DAKOTA NAT. BANK, ETC. v. FIRST NAT. BANK, ETC.

• Decision Date: 18 June 1976
• Docket Number: No. A3-75-40.,A3-75-40.
• Citation: 414 F. Supp. 1161
• Parties: DAKOTA NATIONAL BANK AND TRUST CO., a National Banking Association, Plaintiff, v. FIRST NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association and James Smith, Comptroller of the Currency, Defendants.
• Court: U.S. District Court — District of South Dakota

414 F. Supp. 1161

DAKOTA NATIONAL BANK AND TRUST CO., a National Banking Association, Plaintiff, v. FIRST NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association and James Smith, Comptroller of the Currency, Defendants.

No. A3-75-40.

United States District Court, D. North Dakota, Southeastern Division.

June 18, 1976.

John D. Kelly, Vogel, Vogel, Brantner & Kelly, Fargo, N.D., for plaintiff.

Charles A. Feste, Conmy, Feste & Bossart, Ltd., Fargo, N.D., for First Nat. Bank; Rodger Nordbye, Faegre & Benson, Minneapolis, Minn., of counsel.

Harold O. Bullis, U.S. Atty., Fargo, N.D., for James Smith; Rex E. Lee, Asst. Atty. Gen., Harland F. Leathers, Susan P. Engleman, Dept. of Justice, Dorothy S. Kulig, Gary L. Ryan, Office of Comptroller of Currency, Washington, D.C., of counsel.

MEMORANDUM OF DECISION AND ORDER

BENSON, Chief Judge.

STATEMENT OF THE CASE

On May 9, 1975, the Comptroller of the Currency (Comptroller), after an adversary hearing, approved the application of Defendant First National Bank and Trust Company of Fargo, a National Banking Association (First National), to establish a branch on South University Drive in Fargo, about three miles away from its banking house. Plaintiff Dakota National Bank and Trust Company, a National Banking Association (Dakota National), brought this action alleging:

"The approval of the First National application by the Comptroller of the Currency was arbitrary, capricious and unlawful. Specifically, in view of the provisions of § 6-03-13.1 through § 6-03-13.4 of the North Dakota Century Code NDCC approval of the proposed First National branch in south Fargo is contrary to 12 U.S.C. 36."

The relief requested by Dakota National is a declaration that in view of NDCC § 6-03-13.1 through § 6-03-13.4, the branch is prohibited by 12 U.S.C. § 36, and that the Comptroller be enjoined from issuing a branch certificate and First National be enjoined from establishing and operating a banking facility at the proposed branch location.

Dakota National's jurisdictional allegation is worded:

"The amount in controversy exceeds the sum or value of $10,000.00 exclusive of interest and costs. Jurisdiction and venue are established under the provisions of Chapter 2, Title 12 of U.S.C. including 12 U.S.C. 36 and 94, and under 5 U.S.C. 701 et seq and 28 U.S.C. 1331, 1394, 2201 and 2202."

The matter is before the Court on motions for summary judgment filed by each of the three parties. The Comptroller included in his motion attached certified copies of the administrative record compiled on the application of First National to establish a branch on South University Drive; certified copies of his administrative record compiled on the application of First National to redesignate its branch at 404 Main Avenue (4th and Main), Fargo, as an extension of the bank's main office; and an affidavit of Deputy Comptroller Richard J. Blanchard giving the Comptroller's reasoning in recharacterizing the facility at 4th and Main as an extension of the bank's main office.

Dakota National included with its motion for summary judgment an affidavit by its attorney identifying an attached exhibit as the administrative file of the Comptroller relating to the 1971 application of First National to establish and operate a branch at 4th and Main.¹ It also included an affidavit of A. M. Eriksmoen, President of Dakota National, identifying an attached First National newspaper advertisement relating to alleged banking services offered by First National at its three facilities. Defendants have moved to strike the affidavits and exhibits.

On application, leave was granted to Gilbert W. Ellwein, North Dakota Commissioner of Banking and Financial Institutions, to file an amicus curiae brief.

STANDING

Defendants have raised an initial issue of whether Plaintiff has standing to sue in this proceeding. They argue that since Dakota National has the same right to establish a drive-up installation as an extension of its main facility as does First National, that Dakota National cannot have been injured, thereby depriving this Court of jurisdiction since there is no Art. III case or controversy.

Plaintiff, which has operated a branch on South University Drive since 1962, has alleged it will "sustain irreparable injury, damage and loss of its banking business, particularly with regard to business conducted at its South University Drive branch facility . . .."

