Commercial Security Bank v. Saxon

• Decision Date: 18 December 1964
• Docket Number: Civ. A. No. 1815-63.
• Parties: COMMERCIAL SECURITY BANK, Plaintiff, v. James J. SAXON, Comptroller of the Currency, Defendant, First Security Bank of Utah, N.A., Intervenor-Defendant.
• Court: U.S. District Court — District of Columbia

236 F. Supp. 457

COMMERCIAL SECURITY BANK, Plaintiff, v. James J. SAXON, Comptroller of the Currency, Defendant, First Security Bank of Utah, N.A., Intervenor-Defendant.

Civ. A. No. 1815-63.

United States District Court District of Columbia.

December 18, 1964.

James F. Bell, Washington, D. C., for plaintiff.

John W. Douglas, Asst. Atty. Gen., Department of Justice, Washington, D. C., and David C. Acheson, U. S. Atty., Washington, D. C., for defendant.

Charles J. Steele, Washington, D. C., for intervenor-defendant.

LEONARD P. WALSH, District Judge.

This matter came before the Court on the motion to dismiss filed by defendant Comptroller and the cross motions for summary judgment of Intervenor and Plaintiff.

The relevant facts are not in dispute and can be stated as follows:

Plaintiff, a state bank, and Intervenor, a national bank, each have their principal office and one branch in the city of Ogden, Utah. Two other state banks have their main offices in Ogden, the Bank of Utah and the Bank of Ben Lomand. Since Ogden has a population of between 30,000 and 90,000 persons, it is classified as a city of the "second class" by the Utah Cities and Towns Statute (Utah Code Ann., Title 10, Chap. 1, Sec. 1 (1953, as amended)).

On June 25, 1963, the First Security Bank, Intervenor, filed an application with the Comptroller of the Currency, pursuant to Title 12 United States Code, Section 36(c), requesting permission to establish an additional branch office in Ogden. The requested branch would be in addition to the four main bank offices and two branches presently in existence in Ogden. Shortly thereafter, on July 18, 1963, the Commercial Security Bank brought this action against the Comptroller, seeking a declaratory judgment that approval of the branch application would violate 12 U.S.C.A. § 36, and an injunction to restrain the Comptroller from issuing the certificate evidencing approval of the branch. In addition, plaintiff sought preliminary injunctive relief pending disposition of the case.

Judge Curran on July 19, 1963, issued a temporary restraining order prohibiting the Comptroller from issuing a certificate of authority to First National. Prior to the expiration date of that order, on July 26, 1963, counsel for Commercial Security and the Comptroller filed a Stipulation with the Court by which it was agreed:

"* * * that the Comptroller of the Currency will issue no certificate of authority to the First Security Bank of Utah until the District Court has heard Commercial Security Bank's pending motion for a preliminary injunction * * * that if counsel for the Comptroller of the Currency notifies James F. Bell, Esq., of the Comptroller's intention to issue the certificate, Commercial Security will apply to the Court for the earliest possible hearing on its pending motion for preliminary injunction."

On June 9, 1964, the Comptroller notified the First Security Bank of Utah that its branch application had been approved, but the Comptroller has not, as yet, notified counsel for Plaintiff of his intention to issue the certificate of authority.

The First Security Bank was granted leave to intervene as a party defendant on June 26, 1964.

At the outset, the Comptroller contends that the Commercial Security Bank has no standing to bring this suit. The contention can be disposed of by reference to the uncontroverted affidavit of the president of plaintiff bank that if the certificate of authority is issued to the First Security Bank, plaintiff will sustain damage to its business and profits of upwards of fifty thousand dollars a year and plaintiff would have no adequate remedy at law, and by the following holding of our Court of Appeals in Whitney National Bank in Jefferson Parish v. Bank of New Orleans and Trust Company, 116 U.S.App.D.C. 285, 323 F.2d 290, 300 (C.A.D.C., 1963), cert. granted 376 U.S. 948, 84 S.Ct. 967, 11 L.Ed.2d 969:

"The appellee banks cannot complain of lawful competition from other lawfully chartered state or national banks because their own charters are not exclusive licenses. But where, as here, the threatened competition arises from an allegedly illegal facility, the appellee state banks have standing to invoke the jurisdiction of a federal court to challenge the alleged unlawful federal administrative action which admittedly would result in irreparable injury to their property rights in their charters."

