Brown v. Clarke, 1016

• Decision Date: 29 June 1989
• Docket Number: D,No. 1016,1016
• Parties: Howard B. BROWN, Banking Commissioner, State of Connecticut, Plaintiff-Appellee, v. Robert L. CLARKE, Comptroller of the Currency, Defendant-Amicus Curiae, and First National Bank of Stamford, Defendant-Appellant. ocket 88-6305.
• Court: U.S. Court of Appeals — Second Circuit

Page 627

878 F.2d 627

58 USLW 2054

Howard B. BROWN, Banking Commissioner, State of Connecticut Plaintiff-Appellee, v. Robert L. CLARKE, Comptroller of the Currency, Defendant-Amicus Curiae and First National Bank of Stamford, Defendant-Appellant.

No. 1016, Docket 88-6305.

United States Court of Appeals Second Circuit.

Argued April 24, 1989.

Decided June 29, 1989.

Andrew P. Nemiroff, Stamford, Conn. (Epstein & Fogarty, Stamford, Conn., of counsel), for defendant-appellant.

Jane D. Comerford, Asst. Atty. Gen., State of Conn., Hartford, Conn. (Clarine Nardi Riddle, Acting Atty. Gen. State of Conn., Hartford, Conn., of counsel), for plaintiff-appellee.

John R. Bolton, Asst. Atty. Gen., Dept. of Justice, Washington, D.C., Stanley A. Twardy, Jr., U.S. Atty. D. Conn., New Haven, Conn., Anthony J. Steinmeyer, Robert D. Kamenshine, Civil Div., Dept. of Justice, Washington, D.C., for amicus curiae.

Before OAKES, Chief Judge, MESKILL and WISDOM ^*, Circuit Judges.

WISDOM, Senior Circuit Judge:

This case involves the issues whether a deposit pick-up service operated by the First National Bank of Stamford, Inc. for the convenience of its customers constitutes a "branch" under the National Bank Act, 12 U.S.C. Sec. 36(f) and, if so, whether its operation violates the restrictions on branch banking set forth in 12 U.S.C. Sec. 36(c). The facts of this case are undisputed; the twist comes in the change of position taken by the Comptroller of the Currency at the trial and appellate levels. We recount only those facts relevant to the resolution of the issues remaining on appeal.

I

The First National Bank of Stamford, Inc. ^B, is a banking association chartered by the Comptroller of the Currency, incorporated under the laws of the United States, and authorized to engage in the business of banking under the National Bank Act. ¹ FNB's main and only office is in Stamford, Connecticut. For the benefit of its customers in Stamford, Norwalk, Darien, and Greenwich, Connecticut, FNB has provided a messenger service to collect deposits from customers. The service, which FNB has operated for the past two years, is offered through an agreement between FNB and the customer in which the customer appoints as his agent an FNB employee to collect funds and deliver them to a teller at FNB's office in Stamford. FNB furnishes the vehicle the messenger uses to transport the deposits to the bank. Under the terms of the agreement the funds collected by the messenger are not considered "received by the Bank until such deposits have actually been delivered by messenger to the teller at the Bank's premises".

In a letter dated February 4, 1987 to the Comptroller of the Currency, the Connecticut State Banking Commissioner objected to FNB's messenger service because it constituted unauthorized branch banking in violation of 12 U.S.C. Sec. 36(c). The Commissioner requested that the Comptroller order FNB to cease operating its messenger service. The Comptroller's District Counsel for the Northeastern District responded by rejecting the Commissioner's characterization of FNB's messenger service as a "branch" under 12 U.S.C. Sec. 36(f). The District Counsel took the position that under the applicable statutes, case law, and an Interpretive Ruling issued by the Comptroller, FNB had not created a branch by providing its messenger service. The Commissioner brought suit in federal court seeking relief that would bar FNB's operation of the messenger service. The United States District Court for the District of Connecticut, T.F. Gilroy Daly, Judge, granted summary judgment for the Commissioner on the ground that the messenger service is a branch bank under 12 U.S.C. Sec. 36(f) and its operation violates 12 U.S.C. Sec. 36(c) because Connecticut law does not permit state banks to operate a branch in this manner.

