Webster Groves Trust Company v. Saxon, 18346.

• Decision Date: 14 December 1966
• Docket Number: No. 18346.,18346.
• Citation: 370 F.2d 381
• Parties: WEBSTER GROVES TRUST COMPANY, Appellant, v. James J. SAXON, Comptroller of the Currency of the United States, and West Side National Bank, a National Banking Association, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

370 F.2d 381 (1966)

WEBSTER GROVES TRUST COMPANY, Appellant, v. James J. SAXON, Comptroller of the Currency of the United States, and West Side National Bank, a National Banking Association, Appellees.

No. 18346.

United States Court of Appeals Eighth Circuit.

December 14, 1966.

COPYRIGHT MATERIAL OMITTED

Edwin S. Taylor, of Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for appellant; Thomas V. Connelly, St. Louis, Mo., on the brief.

David L. Rose, Attorney, Dept. of Justice, Washington, D. C., for appellee, James J. Saxon, Comptroller of Currency; John W. Douglas, Asst. Atty. Gen., and Jack H. Weiner, Attorney, Dept. of Justice, Washington, D. C., and Richard D. FitzGibbon, Jr., U. S. Atty., St. Louis, Mo., on the brief.

William H. Biggs, of Biggs, Hensley, Curtis & Biggs, St. Louis, Mo., for appellee, West Side Nat. Bank.

Before VOGEL, Chief Judge, GIBSON, Circuit Judge, and REGISTER, District Judge.

GIBSON, Circuit Judge.

Appellant, Webster Groves Trust Company, and others sued James J. Saxon, Comptroller of the Currency, and the West Side National Bank, seeking to enjoin the operation of the newly chartered West Side National Bank and to compel Saxon to grant a formal adversary hearing before finally passing upon the Bank's charter application. The Honorable Roy W. Harper, United States District Judge for the Eastern District of Missouri, denied relief and awarded judgment in favor of the defendants in an opinion reported at 249 F.Supp. 557. We affirm.

Plaintiffs below were eight commercial banking houses (seven state banks and one national bank) doing business in suburban St. Louis County, Missouri, within approximately a four-mile radius of the newly established place of business of defendant West Side National Bank.

On July 31, 1964, defendant West Side National Bank filed an application for a charter as a national bank with Saxon, Comptroller of the Currency, pursuant to the statutes and regulations controlling such applications. See 12 U.S.C. § 21 et seq. and 12 C.F.R. § 4.1 et seq. Pursuant to these regulations, the Comptroller caused a field investigation to be made of the applicant and the surrounding circumstances. In accordance with the established practice, the agent-examiners of Saxon called upon the competitors of the applicant bank, informed them of West Side's application and ascertained their reaction to the application.

On August 21, 1964, the president of appellant Webster Groves Trust Company wrote the Comptroller, advising him of Webster Groves' opposition to the granting of the charter and requesting a formal hearing on the application. By letter of August 27, 1964, the Deputy Comptroller agreed to discuss the matter, and a meeting was arranged to take place in Washington, D. C. on October 6, 1964. At this conference, the representatives of Webster Groves and another objecting bank met with a Deputy Comptroller. On behalf of the objecting banks, Webster Groves filed a written protest to the granting of the charter and requested that they be furnished a copy of the application and that a formal hearing be held for the purpose of crossexamining the applicant and presenting evidence in opposition to the charter. The Deputy Comptroller indicated that the views of the objecting banks would be taken into consideration, but he did not accede to the request for a formal hearing.

On December 12, 1964, the Comptroller approved the application for the establishment of the West Side National Bank, without holding any formal hearing.

On January 27, 1965, Webster Groves and seven other banks brought this action against the Comptroller and the West Side National Bank, seeking to have the issuance of the charter declared unlawful, directing the Comptroller to cancel the charter and to conduct a formal hearing prior to the granting of another charter, and to enjoin West Side National Bank from establishing and operating its bank during the interim. Webster Groves Trust Company is the only one of the original eight plaintiffs that is appealing the District Court's judgment.

The appellant acknowledges that this is a case of first impression on the precise issue of whether the Comptroller, in processing an application for a national bank charter, must hold a formal adversary hearing upon request of a competitor bank. Appellant contends it is entitled to a formal hearing at which it and other interested parties may be present, after due notice, and be afforded an opportunity to interrogate and cross-examine the applicants and present evidence in opposition; and, further, that a record be made so that a judicial review can be accorded as set forth in § 10(e) of the Administrative Procedure Act, (A. P.A.) 5 U.S.C. § 1009(e).

