Marion National Bank of Marion v. Saxon

Decision Date15 December 1966
Docket NumberCiv. No. 1822.
Citation261 F. Supp. 373
PartiesMARION NATIONAL BANK OF MARION, a national banking association, and First National Bank in Marion, a national banking association, Plaintiffs, v. James J. SAXON, Comptroller of the Currency of the United States, the Van Buren Bank, an Indiana corporation, Thomas Marcuccilli, an individual, Ralph Marcuccilli, an individual, A. L. Hodson, an individual, Robert L. Wright, an individual, and Kenneth A. Wright, an individual, Defendants.
CourtU.S. District Court — Northern District of Indiana

William F. Welch and David Cook, McHale, Cook & Welch, Indianapolis, Ind., on behalf of Marion National Bank of Marion.

David L. Kiley and Albert C. Harker, Harker, Kiley & Osborn, Marion, Ind., on behalf of First National Bank in Marion.

Alfred W. Moellering, U. S. Atty., Fort Wayne, Ind., and C. Westbrook Murphy, U. S. Dept. of Justice, Washington, D. C., on behalf of the Comptroller of the Currency of the United States.

Wasson J. Wilson and Fred Donnersberger, Wilson, Benne & Feingold, Hammond, Ind., and J. A. Bruggeman, Barrett, Barrett & McNagny, Fort Wayne, Ind., on behalf of The Van Buren Bank.

Henry C. Ryder, Roberts & Ryder, Indianapolis, Ind., on behalf of Ralph and Thomas Marcuccilli.

Thurman Biddinger, Biddinger & Johnson, Marion, Ind., on behalf of A. L. Hodson.

William M. Bloom, Bloom & Bloom, Columbia City, Ind., on behalf of Robert L. Wright and Kenneth A. Wright.


ESCHBACH, District Judge.

This is a suit by two national banks located in the city of Marion, Grant County, Indiana, seeking a declaration that certain conduct about to be engaged in by the defendant, The Van Buren Bank, and certain indicated action of the Comptroller of the Currency is unlawful and denies to the plaintiffs due process of law. In addition, plaintiffs seek a preliminary injunction and, upon final determination on the merits, a permanent injunction.

The cause is now before the Court upon plaintiffs' request for a preliminary injunction. Pursuant to notice, hearings were held on November 7 and December 1, 1966, at which time evidence was produced and arguments heard relative to the preliminary injunction issue.

The defendant, The Van Buren Bank, filed with the defendant, James J. Saxon, Comptroller of the Currency, (hereinafter referred to as Comptroller) a single bound application, with supporting exhibits, seeking (a) to be chartered as a national banking association, (b) to move its principal office twelve miles from Van Buren, Grant County, Indiana, to 315 South Adams Street in Marion, Grant County, Indiana, and (c) to retain its former office in Van Buren, Indiana, as a branch. 315 South Adams Street in Marion, Indiana, is approximately one block from the principal offices of both the plaintiffs, First National of Marion and Marion National Bank in Marion. The Comptroller of the Currency, on October 7, 1966, indicated in writing his preliminary approval of the application in three parts, subject to compliance by The Van Buren Bank with certain conditions imposed by the Comptroller in accordance with law. However, the Comptroller has not issued the final certificate authorizing The Van Buren Bank, as converted, to begin operations in Marion, Indiana, or to retain its Van Buren office as a branch. It is the issuance of this final certificate of authorization and the conduct of The Van Buren Bank thereby permitted which plaintiffs now seek to prevent pending determination of this cause on its merits.

Plaintiffs contend that the procedures employed by defendant, The Van Buren Bank, and preliminarily approved by the Comptroller, insofar as they are directed toward enabling The Van Buren Bank to enter into the banking business within the city limits of Marion, Indiana, and to retain its office in Van Buren as a branch bank, is a subterfuge intended solely to circumvent the provisions of the National Banking Act and the laws of the State of Indiana relative to the establishment of branch banks. 12 U.S.C. § 36(c) and Burns' Ind.Stat. § 18-1707 (1964 Repl.). Section 36(c) (2) of the National Banking Act (12 U.S.C.A. § 36(c) (2)) provides in substance that a national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches in any point within the state if such branch is at the time authorized to state banks by the statutes 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."

