First Nat. Bank in Plant City v. Dickinson, 396 U.S. 122 (1969)

U.S. Supreme Court FIRST NATIONAL BANK v. DICKINSON, 396 U.S. 122 (1969) 396 U.S. 122

FIRST NATIONAL BANK IN PLANT CITY v. DICKINSON, COMPTROLLER OF FLORIDA, ET AL. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT No. 19. Argued October 16, 1969 Decided December 9, 1969*

[Footnote *] Together with No. 34, Camp, Comptroller of the Currency v. Dickinson, Comptroller of Florida, et al., also on writ of certiorari to the same court.

[Page 396 U.S. 122, 125]

bank is to be carried on at that place "and not elsewhere."[Footnote 1] The issue must be resolved by determining what constitutes a "branch" or "additional office"; there is a threshold question of the extent to which this is governed by federal law.

[Page 396 U.S. 122, 126]

cash or checks for deposit. The Comptroller's letter authorizing the armored car messenger service relied upon paragraph 7490 of the Comptroller's Manual for National Banks,[Footnote 2] a relatively recent ruling which specifically authorizes such a service. A second letter authorizing construction of an off-premises receptacle authorized such a service "as an incident to" the bank's ordinary business. Both letters contained explicit instructions to First National designed to insure that deposits so received would not become bank liabilities until actually in the hands of the bank teller at the chartered office or regular "banking house"; and that checks cashed for customers would be deemed paid at the bank when the cash was handed to the messenger, not when the cash was delivered to the customer by the armored car teller.

[Page 396 U.S. 122, 127]

Dual Control Contract,"[Footnote 3] arrange to have the armored car call at their place of business to pick up cash and checks for deposit, or to bring cash to them in exchange for checks delivered to the armored car teller. The contract provided that in each situation the bank's armored car messenger would be the agent of the customer. Additionally, proffered deposits were accompanied by a transmittal slip upon which the customer itemized the funds being deposited in the same manner as with deposits made at the chartered office of the bank. The transmittal slip contained a "Contract" which provided that in this off-premises transaction the bank was the agent of the customer, and that "the transmittal of said currency, coin and checks, shall not be deemed to be a deposit until delivered into the hands of the bank's tellers at the said banking house."[Footnote 4] Sums

[Page 396 U.S. 122, 130]

Supp. 449 (D.C. N. D. Fla. 1967). The Court of Appeals reversed, 400 F.2d 548 (C. A. 5th Cir. 1968). We affirm the Court of Appeals.

Federal Statute and Policy

The conditions under which national banks may establish branches are embodied in 7 of the McFadden Act, 44 Stat. 1228, as amended, codified in 12 U.S.C. 36. One such condition is that a "branch" may be established only when, where, and how state law would authorize a state bank to establish and operate such a branch, 12 U.S.C. 36 (c).[Footnote 5] First National Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252 (1966).

We have noted that the State of Florida permits no branch banking under a statute providing that banks are to "have only one place of doing business"; the business of the bank may be transacted at that place "and not elsewhere."[Footnote 6] The parties agree generally that the McFadden Act permits national banks to branch if and only if the host State would permit one of its own banks to branch; the Florida Bank Comptroller insists that the State of Florida unequivocally forbids off-premises banking

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the members of the Conference Committee, Representative Luce, with this statement:

"In the controversy over the respective merits of what are known as `unit banking' and `branch banking' . . . branch banking has been steadily gaining in favor. It is not, however, here proposed to give the advocates of branch banking any advantage. We do not go an inch beyond saying that the two ideas shall compete on equal terms and only where the States make the competition possible by letting their own institutions have branches." 385 U.S., at 260, quoting from 77 Cong. Rec. 5896 (1933). (Emphasis supplied.)

The policy of competitive equality is therefore firmly embedded in the statutes governing the national banking system. The mechanism of referring to state law is simply one designed to implement that congressional intent and build into the federal statute a self-executing provision to accommodate to changes in state regulation.

