Petition for Writ of Certiorari — Bank of Commerce v. City National Bank

Supreme Court brief1974

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—ee Supreme Court, U. $.

' ABS ara t *

Ran: are FILED

SUPREME: \*

JAN 22 1974

MICHAEL RODAK, JR..CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

TERM, 197

no, ©€8- 1142

BANK OF COMMERCE OF LAREDO,

PETITIONER

CITY NATIONAL BANK OF LAREDO, ET AL

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

Jacob G. Hornberger

915 Victoria Street

Laredo, Texas 78040

Attorney for Petitioner

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TABLE OF CONTENTS

Page

TABLE OF CASES <660 50 cicbecccccueccs i

Ce BELA sc ececewcccocunceceve 2

JURISDICTION -------~-------- 22-2 - eee 3

QUESTIONS PRESENTED FOR REVIEW --- 3

STATUTORY PROVISIONS INVOLVED -.--- 4

STATEMENT OF THE CASE .----....-...- 7

REASONS FOR GRANTING THE WRIT ---- 19

PUREE Sheed eebatedecekeunsendnewnce 76

CERTIFICATE OF SERVICE --.-......... 81

RPPPEUEE A acececccndtasccoscnccs 1-20

(Opinion of the United States

Court of Appeals, Fifth Circuit)

APPEMIAE B on cceccwwcccwcccccccces 21-22

(Order Denying Petition for

Rehearing)

BPPEMIEE G cesccvsedcccecesesscecs 23-33

(Memorandum and Order of the

United States District Court for

the Southern District of Texas-

Laredo Division)

APPEMIMA DD ocesietcdcnccdnssdanene 34-36

(Final Judgment)

BP e mE Ee K+ ea csansscceccacaectons 37-44

(Order of the Comptroller of

the Currency)

APPENTALR Fo occceccnccscccseccene 45-48

(Title 12, U.S.C. Sections 21,

26 and 27)

)

PMO PONE ted eet eS

TABLE OF CASES

Page

American School of Magnetic Healing v

McAnnulty, 187 US 94, 23 S.Ct. 3

WT E, Be, WO on sseccicaseceunnadauen 56

Bank of Dearborn v Saxon, 244 FS 394 -- 40, 52,53

62, 63

Camden Trust Co. v Gidney, 112 U.S.

App. D. C.197, 301 F2d 521 -------_- 58

Camp vs Pitts, US , 36 L Ed2d 106-

Fae Newt eb dethtantuaeueuwe 40,48

73,79

Citizens to Preserve Overton Park, Inc.

et al v John A. Volpe, Secretary, Dept.

of Transportation, et al, 401 US 402,

28 L Ed 2d 136, 91 S Ct 814 ------___- 41,48

Columbia Broadcasting System, Inc. v

United States, 316 US 407,62 S Ct.

096; 96 1. Bd 1963 o4..~2255...... - 58

2 Davis, Administrative Law, Sec. 11. 06-- 53

First National Bank of Smithfield,

North Carolina v Saxon, 352 F2 270--- 61

Friedman v Schwellenbach, 81 US App.