Section 18-1707 of the Indiana branch banking law provides in pertinent part that any bank or trust company

"may open or establish a branch bank in any city or town within the limits of the county in which the principal office * * * is located, if there is no bank or trust company located in such city or town * * *." (Emphasis added.)

Plaintiffs contend that The Van Buren Bank, as a state bank located in Grant County, Indiana, could not under Indiana law and the facts involved in this case locate a branch bank in the city of Marion, Grant County, Indiana. Examination of the relevant Indiana statute indicates that this is true. Burns' Ind.Stat. § 18-1707 (1964 Repl.). The Van Buren Bank's present and only location is in Van Buren, Indiana. Though both Van Buren and Marion are in Grant County, The Van Buren Bank would not be able to branch to Marion under the Indiana branch banking law because there presently exists at least one bank already located in Marion. This much has been conceded by counsel for the Comptroller of the Currency in oral argument before this Court. It is clear that a national banking association located in Van Buren, Indiana, would be subject to the same branch banking restrictions as would a state banking institution located there. 12 U.S.C. § 36(c); Union Savings Bank of Patchogue v. Saxon, 118 U.S.App.D.C. 296, 335 F.2d 718 (1964); National Bank of Detroit v. Wayne Oakland Bank, 252 F.2d 537 (6th Cir. 1958).

It is one of plaintiffs' principal contentions that the three-part action proposed by the defendant, The Van Buren Bank, and preliminarily approved by the Comptroller, in actual effect constitutes "reverse" branching and, as such, is a subterfuge to circumvent the relevant section of the Indiana Financial Institutions Act, Burns' Ind.Stat. § 18-1707 (1964 Repl.). See 12 U.S.C. § 36(c).

The individual defendants are directors of The Van Buren Bank and are directors of several other state banking institutions which have made previous efforts to establish either a state branch bank within less than one mile of the city limits of the city of Marion or have endeavored to locate a new state bank within the city of Marion at the same location now sought in Van Buren's current application to the Comptroller. These efforts were not approved by the Indiana Department of Financial Institutions.

Plaintiffs also contend that this conduct, in light of the holdings of the individual defendants, allegedly such as would place them within the proscription of the Indiana Bank Holding Company Act, would constitute a violation by them of the Act, Burns' Ind.Stat. §§ 18-1814 to 18-1817, and, because of such violation, would be contrary to the intendment of the federal Bank Holding Company Act. See 12 U.S.C.A. § 1846. It is in connection with this contention that the individual defendants, other than the Comptroller, have been named as parties to this action. Each of the individual defendants have filed motions to dismiss as to them for lack of jurisdiction. These motions to dismiss will be separately ruled on by this Court, and the bank holding company issue need not be reached for purposes of consideration of the request for preliminary injunction.

In opposition to plaintiffs' contentions, the defendant, Comptroller, argues that although the applications of The Van Buren Bank were simultaneously filed in one binding and preliminarily approved in one letter from the Comptroller, they are in fact three separate applications and must be separately considered to determine the propriety and lawfulness of the whole. Each of the three applications purports to draw its authority from a different section of the National Banking Act, 12 U.S.C. §§ 30, 35, and 36(c). The Comptroller's and The Van Buren Bank's position is that if each of these three applications, viewed independently, is unobjectionable under the relevant separate section of the Act, the three applications taken together should be unobjectionable. In this regard, The Van Buren Bank and the Comptroller argue that what The Van Buren Bank proposes to accomplish by the use of its three-step transformation, relocation and retention of its former banking location as a branch, does not amount to prohibited branch banking within the city of Marion. This contention is based on what plaintiffs have characterized as a "fragmentation" approach to an analysis of Van Buren's proposed plan. By this approach, and after The Van Buren Bank has been converted to a national banking association, 12 U.S.C. § 35, the establishment in Marion of The Van Buren Bank is viewed merely as a "relocation" of an existing national bank pursuant to 12 U.S.C. § 30, which may be approved by the Comptroller without reference to state banking law. At this point, the argument continues, the "relocated" Van Buren Bank, now in Marion, may establish, or retain, a "branch" in the town of Van Buren, Indiana, now (post relocation) without an existing banking facility and therefore is permissible under the Indiana branch banking law, Burns' Ind.Stat. § 18-1707 (1964 Repl.), (incorporated by reference into the National Banking Act's branch banking provision, 12 U.S.C. § 36(c) (2), and made a part of the controlling federal law in this forum). See Commercial State Bank of Roseville v. Gidney, ...

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