Bank of Dearborn v. Saxon, Civ. A. No. 23628.

• Decision Date: 12 July 1965
• Docket Number: Civ. A. No. 23628.
• Citation: 244 F. Supp. 394
• Parties: BANK OF DEARBORN, Plaintiff, v. James J. SAXON, Comptroller of the Currency, & Manufacturers National Bank of Detroit, Defendants.
• Court: U.S. District Court — Western District of Michigan

244 F. Supp. 394

BANK OF DEARBORN, Plaintiff, v. James J. SAXON, Comptroller of the Currency, & Manufacturers National Bank of Detroit, Defendants.

Civ. A. No. 23628.

United States District Court E. D. Michigan, S. D.

July 12, 1965.

Wilber M. Brucker, Wilber M. Brucker, Jr., Detroit, Mich., for plaintiff.

Carson C. Grunewald, of Bodman, Longley, Bogle, Armstrong & Dahling, Detroit, Mich., for defendant Manufacturers Nat. Bank.

Richard S. Beatty, Dept. of Justice, Washington, D. C., John Shepherd, Asst. U. S. Atty., Detroit, Mich., for defendant James J. Saxon.

TALBOT SMITH, District Judge.

This case involves a conflict between a state bank, the Bank of Dearborn, a state banking corporation, a national bank, the Manufacturers National Bank of Detroit, a national banking association, and the Comptroller of the Currency, Mr. James J. Saxon. The controversy is over branch banking.

In the City of Dearborn, Michigan, a new shopping center (Westborn) had been built. Its location was near the intersection of West Michigan Avenue and Outer Drive in the City of Dearborn. Michigan Avenue, the principal business artery of Dearborn, has two commercial focal points. One, the older, is around Mason and Oakwood Avenues, the other, the more recent, is in the area of the Westborn Shopping Center. The latter was characterized in the testimony as "a tremendous drawing factor" with respect to commercial business.

The defendant Manufacturers Bank had a branch near the intersection of Michigan and Mason Avenues in Dearborn, in or near the older commercial center. It had no branch within a mile of the new commercial center, near Westborn Shopping Center, but, being aware of the business potential of the area, was desirous of having a branch at West Michigan Avenue and Outer Drive. The difficulty with the establishment of a new branch in this area was that it was forbidden by state law. It was known by the defendants that a new branch could not legally be established at the West Michigan and Outer Drive location. This is due to the fact that under Michigan law "no such branch could be established in a city or village in which a state or national bank or branch thereof is then in operation."¹ And here, in the City of Dearborn, there was not one but were four branches of the state Bank of Dearborn already in operation. Consequently the following plan to place a branch in the desired location was devised by the officials of the defendant bank and acquiesced in and knowingly implemented by the Comptroller: One of the defendant bank's branches (hereafter called the Carlysle branch) would be "relocated" a short distance away, across the city line, in the township. This would be done at once, for the area's incorporation as a city was in process, after which defendant bank could not establish there a branch. Since this would "theoretically" (such is the terminology found in defendant Saxon's files)² be a new branch (we will call it the Dartmouth branch hereafter) it would leave the old one free to "move" (according to defendants) to the area of the new shopping center.

Thus the "technically" new branch would retain substantially all of the business of the old branch, leaving the old one free to "move" into the new Westborn shopping area, where it could not lawfully have been established in the first place, because of the fact (as defendant bank put it) that "Existing antiquated state banking regulations will not permit us to open another branch in the City of Dearborn."³