D.C. 365, 159 F2 22, 330 US 838,

OTS Ce 979; NS Ed 1208 2 255.46555<: 56

SFE TOS EST Taare AE ee

Page

Frost v Corporation Commission of

Oklahoma, 278 US 515,49 S Ct 235

45 Ts RR EBD on he chowapewwcdenncee sag 54

Great Western Packers Express, Inc. v

VeGy COG PE IG) sticncncwevesncaknuc 57

In Re Josephson, 218 F2 174----------__- 45

Kent v Dulles, 357 US 116, 78 S Ct 1113,

Martin v Mott, 12 Wheat 19,25 US 19,

OLE 98?. sicedctiicscdsccniadiu. 55

McBee v Bomar, 296 F2 238 <cncccnccene 45

National Bank of Detroit v Wayne

Oakland Bank, 252 F2 537, 358 US

OOD, TF Ol OOF ota nssctileceseccnn. 54,61

National City Bank of New York v

Republic of China, 348 US 356,

73 S Ct 423, 99 L Ed 389 -........... 56

Orloff v Willoughby, 345 US 83,

19S C4 SOG, FT 1 DG Obs cc cednccuceie 56

Pacific States Box & Basket Co. v

' White, 296 US 176, 80 L Ed 138

i SO DOR 109 a dcddecccvccsncnenesaceee 44

SEC v Chenery Corp., 318 US 60 -....... 51

Shaughnessy v Accardi, 349 US 280,

99 L Ed 1074, 75 S Ct 746 --.--<--<.- 47

o ee Re

eat

Switchmen's Union v National

Mediation Board, 320 US 297

66 3 'Ce 95, OO 1. We OE en ceki coe 59

Union Cartage Co. v United States,

244 F Supp. 1005 ---------..-.-.... 57

Union Savings Bank of Patchogue,

New York v Saxon, 209 FS 319------- 53

Union Savings Bank v Saxon,

118 U.S. App. D.C. 296, 335 F2 718-- 58

United States v Chemical F oundation,

272 US1, 71 L Ed 13l, 41S Ct ]------ 44

United States v Morgan, 313 US 409,

85 L Ed 1429, 61S Ct 999 ---------- 46

> USC, Section TO6s<ocecccccccudcccce 4

5 USC, Section 706 (2) (A) ------------ 44, 49

5 USC, Section 706, (2) (E) ----------- 48

5 USC, Section 706, (2) (F) ----------- 48

> USC, Section 1009 ---...........5... 60

5 USC, Section 1009 (C), Subsec. 10(c)--- 61

12 USC, Sections 21, 26 and 27 --------

IN THE

AO MAIS POS SSC CLI *

SUPREME COURT OF THE UNITED STATES

TERM, 197

NO.

BANK OF COMMERCE OF LAREDO,

PETITIONER

CITY NATIONAL BANK OF LAREDO, ET AL

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE FIFTH CIRCUIT

The petitioner, Bank of Commerce of

Laredo, respectfully prays that a writ of cer-

tiorari issue to review the judgment and opinion

of the United States Court of Appeals for the

Fifth Circuit, entered in this proceeding on

September 13, 1973; and to the order of that

court dated October 25, 1973, denying the

Petitioner's Petition for Rehearing.

OPINIONS BELOW

The opinion of the Court of Appeals for

the Fifth Circuit, which appears at App. A,

pages 1 thru 20, is reported at 484 F2d 284,

Insofar as counsel can determine, the opinion of

the District Court for the Southern District of

Texas, Laredo Division has not been published,

but it is reproduced at App. C, pages 23 thru

33 hereof. The order of the Comptroller of the

Currency appears at App. E, Pages 37 thru 44.

JURISDICTION

The Judgment of the Court of Appeals

for the Fifth Circuit (App.A, pp. 1 thru 20), was

entered on September 13, 1973. A timely Petition

for Rehearing was denied on October 25, 1973.

The jurisdiction of this Court is invoked under

28 USC Section 1254 (1).

QUESTIONS PRESENTED FOR REVIEW

l. Did the trial court err in denying

the plaintiff (petitioner herein) the

right to the use of discovery processes?

2. Did the trial court err in refusing

to order the Comptroller of the

Currency to explain the reasons for his

decision approving the application for

the charter of the defendant bank?

PLIERS CIOS SLE OR, LE PEE LM AL ES PR EO

ie aa hr taast

706

3. Did the trial court err in hold-

ing that the Comptroller's deci-

sion approving the application for

the charter of the defendant bank

was not arbitrary, capricious

or otherwise not in accordance

with law and in granting the

defendants' motion for summary

judgment on that basis?

