Nebraskans for Independent Banking, Inc. v. Omaha Nat. Bank
| Decision Date | 07 June 1976 |
| Docket Number | No. 75--1109,75--1109 |
| Citation | 530 F.2d 755 |
| Parties | NEBRASKANS FOR INDEPENDENT BANKING, INC., et al., Appellants, v. The OMAHA NATIONAL BANK, a National Banking Association, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Marvin G. Schmid, Omaha, Neb., for appellants.
Virgil J. Haggart, Jr., Omaha, Neb., for appellee.
Before GIBSON, Chief Judge, and LAY, HEANEY, BRIGHT, ROSS, STEPHENSON, WEBSTER and HENLEY, Circuit Judges, en banc.
The plaintiffs-appellants, a group of national and state banks and a trade organization formed to foster independent banking, seek a declaratory judgment and injunctive relief 1 against the defendant-appellee, The Omaha National Bank in Omaha, Nebraska. The plaintiffs claim that Omaha National is maintaining and operating three branch banking facilities, rather than two such facilities, in violation of state and federal law.
A divided panel of this court, in an opinion filed August 5, 1975, affirmed the decision of the United States District Court holding that one of the facilities challenged was only an extension of the main bank, not a branch, thus dismissing plaintiffs' complaint. A petition for rehearing en banc was granted, which action vacated the panel opinion.
After full consideration by the court en banc, the judgment of the District Court is reversed and remanded with directions to enter a judgment finding that Omaha National Bank is violating applicable federal law by operating three detached banking facilities and ordering that one of these facilities be eliminated.
Under Nebraska law, subject to geographic limits, state-chartered banks are permitted to maintain one 'attached' and two 'detached auxiliary teller offices.' Neb.Rev.Stat. § 8--157 (Supp. 1974). The McFadden Act, 12 U.S.C. § 36 (1970), incorporates state law setting forth limits upon a national bank's maintenance and use of branch facilities. 2
Omaha National's main bank is located in the 30-story, multi-tenant Woodmen Tower Building in downtown Omaha, occupying the south half of the block bounded by 17th Street on the east, 18th Street on the west, Douglas Street on the north, and Farnam Street on the south. (See Fig. 1.) Omaha National also operates two outlying banking facilities acknowledged by all parties to be branches under federal law and certified as such by the Comptroller of the Currency pursuant to 12 U.S.C. § 36. One branch is located at 108th and 'M' Streets and the other at 42nd and Grover Streets, both within the city limits of Omaha.
The focal point of this lawsuit is Omaha National's operation of another walk-up/drive-in facility located on leased realty at the southwest corner of 18th and Douglas Streets, directly to the west of the northern half of the block upon which the Woodmen Tower is situated. The plaintiffs contend this facility is also a branch which, when coupled with the other two admitted branch facilities, constitutes an operation by Omaha National of three branch banking facilities in violation of the applicable statutes. Omaha National, on the other hand, contends the 18th and Douglas facility is merely an extension of its main bank operation, not a branch.
The 18th and Douglas facility is a detached office facility with ten drive-in and six walk-in teller stations. It is a custom-built, free-standing building unattached to the main bank. There is a pneumatic tube connection between the two buildings used by the bank to transport currency and papers. The facility is separately staffed, has a separate telephone listing, offers most of the customary banking services, accepts deposits, cashes checks, makes non-commercial loans and maintains somewhat longer public hours than does the main bank. It does not offer safe deposit boxes, trust services or, according to its brief, international banking or commercial loans. Its net deposits are transported to the main bank by armored car.
Approximately ten weeks after Omaha National began constructing the new facility, plaintiffs obtained a state court order restraining Omaha National from operating it as a detached auxiliary teller office. After removal to the federal court pursuant to 28 U.S.C. § 1441 (1970), the District Court dissolved the state restraining order and stayed proceedings, directing Omaha National to ask the Comptroller of the Currency to reconsider the Regional Administrator's prior ex parte ruling, obtained by Omaha National before construction, that the planned facility would not constitute a branch requiring federal certification. The Comptroller, after reconsidering additional submissions by both parties, again concluded that an adversary administrative hearing would be unwarranted and reaffirmed the earlier determination that the Omaha National facility is not a branch under federal law.
