In order to form a banking corporation to be known as the "State Bank of Sykesville," the appellants, as required *Page 89 by law, presented articles of incorporation to the state bank commissioner with a view to obtaining his prerequisite approval. The commissioner declined to approve the incorporation for reasons to be presently stated. In this injunction suit redress is sought on the alternative grounds that the statute investing the bank commissioner with authority to forbid a proposed incorporation is unconstitutional, if construed as justifying his action in this case for the reasons which he assigned, or that his decision was invalid as being beyond the scope of the power intended to be conferred.
In regard to the incorporation of banks and trust companies it is provided by section 22 of article 11 of the Code, in part, as follows:
"The articles of incorporation shall be executed in triplicate by the persons joining therein before any officer authorized to take acknowledgments, and then filed with the bank commissioner for examination. The bank commissioner shall thereupon ascertain from the best sources of information at his command, and by such investigation as he may deem necessary, whether the character, responsibility and general fitness of the person or persons, named in such certificate, are such as to command confidence and warrant belief that the business of the proposed corporation will be honestly and efficiently conducted in accordance with the intent and purposes of this article, and whether the public convenience and advantage will be promoted by allowing such proposed corporation to engage or continue in business. After the bank commissioner shall have satisfied himself by such investigation whether it is expedient, and desirable to permit such proposed corporation to engage or continue in business, he shall have power to require such changes in said certificate as he may deem necessary. He shall within sixty days after the date of the filing of such certificate for examination, endorse upon each of the triplicates thereof over his official signature, the word `approved' or the word `refused' with the date of such endorsement. In case of refusal he shall *Page 90 return one of the triplicates so endorsed to the proposed incorporators."
The refusal of the bank commissioner to approve the articles of incorporation for a bank in Sykesville, submitted by the appellants, was explained by the following statement in the commissioner's letter returning one of the copies:
"After a very careful investigation I can only reach the conclusion that it would not be expedient to grant the charter, as in my opinion, there is no need for the bank there, and it would not have a reasonable chance for success."
The charter had been sent to the commissioner with a letter of transmittal from which we quote as follows:
"Accompanying the charter are letters to you from a number of leading citizens of Sykesville and vicinity which can be added to should you decide that further expression of public opinion is necessary. Sykesville is an incorporated town, in the southern part of Carroll County, about 18 miles south of Westminster, 14 miles northwest of Ellicott City, 15 miles east of Mt. Airy and 12 miles west of Randallstown. It is the banking and business center of a section of Howard as well as a part of Carroll County. The capital stock of $25,000 has been subscribed for by 160 persons. Of a total number of 30 business houses in Sykesville, the proprietors of 19 establishments are among the subscribers. Taneytown, Union Bridge, Hampstead and Mt. Airy, each has two banks, and Sykesville desires to have and requests that you permit it to have the same advantages and privileges enjoyed by these other communities in Carroll County."
The amended bill alleges that the charter was refused by the commissioner without opportunity being given to the proponents to be heard, that the public convenience requires a state bank in Sykesville in addition to the national bank already in operation there, that the adverse action of the commissioner was based on reasons not recognized by the *Page 91 law, and that his conclusions were contrary to the facts and could not fairly be reached upon the "open and ascertainable evidence." There was, however, a disavowal in the bill of any intention to charge that the commissioner had "acted corruptly or fraudulently or from bias or prejudice."
A demurrer to the bill was sustained, and the plaintiffs declining to amend further, the bill was dismissed by the decree which is the occasion of this appeal.
