Clermont National Bank v. CITIZENSBANK NATIONAL ASS'N

• Decision Date: 15 June 1971
• Docket Number: Civ. A. No. 7987.
• Parties: CLERMONT NATIONAL BANK, Plaintiff, v. CITIZENSBANK NATIONAL ASSOCIATION and William B. Camp, Comptroller of the Currency of the United States, Defendants.
• Court: U.S. District Court — Southern District of Ohio

329 F. Supp. 1331

CLERMONT NATIONAL BANK, Plaintiff, v. CITIZENSBANK NATIONAL ASSOCIATION and William B. Camp, Comptroller of the Currency of the United States, Defendants.

Civ. A. No. 7987.

United States District Court, S. D. Ohio, W. D.

June 15, 1971.

Irving Harris, Cincinnati, Ohio, for plaintiff.

David H. Schneider, Milford, Ohio, for defendant Citizensbank.

Norbert A. Nadel, Asst. U. S. Atty., Cincinnati, Ohio, Peter J. P. Brickfield, Civil Div., Dept. of Justice, Washington, D. C., for defendant Wm. B. Camp.

MEMORANDUM AND ORDER

HOGAN, District Judge.

In this action the plaintiff Clermont National Bank (hereinafter called "Clermont") sought a temporary and permanent injunction against the Comptroller of the Currency of the United States and the Citizensbank National Association, a National banking association of Felicity, Ohio (hereinafter called "Citizens") the effect of which would be to prevent Citizens from operating a branch in Milford (which has just attained City or 5,000 population status) Clermont County, Ohio. Alternately, the plaintiff seeks a temporary injunction with a remand to the Comptroller for further proceedings in compliance with law.

The Comptroller has filed a motion to dismiss and a motion for a summary judgment. The plaintiff's motion for a restraining order was heard on or about May 27, 1971, and neither granted nor denied. A hearing on the motion for a temporary injunction was had on June 3, 1971. In the interim Clermont had obtained a subpoena duces tecum and Citizens had filed a motion to quash it. At the hearing on June 3rd, the parties, all represented, agreed that upon the filing by the Comptroller in this case as Exhibits 1, 2, and 3—constituting the entire Administrative Record—there was no issue of fact before this Court and further agreed to submit the case on the merits on the record as it stood at the conclusion of the hearing. The various motions—commonly called preliminary sparring—are therefore mooted. If that be not so in respect of the motion to quash, it is unnecessary to pass on it to arrive at the conclusion on the merits. A merit submission prior to answer date is concededly a little unusual—however, there is no constitutional question leveled at the administrative process, nor is there any unfair hearing charge. (There scarcely could be in the light of the complimentary exchange reflected at pages 212, et seq., of the Transcript. Def.Ex. 3) Lacking such and/or any fact question, the scope of review of this Court is the same with or without an answer.

Two statutes, one federal and one state, are involved in this controversy. The relevant portions of the two are each Subsection (c). Subsection (c) of 12 U.S.C. § 36 provides as follows:

(c) A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) Within the limits of the city, town or village in which said association is stituated, if such establishment and operation are at the time expressly authorized to State banks by the law of the State in question; and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law of the State in question by language specifically granting such authority affirmatively and not merely by implication or recognition, and subject to the restrictions as to location imposed by the law of the State on State banks. * * * no such association shall establish a branch outside of the city, town, or village in which it is situated unless it has a combined capital stock and surplus equal to the combined amount of capital stock and surplus, if any, required by the law of the State in which such association is situated for the establishment of such branches by State banks, or, if the law of such State requires only a minimum capital stock for the establishment of such branches by State banks, unless such association has not less than an equal amount of capital stock.

Subsection (C) of the Ohio statute, Revised Code Section 1111.03 provides in pertinent part as follows:

(C) In considering an application for a branch under division (A) of this section, the superintendent shall ascertain whether:

(1) The convenience and needs of the public will be served by the proposed branch;

(2) The population and economic characteristics of the area primarily to be served afford reasonable promise of adequate support for the proposed branch;

(3) The proposed branch meets such other reasonable criteria as he may require.

