Farmers National Bank of Annapolis v. Camp

• Decision Date: 21 September 1971
• Docket Number: Civ. No. 71-70.
• Citation: 345 F. Supp. 622
• Parties: The FARMERS NATIONAL BANK OF ANNAPOLIS et al. v. William B. CAMP, Comptroller of the Currency of the United States.
• Court: U.S. District Court — District of Maryland

345 F. Supp. 622

The FARMERS NATIONAL BANK OF ANNAPOLIS et al. v. William B. CAMP, Comptroller of the Currency of the United States.

Civ. No. 71-70.

United States District Court, D. Maryland.

September 21, 1971.

Donald N. Rothman, Robert E. Sharkey and Gordon, Feinblatt & Rothman, Baltimore, Md., and Ernest N. Cory, Jr., Laurel, Md. (R. Tilghman Brice, III, and William E. Kirk, Annapolis, Md., on brief), for plaintiffs.

George Beall, U. S. Atty., and J. Frederick Motz, Asst. U. S. Atty., Baltimore, Md., and John E. Shockey and Dorothy S. Kulig, Attys., Office of the Comptroller, Washington, D. C. (L. Patrick Gray, III, Asst. Atty. Gen., Dept. of Justice, and Harland F. Leathers and David Epstein, Attys., Dept. of Justice, Washington, D. C., on brief), for defendant.

THOMSEN, District Judge.

On May 11, 1970, Chesapeake National Bank, of Towson, Baltimore County, Maryland, applied to the Comptroller of the Currency for permission to establish a branch bank at 209 Main Street, Annapolis, Anne Arundel County, Maryland. A detailed summary of economic and financial information was submitted by Chesapeake in support of its application.

Competing banks in the area and the Maryland State Bank Commissioner were notified of the application and invited to submit their view to the Regional Administrator of National Banks for the Fifth National Bank Region in Richmond, Virginia. The Deputy State Bank Commissioner noted that the proposed branch would be located near the main office of the Annapolis Banking & Trust Co., but did not offer any additional comment on the application. Farmers National Bank and Annapolis Banking & Trust Co. objected to the branch and requested a hearing. A protest was also lodged by Colonial Bank & Trust Co., of Parole, a suburb of Annapolis. No objections were filed by other banks in the area.

The requested hearing was held in Richmond on August 13, 1970, before a panel consisting of the Regional Administrator, the Regional Economist and a staff attorney. Prior to the hearing each protestant was furnished with a copy of the written procedures by which the hearing would be conducted and each had access to the Comptroller's public file. The protestants asked that they be given access to the materials deleted from the public file, and filed suit in this Court to compel such access. The Deputy Comptroller thereupon ordered that all of the deleted information, except the opinions, conclusions and recommendations contained in the report of the investigating examiner, be included in the public file. The plaintiffs then dismissed their suit, stating: "The Defendant's having furnished all of the information that the Plaintiff was seeking except the examiner's conclusions, and the Plaintiffs being satisfied that the defendant cannot be called upon to furnish these conclusions, it is respectfully requested that the case be marked `dismissed'."

At the panel hearing the three protestants appeared, offered testimony, and filed documentary evidence. The applicant rested on its written application and supporting information, although both its president and chairman were present. The Regional Administrator attempted to question the applicant's president pursuant to Rule 16(b) of the hearing procedures for the Fifth National Bank Region (which permits questioning of any person present by the hearing panel and subsequent cross-examination by other parties on those matters on which he has been questioned), but counsel for the protestants objected, stating that they did not want the applicant's president called "either now or hereafter".

A field investigation of the application was made by a national bank examiner, and the record was reviewed by the Regional Administrator, the Regional Economist and members of the Comptroller's Senior Staff. All but one of them recommended approval, and the Comptroller approved the application on October 7, 1970, without a written opinion or other statement discussing the issues.

The three protestants then filed this action, attacking the decision on substantive and procedural grounds.

On March 1, 1971, the Comptroller moved that the case be remanded to him, so that he might set forth the reasons for his approval of the application. After a hearing, the motion was granted, on conditions, and on May 28, 1971, the Comptroller issued a formal opinion, stating his reasons for approving the application, which was filed with this Court, together with the administrative record. Thereafter hearings were held on plaintiffs' (protestants') motion for de novo review and on the Comptroller's motion for summary judgment.