We reject the contention made by amicus curiae National Association of Supervisors of State Banks to the effect that state law definitions of what constitutes "branch banking" must control the content of the federal definition of 36 (f).[Footnote 7] Admittedly, state law comes into play in deciding how, where, and when branch banks may be operated, Walker Bank, supra, for in 36 (c) Congress entrusted to the States the regulation of branching as Congress then conceived it. But to allow the States to define the content of the term "branch" would make them the sole judges of their own powers. Congress

[Page 396 U.S. 122, 134]

did not intend such an improbable result, as appears from the inclusion in 36 of a general definition of "branch." On this point the language of the Court of Appeals perhaps overstated the relation of state law to the problem, since the threshold question is to be determined as a matter of federal law, having in mind the congressional intent that so far as branch banking is concerned "the two ideas shall compete on equal terms and only where the States [allow] their own institutions [to] have branches." In short, the definition of "branch" in 36 (f) must not be given a restrictive meaning which would frustrate the congressional intent this Court found to be plain in Walker Bank, supra.[Footnote 8]

[Page 396 U.S. 122, 136]

by the private contract. Since these contracts must be interpreted under state law, the argument runs, no "deposit" is actually received as such until monies delivered to the armored car or the receptacle are physically delivered into the hands of a bank teller at the chartered premises. Until such time the bank may not, under the contracts, be held to account for the customer's funds.

We have no difficulty accepting the bank's argument that the debtor-creditor relationship is a creature of contract and that the parties can agree that until monies are physically delivered to the bank no deposit will be credited to the customer's account.[Footnote 9] We are satisfied, however, that the contracts have no significant purpose other than to remove the possibility that the monies received will become "deposits" in the technical and legal sense until actually delivered to the chartered premises of the bank.

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in its competition for customers. Unquestionably, a competitive advantage accrues to a bank that provides the service of receiving money for deposit at a place away from its main office; the convenience to the customer is unrelated to whether the relationship of debtor and creditor is established at the moment of receipt or somewhat later.

We need not characterize the contracts as a sham or subterfuge in order to conclude that the conduct of the parties and the nature of their relations bring First National's challenged activities within the federal definition of branch banking. Here, penetrating the form of the contracts to the underlying substance of the transaction, we are satisfied that at the time a customer delivers a sum of money either to the armored truck or the stationary receptacle, the bank has, for all purposes contemplated by Congress in 36 (f), received a deposit. The money is given and received for deposit even though the parties have agreed that its technical status as a "deposit" which may be drawn on is to remain inchoate for the brief period of time it is in transit to the chartered bank premises. The intended deposits are delivered and received as part of a large-scale continuing mode of conducting the banking business designed to bring basic bank services to the customers.

Since the putative deposits are in fact "received" by a bank facility apart from its chartered place of business, we are compelled, in construing 36 (f), to view the place of delivery of the customer's cash and checks accompanied by a deposit slip as an "additional office, or . . . branch place of business . . . at which deposits are received."[Footnote 10]

[Page 396 U.S. 122, 138]

Here we are confronted by a systematic attempt to secure for national banks branching privileges which Florida denies to competing state banks. The utility of the armored car service and deposit receptacle are obvious; many States permit state chartered banks to use this eminently sensible mode of operations, but Florida's policy is not open to judicial review any more than is the congressional policy of "competitive equality." Nor is the congressional policy of competitive equality with its deference to state standards open to modification by the Comptroller of the Currency.[Footnote 11]

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the currency, coin and checks detailed on the front side hereof to the bank's offices at 302 West Haines Street, Plant City, Fla. for deposit to Principal's account. It is agreed and understood by Principal and the bank that in transmitting said currency, coin and checks, the bank is acting solely as agent for said Principal and that the transmittal of said currency, coin and checks, shall not be deemed to be a deposit until delivered into the hands of the bank's tellers at the said banking house. "The bank maintains hazard insurance covering holdup, employee fidelity, etc. for the protection of the Principal for all amounts and items delivered to the bank's messenger by said Principal."

