Dakota Nat. Bank & Trust Co. v. First Nat. Bank & Trust Co. of Fargo

Citation554 F.2d 345
Decision Date16 May 1977
Docket NumberNo. 76-1585,76-1585
PartiesDAKOTA NATIONAL BANK AND TRUST CO., a National Banking Association, Appellant, v. FIRST NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association, and James Smith, Comptroller of the Currency, Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

John D. Kelly (argued) and Beryl J. Levine, Fargo, N. D., on brief, for appellant.

Mark N. Mutterperl, Atty., App. Section, Civil Div., Dept. of Justice (argued), Rex E. Lee, Asst. Atty. Gen., Washington, D. C., Harold O. Bullis, U. S. Atty., Fargo, N. D., and Leonard Schaitman, Washington, D. C., on brief, for appellee, Comptroller of the Currency.

Charles A. Feste (argued) and Wickham Corwin, Fargo, N. D., and Rodger Nordbye, Minneapolis, Minn., on brief, for appellee First Natl. Bank & Trust Co. of Fargo.

David O. Lee, Sp. Asst. Atty. Gen., Dept. of Banking & Financial Institutions, Bismarck, N. D., on brief, for amicus curiae, State Banking Bd.

Before LAY and ROSS, Circuit Judges, and WANGELIN, District Judge. *

ROSS, Circuit Judge.

This appeal again presents to the court a question of the proper construction of 12 U.S.C. § 36, the branch banking law. Dakota National Bank & Trust Co. (Dakota National) initiated this action to protest a decision of the Comptroller of the Currency to award the First National Bank and Trust Company of Fargo (First National) a branch certificate for its newly proposed branch facility at University Drive and Twenty-eighth Avenue in the city of Fargo. From an adverse decision by the district court sustaining the Comptroller, Dakota National appeals to this court.

The Facts.

First National and Dakota National both maintain a main banking house in Fargo, North Dakota, respectively at 15 Broadway and 51 Broadway in that city. Dakota National also operates a branch authorized by the Comptroller at 1501 South University Drive. The legality of First National's proposed University Drive location is brought into question by Dakota National because First National also maintains the "Auto Bank" at 404 Main Avenue, which had previously operated as a certified branch and which, Dakota National contends, constitutes the one and only lawful branch permitted by North Dakota law.

According to the administrative files of the Comptroller of the Currency which were submitted by the plaintiff, First National made application on September 14, 1971, for permission to operate a "branch" bank drive-in facility at Main Avenue and Fourth Street South at a distance of 1,075 feet from the main banking facility. The application stated that First National's present drive-in facility, which was then a part of the main office, was "in serious jeopardy due to imminent prohibition of left-turns by vehicle traffic from Broadway and the eventual curtailment of all vehicular traffic on Broadway." The investigative report on the branch application compiled by the office of the Regional Administrator of National Banks discloses that proposed services at the Auto Bank were to include, among other things, deposits and withdrawals from checking and savings accounts. North Dakota state branching laws, the substantive provisions of which are applicable to national banks as well, at that time allowed a bank to "maintain and operate separate and apart from its banking house one facility for drive-in and walk-up service, whereat the services rendered shall be limited to receiving deposits of every kind and nature, cashing checks or orders to pay, issuing exchange, and receiving payments payable at the bank." N.D.Cent.Code § 6-03-13.1 (emphasis added). The facility was required to be no more than 1,500 feet from the main banking house. N.D.Cent.Code § 6-03-13.2. The First National gave published notice of its intention to establish a branch, and on October 27, 1971, the bank was notified that its "application to establish a branch," the Auto Bank, had been approved by the office of the Comptroller.

The Auto Bank branch opened for business in 1972 and operated as a branch until 1974, when, on July 25, 1974, First National's president submitted a proposal to the Comptroller to have the Auto Bank recharacterized as an "extension" of the main bank, rather than a certified "branch." The bank president cited as reasons for the change, inter alia, the fact that the only structure separating the main and Auto Bank was a seed warehouse located on a railroad right-of-way; that at the time the Auto Bank was constructed "economics and customer convenience" required that it not be closer to the main banking house; and, finally, that only "550 feet" separated the auto and main bank facilities. 1 In an ex parte decision on December 23, 1974, the Comptroller gave his concurrence, the branch was recharacterized as an extension, and the First National relinquished its auto branch certificate.

