Saxon v. Georgia Ass'n of Independent Ins. Agents, Inc.

Citation399 F.2d 1010
Decision Date28 October 1968
Docket NumberNo. 25050,25060.,25050
PartiesJames J. SAXON (Succeeded in Office by William B. Camp on February 1, 1967), Comptroller of the Currency of the United States of America, Appellant, v. GEORGIA ASSOCIATION OF INDEPENDENT INSURANCE AGENTS, INC., et al., Appellees. The CITIZENS AND SOUTHERN NATIONAL BANK, Appellant, v. GEORGIA ASSOCIATION OF INDEPENDENT INSURANCE AGENTS, INC., et al., Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Charles L. Goodson, U. S. Atty., Slaton Clemmons, Edwin L. Weisl, Jr., Asst. Attys. Gen., Atlanta, Ga., Alan S. Rosenthal, Leonard Schaitman, Attys., Dept. of Justice, Washington, D. C., for appellant Saxon.

Henry J. Miller, John K. Train, III, Atlanta, Ga., for appellant Citizens & Southern Nat. Bank.

E. Smythe Gambrell, Charles A. Moye, Jr., James H. Bratton, Jr., Edward W. Killorin, Gambrell, Russell, Moye & Killorin, Theodore M. Forbes, Jr., J. Arthur Mozley, Atlanta, Ga., for appellees.

Before GEWIN and THORNBERRY, Circuit Judges, and ELLIOTT, District Judge.

Rehearing Denied En Banc in No. 25060 October 28, 1968.

ELLIOTT, District Judge:

These two actions1 were brought by Appellees (Plaintiffs below) to have declared unlawful Appellant Comptroller's 1963 Ruling No. 7110 and to enjoin Appellant Citizens and Southern National Bank's insurance agent and agency activities in Georgia cities of over 5,000 population. The individual Appellees are duly licensed independent Georgia insurance agents. The National Association of Insurance Agents, Inc. is an incorporated professional association of approximately 35,000 independent insurance agencies, which includes approximately 150,000 licensed independent insurance agents located throughout the United States. The Georgia Association of Independent Insurance Agents, Inc. is an incorporated professional association of approximately 3,000 licensed independent Georgia insurance agents. The individual plaintiffs and the agent members of the two associations above named engage in their licensed profession for a livelihood and all of them have a substantial interest and investment in their profession in terms of time, money and effort. A considerable portion of the insurance agency business of the individual plaintiffs and of the agent members of the two associations is devoted to the sale and writing as agent of various forms of automobile and home insurance. The individual plaintiffs sue individually and on behalf of all similarly situated licensed independent insurance agents in the State of Georgia and the Associations sue individually and as the representatives of their agent members.

Two provisions of the National Bank Act (Title 12, U.S.C.A.) are involved:

Section 24(7), enacted in 1864, grants to national banks "all such incidental powers as shall be necessary to carry on the business of banking".

Section 92, enacted in 1916, provides that national banks "located and doing business in any place the population of which does not exceed five thousand inhabitants * * * may, under such rules as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life or other insurance company authorized by the authorities of the State in which such bank is located to do business in said State * *."

In this statutory setting James J. Saxon (the original defendant below in Case No. 25050)2 was secretary of an Advisory Committee appointed by the United States Senate in 1956 to make a study of the national banking laws and to make suggestions concerning revisions. He and the Advisory Committee drafted and recommended passage of legislation which would have allowed national banks in cities of more than 5,000 population to act as insurance agents if state chartered banks could do so under State law. This legislation was proposed in Congress as the Financial Institutions Act of 1957. After consideration and debate by the Congress this legislative proposal as drafted and recommended by Mr. Saxon and the Committee of which he was a member was rejected by Congress.3

In 1961 Mr. Saxon became Comptroller of the Currency and in 1962 Comptroller Saxon created a "National Advisory Committe on Banking Regulatory Policies and Practices", which committee was composed entirely of persons affiliated with the banking business. Comptroller Saxon asked this committee to make suggestions and recommendations to him for changes in the laws, policies and regulations affecting national banks. In due course Mr. Saxon's Advisory Committee recommended with regard to the insurance agency matter that "appropriate legislation should be enacted expressly to permit any National Bank to act as broker or agent in the writing of * * insurance issued in connection with a loan by the bank, and to participate in premium experience refunds. * * *"4 Instead of asking Congress for the "appropriate legislation" recommended by the committee, Comptroller Saxon in 1963 simply converted that recommendation into an administrative ruling, that being Ruling No. 7110, which is the subject of this inquiry, the full text of which provides:

"Incidental to the powers vested in them under 12 U.S.C. Sections 24, 84 and 371, National Banks have the authority to act as agent in the issuance of insurance which is incident to banking transactions. Commissions received therefrom or service charges imposed therefor may be retained by the bank."