STATUTORY PROVISIONS INVOLVED

Title 5, United States Code, Section

'706. Scope of review. --To the

extent necessary to decision ail when

presented, the reviewing court shall

decide all relevant questions of law,

interpret constitutional and statutory

provisions, and determine the mean-

-4-

LEROEOLI SL,

PLAIN

sind te, incenth ded.

ing or applicability of the terms of

an agency action. The reviewing

court shall--

(1) compel agency action unlaw-

fully withheld or unreasonably delayed ;

and (2) hold unlawful and set aside

agency action, findings and conclusions

found to be--

(A) arbitrary, capricious, an

abuse of discretion, or otherwise not

in accordance with law;

(B) contrary to constitutional

right, power, privilege or immunity;

diction, authority, or limitations, or

short of statutory right;

(D) without observance of pro-

cedure required by law;

(E) unsupported by substantial evi-

dence in a case subject to sections 556

and 557 of this title or otherwise re-

viewed on the record of an agency hear-

ing provided by statute; or

(F) 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

those parts of it cited by a party, and due

account shall be taken of the rule of pre-

judicial error. (Sept. 6, 1966, P.L. 89-

554§1, 80 Stat. 393,"

and Title 12 USC, being the National Bank Act,

and particularly Sections 21, 26 and 27 of said

Title 12, which sections are reproduced at

Appendix F, pp. 45 thru 48 °

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STATEMENT OF THE CASE

Federal Jurisdiction in the Court of

the first instance was invoked under the provi-

sions of Title 5, Section 706, United States Code,

and Title 12, United States Code, and particularly

Sections 21, 26 and 27 thereof,

An application for a charter of the

proposed defendant, City National Bank of Laredo,

dated November Il, 1971, was submitted to the

Regional Administrator in Dallas, Texas, on

November 12, 1971, by the defendants, Hall,

Sanchez, Guerra, Magnon and Zuniga. (See

page 838 of the Administrative File). On

November 22, 1971, the application was returned

for correction. (Page 829 of AF). A corrected

application was filed on November 26, 1971,

(page 828 of AF), and this application was

accepted for filing on December 3, 1971. (p. 821

of AF).On or about December 13, 1971, the

TESS Sy Se ee

sini

Union National Bank of Laredo requested per-

mission to be heard on the application, (p. 797

of AF), and on the same day the plaintiff bank;

] Bank of Commerce of Laredo notified the Comp-

troller it desired to be heard (p. 795 AF). On

December 16, 1971, the Union National Bank of

Laredo requested a formal hearing (p. 791 of AF).

On December 22, 1971, Ramiro Sanchez, Presi-

dent of the Laredo National Bank and one of the

organizers of the Proposed City Nationa] Bank,

wrote to the Regional Administrator Stating that

the Laredo National Bank would like to appear in

favor of the petition ( Pp. 783 of AF). On Decem-

ber 28, 1971, the applicants for the charter

requested an extension of time in which to file

their economic Survey to January 7, 1972, and

this application was granted on January 3, 1972,

(pp. 780 and 781 of AF). This survey prepared

by the applicants was filed on or about January 5,

1972, and on January 7, 1972, the attorney for

ICES NEON EEE OLE CVD OOS SILER EBLE LEE LIER

—

the applicants wrote to the Regional Administrator

and stated that they did not have a definite location

yet, but to keep this information confidential.

(p. 773 of AF). On January 14, 1972, Mr. Knight,

a Bank Examiner, was ordered by the Regional

Administrator to commence a field investigation

on January 24, 1972, and he was furnished a copy

of the economic survey filed by the applicants.

The Regional Administrator then set the formal

hearing for February 15, 1972, in Dallas (p. 758

of AF). The Bank of Commerce of Laredo,

Petitioner herein, filed a motion for continuance

on or about February 4, 1972 (p. 754 of AF),

which was denied by letter dated February 7, 1972,

(p. 748 of AF). A hearing was held on February

15, 1972, anda transcript of the matters pre-

sented by the various parties present appears as

an attachment to the Administrative file. Pre-

liminary approval of the application was given

-9-

<) pacer”

by the Comptroller on May 23, 1972 (pp. 2-4 of

AF) and(pages 37 thru 44 of Appendix E hereof, )