Defendants' argument goes to the merits and the question of standing is independent of the merits. In this case, it is clear the Plaintiff has standing. See Association of Data Processing Service Organizations v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970); Warth v. Seldin, 422 U.S. 490, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975).

STANDARD OF REVIEW

Initially, it is necessary to first determine the appropriate standard of review. The thrust of Plaintiff's case is the allegation that the Comptroller's certificate authorizing the branch on South University Drive in effect allows First National to operate two branches which, under state law, would not be allowed to a state bank and under 12 U.S.C. § 36 and the doctrine of competitive equality would thereby be denied to national banks.

On December 23, 1974, First National was notified the Comptroller had approved its requested redesignation of the 4th and Main facility as an extension of the bank's existing main banking operation. On December 26, 1974, First National made application for the South University branch. If Plaintiff's action is an appeal from the Comptroller's redesignation of the 4th and Main facility and the Comptroller's subsequent approval of a branch on South University Drive, the proper standard of review is set out in Camp v. Pitts, 411 U.S. 138, 141-142, 93 S.Ct. 1241, 1244, 36 L.Ed.2d 106 (1973).

"The proper standard for judicial review of the Comptroller's adjudications is not the `substantial evidence' test which is appropriate when reviewing findings made on a hearing record, 5 U.S.C. § 706(2)(E). Nor is the reviewing court free to hold a de novo hearing under § 706(2)(F) and thereafter determine whether the agency action was `unwarranted under the facts.' It is quite plain from our decision in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 91 S.Ct. 814, 28 L.Ed.2d 136 (1971), that de novo review is appropriate only where there are inadequate factfinding procedures in an adjudicatory proceeding, or where judicial proceedings are brought to enforce certain administrative actions.

* * * * * *

The appropriate standard for review is, accordingly, whether the Comptroller's adjudication was `arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,' as specified in 5 U.S.C. § 706(2)(A). In applying that standard, the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." Camp v. Pitts, supra.

Conversely, if this is not an appeal from the Comptroller's adjudication, this Court is not bound by the narrow "arbitrary and capricious" standard, but should take evidence and adjudicate the issue of whether First National is entitled to operate a branch on South University Drive. Nebraskans for Ind. Banking v. Omaha Nat. Bank, 530 F.2d 755, 761 n. 5 (8th Cir. 1976). In that case, the Circuit Court reviewed the decision of the District Court under the clearly erroneous rule since the District Court had reached its decision based on evidence admitted at a trial on the merits.

Determination of the proper scope of review is not ended by construing Plaintiff's action to be an appeal. The agency's adjudication is usually a mixed question of law and facts. Some courts hold that the factual determinations of the agency are to be reviewed by the narrow arbitrary and capricious standard, but the legal conclusion reached by the agency (in this case, that the Auto Bank is not a branch) must be judged by the "rightness" test, that is, whether the Comptroller's legal conclusion that the Auto Bank was not a branch was legally correct. This is a broader scope of review involving a de novo determination of the legal issues.

Seattle Trust & Savings Bank v. Bank of California, N.A., 492 F.2d 48 (9th Cir. 1974) is cited as authority by Plaintiff in support of its position that this Court should review the Comptroller's legal conclusion by a de novo determination based on the record and additional affidavits. This still involves an appeal from the agency ruling but allows a broader scope of review of the legal conclusion reached. In Seattle Trust, supra at 50, the Court states:

"The arbitrary and capricious standard has been judicially fashioned to protect against the wrongful exercise of discretion by the Comptroller regarding factual controversies. In this case, however, the principal issue was whether the Comptroller has acted within the limitations imposed upon him by federal and state law, not whether he has acted reasonably or unreasonably. If the Comptroller was incorrect in his interpretation of the law, he should have been overruled in the District Court. First National Bank of Logan, Utah v. Walker Bank & Trust Co., 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343, reh. den., 385 U.S. 1032, 87 S.Ct. 738, 17 L.Ed.2d 680 (1966). This standard of review has been customarily applied to cases involving interpretation of 12 U.S. C.A. § 36(c). See First National Bank v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1966)."

In the case now before this Court, Plaintiff was a party in an adversary proceeding before the Comptroller relating to the South University Branch application, and over First National's objection, was permitted to offer evidence and argument on the question of whether the 4th and Main facility was a branch. The decision of the Comptroller was adverse to the Plaintiff, and it initiated this action naming the Comptroller as a party defendant...