Bank of New Bern v. Wachovia Bank & Trust Co., NA, Civ. No. 2957.

• Citation: 353 F. Supp. 643
• Decision Date: 16 June 1972
• Docket Number: Civ. No. 2957.
• Court: U.S. District Court — Eastern District of North Carolina
• Parties: The BANK OF NEW BERN, Plaintiff, v. WACHOVIA BANK & TRUST COMPANY, N. A., and William B. Camp, Comptroller of the Currency of the United States, Defendants.

353 F. Supp. 643

The BANK OF NEW BERN, Plaintiff, v. WACHOVIA BANK & TRUST COMPANY, N. A., and William B. Camp, Comptroller of the Currency of the United States, Defendants.

Civ. No. 2957.

United States District Court, E. D. North Carolina, Raleigh Division.

June 16, 1972.

Hugh Cannon, Sanford, Cannon, Adams & McCullough, E. D. Gaskins, Jr., Raleigh, N. C., for plaintiff.

John R. Jordan, Jr., Jordan, Morris & Hoke, William R. Hoke, Raleigh, N. C., for defendant Wachovia Bank & Trust Co.

John V. Austin, Atty., Office of the Comptroller of the Currency, Treasury Dept., Washington, D. C., Warren H. Coolidge, U. S. Atty., Raleigh, N. C., for defendant Comptroller.

MEMORANDUM OF DECISION

DUPREE, District Judge.

In this action originally instituted in the Middle District of North Carolina by the Bank of New Bern, as plaintiff, against Wachovia Bank & Trust Company, N.A., and William B. Camp, Comptroller of the Currency of the United States, as defendants, the plaintiff sought a judgment invalidating a certificate of the Comptroller approving the establishment and operation by Wachovia of a branch bank in New Bern, North Carolina. The case was argued before the late Chief Judge Edwin M. Stanley on cross-motions of the parties for summary judgment in October, 1971, but at the time of his death in December, Judge Stanley still had the case under advisement and had not announced his decision.

Thereafter at the suggestion of counsel for all parties the case was transferred to this district pursuant to 28 U. S.C. § 1404 by order of the Honorable Eugene A. Gordon, who became Chief Judge of the United States District Court for the Middle District of North Carolina upon Judge Stanley's death. The case was heard de novo by this court on oral argument of counsel and the voluminous record which had been amassed in Judge Stanley's court and is now ready for decision.

On August 13, 1970, Wachovia applied to the Comptroller for permission to establish a branch bank in the central business district of New Bern, Craven County, North Carolina. The application was supported by financial and economic data required by the Comptroller's office, and the usual field investigation was conducted by a National Bank Examiner.

The Bank of New Bern, one of three commercial banks presently serving the New Bern area, protested the application and requested a hearing. The other two banks, First-Citizens Bank & Trust Company and Branch Banking and Trust Company, filed no objection to Wachovia's application.¹ Procedures looking to the holding of a public hearing were instituted by the Regional Administrator of National Banks for the Fifth National Bank Region, Richmond, Virginia, and a public file of Wachovia's application was established containing the application with all supporting materials and the National Bank Examiner's report. This file was made available to the Bank of New Bern which thereafter withdrew its request for a hearing and instead filed a lengthy documentary protest with numerous supporting exhibits. Wachovia then filed certain supplemental information in support of its application.

At the conclusion of these investigatory proceedings the Regional Administrator of National Banks and other members of the Comptroller's staff made written recommendations concerning Wachovia's application, and the administrative record thus compiled was submitted to the Comptroller for his decision. The Regional Administrator and the National Bank Examiner had recommended approval as did a Deputy Comptroller of the Currency in Washington. The Director of the Comptroller's Bank Organization Division recommended disapproval.

On February 26, 1971, the Comptroller granted approval of Wachovia's application without filing any formal opinion setting forth his findings and conclusions. The complaint was filed in this action on April 14, 1971, which was before the Comptroller had issued a certificate to Wachovia to operate the branch.

