Traverse City State Bank v. Empire National Bank, Civ. A. No. 4036

• Decision Date: 01 May 1964
• Docket Number: Civ. A. No. 4036,4038.
• Citation: 228 F. Supp. 984
• Parties: TRAVERSE CITY STATE BANK, a Michigan banking corporation, Plaintiff, v. The EMPIRE NATIONAL BANK, a national banking association, Defendant. NATIONAL BANK AND TRUST COMPANY OF TRAVERSE CITY, a national banking corporation. Plaintiff. v. The EMPIRE NATIONAL BANK, a national banking corporation, and James J. Saxon, Comptroller of the Currency of the United States, Defendants.
• Court: U.S. District Court — Western District of Michigan

228 F. Supp. 984

TRAVERSE CITY STATE BANK, a Michigan banking corporation, Plaintiff, v. The EMPIRE NATIONAL BANK, a national banking association, Defendant.

NATIONAL BANK AND TRUST COMPANY OF TRAVERSE CITY, a national banking corporation. Plaintiff. v. The EMPIRE NATIONAL BANK, a national banking corporation, and James J. Saxon, Comptroller of the Currency of the United States, Defendants.

Civ. A. Nos. 4036, 4038.

United States District Court W. D. Michigan, S. D.

May 1, 1964.

Murchie, Calcutt & Brown, Traverse City, Mich., Dickinson, Wright, McKean & Cudlip, Detroit, Mich., Robert B. Murchie, Traverse City, Mich., Robert E. McKean, Detroit, Mich., of counsel, for plaintiff Travis City State Bank.

Running & Wise, Traverse City, Mich., Dickinson, Wright, McKean & Cudlip, Detroit, Mich., Harry T. Running, Traverse City, Mich., Robert E. McKean, Detroit, Mich., of counsel, for plaintiff National Bank & Trust Co. of Traverse City.

Williams, Thompson & Coulter, Traverse City, Mich., Maxwell F. Badgley, Jackson, Mich., Fitch R. Williams and K. E. Thompson, Traverse City, Mich., of counsel, for defendant Empire Nat. Bank.

George E. Hill, U. S. Dist. Atty., H. David Soet, Asst. U. S. Dist. Atty., Grand Rapids, Mich., for defendant Comptroller.

FOX, District Judge.

These two cases were filed in February of 1961. Plaintiffs, in their complaints, pray for a declaration that the establishment and operation by the defendant Empire National Bank, of a banking office within or near Traverse City, Michigan, whether by change of location of its principal office, or otherwise, is unlawful. Plaintiffs also prayed for an injunction restraining the defendant bank from prosecuting its application for approval of such an office in Traverse City, and restraining the Comptroller of the Currency from issuing a certificate evidencing approval of the office.

The application for a preliminary injunction was denied on March 10, 1961, by then Chief Judge Raymond W. Starr.¹

Early in the proceedings, defendant Empire filed a motion to dismiss the actions.

Before the Court ruled on defendant Empire's motion to dismiss, the plaintiff filed a motion in National Bank and Trust Company of Traverse City v. The Empire National Bank to add the Comptroller of the Currency as a party defendant. After extensive briefing, oral arguments, and a hearing, the Court, on July 10, 1963, in its opinion filed on July 12, 1963, ordered that the Comptroller be joined as a party defendant.

The Comptroller subsequently filed a motion for a judgment on the pleadings. Defendant Empire's motion to dismiss in Traverse City State Bank v. The Empire National Bank and the Comptroller's motion for judgment on the pleadings in National Bank and Trust Company of Traverse City v. The Empire National Bank, were treated as one in the briefs of the parties and at oral argument, at the direction of the court, and these motions by agreement were treated as motions for Summary Judgment.

After deliberate consideration of the very excellent briefs and arguments in the case, this Court concludes there is no genuine dispute as to any material issue of fact, and that the respective motions of the Comptroller and the defendant bank must be granted. Findings of fact and conclusions of law in support of this judgment are hereafter set forth.

Plaintiff National Bank and Trust Company of Traverse City is a national banking association having its principal office in the City of Traverse City, Michigan. Plaintiff Traverse City State Bank is a Michigan banking corporation, having its principal office in the City of Traverse City, Michigan.

Defendant, The Empire National Bank, is a national banking association, having its principal office in the City of Traverse City, Michigan. Defendant James J. Saxon is the Comptroller of the Currency of the United States.

Before February 15, 1961, the defendant, The Empire National Bank, was a Michigan banking corporation with the name "Empire State Bank" and with its principal office in the Village of Empire, Michigan.