The business of banking bears such a relation to the economic security of the public as to be a legitimate subject of regulation by the state in the exercise of its police power. This proposition is not here disputed. It is supported by ample authority. Noble State Bank v. Haskell, 219 U.S. 104;Shallenburger v. First State Bank, 219 U.S. 114; Engel v.O'Malley, 219 U.S. 128; Farmers' Merchants' Bank v. FederalReserve Bank, 262 U.S. 649; Dillingham v. McLaughlin,264 U.S. 370; Schaake v. Dolley, 85 Kan. 598, 37 L.R.A. (N.S.) 877;Saari v. State Securities Com., 149 Minn. 102; Dodd v. Hill,84 W. Va. 468; Mulkey v. Bennett, 95 Or. 70. In Noble StateBank v. Haskell, supra, the Supreme Court, in an opinion by Mr. Justice Holmes, said that the question "whether the right to engage in banking is or can be made a franchise," "is not answered by citing authorities for the existence of the right at common law." The opinion said: "There are many things that a man might do at common law that the states may forbid. He might embezzle until the statute cut down his liberty. We cannot say that the public interests to which we have adverted, and others, are not sufficient to warrant the state in taking the whole business of banking under its control. On the contrary, we are of opinion that it may go on from regulation to prohibition except upon such conditions as it may prescribe. In short, when the Oklahoma Legislature declares by implication that free banking is a public danger, and that incorporation, inspection and the above-described co-operation are necessary safeguards, this court certainly cannot say that it is wrong." *Page 92
The fact that the statute quoted has no application to private bankers, or to the establishment of branch banks by existing corporations, does not render it invalid. The purpose of the statute is to regulate the exercise of the State's authority in conferring corporate powers and privileges for the prosecution of banking enterprises. It is not essential to such a policy that similar restrictions shall be imposed upon private bankers, or upon banking corporations in existence when the statute was enacted. In the exercise of its police power the Legislature may classify, upon grounds not plainly unreasonable and arbitrary, the persons to whom its regulations shall apply. Ruggles v.State, 120 Md. 553; American Coal Co. v. Allegany County,128 Md. 564; State v. Seney Co., 134 Md. 437. There is no valid objection, in our opinion, to the classification involved in the statute under discussion.
It is competent for the State to impose upon administrative officers the duty of ascertaining specific facts upon which a prescribed application of the police power is made to depend.Tighe v. Osborne, 150 Md. 452; Baltimore v. Bloecher,149 Md. 648; Smith v. Standard Oil Co., 149 Md. 61; Creaghan v.Baltimore, 132 Md. 442; State v. Hyman, 98 Md. 596; Osbornev. Grauel, 136 Md. 88; Boehm v. Baltimore, 61 Md. 259; Downsv. Swann, 111 Md. 53; State v. Loden, 117 Md. 384; State v.Broadbelt, 89 Md. 565; Deems v. Baltimore, 80 Md. 164;Scholle v. State, 90 Md. 729. No question is raised as to the right of the Legislature thus to avoid the inconvenience of determining, from its own investigations, the results in particular instances of the application of its statutory rules in reference to the incorporation of banks. The contention is that it could not constitutionally confer upon the bank commissioner authority to reject a charter in his unrestricted discretion or upon such grounds as those on which his action in this case was based.
The statute does not commit to the bank commissioner an unlimited discretion. It directs him to ascertain, "whether the character, responsibility and general fitness" of the incorporators *Page 93 "are such as to command confidence and warrant belief that the business of the proposed corporation will be honestly and efficiently conducted," and "whether the public convenience and advantage will be promoted by allowing the proposed corporation to engage or continue in business." These are sufficiently definite standards for the administrative action which the statute authorized. Public Service Comm. v. Byron, 153 Md. 464;Electric Utilities Co. v. Public Service Comm., 154 Md. 445. The reasons given by the commissioner for his disapproval of the Sykesville bank charter did not include any objection to the incorporators with respect to their qualifications. The explanation was simply that the bank was not needed and that it would not have a reasonable chance to succeed. This is said to be a different basis of decision from that which the statute defines. Its concern was with the public convenience and advantage, and, according to its evident design, the commissioner was authorized to refuse a projected incorporation by which that object would not be promoted. In stating his conclusion that another bank was not needed at Sykesville, and that its prospect for success was unfavorable, the commissioner was dealing with considerations which vitally affected the question presented for his determination. It could not be said that the public convenience of a community would be promoted by the organization of an additional bank which it did not need, and its interests might be seriously prejudiced by the unsuccessful operation of such an institution. In substance and effect, therefore, the statement of the commissioner was equivalent to a declaration that it would not promote the public convenience and advantage to permit the new bank to be organized. This was an important question, and a just regard for the rights of the applicants, as well as the interests of the community, required a full and fair inquiry by the commissioner as to all the facts and conditions by which his decision might properly be affected. A casual and incomplete consideration of the case would not satisfy the demands of his duty. *Page 94
