State Bank of Fargo v. MERCHANTS NAT. BANK & TRUST

• Decision Date: 31 May 1978
• Docket Number: Civ. No. A3-76-9.
• Citation: 451 F. Supp. 775
• Parties: STATE BANK OF FARGO, a North Dakota State Banking Association, Plaintiff, v. The MERCHANTS NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association, and John G. Heimann, Comptroller of the Currency, Defendants.
• Court: U.S. District Court — District of South Dakota

451 F. Supp. 775

STATE BANK OF FARGO, a North Dakota State Banking Association, Plaintiff, v. The MERCHANTS NATIONAL BANK AND TRUST COMPANY OF FARGO, a National Banking Association, and John G. Heimann, Comptroller of the Currency, Defendants.

Civ. No. A3-76-9.

United States District Court, D. North Dakota, Southeastern Division.

May 31, 1978.

COPYRIGHT MATERIAL OMITTED

Norman G. Tenneson, Tenneson, Serkland, Lundberg & Erickson, Fargo, N. D., for plaintiff.

Frank J. Magill, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., for Merchants.

Dorsey, Windhorst, Hannaford, Whitney & Halladay, Minneapolis, Minn., for defendants; David A. Ranheim, of counsel.

James R. Britton, U. S. Atty., Fargo, N. D., for Comptroller.

MEMORANDUM OF DECISION AND ORDER

BENSON, Chief Judge.

Plaintiff in the above-entitled action challenges the granting by defendant Comptroller of the Currency¹ (Comptroller) of branch certificates for the operation of two customer electronic funds transfer centers, otherwise known as customer bank communications terminals (CBCTs),² by defendant The Merchants National Bank and Trust Company of Fargo (Merchants).³ In the amended complaint, plaintiff alleges that the Comptroller's actions in granting the CBCT branch certificates were arbitrary, capricious, unlawful and "contrary to and in violation of 12 U.S.C. 36 and were not authorized or permitted by the provisions of Section 6-03-13.1 through 6-03-13.4 of the North Dakota Century Code." Plaintiff further alleges the CBCT operations of Merchants "have not been approved by the State Banking Board of North Dakota as required by" Section 6-03-02, subsection 8 of the North Dakota Century Code. In the prayer for relief, plaintiff seeks a declaration that the CBCT operations of Merchants are illegal, and an order nullifying the action of the Comptroller granting the CBCT branch certificates and enjoining the Comptroller from "authorizing branch certificates for" such CBCTs, and further enjoining Merchants from operating the two CBCTs in question. Jurisdiction is predicated upon 12 U.S.C. § 36, 5 U.S.C. §§ 701 et seq., and 28 U.S.C. § 1331.

The matter was before this court once before on defendants' motion to stay proceedings. That motion was granted, and the proceedings were stayed pending administrative action by the Comptroller on applications by Merchants for branch certificates authorizing operation of the CBCTs in question as branches.⁴ CBCT branch certificates were issued on Merchants' applications in March of 1977. Subsequent to issuance of the CBCT branch certificates (and subsequent to the filing of the amended complaint), Merchants filed a motion for summary judgment pursuant to Rule 56(b), F.R.Civ.P., and the Comptroller filed a "motion to dismiss Rule 12(b)(1), (6), F.R. Civ.P. or, in the alternative, for summary judgment," under Rule 56(b). These motions, as well as a motion filed by the Comptroller for a protective order,⁵ were argued at a hearing before the court and taken under advisement at the conclusion of the hearing.

The record before the court consists of the pleadings and motions (with supporting and resisting briefs and materials), certain discovery material, the complete administrative records compiled by the Comptroller on the two CBCT branch applications filed by Merchants and the record made at the hearing.

Under Rule 56(c), F.R.Civ.P., a moving party is entitled to summary judgment only if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that such party is entitled to a judgment as a matter of law. Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 467, 82 S.Ct. 486, 488, 7 L.Ed.2d 458 (1962). Only when "`it is quite clear what the truth is and that no genuine issue remains for trial'" is summary judgment appropriate. Pfizer, Inc. v. International Rectifier Corp., 538 F.2d 180, 184 (8th Cir. 1976), cert. denied, 429 U.S. 1040, 97 S.Ct. 738, 50 L.Ed.2d 751 (1977), quoting Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627, 64 S.Ct. 724, 88 L.Ed. 967 (1944) (brackets in original). These summary judgment standards are applicable in actions wherein administrative action of the Comptroller is under review. See Merchants & Planters Bank of Newport, Ark. v. Smith, 516 F.2d 355 (8th Cir. 1975) (Per Curiam); First Nat. Bank of Fayetteville v. Smith, 508 F.2d 1371, 1374 (8th Cir. 1974), cert. denied, 421 U.S. 930, 95 S.Ct. 1655, 44 L.Ed.2d 86 (1975); Bank of Commerce of Laredo v. City Nat. Bank of Laredo, 484 F.2d 284, 289 (5th Cir. 1973), cert. denied, 416 U.S. 905, 94 S.Ct. 1609, 40 L.Ed.2d 109 (1974).