In an affidavit submitted to the district court pursuant to cross summary judgment motions, Deputy Comptroller Blanchard recounted the reasons for which his permission was given:

(a) First National was unable to continue to provide drive-up service for its customers at its main office in 1971 because of urban renewal plans to turn the sole access street into a pedestrian walkway;

(b) Discontinuation of drive-up service would subject First National's customers to the inconvenience of "horse and buggy day banking" after they had become accustomed to the convenience and efficiency of the drive-up service now routinely provided by banks throughout the nation;

(c) Physical modifications to the existing main office premises to provide drive-up service were unfeasible;

(d) No other property contiguous to First National's main office premises was available for expansion;

(e) The only reasonably available premises upon which First National could continue to provide drive-up service to its customers was a tract of land located approximately 550 feet (168 meters) from the existing main office premises, and, out of necessity, this was purchased for the purpose of relocating the unusable drive-up installation;

(f) The only intervening structure at ground level was a building scheduled to be razed pursuant to urban redevelopment plans;

(g) The only intervening property was a railroad easement and a dedicated street;

(h) The drive-up installation would continue to provide limited service to First National's existing customers in the main office service area;

(i) All transactions entered into at the drive-up installation would be processed at the main office;

(j) The drive-up installation would be completely dependent upon the main office and could function only in conjunction with the main office to enable First National to continue to provide modern, convenient service to its existing customers; and

(k) The operation of the drive-up installation had resulted in no injury to any of First National's competitors and had not affected the competitive balance in the market.

6. In determining whether an additional installation, adjunctive to an existing main office, amounts to the establishment of a branch or merely an extension of the existing main office premises, the Comptroller of the Currency examines all of the facts and circumstances surrounding the additional installation.

7. The factors weighed by the Comptroller of the Currency include, but are not limited to, the distance separating the additional and existing installations, the presence or absence of any intervening structures, the presence or absence of any physical connection, the economic effect of the additional installation upon the balance of the competition within the banking community, and the feasability (sic) of placing the additional installation closer to the existing office. No single factor is controlling.

Meanwhile, in 1973, the North Dakota legislature amended its branch banking law to permit a branch to locate within the corporate city limits of the main banking house or within three miles of such city if it were not within the corporate limits of another city. N.D.Cent.Code § 6-03-13.1 (1975). Concluding that it was operating without a separate facility after the recharacterization of the Auto Bank on December 23, 1974, First National made application on December 26, 1974, to establish a branch bank on University Drive.

The State Commissioner of Banking learned of the application and responded by writing to the Regional Administrator of National Banks on January 24, 1975, expressing the opinion that the proposed branch would violate federal law and state law, which "specifically limits that only one facility separate and apart from its banking house is authorized." Dakota National Bank also announced its opposition and on February 6, 1975, requested a hearing in connection with the application; the hearing request was granted by the office of the Regional Administrator on February 10, 1975.

At the February 28 hearing, which was conducted pursuant to rules in 12 C.F.R. § 5, Mr. Elder, counsel for the Regional Administrator, announced that the hearing would be limited to "the presentation of factual matters concerning the subject branch. It is not the purpose * * * to air legal issues * * *." Though most of the hearing, through both parties' presentations, was devoted to economic issues and the propriety of a bank branch in the south Fargo area, Dakota National was permitted, over First National's relevancy objection, to present some evidence concerning the Auto Bank and its recharacterization by the Comptroller as an extension. In May 1975 the Deputy Comptroller approved First National's University Drive branch application, and subsequently in February 1976 Dakota National, seeking injunctive and declaratory relief against the Comptroller and First National, filed suit in federal district court, arguing that the Comptroller's approval of First National's application was ...

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