De Novo Review

Plaintiffs state the grounds of their motion for de novo review as follows:

"1. That the Comptroller did not afford the Plaintiffs an opportunity to know, and effectively rebut, essential adjudicative facts which he considered and upon which he, in whole or in part, based his action.

"2. That the Plaintiffs were not afforded the opportunity to effectively rebut or refute essential adjudicative facts submitted by the applicant bank for his consideration, and upon which facts he, in whole or in part, based his action, because the applicant was not required to, and it did not voluntarily, submit to cross-examination by Plaintiffs on these facts.

"3. Since the action of the Comptroller in approving the said application was adjudicatory in nature, his failure to afford Plaintiff a fair hearing on essential adjudicative facts consonant with the requirements of due process subjects his action to de novo review in this Court."

The Fourth Circuit has held that the Comptroller is not required to hold a hearing on an application, but unless he does hold an adversary hearing, a protestant is entitled to a determination de novo in court; a protestant is not entitled to a determination de novo except where the Comptroller failed to conduct an adversary hearing. First National Bank of Smithfield v. Saxon, 352 F.2d 267 (4 Cir. 1965); First-Citizens Bank and Trust Co. v. Camp, 409 F.2d 1086 (4 Cir. 1969).

In First-Citizens the Fourth Circuit also held that in considering an application for a branch bank the Comptroller is not bound to the requirements of § 7 of the Administrative Procedure Act, 60 Stat. 241, now codified as 5 U.S.C. § 556, which specifies procedures for hearings required by what is now 5 U. S.C. 553 and 554 (Rule Making and Adjudications, respectively). 409 F.2d at 1089. A panel which conducts such a hearing as was held in this case "is simply an investigatory or fact-gathering organ, not having any fact-finding function." 409 F.2d at 1090.¹ However, "even in a fact-gathering procedure, due regard should be had for a party to know and meet opposing evidence with explanation or rebuttal evidence. 1 Davis, Administrative Law Treatise, § 4.04 (1958 Ed. and 1965 Supp.); § 7.16, at p. 180 (1965 Supp.)." 409 F.2d 1090.

The action of the Comptroller in either granting or denying approval of the establishment of a branch is reviewable under § 706 of the APA, 5 U.S.C. § 706. In Smithfield, the Fourth Circuit said:

"Abundant authority, with which we agree, holds that the Comptroller's determination in the present area is not immunized from review by the exemption in the preface of § 1009, APA, reading, `Except so far as * * * agency action is by law committed to agency discretion.' Any discretion vested in the Comptroller in passing upon applications for approval of bank branches is not the type of discretion to which action has been `committed by law' but is rather one of the character expressly made reviewable by § 1009(e) (1). * * *" 352 F.2d at 270.

See also First-Citizens, supra, and Pitts v. Camp, 321 F.Supp. 407 (D.S.C. 1970).

The section of the APA referred to in the passage from Smithfield, quoted above, § 1009, APA, is now codified as 5 U.S.C. § 706, pursuant to P.L. 89-554, 80 Stat. 378, approved September 6, 1966. It provides in pertinent part as follows:

"To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall—

"* * *

"(2) hold unlawful and set aside agency action, findings, and conclusions found to be—

"(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

"* * *

"(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

"In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule, of prejudicial error."

In Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 415, 91 S.Ct. 814, 823, 28 L.Ed.2d 136 (1971), the Court said:

"* * * De novo review of whether the Secretary's decision was `unwarranted by the facts' is authorized by § 706(2) (F) in only two circumstances. First, such de novo review is authorized when the action is adjudicatory in nature and the agency fact finding procedures are inadequate. And, there may be independent judicial fact finding when issues that were not before the agency are raised in a proceeding to enforce non-adjudicatory agency action. * * *"

The question whether the action of the Comptroller in such a case as this is or is not "adjudicatory", as that term is used in Overton Park, is not without difficulty. See 1 Davis, Administrative Law, § 7.02 and § 7.03 (1958 ed.); Ibid (1965 pocket supp.), §§ 7.02, 7.03 and 7.10; Ibid (1970 supp. vol.) § 7.03.² In Smithfield, the Fourth Circuit found it unnecessary to decide the question, which was raised in a different context; the Court avoided the point by assuming, arguendo, that the Comptroller's action was adjudicatory. 352 F.2d 270.

In First-Citizens, as we have seen, the Fourth Circuit held that in considering an application for a branch bank the...