The letter of the commissioner, declining to approve the charter submitted by the appellants, stated that he arrived at his conclusions after a careful investigation. But the bill of complaint alleges that the conclusions so reported could not fairly be reached upon the ascertainable evidence, and were contrary to the facts, unreasonable, and arbitrary. This averment is admitted by the demurrer for the purposes of our decision. It would not be proper to treat such an allegation as a conclusion of law, when the facts upon which the commissioner based his determination are not stated in his letter or otherwise shown in the record. As the case is now presented, we must consider it as involving a virtual concession that the rejection of the charter was in pursuance of conclusions to which the facts and "the open and ascertainable evidence" were opposed. This effect of the demurrer cannot be ignored. It requires us to proceed upon the assumption that the commissioner's investigation was inadequate and that his views as to the facts were wholly unwarranted. No appeal from the action of the commissioner is provided by the statute, and in this proceeding the court would have no right to reverse his decision upon a review of any evidence by which it could legally be supported. Funeral Directors v. State Board ofUndertakers, 150 Md. 294; Henkel v. Millard, 97 Md. 24. But when there is no indication in the record of the evidence upon which the commissioner acted, or any detailed description of the nature and extent of the investigation which he conducted, and when the charge of improvidence and arbitrariness in not considering available evidence, and in deciding contrary to the facts, is admitted by the demurrer, we are not at liberty to assume that his duty to ascertain the statutory conditions for the approval or rejection of the charter was duly performed.
If the decision of the commissioner disregarded evident and important facts by which his judgment should have been guided, his action was not within but beyond the purview of the statute which prescribed his authority. In that event his refusal to approve the charter would not be sustainable as an exercise of statutory power, but would have to be held void *Page 95 as a mere exertion of his individual will. The statute imposes an important duty and responsibility upon the commissioner in requiring him to determine the questions of public convenience and advantage to which it refers. For the solution of such problems he must avail himself of "the best information at his command." While a formal hearing is not expressly required by the statute, and was not requested by the appellants, yet sufficient opportunity should be afforded applicants and the public to support or oppose an effort to obtain a bank charter under the laws of the state. The investigation here in question does not appear to have been conducted with undue haste, but, as described in the bill of complaint, it did not utilize readily available evidence which might have demonstrated the public need and the probable success of the bank which the plaintiffs wish to incorporate. An investigation thus failing to follow the course directed by the statute, and producing results which, upon the pleadings, must be regarded as concededly wrong, could not be sustained as a valid exertion of administrative power.
The specific question to be decided in this appeal is whether the allegations of the bill of complaint required an answer. In our opinion they were sufficient for that purpose. The demurrer did not meet, except technically to admit, the allegation of fact that the commissioner did not consider evident conditions by which his action should have been governed. If such conditions were in reality thus ignored, the resulting rejection of the charter would be an arbitrary act and consequently subject to restraint by a court of equity. Baltimore v. Bloecher; FuneralDirectors v. State Board of Undertakers, supra. It is not permissible for the court to anticipate the defense which the answer may interpose, or to decide the case on the theory that the commissioner's investigation was reasonably adequate to meet the statutory requirement. In questioning by demurrer, rather than denying by anwser, the averments of the bill of complaint, the defendant has made it the duty of the court to decide whether the facts alleged are sufficient, if proved, to entitle the plaintiffs to equitable relief. For the reasons stated we are obliged to *Page 96 make an affirmative reply to that question. The case will be remanded in order that an answer may be filed and further proceedings had to determine whether the disputed action of the bank commissioner was in pursuance of such an investigation as the law requires, and in the exercise of his judgment applied to the information so obtained, in which event it would not be subject to judicial review and control, or whether it was the result of an abuse of his authority and discretion, which would justify the court's intervention to ensure a due observance by the commissioner of the statutory limitations.
Decree reversed and cause remanded for further proceedings.