New Hampshire Bankers Association v. Nelson, Civ. A. No. 3355.

Citation336 F. Supp. 1330
Decision Date19 January 1972
Docket NumberCiv. A. No. 3355.
PartiesNEW HAMPSHIRE BANKERS ASSOCIATION et al. v. James W. NELSON, Bank Commissioner for the State of New Hampshire, and Warren B. Rudman, Attorney General for the State of New Hampshire.
CourtUnited States District Courts. 1st Circuit. United States District Courts. 1st Circuit. District of New Hampshire

COPYRIGHT MATERIAL OMITTED

William S. Green, Sheehan, Phinney, Bass & Green, Manchester, N. H., for plaintiffs.

Donald W. Stever, Jr., Attorney, Office of the Attorney General for the State of New Hampshire, Concord, N. H., for defendants.

OPINION

BOWNES, District Judge.

This case, brought under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201, is a three pronged attack on that provision of New Hampshire Revised Statutes Annotated, Chapter 390:13, which prohibits trust companies or similar corporations or national banks from advertising or circularizing the fact that they are authorized to act as executors.

The plaintiffs seek a decree adjudging that:

1. The prohibition is null and void as to the national bank plaintiffs on the grounds that federal law preempts the field.

2. The prohibition is null and void as to both national and state banks because it denies them due process of law and equal protection of the law guaranteed by the United States Constitution.

3. The prohibition is null and void as to both national and state banks because it contravenes Articles 1st and 2d of Part First of the New Hampshire Constitution.

All of the facts have been stipulated:

1. The State of New Hampshire is the only state in the United States which clearly prohibits banks from advertising their capacity to act as executors. The State of Washington has an ambiguous statute which some banks interpret to restrict their right to so advertise; however, many banks in Washington do advertise their capacity to serve as executors.
2. All plaintiff banks have an operating trust department which actively seeks trusteeships and executorships.
3. A survey by the firm of Kennedy Sinclaire, Inc., of Wayne, New Jersey, was made of some 700 probate courts in states which permit banks to advertise their capacity to act as executors. The results of this survey show that corporate fiduciaries served as executors in only 26% of the dollar value of all surveyed estates.
4. Another survey made by Kennedy Sinclaire, Inc. of Wayne, New Jersey, of the records of 42 probate courts during 1967 through 1969 in only those states which allow banks to advertise their capacity to act as executors showed the following results:
                Number of Estates   3,485 = 100%
                Individual
                  Executorships     2,238 = 64%
                Corporate
                  Executorships     1,009 = 29%
                Intestacies           238 = 7%
                
5. A survey of the probate records in the City of Baltimore in 1961 through 1962 made by Kennedy Sinclaire, Inc. of Wayne, New Jersey, shows the following results:
                     City of Baltimore, Md
                          1961 - 1962
                    Estates $50,000 and Over
                Total Number
                  Estates             609 = 100%
                Individual Executors  395 =  65%
                Corporate Executors   165 =  27%
                Intestacies            49 =   8%
                
6. In 1970, 3,500 banks in the United States possessed the power to act as trustees and executors; of these only 28 banks in New Hampshire and less than 32 banks in Washington were not allowed to advertise their capacity to act as executors.
7. Foreign banks presently conduct advertising of their capacity to act as executors which reaches New Hampshire; advertisements are regularly carried by major banks in the Boston Globe, Boston Herald, New York Times and Wall Street Journal; in various national and regional magazines; and by radio and television.
8. Each plaintiff bank will incur loss of potential profit in excess of $10,000 (exclusive of interest and costs) if the prohibitions of RSA 390:13 are not removed.
9. James W. Nelson, Bank Commissioner for the State of New Hampshire, has, by letter dated May 5, 1971, threatened to initiate prosecution under RSA 390:13 of any plaintiff bank who engages in the activity described in paragraph 13 of the complaint in this action.