This ruling was not limited in scope to cities of 5,000 population or less and purported to authorize every national bank, regardless of where located, to enter the insurance agency field and to compete with Appellees and other insurance agents.

In 1964 by an exchange of letters Appellant C & S Bank requested and received Comptroller Saxon's specific approval of the Bank's entry "into the insurance agency business", and in 1965 the Bank in its Atlanta offices began selling to borrowers broad forms of automobile, home, casualty and liability insurance, and the program was subsequently extended to its national bank offices in the cities of Athens, Augusta, Macon, Savannah and Valdosta, each of which has a population in excess of 5,000.

To protect their business from what was alleged to be unlawful encroachment by the bank, Appellees brought suit against the Bank, federal jurisdiction being based upon 28 U.S.C. §§ 1331(a), 1348 and 1391, and against Comptroller Saxon, jurisdiction being based upon 28 U.S.C. §§ 1331(a) and 1391(e) and 5 U.S.C. § 1009.

After overruling Appellants' motion to dismiss (260 F.Supp. 802), the District Court granted Appellees' motions for summary judgment (268 F.Supp. 236), and subsequently entered judgments declaring Comptroller Saxon's Ruling No. 7110 unlawful and in excess of statutory authority and declaring unlawful the Bank's insurance agent and agency activities in cities of more than 5,000 population.

We affirm the judgments of the District Court.

Two questions are presented for consideration:

(1) Does Section 92 of the National Bank Act impliedly prohibit national banks from carrying on the business of insurance agents in places of more than 5,000 population; (2) Did the plaintiffs below (Appellees here) have standing to bring these suits?

Appellants contend that authority for national banks located in cities of over 5,000 population to act as insurance agents may be inferred from the general provisions contained in Section 24 (7) of the Act, heretofore set out in pertinent part, this Section allowing national banks to exercise, subject to law, all such "incidental" powers as shall be "necessary" to carry on the business of banking. The District Court held that the specific grant of insurance agency power contained in Section 92 of the Act, heretofore set out, is the full extent of the insurance agency power possessed by national banks, and that an insurance agency power may not be inferred from the provisions of Section 24(7). Adjudication of the first question presented, therefore, hinges upon the proper construction to be given to these two sections of the Act.

Pertinent to consideration of these statutory provisions, we take note of the fact that prior to the 1916 enactment of Section 92 it seems to have been universally understood that no national banks possessed any power to act as insurance agents. Section 24(7) was contained in the original National Bank Act of 1864. Between that time and 1916 when Section 92 was enacted, the various administrative agencies charged by law with the administration of the Bank Act consistently ruled that national banks had no power to act as insurance agencies. In 1915 the Federal Reserve Board held that:

"National banks have no express or implied power to write fire, cyclone, liability, or other kinds of insurance. * * *
* * * * * *
"* * * writing insurance on commission is in no sense incidental to any of the enumerated powers of a national bank.
* * * * * *
"Inasmuch, therefore, as this class of business does not come within either the expressed or implied powers of national banks, an administrative board or officer cannot authorize it. Any such extension of the powers of national banks must be left to the consideration of Congress." 2 Fed. Reserve Bull. 73, 74 (1916).

Immediately prior to the enactment of Section 92 in 1916 the office of the Comptroller of the Currency ruled that national banks possessed no power to act as insurance agents, Congress being told by the then Comptroller:

"National banks are not given either expressly nor by necessary implication the power to act as agents for insurance companies. * * *
* * * * * *
"It is certainly clear that the Comptroller of the Currency has no right to authorize or permit a national bank to exercise powers not conferred upon it by law." 53 Cong.Rec. 11001 (1916).

The Comptroller then recommended to Congress that it grant insurance agency power to national banks located in small towns, submitting to Congress a draft of a proposed ...

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