Defendants urge to us that these were two separate and independent transactions, each act legal which plaintiff denies, each to be considered on its own merits. The argument is belied in clearest terms by the record. The defendant bank considered the two proposals together, succcessively, and its own resolutions made the "move" to the shopping center area "contingent upon" the establishment of the Dartmouth branch. The applications for certificates were made the same day. They were investigated together and reported upon together. Far from being bona fide separate transactions, each treated on its own merits, the proposals were interrelated, intertwined, and interdependent. Mr. Lutz himself, the Chief National Bank Examiner, Chicago, in commenting upon the proposals to defendant Saxon described them as a "package proposal"⁴ which, in truth, they were. Looking at the realities of the situation, there was never any intention on the part of anyone that the "new" Dartmouth branch would be other than a simple move of the Carlysle branch a short distance down the street, within the same economic area of small homes and modest businesses. In fact, in answer to a request of the Comptroller for an estimate of the deposits and loans of the new Dartmouth branch, the defendant bank furnished, to the penny, the corresponding figures for the Carlysle branch. Nor do we overlook the defendant bank's representations to defendant Saxon that the "customers of the already successful Telegraph-Carlysle office would be transferred to the proposed new office, which will offer larger and more modern quarters, in the vicinity of Telegraph and Lehigh. The new branch would obviously be profitable immediately." Even conceding defendant's elaborate explanation that what they really meant by this was that all of the customers themselves who wanted or desired to transfer would be allowed by the bank to transfer, the statement made is revealing as to the intent and expectations of the parties. What was intended was a move. The business of the Dartmouth branch, Mr. Lutz reported to defendant Saxon "will come from customers formerly served by that Carlysle branch.⁵

So far as the alleged "move" of the Carlysle branch to the new shopping center area is concerned, again we have a mis-labeling. Although the word "move" is not defined in the statutes its meaning in banking circles is well established. It means the actual physical transport of the usable equipment and the customer account records from the old location to the new, so far as is reasonably compatible with the new location and the possibly newly-constructed building. At least it means taking the bulk of the customer's accounts along. This was not the contemplation here and the defendants frankly recognized it. In fact there is in the record much speculation as to how many of the Carlysle customers would go to the new shopping center area to bank. Percentage estimates varied, depending upon whether the plaintiff's witnesses or the defendants' were testifying. But the mere fact that defendant was concerned, in its planning, over how many of its customers would go with it to its new location was both significant and revealing. There was something here other than a mere move. It was the establishment of a new branch in a substantially different area. Since the new location was some distance from the old, and in a predominantly commercial rather than an area of residential-small business, the defendant bank was concerned as to how many of its old neighborhood customers would make the trip into the new area with it. Cutting through the various percentages tendered and getting to the core of the matter, it is perfectly clear that the defendant bank expected most of its old neighborhood customers to stay in the neighborhood with the Dartmouth branch, not to travel with it on its "move". Defendant Saxon was aware of all of this. The Summary of Information furnished him pointed out the tremendous business potential of the expanding area in this part of Dearborn, stating, in fact, that the market area for the new branch would be extensive and that the proposed branch "would serve to a certain extent as an adjunct to the old Michigan-Mason office."

The Lutz report to defendant Saxon also makes it clear why the defendant bank wanted a new branch in this area and where its business was to come from.

"The center is well situated near main thoroughfares and unquestionably a bank located in the immediate vicinity of the center would be positioned to generate added business and offering the public added banking convenience. Applicant's Michigan-Mason branch is a very successful branch office. However, it is located one mile distance from this proposed relocation site and thus is not positioned to conveniently serve the banking needs of the activity near the Michigan Avenue-Outer Drive intersection nor the public employing the facilities of this comparatively new commercial development. It is believed that the overall program proposed by the Manufacturers National Bank of Detroit which includes the establishment of a new branch in Dearborn Village, the relocation of its Telegraph-Carlysle branch as indicated above, is sound and should prove of benefit not only in offering added convenience to the public but in generating added banking business profitable to applicant."

Obviously we have here a completely new operation, not the simple move of a neighborhood branch. That had already taken place, down the street from Carlysle to Dartmouth. This was a venture into new and more lucrative fields. And here it is that the defendants run foul of the law. Maybe the laws should be amended to permit the utmost flexibility in branch banking. Maybe they should not. Congressional debate on this issue has gone on for years. But it is not for defendant Saxon and defendant bank to amend our "antiquated" laws by clever devices of evasion, covered by a broad grant of discretion and cloaked under the privileges of the executive branch of government.

It is abundantly clear that what was described as a move, was, in fact, the location (near the new shopping center) of a new branch, and that what was described as the establishment of a new branch was actually merely a move from (Carlysle to Dartmouth).

We now proceed from the factual situation to the meaning of the various statutes involved with respect to the moving of branches. Defendant Saxon takes the position "* * *...