The fundamental question in this case is whether or not the requirements of these statutes were complied with in connection with the award by the defendant Comptroller to the defendant Citizens of authority to establish and operate a branch bank in Milford, Ohio. The question arises on these facts which we take, as we are required to do, from a complete review of the Administrative Record. The Administrative Record consists of Defense Exhibits 1, 2, and 3, containing about 1,000 pages, all of which have been reviewed by this Court. Exhibit 3 is the transcript of the adversary hearing held in Cleveland in April of this year before a panel consisting of the Regional Administrator of National Banks for the Fourth Region, the Senior National Bank Examiner and the Regional Counsel, designated by the Comptroller to "obtain clarification of the issues" and gather factual information tendered by the adversaries at that hearing, i. e., the two banks and their counsel. Any reference hereinafter to pages means pages in Exhibits 1 and 2, unless otherwise designated.

This controversy began over two years ago. While it involves the establishment by a little bank of a little branch in a little town, the controversy has produced thousands of pages of legalistic record and has received the services of a prominent law firm in Cleveland, two prominent law firms in Columbus, three prominent law firms in Cincinnati, and a young and aggressive law firm in Milford. It has been presented in one facet or another to the Ohio State Bank Board, the Ohio State Bank Examiners, The Ohio State Superintendent of Banks, the Franklin County, Ohio, Common Pleas Court, the Ohio State Court of Appeals for the Franklin County District, the Eastern Division of this Court, multi-levels of the Comptroller's Office, etc. The Citizensbank, at its commencement, had only one office and that was its home office in Felicity, Ohio, a small village in Clermont County, located some 34 miles from Milford. Felicity's Citizens balance sheeted at about a million and a half. Its capital accounts aggregated about $200,000. It wanted to establish a branch in Milford and filed an application with the Ohio State Superintendent of Banks for permission so to do — Citizens being then, of course, a State bank. At that time Milford was served by one bank—Clermont—which had at that time its home office and one branch in Milford. Since that time Clermont has been authorized by the Comptroller to establish a new main office approximately a mile and a half from its present main office and in the adjacent Miami Township. The new main office is a-building and, upon its completion, Clermont will move its home office to the new location, maintaining its old office as a branch. For our purposes, it may be considered that the Clermont has a home office and two branch offices in the area to be served by a Milford bank.

Some procedural difficulties relative to fairness or adequacy of preparation were encountered before the Ohio administrative authorities, which rule out any possibility of applying the doctrine of collateral estoppel to the bank parties to this case. At that time there were five banks in Clermont County—a county which for our purposes may be considered as having a population of approximately 100,000. Clermont was and is the largest and the only one of the Clermont County banks which would have been competitive to the proposed new branch. Clermont then had approximately a $35 million balance sheet and operated some eight offices throughout Clermont County. Four of their seven branches were acquired by asset transactions with existing banks. Its business then represented about seventy-five percent of the County's banking business and some, if not all of its acquisitions, about which the Comptroller is chided, were in fact approved by the Comptroller.

The control of Citizens was acquired early in 1969 by a company called, "U. S. Grant Financial Corporation." That company was incorporated in Ohio in December, 1968, for that purpose, among others, and obviously the branch expansion was an initial purpose. It has sold stock to the public and we note in this record several things. The asset side of its balance sheet amounts to approximately $550,000 of which seventy percent is represented by the subsidiary Citizensbank. Grant, over a recent two-year period, lost some $40,000 and there appears on its asset side an item "Increase in Equity of Subsidiary—$50,000.00." While it and its subsidiary addressed some monopoly charges at the plaintiff, Grant has engaged in some tie-selling, which, although of the primitive type, is quite monopolistic and it issued some stock in a manner sufficiently preferential and manipulative to involve it in a proceeding before the Ohio State Division of Securities for violation of the Ohio Blue Sky laws. It did manage to exculpate itself under the exculpative provisions of the Ohio statute, but nonetheless in the light of the expertise of its board, it is noteworthy.

Be that as it may, the Comptroller is peculiarly possessed of the expertise and authority to determine who is suitable to engage in expanded banking.

The State Superintendent of Banks granted to Citizensbank the authority in June of 1969. His determination was promptly appealed to the Common Pleas Court of Franklin County, Ohio, by Clermont. That Court, in December of...