The Comptroller takes the position that neither the appellant nor any of the competitor banks have a standing to challenge the chartering of a new national bank; that the chartering of a new national bank is discretionary and is not subject to judicial review, and that he may pass upon charter applications informally, without a formal adversary hearing.

We believe that competing banks, as interested parties, have a right to challenge illegal acts of the Comptroller and that the Comptroller's discretionary actions are not immunized from judicial review, but we also believe that neither the National Banking Act, 12 U.S.C. § 21 et seq., the Administrative Procedure Act, nor procedural due process requires a formal hearing of the type sought by appellant.

The National Banking Act is the source of the Comptroller's powers and duties in the granting of a national bank charter. This Act sets forth no requirement of a formal hearing on an application for a charter. The legislative history of the Act clearly indicates that no formal hearing was intended by Congress. After enumerating the detail requirements, 12 U.S.C. § 27 authorizes the Comptroller to issue a certificate of authority:

"If, upon a careful examination of the facts so reported, and of any other facts which may come to the knowledge of the comptroller, whether by means of a special commission appointed by him for the purpose of inquiring into the condition of such association, or otherwise, it appears that such association is lawfully entitled to commence the business of banking * *."

The Comptroller's practice for over one hundred years has been to proceed informally on these new bank applications. This practice has received the approval of the Attorney General's Committee on Administrative Procedure and has gone unchallenged in at least the appellate courts for the same period of time.¹

The very nature of the decision required by the Comptroller indicates that a formal adversary type hearing would be of little benefit to him in the discharge of his discretionary powers. There is the further factor present that if bank applicants were subjected to severe public cross-examination, public presentation of unfavorable evidence and were forced to disclose their future plans and programs to competitors, public confidence in the banking system could be adversely affected.

There are a series of cases allowing judicial review of the Comptroller's actions in approving the establishment and location of a branch bank within state statutory guidelines in those states which allow branch banking. The review is generally limited to an abuse of discretion or actions beyond legal authority. First National Bank of Smithfield, North Carolina v. Saxon, 352 F.2d 267 (4 Cir. 1965), Camden Trust Company v. Gidney, 112 U.S.App.D.C. 197, 301 F.2d 521 (1962), cert. denied 369 U.S. 886, 82 S.Ct. 1158, 8 L.Ed.2d 287; Community National Bank of Pontiac v. Saxon, 310 F.2d 224 (6 Cir. 1962); National Bank of Detroit v. Wayne Oakland Bank, 252 F.2d 537 (6 Cir. 1956), cert. denied 358 U.S. 830, 79 S.Ct. 50, 3 L.Ed.2d 69.

The appellant seeks to analogize the branch banking application cases to the chartering of a new bank; and then contends that since there is judicial review of the Comptroller's decisions the A.P.A. requires an adversary hearing. Appellant admits that § 5 of the A.P.A., setting up requirements of a formal hearing of an "Adjudication required by statute to be determined on the record after an opportunity for an agency hearing," does not expressly apply to the grant of a national bank charter, so that its only basis for legislative support for a formal hearing lies, if at all, within the ambit of § 10(e) of the A.P.A., 5 U.S.C. § 1009(e). Appellant then postulates this position into a contention that a hearing substantially equivalent to a § 5 hearing is necessary for an adequate judicial review.

Section 10(e) of the Administrative Procedure Act, 5 U.S.C. § 1009(e), provides in part:

"Scope of review.

"(e) So far as necessary to decision and where presented the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of any agency action. It shall * * * (B) hold unlawful and set aside agency action, findings, and conclusions found to be (1) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law; * * * or (6) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court. In making the foregoing determinations the court shall review the whole record or such portions thereof as may be cited by any party, and due account shall be taken of the rule of prejudicial error."

We do not accept appellant's argument. We do not think that the Administrative Procedure Act imposes any requirement of an adversary hearing before an agency, but that it only specifies the procedure to be followed when a hearing is required by some other statute. There is some legislative history indicating that the Act was intended to be applicable "only where Congress by some other statute has prescribed that the agency shall act only on a hearing." (Statement of...