On July 14, 1958, the defendant bank, then a Michigan banking corporation, filed an application with the Commissioner of the State Banking Department of Michigan for permission to move its main office from the Village of Empire to a point just north of Traverse City, and a month later it applied to the State Banking Commissioner for permission to establish a branch office in Empire.

The State Banking Commissioner did not pass on either application, but he did issue a certificate of authority permitting the defendant bank to establish a branch office at the location where it desired to move its principal office. The defendant bank thereafter established this branch office on August 17, 1959.

On August 24, 1959, the Traverse City State Bank and the First Peoples State Bank (now National Bank and Trust Company of Traverse City, plaintiff in this suit) brought suit under Section 23.739 of the Michigan Statutes Annotated,² in the Circuit Court for the County of Ingham. This statute provides for judicial review of any decision by the State Banking Commissioner.

In a decree filed June 29, 1960, the Circuit Court for the County of Ingham overruled the Commissioner by holding that there was no "necessity" for the new branch. Section 23.762 of the Michigan Statutes Annotated provides that a new branch office shall not be approved unless there is "necessity for the establishment of such branch."³

Before February 15, 1961, defendant Empire State Bank filed an application for approval of the Comptroller of the Currency to be converted into a national banking association. Defendant also sought to have its chosen name, The Empire National Bank, approved by the Comptroller. 12 U.S.C.A. § 35.

On February 15, 1961, the conversion from Empire State Bank to The Empire National Bank was approved by the then Comptroller of the Currency, Ray M. Gidney.

On February 16, 1961, defendant Empire National Bank made application to the Comptroller of the Currency pursuant to 12 U.S.C.A. § 30, for approval of the Comptroller to change the location of its main office from Empire, Michigan, to Traverse City, Michigan, which is within a distance of thirty miles from Empire, Michigan.

At the same time, defendant bank made application to operate its then main office in the Village of Empire as a branch, pursuant to 12 U.S.C.A. § 36.

Application was also made for approval of a change in the name of defendant from The Empire National Bank to Empire National Bank of Traverse City.

On June 27, 1961, Comptroller Gidney issued a certificate approving the change in defendant bank's name, and approving a change in the location of the main office to Traverse City. The Comptroller also issued a certificate authorizing the continuance of defendant bank's operation in Empire as a branch. Defendant bank has been operating its main office in Traverse City since that time.

On February 21 and 24, 1961, these plaintiffs instituted the present action, seeking the relief set out above.

In granting the request for change of location of defendant bank, the Comptroller was necessarily acting pursuant to Title 12 U.S.C.A. § 30:

"Any national banking association, with the approval of the Comptroller of the Currency, may change its name or change the location of the main office of such association within the limits of the city, town, or village in which it is situated. Any national banking association, with the approval of the Comptroller of the Currency, may change the location of the main office of such association to any other location outside the limits of the city, town, or village in which it is located, but not more than thirty miles distant, by the vote of shareholders owning two-thirds of the stock of such association. A duly authenticated notice of the vote and of the new name or location selected shall be sent to the Comptroller of the Currency; but no change of name or location shall be valid until the Comptroller shall have issued his certificate of approval of the same." (Emphasis supplied.)

On February 15, 1961, defendant became a national bank, subject to the federal laws, rules and regulations, and to the administrative control of the Comptroller of the Currency. On that date the Comptroller of the Currency certified defendant had complied with all statutory requirements of the National Banking Act essential to convert into a national banking association. From that time forward defendant bank "and all its stockholders, officers, and employees * * * had the same powers and privileges, and * * * were subject to the same duties, liabilities, and regulations, in all respects, * * * which had been prescribed by the Federal Reserve Act and the National Banking Act for associations originally organized as national banking associations." 12 U.S.C.A. § 35. (Emphasis supplied.)

An analysis of the briefs of the parties and the record in this case demonstrates that the primary, essential challenge by the plaintiffs is that the move of The Empire National Bank to Traverse City in this suit is foreclosed and illegal because it is contrary to the decision of the Circuit Court for Ingham County discussed above, which held that there was no necessity for a new banking facility in Traverse City.

Plaintiffs claim the decision of the Ingham County Circuit Court is res judicata in the instant case, or that defendant bank and the Comptroller are equitably estopped by that decision.

The state circuit court's decision interpreted the state law applicable to a state bank, and the exercise of discretion by the State Banking Commissioner under the state branch banking law. When defendant bank was fully converted from a state banking association to a national banking association, it ceased to be subject to state banking laws and the state banking commissioner insofar as they relate to the administration of the defendant as a banking association.

Plaintiffs cite Michigan...