Footnote 5 The National Bank Act, 44 Stat. 1228, 12 U.S.C. 36 (c) (1) and (2) provides: "(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."

Footnote 6 See n. 1, supra.

Footnote 7 In their briefs before this Court, the litigants are all in agreement that federal law alone applies to resolve the threshold question whether the challenged activity falls within the definition of "branch." Reply Brief for the Comptroller of the Currency 2; Respondents' Brief 41, 44.

Footnote 8 Representative McFadden described the definitional section of the Act as providing that: "Any place outside of or away from the main office where the bank carries on its business of receiving deposits, paying checks, lending money, or transacting any business carried on at the main office, is a branch." 68 Cong. Rec. 5816 (1927).

Footnote 9 5A A. Michie on Banks and Banking 4a, 5, 14, 15 and 17 (1950); 10 Am. Jur. 2d Banks 358 (1963); 9 C. J. S. Banks and Banking 269 (1938).

Footnote 10 We need not here try to draw fine distinctions around relatively isolated, sporadic, and inconsequential transactions where a bank employee carries cash to a customer to cash a check, or secures a signature on a note in exchange for a check delivered off premises.

Footnote 11 In 1963 Comptroller Saxon, author of  7490 in the Comptroller's Manual for National Banks, supra, n. 2, declared that "[t]he branching powers of National Banks should, in my judgment, not be limited according to those policies which the individual States find appropriate to meet their local needs through State-chartered banks." Saxon, Branching Powers and the Dual Banking System, 101 Comp. Currency Ann. Rep. 316, 318 (1963). During the course of the congressional debates over what became the McFadden Act, Representative Stevenson remarked: "[Y]ou have branches in the Federal reserve system established by the dictum of the Comptroller of the Currency, who has assumed to say that he can allow a national bank to establish as many agencies for receiving deposits and paying checks as he sees fit. . . . I will show presently that we cut that out, root and branch." 66 Cong. Rec. 1627.

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The Comptroller's definition of "deposits" should be honored here. For where the risk is on the customer that his cash and checks may never reach the bank, he cannot in good sense or in good law be deemed to have made a deposit while the funds are in transit.

By the standards of administrative law honored until today, the Comptroller was justified in defining "deposits" to make the armored cars messengers of the customers, not agents of the bank. So whether common sense or the law is our standard, the judgment of the Court of Appeals should be reversed. The Comptroller's authorization of these armored car activities as being permissible under the National Bank Act was an interpretation of the Act which, as MR. JUSTICE STEWART says in his dissent, cannot be said to be "not a reasonable one."

[Footnote 1] Par. 7490, Comptroller's Manual for National Banks. This paragraph provides: "To meet the requirements of its customers, a national bank may provide messenger service by means of an armored car or otherwise, pursuant to an agreement wherein it is specified that the messenger is the agent of the customer rather than of the bank. Deposits collected under this arrangement are not considered as having been received by the bank until they are actually delivered to the teller at the bank's premises. Similarly, a check is considered as having been paid at the bank when the money is handed to the messenger as agent for the customer."

[Footnote 2] See SEC v. New England Electric System, 384 U.S. 176, 185; Udall v. Tallman, 380 U.S. 1, 16; United States v. Drum, 368 U.S. 370, 374-376; NLRB v. Coca-Cola Bottling Co., 350 U.S. 264, 269; Unemployment Compensation Comm'n v. Aragon, 329 U.S. 143, 153-154; NLRB v. Hearst Publications, Inc., 322 U.S. 111, 130-131; Gray v. Powell, 314 U.S. 402, 411-413; Rochester Telephone Corp. v. United States, 307 U.S. 125, 145-146; Jaffe, Judicial Review: Question of Law, 69 Harv. L. Rev. 239, 261 (1955); Nathanson, Administrative Discretion in the Interpretation of Statutes, 3 Vand L. Rev. 470, 490-491 (1950).

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