Both the Union National Bank and the plaintiff

bank filed economic surveys which appear in the

administrative file, but which were not used by

the field investigator in making his investigation

and recommendations. On June 12, 1972, Plain-

tiff, Bank of Commerce of Laredo, filed its ori-

ginal complaint, and on December 6, 1972, filed

its First Amended Original Complaint against

City National Bank of Laredo, Horace C. Hall,

Ill, Ramiro Sanchez, Alberto H. Magnon, Jr.,

Armengol Guerra, Jr., Carlos A. Zuniga, Max

A. Mandel, Gary G. Jacobs, Michael Doman,

individually and in his official capacity as

Regional Administrator of National Banks under

the Office of the Comptroller of the Currency,

the Department of the Treasury, the Govern-

ment of the United States, William B. Camp,

individually and in his official capacity as Comp-

troller of the Currency of the United States, the

Department of the Treasury, Government of the

United States, and the Laredo National Bank.

Plaintiff sought the following relief:

1. That after notice and hearing a

preliminary injunction is sue during the pendency

of the cause as follows:

a. Enjoining the defendant, William

B. Camp, as Comptroller of the Currency,

from issuing a certificate of authority to the

defendant, City National Bank of Laredo and

its applicants, should such certificate not

have been issued at the time of the filing

of said petition.

b. Enjoining the defendants, City

National Bank of Laredo, and its organizers,

Horace C, Hall, III, Ramiro Sanchez,

Alberto H. Magnon, Jr., Armengol Guerra,

Jr. and Carlos A. Zuniga, from exer-

cising any right or privilege purported

to have been granted by the Comptroller

of the Currency by virtue of any cer-

tificate approving said application that

might have been issued by the office of

the Comptroller,

c. That after hearing this Court orde

that a trial de novo be had on all issues

presented in this cause.

2. That upon a final hearing of this

cause:

a. A declaratory judgment be entered

providing that:

(1) The approval by the Comp-

troller of the Currency of an application by

the defendant, City National Bank of Laredo

and Horace C. Hall, III, Ramiro Sanchez,

Alberto H. Magnon, Jr., Armengol Guerra

-]12-

Jr. and Carlos A. Zuniga, being the

organizers of said proposed bank, for the

establishment of an affiliate bank of the

defendant, the Laredo National Bank, in

the City of Laredo, Webb County, Texas,

was and is unlawful.

(2) The issuance by the Comp-

troller of the Currency of a certificate

evidencing said illegal and invalid appro-

val, should the Comptroller of the Cur-

rency have issued such a certificate, was

and is likewise unlawful and that said

certificate should one have been issued,

was and is void ab-initio. —

(3) Said invalid and void certi-

ficate or temporary approval be vacated,

set aside and held for naught.

(4) That the Court find as a

matter of law that the granting of a

-13-

certificate of approval to the defen-

dant applicants would be contrary

to the best interests of this commu-

nity, and so destructive of a com-

petitive atmosphere of the banking

industry in this community as to be

against public policy.

(5) A permanent injunction be

issued for the said relief set forth

in paragraph 1 of this Prayer.

3. Pe damages as hereinabove

set forth,

4. That such other and further

relief be granted to this plaintiff as

may seem just and proper to this

Honorable Court.

During the pendency of the proceedings,

plaintiff sought to take the depositions of all parties

defendant, as well as other witnesses, and upon

order of the court filed a form of written interro-

gatories that it desired to be submitted to the

witnesses . On June 29, 1972, the defendants,

City National Bank of Laredo, Hall, Sanchez,

Magnon, Guerra and Zuniga, filed a motion to

dismiss for failure to state a claim and in the

alternative, for judgment pursuant to Rule 12b

of the Federal Rules of Civil Procedure. On

July 3, 1972, the defendants, Laredo National

Bank, Mandel and Jacobs, filed a Motion to

Dismiss the Complaint. On October 31, 1972,

the defendant, City National Bank of Laredo, filed

its motion to quash notices of intention to take

deposition. On November 1, 1972, the Defendants,

Mandel and Jacobs, filed their Motion for Stay

of Discovery. On November 2, 1972, the

defendant, City National Bank, Hall, Sanchez,

Magnon, Guerra and Zuniga, filed their Motion

«FS.

