Citizens National Bank of Southern Maryland v. Camp, Civ. No. 70-620.

• Decision Date: 29 September 1970
• Docket Number: Civ. No. 70-620.
• Citation: 317 F. Supp. 1389
• Parties: CITIZENS NATIONAL BANK OF SOUTHERN MARYLAND v. William B. CAMP, Comptroller of the Currency of the United States of America Treasury Department and Maryland National Bank, a National Bank Association organized and existing under the laws of the United States.
• Court: U.S. District Court — District of Maryland

317 F. Supp. 1389

CITIZENS NATIONAL BANK OF SOUTHERN MARYLAND v. William B. CAMP, Comptroller of the Currency of the United States of America Treasury Department and Maryland National Bank, a National Bank Association organized and existing under the laws of the United States.

Civ. No. 70-620.

United States District Court, D. Maryland.

September 29, 1970.

Ernest N. Cory, Jr., and Cory, Boss & Rice, Laurel, Md., and Donald N. Rothman and Robert E. Sharkey, Baltimore, Md., for plaintiff.

William D. Ruckelshaus, Asst. Atty. Gen., Washington, D. C., George Beall, U. S. Atty., and J. Frederick Motz, Asst. U. S. Atty., Baltimore, Md., Harland F. Leathers and A. James Barnes, Attys., Dept. of Justice, Washington, D. C. (John E. Shockey and E. Jerry Higginson, Attys., Office of Comptroller of the Currency, of Washington, D. C., of counsel), for defendant, Comptroller of the Currency.

David F. Albright and Thomas W. W. Haines, Baltimore, Md., for intervenor, Maryland Nat. Bank.

THOMSEN, District Judge.

Maryland National Bank, the intervenor herein (Maryland National) is the largest bank in the State, with many branches, including two in St. Mary's County, one at Leonardtown and the other at Mechanicsville. In November 1969 it applied to the Comptroller of the Currency, the defendant herein, for permission to establish a branch at Lexington Park, another town in St. Mary's County.¹ The application was opposed by Citizens National Bank of Southern Maryland, the plaintiff herein (Citizens), and by the First National Bank of St. Mary's (First), both of which had branches in Lexington Park. After a hearing before the Regional Administrator of National Banks and two other men representing the Office of the Comptroller, and after other proceedings, the Comptroller approved Maryland National's application on May 22, 1970.

Meanwhile, on May 21, Citizens had filed its complaint in this case seeking to enjoin the Comptroller from issuing a certificate to Maryland National to operate the proposed branch in Lexington Park, or, in the alternative, "to institute de novo proceedings", on the grounds that the hearing before the Office of the Comptroller had not been fair and that the requirements of the applicable Federal and State statutes had not been met. Maryland National intervened as a party defendant and filed a motion for summary judgment, as did the Comptroller. After various preliminary proceedings, Judge Watkins on August 3 granted leave to Citizens to seek discovery from Maryland National of the financial data referred to in the report of the Comptroller which had not been furnished to counsel for the protestants at the administrative hearing, and to test the accuracy of the material which was available at that hearing. The Judge stated that after such discovery he would reconsider the motion to dismiss, and said: "The bank is, therefore, free to proceed, at its risk, with the construction of the proposed branch".

Maryland National did not suggest the possibility that it might open a temporary branch; indeed, it had told the National Bank Examiner who investigated and reported on its application that no temporary location was planned, and that the approximate period of time to place the proposed branch in operation would be one year from the date of approval.

Nevertheless, on September 1 Maryland National moved onto the site of the proposed branch a mobile trailer with a sign "Maryland National Bank" affixed thereto, and shortly thereafter Citizens learned that Maryland National proposed to begin business in the trailer on or about September 8, the day after Labor Day. On Friday, September 4, counsel for Citizens asked the Court to fix a time on September 8 for a hearing on a motion for a temporary restraining order.² Counsel for Maryland National and the Comptroller were notified on September 4 of the proposed hearing, which was held on September 8 and 9.

After argument, the parties agreed that it would be desirable for each side to submit motions for summary judgment and briefs in support thereof without waiting for further discovery. Citizens withdrew its request for a temporary restraining order, on the understanding that the points would be briefed and decided promptly.