While not required by the Administrative Procedure Act, 5 U.S.C. § 500 et seq., to file formal findings and conclusions, the courts have frequently suggested to the Comptroller in these cases the desirability of his doing so and have remanded cases to him for this very purpose. In one opinion filed by the Comptroller after remand he said:

"The Comptroller respectfully disagrees with this conclusion. Such a procedure is not required by 12 U.S.C. § 36(c) or any other provision of the National Bank Act or other federal law . . . For reasons which are well-illustrated by the present application, such a procedure cannot be followed in the administration of banking statutes generally without risking significant damage to the soundness of the banking system through disclosure of confidential information concerning the internal affairs and condition of banks. Frequently . . . this confidential information influences the decision on branch or charter applications and, presumably, would have to be made available if opinions were required."²

The fact remains that so long as the Comptroller's action in these cases is subject to judicial review, the basis for his decision is going to have to be made known at some time in the proceedings if he is to avoid the appearance of arbitrariness which alone might suffice to invalidate his action.

Although in his answer filed herein on June 16, 1971, the Comptroller alleged that his review and approval of the application of Wachovia "in fact took into account, and did satisfy, all requirements considered by the North Carolina State Banking Commissioner under North Carolina General Statutes § 53-62(b) in connection with branch bank applications in North Carolina", he did not issue a written opinion giving his reasons for such action until September 7, 1971.

The federal statute authorizing the Comptroller to approve the opening of branch banks by national banking associations is contained in 12 U.S.C. § 36(c) which reads in pertinent part as follows:

"A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) . . .; 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. . . ."

The provisions of the North Carolina statute governing the establishment of branch banks in this state are set forth in North Carolina General Statutes § 53-62(b) which reads:

"Any bank doing business under this chapter may establish branches or teller's windows in the cities or towns in which they are located, or elsewhere, after having first obtained the written approval of the Commissioner of Banks, which approval may be given or withheld by the Commissioner of Banks, in his discretion. The Commissioner of Banks, in exercising such discretion, shall take into account, but not by way of limitation, such factors as the financial history and condition of the applicant bank, the adequacy of its capital structure, its future earnings prospects, and the general character of its management. Such approval shall not be given until he shall find (i) that the establishment of such branch or teller's window will meet the needs and promote the convenience of the community to be served by the bank, and (ii) that the probable volume of business and reasonable public demand in such community are sufficient to assure and maintain the solvency of said branch or teller's window and of the existing bank or banks in said community."

For a long time the Comptroller in approving branch bank applications in this state insisted that he was not bound by the "needs and convenience" and "solvency of the branch" requirements of this North Carolina statute, but no court ever agreed with him in this, and in his answer and briefs filed herein and on oral argument it has been conceded in his behalf that the quoted provisions of the North Carolina banking law are binding on him.

It thus becomes necessary to examine the Comptroller's findings and conclusions as set forth in his belated opinion in the light of the 473-page administrative record compiled by the Comptroller's staff while Wachovia's application was under consideration. The parties are agreed that if the findings required by North Carolina law have been made and that there is substantial evidence in this record to support the findings, the defendants are entitled to summary judgment; otherwise, summary judgment must be entered for the plaintiff and the injunctive relief prayed for in plaintiff's complaint granted.

There being no question that the Comptroller took into consideration the financial history and condition of the applicant bank, the adequacy of its capital structure, its future earning prospects and the general character of its management, the real inquiry here is whether the Comptroller made sufficient findings supported by substantial evidence that the establishment of the branch "will meet the needs and promote the convenience of the community to be served" and that "the probable volume of business and reasonable public demand . . . are sufficient to assure and maintain the solvency of said branch . . . and of the existing bank or banks in said community". And inasmuch as the plaintiff here has conceded that Wachovia's financial history and condition support the application; that Wachovia's future earning prospects are favorable; and that the solvency of neither the applicant nor the existing banks would be endangered by the establishment of the branch, the inquiry is further narrowed to the matter of "needs and convenience".

Unfortunately, the decisions of the North Carolina appellate courts provide little guidance as to the meaning of the words, ...