to Quash the Notices of Intention to Take Depo-

sitions. On November 3, 1972, the defendants,

Mandel and Jacobs, filed an additional Motion to

‘Stay of Discovery. On November 6, 1972, the

plaintiff was ordered to file written interrogatorie

and all discovery was stayed until further order

of the Court. Interrogatories were filed on

November 21, 1972, to be submitted to Michael

Doman, William B. Camp, Max A. Mandel,

Horace C, Hall, Ill, Gary G. Jacobs, Ramiro

Sanchez, Alberto H. Magnon, Jr., Armengol

Guerra, Jr. and Carlos A. Zuniga, parties, and

to Thomas G. DeShazo, William Paul Smith, T.

M. Brezinski and P. Brantley Knight, witnesses.

On November 17,° 1972, the defendants, Camp

and Doman, filed a Motion for Judgment on the

Pleadings or, in the alternative, for Summary

Judgment. An oral hearing was held before the

Court on December 5, 1972, and on April 25,

1973, a memorandum and order was entered by

the Court in which the Court stated in part:

"Upon reviewing the administrative

file and Plaintiff's pleadings and briefs, the

Court concludes that the Comptroller's

decision was not arbitrary, capricious, or

otherwise not in accordance with law. For

this reason, the several motions for

summary judgment filed by the respective

Defendants must be, and hereby are,

granted. Counsel for the Defendants shall

prepare a form of final judgment in

accordance with the foregoing Memorandum

and Order, and present same to the Court

within fifteen (15) days from this date. The

Clerk shall furnish the appropriate counsel

with copies hereof. "'

See App. C pp. 32-33). On May 16, 1973, Final

Judgment was entered granting all of the

Defendants' Motions for Summary Judgment and

dismissing the case with prejudice. (See App. D

p. 34-36).

4. The plaintiff bank was advised by the

Regional Administrator not to prepare an economic

survey until the survey of the applicants had been

furnished them. When the applicants' survey was

finally furnished, the plaintiff was not given suffi-

cient time in which to prepare its economic survey,

5. The field investigation was ordered by

the Regional Administrator when only the economic

survey of the applicants was on file, and the field

investigator made his report based only on the sur-

vey filed by the applicants.

6. The field investigator did not make

a complete investigation but based his report pri-

marily on verbatim statements from the economic

survey of the applicants.

7. The field investigator falsely stated

that the proposed bank was to be Iveated four and

one-fourth (4 1/4) miles from the plainti}y bank,

when actually, the correct distance is only approx-

20s

SE IP STE ELL LP a OE ee, WEP

imately two (2) miles.

8. The field investigator stated that the plain-

tiff bank is in the downtown section of the City of

Laredo when actually, the plaintiff bank is located

on the outskirts of the downtown section of Laredo

and is less than six minutes driving time within the

proposed primary service area.

9. The Regional Administrator permitted the

applicants to choose their own service area even

though a good portion thereof is located closer

to the plaintiff bank than it is to the proposed bank

even if it is located at the location originally shown

10. The Regional Administrator refused to

grant to the plaintiff bank sufficient time in which

to prepare its economic survey and other matters

necessary to contest the proposed application.

ll. The Regional Administrator, in not re-

quiring the applicants to give a specific location

for the proposed bank, made it, from a practical

-21-

Oe eR a ee ee ee. eee ee

standpoint, impossible for this plaintiff bank to pr

pare a comprehensive economic survey that could

relate to a specific site. In this connection, the

Administrative File shows that the proposed pri-

mary service area is approximately five miles lon

and 3 3/4 miles wide.

