First Bank & Trust Co. v. Smith

• Decision Date: 04 November 1974
• Docket Number: No. 74--1263,74--1263
• Citation: 509 F.2d 663
• Parties: The FIRST BANK AND TRUST COMPANY, Plaintiff-Appellant, v. James E. SMITH, Comptroller, etc., et al., Defendants-Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 663

509 F.2d 663

The FIRST BANK AND TRUST COMPANY, Plaintiff-Appellant, v. James E. SMITH, Comptroller, etc., et al., Defendants-Appellees.

No. 74--1263.

United States Court of Appeals, First Circuit.

Heard Nov. 4, 1974.

Decided Jan. 3, 1975.

Michael T. Putziger, Boston, Mass., with whom Roche, Carens & DiGiacomo, Boston, Mass., was on brief for appellants.

William A. Waldron, Boston, Mass., with whom Alan L. Lefkowitz, Paul E. Clifford, and Gaston, Snow & Ely Bartlett, Boston, Mass., were on brief for Middlesex Bank, N.A., appellee.

Morton Hollander, Atty., Dept. of Justice, with whom Carl A. Hills, Asst. Atty. Gen., James N. Gabriel, U.S. Atty., and Leonard Schaitman, Atty., Dept. of Justice, were on brief for James E. Smith, Comptroller of the Currency of the United States, appellee.

Before COFFIN, Chief Judge, ALDRICH and CAMPBELL, Circuit Judges.

LEVIN H. CAMPBELL, Circuit Judge.

This appeal requires us to review a decision by the Acting Comptroller of the Currency of the United States approving an application for permission to establish a branch bank in Chelmsford, Massachusetts. The district court, on the basis of the administrative record and an affidavit supplied by the applicant, granted summary judgment for the defendant. Comptroller. Fed.R.Civ.P. 56(b). We vacate and remand for further proceedings.

Defendant-Appellee, Middlesex Bank, N.A., is a national bank operating under the provisions of 12 U.S.C. § 12 et seq. It maintains 28 branch offices in Middlesex County. Plaintiff-Appellant, The First Bank and Trust Company (First Bank) is a Massachusetts Trust Company operating as a commercial bank under M.G.L. c. 172. It has its principal office in Chelmsford, Massachusetts, and four branch offices in surrounding towns.

On December 6, 1972, Middlesex Bank filed an application with the Regional Administrator of National Banks for the First Bank Region requesting permission from the Comptroller of the Currency to establish a branch office in the Purity Supreme Shopping Center in Chelmsford, Massachusetts. Pursuant to 12 C.F.R. § 5.2(b) Middlesex Bank published legal notice of its application, and First Bank requested that a hearing on the application be held in accordance with 12 C.F.R. §§ 5.4--5.10.

Acting by designation of the Comptroller, the Regional Administrator held a public hearing, having first requested an investigation into the facts by a National Bank Examiner who rendered a written report. At the hearing Middlesex Bank presented evidence to support its application, First Bank presented opposing evidence, and several other local banks appeared in opposition. The Regional Administrator, without comment, then transmitted the file established pursuant to 12 C.F.R. § 5.3, including a transcript of the hearing, to the Comptroller who, after various levels of staff review, approved the application without stating his reasons. First Bank thereupon brought this action in the district court, 28 U.S.C. § 1331(a), challenging the Comptroller's action as violative of his statutory duty and authority and seeking declaratory and injunctive relief.

Appellant argues that the Comptroller failed to take into account a statutory requirement that he approve new branches for national banks only 'if such establishment and operation are at the time authorized to State banks by the statute law of the State in question' and 'subject to the restrictions as to location imposed by the law of the State on State banks.' ¹ The statute has been held to incorporate by reference state laws governing the establishment of branch banks, First National Bank v. Walker Bank & Trust Co.,385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966). Its purpose is to ensure 'competitive equality' so that national banks may not overwhelm and displace a state's own banks. By requiring national banks to adhere to the same restrictions on branching, Congress intended to prevent them from enjoying an unfair advantage over state banks. Walker Bank, supra; First National Bank v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969). In passing on each branch application, the Comptroller 'is to weigh (it) against the standard imposed by the statute law of the state, and to deny the application if that standard is not met.' First National Bank of Fairbanks v. Camp, 151 U.S.App.D.C. 1, 465 F.2d 586, 597 (1972), cert. denied, 409 U.S. 1124, 93 S.Ct. 936, 35 L.Ed.2d 255 (1973). The statute law of Massachusetts provides that state banks may establish branch offices only if the Board of Bank Incorporation, a state agency, finds that a city's or town's present banking facilities are 'inadequate for the public convenience.' M.G.L. c. 172, § 11. It is this standard, incorporated by reference in the federal legislation, which appellant contends was ignored.

Our review of the Comptroller's action is under the Administrative Procedure Act (APA), 5 U.S.C. § 701 et seq. Neither the National Bank Act nor the APA requires the Comptroller, before approving a branch application, to hold a hearing on the record or to make formal findings. Cf. Camp v. Pitts, 411 U.S. 138, 140--142, 93 S.Ct. 1241, 36 L.Ed.2d 106 (1972). Thus, the appropriate measure is simply whether the Comptroller's decision was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.' 5 U.S.C. § 706(2)(A). The district court so recognized, stating correctly that the Comptroller was under no duty to make findings of fact, and that review was to be based on the full record before the Comptroller when he made his decision. In affirming the Comptroller's approval, the court said,

'There may exist some confusion as to the reasoning process employed by the Comptroller in reaching his decision, but there is sufficient explanation in the administrative record . . . to obviate the need for further explanation . . ..'

We agree that there would be enough support in the record concerning possible inadequacy and inaccessibility of present banking facilities in Chelmsford to provide a rational basis for the Comptroller's approval. ² But the record leaves us in doubt whether the Comptroller took Massachusetts' statutory standard into account. Under 5 U.S.C. § 706(2)(A), a reviewing court must be satisfied that the Comptroller's decision was 'in accordance with law.' While a decision favorable to Middlesex Bank would not be arbitrary or capricious on this record, neither would one turning down its request for a new branch. It thus becomes crucial to determine whether the relevant legal standard was applied.

At the hearing the applicant bank and its opponent made reference to the Massachusetts statutory standard, but the Comptroller's subordinates later made no reference to it in the written...