The statute under attack provides:

Power to Act as Fiduciary. Any trust company or similar corporation, incorporated under the laws of this state, or any national bank duly authorized and located within the state, may be appointed trustee or executor in any case where an individual can be appointed, upon the same conditions and subject to the same control, requirements, and penalties. No such trust company or similar corporation or national bank shall advertise or circularize the fact that it is authorized to act as executor.
Any trust company organized under the laws of New Hampshire may be authorized and empowered to act as receiver, assignee or agent for any person, firm, association or corporation, public or private; and in all proceedings in court or elsewhere in relation to such trusts or agencies, all accounts and other papers may be signed and sworn to in behalf of the corporation by any officer duly authorized.
Nothing herein contained shall affect the rights of religious, charitable, and eleemosynary corporations organized under the laws of New Hampshire to act in fiduciary capacities, or extend to corporations other than trust companies and similar corporations, or any national bank duly authorized and located within the state, power to act in a fiduciary capacity. N.H.Rev.Stat. Ann., Ch. 390:13. Emphasis added.

I first consider the question of whether or not federal law preempts the field as far as the national banks are concerned and renders the advertising prohibition inoperative as to them. The pertinent federal statute is 12 U.S.C. § 92a:

Trust powers—Authority of Comptroller of the Currency
(a) The Comptroller of the Currency shall be authorized and empowered to grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located. Emphasis added.

It is significant that this section of the Act uses the phrase "when not in contravention of State or local law." The Congress clearly intended that national banks should have the same rights as state banks "under the laws of the State in which the national bank is located."

One of the leading cases in this field is Franklin National Bank v. New York, 347 U.S. 373, 74 S.Ct. 550, 98 L.Ed. 767 (1954). That case, in the words of Mr. Justice Frankfurter, presented:

. . . the narrow question whether federal statutes which authorize national banks to receive savings deposits conflict with New York legislation which prohibits them from using the word "saving" or "savings" in their advertising or business. At page 374, 74 S.Ct. at page 551.

The Court held:

We think the federal and state statutes are incompatible, and in such circumstances the policy of the State must yield. At page 374, 74 S.Ct. at page 552.

The New York statute clearly discriminated against national banks in favor of state mutual savings banks. Mr. Justice Frankfurter, in the course of deciding the narrow question used some broad language that the plaintiffs have seized upon as the spearhead of their preemption attack:

Nor can we construe the two Federal Acts as permitting only a passive acceptance of deposits thrust upon them. Modern competition for business finds advertising one of the most usual and useful of weapons. We cannot believe that the incidental powers granted to national banks should be construed so narrowly as to preclude the use of advertising in any branch of their authorized business. It would require some affirmative indication to justify an interpretation that would permit a national bank to engage in a business but gave no right to let the public know about it. At pages 377-378, 74 S.Ct. at page 553.

This paragraph does suggest that there can be no prohibition of advertising as it affects a national bank. But it is dicta only and, in my opinion, does not overcome the plain words of 12 U.S.C. § 92a. The purpose of this type of federal banking statute can best be expressed in the words of Mr. Justice Frankfurter:

That these federal institutions may be at no disadvantage in competition with state-created institutions, the Federal Government has frequently expanded their functions and authority. Franklin National Bank v. New York, supra, at page 375, 74 S.Ct. at page 552.

The New Hampshire statute does not put the national banks at any competitive disadvantage with state banks. Both are treated equally. 12 U.S.C. § 92a allows national banks to offer the equivalent fiduciary services to their customers as do state banks. Investment Company Institute v. Camp, 274 F.Supp. 624, 640 (D. C.1967). If, as plaintiffs urge, advertising is necessary to make these services effective, then both sets of banks labor under the same handicap.

In First National Bank of Logan v. Walker Bank and Trust Co., 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966), Mr. Justice Clark delved deeply into the history and background of the National Banking Act. Although the case was concerned with branch banking, the opinion makes it clear that the Congress in enacting, supplementing, and amending the National Banking Act was ever seeking to keep national banks and state banks on the same basis of "competitive equality." The holding indicates that state statutes are not to be swept aside by federal law merely because they may inhibit banking activities, but must be complied with by national banks if they do not put them at a competitive disadvantage with state banks.

Indeed, it would fly in the face of the legislative history not to hold that national branch banking is limited to those States the laws
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