The Comptroller further contends that his determination, based upon his statutory interpretation of 12 U.S.C. § 36(c), should be upheld by this Court unless it is clearly unreasonable. Whatever be the merits of this contention, it is clearly not the law in this Circuit. In both Commercial State Bank of Roseville v. Gidney, D.C., 174 F.Supp. 770, 778, affirmed per curiam 108 U.S.App. D.C. 37, 278 F.2d 871 (1960), and the Whitney National Bank case, supra, 323 F.2d at page 300, the Court stated, "* * * there is no discretion to unlawfully issue a certificate.", and went on to an independent interpretation of 12 U.S.C. § 36(c) and the applicable state law.

The sole question before this Court is whether the Comptroller of the Currency has the statutory authority to grant a certificate to First Security Bank of Utah, N. A., for the establishment of a new branch in the city of Ogden, Utah.

The applicable statutory law primarily involved is clause (1) of Title 12 U.S.C. § 36(c) (1927, as amended), which provides:

"(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; * * *". Emphasis supplied.

Utah Code Ann., Title 7, Chap. 3, Sec. 6 (1953, as amended), provides as follows:

"Except in cities of the first class, or within unincorporated areas of a county in which a city of the first class is located, no branch bank shall be established in any city or town in which is located a bank or banks, state or national, regularly transacting a customary banking business, unless the bank seeking to establish such branch shall take over an existing bank. No unit bank organized and operating at a point where there are other operating banks, state or national, shall be permitted to be acquired by another bank for the purpose of establishing a branch until such bank shall have been in operation as such for a period of five years." Emphasis supplied.

As stated above, Ogden, Utah, is not a city of the "first class," and there are already located in Ogden four main bank offices and two branch banks. It is clear to this Court at the outset that a state bank would be prohibited from opening a branch in Ogden unless it took over one of the existing banks which had been in operation for at least five years. Thus, if a state bank had applied to the Utah Bank Commissioner for a branch in Ogden under the same conditions which the First Security Bank applied to the Comptroller in this case, the application would clearly have been denied.¹ The question before this Court, therefore, has been narrowed down to whether or not clause (1) of 12 U.S.C. § 36 (c) requires the Comptroller to apply to the establishment of national bank branches exactly the same statutory standards as apply to the establishment of state bank branches.

The defendants argue that if it is at all possible for a state bank to establish a branch in the city in question, then the Comptroller may approve a branch for a national bank, whether or not the national bank meets the specific requirements of a state law which would be applied to the state bank. The plaintiff, on the other hand, argues that the Comptroller must apply the same statutory standards as would be applied to a state bank.

In Commercial State Bank of Roseville v. Gidney, supra, an opinion affirmed by our Court of Appeals, Judge Youngdahl of this Court held that indeed it was "* * * the apparent purpose of Congress to have exactly the same standards — state law — apply to the establishment of national bank branches as apply to the establishment of state bank branches." (174 F.Supp. at page 775). Judge Youngdahl applied a Michigan state court case in granting a preliminary injunction against the Comptroller restraining him from issuing a branch certificate to a national bank in Michigan. The holding was in terms of § 36 (c) generally, though the provision involved in that case, set out in clause (2) of § 36(c), deals only with branches outside of the city in which the main office of the bank is situated.

On the other hand, the learned Judge Christensen of the United States District Court of Utah, Northern Division, recently held that the Comptroller is not held to specific conditions of Utah law in granting branches to national banks under clause (1) of § 36(c), that the granting of express...