complaint are in substance that the proposed organization of the three new banks will violate the Illinois Banking Laws; that the issuance of permits to so organize, or of a charter for said banks is unlawful for the reason that it appears to the plaintiffs that Citizens is promoting the organization of the proposed new banks and in so doing is attempting to establish branch banks; that the management of the proposed banks will be controlled by Citizens; that the organization and establishment of the three new banks in Decatur would cause plaintiffs irreparable injury, loss and damage for which they have no adequate remedy at law. The relief prayed was a temporary injunction restraining the Director from issuing either a permit to organize or a charter for the proposed three new banks, and a temporary injunction restraining defendant, Citizens, its officers, agents, and employees, from taking any further steps to obtain a permit to organize or a charter for said three new banks; and that upon final hearing, said temporary injunctions be made permanent.

On December 20, 1961, a temporary injunction as prayed was issued against the Director, but the prayer for relief against Citizens was abandoned because of the provisions of Title 12, Sec 91 USCA which prohibits the issuing of a temporary injunction against National Banks.

In its answer, Citizens denied that it was attempting to organize the three banks, or that it had authorized anyone to organize them, and denied its intention to engage in branch banking. One of several defenses set up in the answer was:

"That neither its Board of Directors nor its stockholders has taken corporate action of any kind or character authorizing or directing the persons who signed the applications mentioned in the complaint to sign them, nor has its Board of Directors or its stockholders ratified or approved the signing of said applications, nor have they taken any corporate action of any kind in relation to the proposed new banks."

The Attorney General answered for the Director, denying that Citizens in its corporate capacity is attempting to exercise powers not conferred on it by its charter or law.

The cause was heard upon the complaint and answers, with the result that the trial court found insufficient evidence to establish that Citizens, as a corporate entity, is attempting to establish and maintain the proposed three banks; that there was insufficient evidence to establish that said proposed banks are being organized as adjunct instrumentalities or agencies of Citizens, at which agencies, business of Citizens is to be conducted; that there was not sufficient competent evidence to establish that domination and control of the operation and business of the proposed three banks will be exercised by Citizens; that there was no clear and convincing evidence that plaintiff will be irreparably injured or damaged by the issuing of permits to organize the said proposed three banks under names not deceptively similar to any other bank in the State of Illinois; that the names proposed, Citizens North Decatur Bank, Citizens East Decatur Bank, and Citizens South Decatur Bank, are deceptively similar to the name "The Citizens National Bank of Decatur." In accordance with such findings, the court decreed that the Director be perpetually enjoined from issuing a permit to any of the proposed three banks under the names appearing in the applications for permits; that the complaint for permanent injunction against Citizens be dismissed for want of equity; and that the temporary injunction against the Director be dissolved.

From such decree plaintiffs appealed directly to the Supreme Court on the ground that a franchise is involved. However the Supreme Court determined that such appeal was wrongfully taken to that court and transferred the cause here for decision.

Plaintiffs' theory, as indicated in their brief, is that the trial court erred in giving "controlling effect" to Citizens self-serving resolution of February 12, 1962; and that violation of the banking laws of this state was clearly established by the evidence. Plaintiffs' statement that the trial court gave controlling effect to the February 12, 1962 resolution apparently refers to a memorandum opinion of the trial court which appears in the record. In that opinion the court expressed the belief that if a resolution adopted February 12, 1962 by the board of Citizens was to be ignored, then a presumption and reasonable inference could be found that an attempt was being made by Citizens through its officers and directors to circumvent section 6 of the Illinois Banking Law; that although a part of said resolution was self-serving, it nevertheless expressed the policy of Citizens and in the absence of proof of ratification of the acts of its officers it overcame any presumption or implication of an attempt by Citizens to institute branch banking. It was further observed by the court that the question whether the appearance of the names of officers of Citizens as officers of the new banks would amount to domination of the new banks by Citizens could not be determined until after the organization of the three proposed new banks was perfected.

It appears from the resolution in question that its adoption was occasioned by the filing of this action. It recites that Citizens is charged in the complaint in said action with attempting to organize three new banks in which its banking business will be conducted; that the proposed new banks will be agencies and instrumentalities of Citizens and dominated and controlled by it; and that such actions of Citizens demonstrate an intention on the part of Citizens to violate the statutory provisions and public policy of Illinois prohibiting branch banks and branch banking and restricting bank holding companies. It further recites that none of the actions of the individuals making the applications for permits to organize the three new banks were authorized or subsequently ratified by the board of directors of Citizens; that on May 8, 1961, long prior to the filing of the applications in question and to the institution of this action, the board of directors of Citizens unanimously adopted a resolution openly expressing their opposition to proposals for branch banking in Illinois. The resolution concluded with a statement that Citizens has no intention or plan to establish or maintain any branch bank, any branch office, or additional office or agency for the conduct of its bank business. Plaintiffs insist that such resolution should not have been admitted in evidence and is not entitled to any weight. We are unable to agree that the February 12, 1962 resolution was the controlling factor in the conclusion reached by the trial court. As we read the memorandum opinion, it does no more than suggest possible presumptions which the court might indulge, depending upon whether or not the said resolution was held to be competent. But regardless of the weight the trial court may have accorded the resolution in question, for the reasons hereinafter indicated, we are of the opinion that the trial court's decision may be upheld without the resolution's support. It is true that corporation records are not admissible to establish or support a claim of the corporation against third parties. However in this instance, this rule is not applicable because the issue in no way involves any claim or assertion of a right of the corporation of Citizens against third parties. Since much of plaintiffs' evidence bore upon the subject of the intentions and plans of Citizens, we think the statement of policy of that corporation as embodied in the resolution was competent as rebuttal evidence. George J. Cooke Co. v. Fred Miller Brewing Co., 316 Ill. 46, 146 N.E. 459; Taylor v. Champaign County Abstract Co., 288 Ill. App. 442, 123 N.E.2d 543.

Since Citizens is charged with organizing new banks in violation of the Banking Act, the organization procedures set out in the Act are important. Section 6 of the Illinois Banking Act (Ill Rev Stats 1961, c 16 1/2, § 106) provides:

"6. Branch Banking Prohibited.) No bank shall establish or maintain more than one banking house, or receive deposits or pay checks at any other place than such banking house, and no bank shall establish or maintain in this or any other state or country any branch bank, nor shall it establish or maintain in this State any branch ...


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