I. The Record Before the Court and the Applicable Law

The Comptroller is the Chief Administrator of the Office of the Comptroller of the Currency, Department of the Treasury. He is charged with the administration of the National Bank Act, 12 U.S.C. §§ 21 et seq., and related statutes. As Comptroller, he has been granted authority by Congress to regulate certain activities of national banks, including authority to investigate and approve or disapprove applications to establish new national banks (12 U.S.C. §§ 26-27); to investigate and approve or disapprove applications by national banks to change their names (12 U.S.C. § 30); to supervise the operations of the national banking system through various procedures including periodic examinations (12 U.S.C. § 481); and to investigate and approve or disapprove applications by national banks to establish branches (12 U.S.C. § 36).

With respect to branch banking by national banks, 12 U.S.C. § 36 provides in part as follows:

The conditions upon which a national banking association may retain or establish and operate a branch or branches are the following:

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(c) A national banking association may, with the approval of the Comptroller of the Currency, establish and operate new branches: (1) Within the limits of the city, town or village in which said association is situated, if such establishment and operation are at the time expressly authorized to State banks by the law of the State in question; and (2) at any point within the State in which said association is situated, if such establishment and operation are at the time authorized to State banks by the statute law 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. . . .

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The effect of Section 36(c) is to incorporate into the National Bank Act the branching limitations of each state, insofar as branch banking by national banks located in the respective states is concerned.

Under North Dakota law, "branch" banking is not allowed except: (1) at a separate drive-in facility (N.D.Cent.Code §§ 6-03-13.1 through 6-03-13.4); (2) at paying and receiving stations (N.D.Cent.Code §§ 6-03-14 through 6-03-19); and (3) at customer electronic funds transfer centers, otherwise known as customer bank communications terminals (CBCTs) (N.D.Cent.Code § 6-03-02, subsection 8).⁶ The North Dakota CBCT provision, involved in the branching dispute before the court, reads as follows:

Powers.—After an association state banking association, as defined in N.D. Cent.Code § 6-01-02 (Supp.1977) has made and filed articles of association and an organization certificate, it shall become a body corporate, and as such, and in the name designated in the certificate, it, subject to section 6-03-01, shall have the power:

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8. To exercise, by its board of directors or duly authorized officers or agents subject to law, all such incidental powers as shall be necessary to carry on the business of banking, including: . . . providing services to its customers involving electronic transfer of funds to the same extent that other financial institutions chartered and regulated by an agency of the federal government are permitted to provide such services within this state. A bank which provides electronic funds transfer equipment and service to its customers, at premises separate from its main banking house or duly authorized paying and receiving station or facility approved by the state banking board, must make such equipment and service available for use by customers of any other bank upon the request of such other bank to share its use and the agreement of such other bank to share pro rata all costs incurred in connection with its installation and operation, and such electronic operations shall not be deemed to be the establishment of a branch, nor of a paying and receiving station, nor of a separate facility. Such electronic operations at premises separate from its banking house or duly authorized paying and receiving station or facility, shall be considered a customer electronic funds transfer center and may be established subject to rules and regulations that the state banking board shall adopt.

N.D.Cent.Code § 6-03-02, subsection 8. The "rules and regulations" for establishment of CBCTs by state banking associations were adopted by the State Banking Board on July 28, 1976, in N.D.Reg. 6-03-02(8), "Regulations For The Establishment of Customer Electronic Funds Transfer Centers." They provide in part as follows:

1. Pursuant to Section 6-03-02(8), North Dakota Century Code, the State Banking Board is prepared to authorize the establishment of customer electronic funds transfer centers by state-chartered banks.

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4. The criteria for approval of customer electronic funds transfer centers shall be whether or not the establishment of such centers would impair the applicant bank's capital structure. There will be no population or distance criteria applied to such centers.

5. A bank may receive and act upon communications from its customers transmitted through customer electronic funds transfer centers

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