Old Kent Bank and Trust Company v. William McC Martin, Jr., Individually and as Chairman of the Board of Governors of the Federal Reserve System

281 F.2d 61

• Court: Court of Appeals for the D.C. Circuit
• Decided: September 9, 1960
• Docket: 15244_1
• Status: Published

Opinions

EDGERTON, Circuit Judge.

Appellant is a State bank and a member of the Federal Reserve System. It was formed by a merger or consolidation, “under the charter” of a predecessor State bank and under State law, between that predecessor and a national bank. It proposes to operate branches that were operated, until the merger, by the national bank.

Section 9 of the Federal Reserve Act, as amended, provides: “* * * Upon the merger or consolidation of a national bank with a State member bank under a State charter, the membership of the State bank in the Federal Reserve System shall continue. * * * The approval of the Board [of Governors of the Federal Reserve System] shall * * * be obtained before any State member bank may establish any new branch * * *.” 66 Stat. 633, 12 U.S.C.A. § 321 (1958 ed.).

The Board has disapproved appellant’s operation of the branches formerly operated by the national bank, on the ground that this would have an “adverse effect * * * on competition * * Appellant asked the District Court for a declaratory judgment that the Board’s disapproval is not within its statutory authority and is illegal. This appeal is from a summary judgment for the Board.

We think the court erred. In our opinion the statutory word “establish” does not include “operate after acquiring by merger”, and the statutory phrase “any new branch” of a State member bank does not include “any existing branch of a national bank that merges with a State member bank.” In short, we think a State bank does not “establish any new branch” when it retains the branches it has acquired by mergér.

The Board is not, ahd does not claim to be, authorized to ptfevent the merger of the two banks. It should follow, in the absence of clear language to the contrary, that the Board has no authority to prevent the incident of merger which is involved here. We find no such contrary language. Moreover, the Federal Reserve Act provides that when a national banking association merges or consolidates with a State bank under a State charter, “the resulting State bank shall be considered the same business and corporate entity as the national banking association, although as to rights, powers, and duties the resulting bank is a State bank.” 64 Stat. 456, 12 U.S.C.A. § 214b (1952 ed.). If Congress had meant to require “the same business and corporate entity as the national banking association” to get the Board’s approval in order to continue operating the association’s branches, we think Congress would have said so.

Reversed.