Under 12 U.S.C. § 36(c) a national banking association may engage in branch banking only when, where and how state law would expressly authorize a state bank to do so. First National Bank v. Walker Bank & Trust Co., 385 U.S. 252, 260--62, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966). It is established that what constitutes a 'branch' is a question of federal law, not controlled by state law definitions, First National Bank v. Dickinson, 396 U.S. 122, 133, 90 S.Ct. 337, 24 L.Ed.2d 693 (1969); Driscoll v. Northwestern National Bank, 484 F.2d 173, 175 (8th Cir. 1973), but the determination must be made on the facts of each case, not according to a fixed test. North Davis Bank v. First National Bank, 457 F.2d 820, 824 (10th Cir. 1972). The definition of 'branch,' governing national banks, contained in § 36(f), includes:
(A)ny branch bank, branch office, branch agency, additional office, or any branch place of business located in any State or Territory of the United States or in the District of Columbia at which deposits are received, or checks paid, or money lent.
The Supreme Court has recognized that this circular definition 'may not be a model of precision' and has added substance to it by observing that:
(T)he term 'branch bank' at the very least includes any place for receiving deposits or paying checks or lending money apart from the chartered premises (.) (Emphasis in original.)
First National Bank v. Dickinson, supra, 396 U.S. at 135, 90 S.Ct. at 344.
As this definition is phrased in the disjunctive, the offering of any of the three listed services at a location 'apart from the chartered premises' will provide a basis for finding that branch banking is taking place. Considered in light of this definition, the 18th and Douglas facility is definitely a branch unless it can be characterized as being 'attached' to, rather than 'apart from,' the main bank.
The Supreme Court has held that in applying the statutory definition of 'branch,' equal recognition must be extended to the policy of maintaining 'competitive equality' between the state and national banking systems insofar as branch banking is concerned. The preservation of competitive equality is the pervasive underlying principle of the McFadden Act. First National Bank v. Walker Bank & Trust Co., supra, 385 U.S. at 261, 87 S.Ct. 492. In this light, Chief Justice Burger has observed for the Court that:
(W)hile Congress has absolute authority over national banks, the federal statute has incorporated by reference the limitations which state law places on branch banking activities by state banks. Congress has deliberately settled upon a policy intended to foster 'competitive equality.' * * * State law has been utilized by Congress to provide certain guidelines to implement its legislative policy.
The mechanism of referring to state law is simply one designed to implement that congressional intent and build into the federal statute a self-executing provision to accommodate to changes in state regulation.
In short, the definition of 'branch' in § 36(f) must not be given a restrictive meaning which would frustrate the congressional intent this Court found to be plain in Walker Bank, supra. (Citations and footnote omitted.)
First National Bank v. Dickinson, supra at 131, 133, 134, 90 S.Ct. at 342.
The central issue in this case is whether Omaha National's 18th and Douglas facility has properly been characterized as an extension of the main bank and not a branch bank 'apart from the chartered premises.' To be sure, the Supreme Court's use of the phrase 'apart from the chartered premises' was not intended to classify every free-standing facility as a branch. Virginia ex rel. State Corporation Commission v. Farmers & Merchants Bank, 380 F.Supp. 568, 572 (W.D.Va.1974), aff'd per curiam, 515 F.2d 154 (4th Cir.), cert. denied, 423 U.S. 869, 96 S.Ct. 133, 46 L.Ed.2d 99 (1975). However, lack of physical connection to the main bank is obviously a necessary though not sufficient characteristic shared by all facilities 'apart from the chartered premises.'
If the instant facility is 'apart from the chartered premises' so as to be a branch embraced by the rule of First National Bank v. Dickinson, supra, then Omaha National is engaging in branch banking in a manner exceeding that permitted Nebraska state banks. Each Nebraska bank, subject to geographic limits, is permitted to maintain only one 'attached auxiliary teller office' and two 'detached auxiliary teller offices.' Neb.Rev.Stat. § 8--157. 3 Regulations promulgated by the Nebraska Department of Banking define attached and detached auxiliary teller offices as follows:
(a) A detached auxiliary teller office contemplates the establishment of another banking facility which is physically removed and located in another area away from the main banking house and which is separated from the main banking house in such a way so as to not constitute a contiguous unit operation.
(b) An attached auxiliary teller office contemplates a physical connection, a...
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