In his amicus-curiae brief filed on appeal, the defendant Comptroller of the Currency made a u-turn. He renounced the District Counsel's former position and announced his agreement with the state banking Commissioner that FNB's messenger service is a branch. The Comptroller urges us to affirm the district court's summary judgment on the ground that FNB failed to obtain necessary approval from the Comptroller to operate the messenger service. Such approval could not have been given, the Comptroller maintains, both because the messenger service operates outside the geographic limits set out in the Connecticut branch banking statute and because Connecticut law does not expressly authorize a state bank to operate a branch in this manner. ²

II

The National Bank Act, as amended by the McFadden Act, ³ governs the permissibility of establishing a branch of a national bank. The legislative history of these statutes has been carefully considered in numerous cases involving the nature and scope of the activities Congress intended to regulate as well as the broad policy objectives sought to be achieved through this regulatory scheme. ⁴ We need not, therefore, engage in a de novo review of the history and purpose of the federal branching provisions. In applying the appropriate federal and state provisions to FNB's messenger service, we are guided, however, by the McFadden Act's intended goal of re-establishing competitive equality between national and state banks insofar as branch banks are concerned. ⁵ The pertinent language of section 36(c) is straightforward:

(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 situated, 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.

12 U.S.C.A. Sec. 36(c) (West 1989).

Although some courts have interpreted section 36(c) as not incorporating every state law restriction applicable to state banks, ⁶ it is well settled that section 36(c) authorizes branch banking by national banks only to the extent and in the manner expressly permitted state banks under the applicable state law. ⁷ The question whether a particular operation of a national bank is a branch, however, is answered solely by reference to federal law. ⁸

III

The starting point for determining whether FNB's messenger service is a branch is 12 U.S.C. Sec. 36(f) which provides:

The term "branch" as used in this section shall be held to include any branch bank, branch office, branch agency, additional office, or any branch place of business ... at which deposits are received, or checks paid, or money lent.

The controlling case addressing the question whether a messenger service is a branch under section 36(f) is First National Bank of Plant City v. Dickinson. ⁹ The national bank in Plant City, with the Comptroller's approval, offered two services for the convenience of its customers: an armored car messenger service and an off-premises receptacle for receipt of deposits. We reject FNB's suggestion that it was the combination of these services that created a branch; the Court made it clear that each was a branch independently of the other. ¹⁰ FNB attempts to distinguish its messenger service from that provided by the bank in Plant City. The messenger service in Plant City cashed customers checks in addition to collecting funds for deposit. A transmittal slip accompanying the check cashing transaction stated that the customer's account had been charged for the amount of the check. With respect to deposits, a contract between the bank and its customer provided that the messenger was the customer's agent; a transmittal slip used with deposits, however, stated that the bank was the messenger and agent for the customer.

FNB seeks refuge in its contractual arrangement whereby the customer appoints as his agent and messenger an employee of FNB. Additionally, FNB points out that its service is more circumscribed; it is limited to collecting funds for deposit. Notwithstanding this difference in the contractual arrangements and the more limited nature of the service provided by FNB, we find, as did the district court, a remarkable similarity in the essential characteristics of the messenger services provided in Plant City and in this case. Moreover, the effect of both services is the same--bank customers enjoy an added convenience; they are able to conduct some banking transactions at their homes or offices rather than having to go to the bank's office in Stamford. Contractual language used by FNB and the bank in Plant City stating that deposits are not deemed received until in the custody of the teller at the bank does not diminish the bank's competitive advantage over state banks gained by providing the messenger service. In Plant City the Court made it clear that the parties are free to arrange their rights and liabilities as they see fit but their decision to delay the creation of a debtor-creditor relationship until after the deposit funds are turned over to the teller does not affect the determination of whether the messenger service is a branch under section 36(f). ¹¹

Because the Comptroller now agrees with the state banking Commissioner that the service is a branch we need not address the question whether the District Counsel's pre-trial position or the Interpretive Ruling ¹² relied on below is entitled to deference. The Supreme Court's analysis of the meaning of section 36(f) in Plant City controls this case. ¹³ That section's definition of a branch includes a place where "deposits are received". Penetrating the verbal walls of the...