State Bank of Fargo v. Merchants Nat. Bank and Trust Co. of Fargo, 78-1505

• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)
• Writing for the Court: Before MATTHES, Senior Circuit Judge, HENLEY, Circuit Judge, and NANGLE; HENLEY
• Citation: 593 F.2d 341
• Parties: STATE BANK OF FARGO, a North Dakota State Banking Association, Appellant, v. The MERCHANTS NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association, and John G. Heiman, Comptroller of the Currency, Appellees.
• Docket Number: No. 78-1505,78-1505
• Decision Date: 28 February 1979

Page 341

593 F.2d 341 STATE BANK OF FARGO, a North Dakota State Banking
Association, Appellant,
v.
The MERCHANTS NATIONAL BANK AND TRUST COMPANY OF FARGO, a
National Banking Association, and John G. Heiman,
Comptroller of the Currency, Appellees. No. 78-1505. United States Court of Appeals,
Eighth Circuit. Submitted Feb. 12, 1979.
Decided Feb. 28, 1979.

Page 342

Ronald H. McLean of Tenneson, Serkland, Lundberg, Erickson, Leclerc & Marcil, Fargo, N. D., argued and on brief, for appellant.

David A. Ranheim of Dorsey, Windhorst, Hannaford, Whitney & Halladay, Minneapolis, Minn. (argued), J. David Jackson, Minneapolis, Minn., and Frank J. Magill of Nilles, Hansen, Selbo, Magill & Davies, Fargo, N. D., on brief, for appellees.

Before MATTHES, Senior Circuit Judge, HENLEY, Circuit Judge, and NANGLE, District Judge. ^*

Page 343

HENLEY, Circuit Judge.

This branch banking case, which comes to us from the United States District Court for the District of North Dakota, ¹ involves the right of a national bank domiciled in the State just mentioned to operate under authority issued by the Comptroller of the Currency of the United States machines known as customer electronic funds transfer centers, commonly referred to as CBCT's, which machines can perform a number of banking services at any hour of the day or night and on holidays without personal contact between a bank customer and bank personnel and without the customer physically entering the bank's place of business.

The plaintiff in the district court was the State Bank of Fargo, a banking institution chartered under the laws of North Dakota and governed by state statutes and regulations. Plaintiff will at times be referred to herein as "State Bank." The defendants were The Merchants National Bank and Trust Company of Fargo (Merchants), a national bank, and the Comptroller of the Currency. Merchants is subject to the provisions of the National Bank Act, 12 U.S.C. § 21 Et seq., and is subject to the regulatory jurisdiction of the Comptroller.

The object of the suit is to prohibit Merchants from operating in the City of Fargo two CBCT's under initial authority granted by the Comptroller in 1976 and under branch bank authority issued by him in 1977. Plaintiff sought appropriate declaratory and injunctive relief.

In due course the defendants moved for summary judgment pursuant to Fed.R.Civ.P. 56(b). On May 31, 1978 Judge Benson filed a full memorandum opinion in which he held that Merchants was entitled to operate the machines and that the defense motions for summary judgment should be granted. State Bank of Fargo v. Merchants Nat'l Bank & Trust Co. of Fargo, 451 F.Supp. 775 (D.N.D.1978). A final judgment in favor of the defendants having been entered, this appeal followed.

As the law stood when Judge Benson decided the case and as it stands today, a national bank is permitted to operate at the discretion of the Comptroller one or more CBCT's. However, the right or privilege of a national bank to operate such a machine at a given place or in a given state is limited by the branch banking provisions appearing in 12 U.S.C. § 36(c). That statute provides generally that a national bank may not operate a branch in circumstances or at locations within a state in or at which a state chartered bank would not be permitted under state law to operate a branch.

For reversal, State Bank contends that in view of relevant provisions of North Dakota law the Comptroller was forbidden by 12 U.S.C. § 36(c) to authorize the maintenance and operation of the CBCT's involved in the case. The district court rejected that contention, and the district court also found with respect to the particular machines in question that the Comptroller did not act arbitrarily or capriciously or abuse his administrative discretion when he authorized the maintenance and use of the machines. ²

Prior to the adoption of the so-called McFadden Act of 1927, which was an amendment to the National Bank Act, national banks were not permitted to engage in branch banking. The 1927 statute permits national banks to establish branches with the approval of the Comptroller but subject to the important limitation that a national bank domiciled in a given state cannot establish a branch unless a state chartered bank in the same state could establish a branch at the location or in the area involved. And, as indicated, it is on that limitation that State Bank relies in this case.

Whether a national bank may establish and operate a branch in a given state or

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at a particular point in that state is governed by state law. First Nat'l Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966). But the question of whether a particular operation or facility of a national bank constitutes a "branch bank" is a question of federal law. First Nat'l Bank in Plant City v. Dickinson, 396 U.S. 122, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969).

Recent years have been characterized by increasing competition between banks and between banks and other types of financial institutions. Those years have also been characterized by tremendous advances in electronic technology including the development of CBCT's and similar machines.

Efforts on the part of national banks to establish branches are frequently opposed both by...