There are two basic points in dispute between the parties:

1. Citizens contends that the "approval" of the Comptroller was insufficient and invalid because he made no findings, filed no opinion and did not otherwise indicate that he had complied with the applicable statutory requirement that he "ascertain" that public convenience and advantage will be promoted by the opening of the proposed branch. Maryland National and the Comptroller argue that the fact of the Comptroller's approval and the recommendations of his subordinates satisfy that requirement.

2. Citizens contends that it is entitled to a trial de novo in this Court, on the ground that the administrative hearing was inadequate and unfair. Maryland National and the Comptroller contend that the hearing was fair and adequate, and that Citizens waived the objections it now raises.

1.

The applicable Federal statute, 12 U.S. C. § 36(c) (2), allows the establishment of branches of national banks

"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 Maryland statute, Art. 11, § 65, Md.Ann.Code, contains no objective restriction as to location, but provides that the approval of the Bank Commissioner "shall not be given until he shall have ascertained to his satisfaction that the public convenience and advantage will be promoted by the opening of any such branch or branches, * * *".

The Comptroller is bound by this provision of the Maryland law when he considers an application for the establishment of a proposed new branch of a national bank in Maryland. First National Bank of Logan, Utah v. Walker Bank & Trust Co., 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966); First-Citizens Bank and Trust Co. v. Camp, 409 F.2d 1086, 1091 (4 Cir. 1969).

On the application in question in this case, the Comptroller made no findings of fact and issued no opinion, despite the fact that the practice of rendering written opinions setting out the basis of the Comptroller's determination had been adopted after Professor Davis had severely criticized the previous practice. See 1 Davis, Administrative Law Treatise, § 4.04 (1958 ed., 1965 suppl.); Davis, Administrative Procedure in the Regulation of Banking, 31 Law & Contemporary Problems 713 (1966),³ and the reply thereto by the Chief Counsel to the Comptroller: Bloom, Hearing Procedures of the Office of the Comptroller of the Currency, Ibid, 723 (1966).⁴ The criticism by Professor Davis echoed that made by Judge Sobeloff, dissenting in First National Bank of Smithfield, N. C. v. Saxon, 352 F.2d 267, at 273-275 (4 Cir. 1965). The opinion of the majority in that case did not disagree with the criticism. The new practice was noted in First-Citizens, supra, 409 F.2d at 1090.

In the instant case, the Comptroller merely wrote his signature after the printed word "Approve" on the third page of a three-page form. The first page contained a small amount of information, a reference to the transcript of the hearing, and under the heading "Legality-Capital, State Law, etc.", the notation: "Capital and surplus sufficient to meet requirements of both State law and Federal statutes".

The second page, headed "Recommendations", contains a 32-line comment on various factors, favorable and unfavorable, by a National Bank Examiner, concluding with a recommendation that the application be approved. No reference was made to the requirement of the applicable Maryland statute. There is no indication in the reports of the members of the Comptroller's staff that any of them had considered the Maryland law. There are some comments in the reports and some evidence in the record which would support a finding or conclusion that the public convenience and advantage would be promoted by the opening of the proposed branch, and some evidence and comments which would support the opposite finding or conclusion.

The third page, headed "Recommendation Sheet", contains two recommendations. The first, by the Director, Bank Organization Division, was as follows:

"Reasons "Branch can be supported and applicant has established a case in terms of providing improved service & convenience. Favorable T. M. BREZINSKI 5-19-70 Conclusion Director, Bank Organization Division Date" The second, by the Deputy Comptroller of the Currency, was as follows "Reasons "Lexington Park is the focal point of business activity for St Mary's County and is the location of the Naval Air Station which provides the major economic support. Applicant has a significant loan and deposit volume from the area with the former exceeding the latter by over a million dollars. Entry will provide a needed convenience for these accounts. Favorable P. J. Blanchard May 21, 1970 Conclusion Deputy Comptroller of the Currency Date"

Below that conclusion, under the heading "Comptroller's Decision" and after the printed word "Approve", appeared the Comptroller's signature and the date, 5/22/70. There was no opinion, no statement of findings or conclusions, no indication what evidence the Comptroller had considered, nothing whatever to show that he had "ascertained to his satisfaction that the public convenience and advantage will be promoted by the opening of" the proposed branch.

It is a reasonable inference that the Comptroller considered particularly the final recommendation of his Deputy, immediately above the Comptroller's signature. His recommendation, quoted...