12. .The plaintiff bank learned for the first

time at the hearing itself that a definite location

had not been established and would not be required

to be established and the preparation of its econo-

mic survey, as well as briefs and argumentative

matters had been based on the represented locatio

13. The field investigator also stated that the

three downtown banks did not have sufficient park-

ing and were in a congested area, whereas in truth

and in fact the plaintiff bank has ample parking and

is not in a congested area but is accessible to all

parts of Laredo and particularly accessible by

freeway to the primary service area as proposed

by the applicants.

14. The applicants notified the Regional Ad-

ministrator by confidential letter that they had an

alternate location which was possibly mone than

the original location, and this letter was not made

a part of the public file but was actually labeled

‘submitted only to the court due to reproduction

difficulty. '

15. The Regional Administrator refused to

honor a written request by the plaintiff bank that

copies of all materials filed by any parties to the

proceeding be forwarded to the plaintiff bank even

though such a request by other inttine wats honored.

16. The Regional Administrator refused to re-

quire the applicant bank to state a definite location

where the new bank would be located.

17. The Regional Administrator clea thas the

applicant bank could be located anywhere in the

primary service area and that the plaintiff bank did

-23-

not have to be notified of such location.

18. The attorney for the Regional Administra-

tor stated that if a location other than the primary

location was used and was over two or three blocks

away from the primary location, a rehearing would

be granted. No rehearing was ever granted in spite

of the fact that a definite location had not been es-

tablished.

19. Certain preliminary motions had been filed

and were heard on the same day that the hearing

was held on the application. All time spent in the

hearing of the preliminary motions was charged to

to the contestant banks.

20. The Regional Administrator refused to in-

form the plaintiff bank and other contestants of

what material he was forwarding to the Comptrol-

ler in Washington for the consideration of the

Comptroller. |

21. The Regional Administrator refused to re-

veal to the Contestants, and particularly to this

plaintiff bank, what material had not beer placed

in the public file and why it had not been placed

therein, and further, why it had been declared

confidential.

22. When the plaintiff, Bank of Commerce of

Laredo, was advised that a hearing was to be held

on February 8, 1972, the President of that Bank

asked for additional time. The plaintiff was not

granted such time and at the request of the Union

National Bank, the hearing was extended only for

one week to February 15, 1972. These Wetitn are

completely contradictory to that statement contained

in the Brief of the Comptroller whe rein it is stated

on page 4 that 'Pursuant to the request of protes-

tant, Bank of Commerce, a hearing was scheduled

before the Comptroller's Regional Administrator

in Dallas, Texas, for February 15, 1972.'

23. The field investigator withheld from the

-25-

————— 7

members of the public interviewed by him, if in

fact he interviewed members of the public, that the

proposed new bank was to be an affiliate of the

Laredo National Bank rather than a completely

independent wn

24, The Regional Administrator did not take

into consideration the affidavit of approximately

fifty prominent businessmen in the proposed servic

area that they were opposed to an affiliate bank in

their area.

25. The Sanloaad Administrator never recuired

the applicants to state the names of the persons

who would own stock in the corporation in order

that contestants could determine wherein the own-

ership of this proposed bank would lie.

26. The Regional Administrator failed to take

into consideration that the field investigator had

actually counted the Laredo Air Force Base Per-

sonnel twice in making his recommendations.

-26-

27. The Regional Administrator failed to

take into consideration that the Laredo National

Bank has a branch banking facility on the Laredo

Air Force Base and that military and civilian per-

sonnel do not offer a source of potential customers

to the affiliate bank.

28. The Regional Administrator permitted

the applicants to include in their proposed service

Pee the entire Laredo Air Force Base, whereas

in truth and in fact, the Bank of Commerce is as

easily accessible to the Laredo Air Force Base as

the proposed new bank even if it is located at its

primary stated location.

29. The Administrative File makes it evi-

dent that the Comptroller, in reaching his decision,

completely disregarded the anti-competitive effect

in the City of Laredo in granting a bank charter as

an affiliate to the defendant, The Laredo National

Bank,

<27-

30. The plaintiff Bank was advised by the

Comptroller as follows: 'The record indicates

that you had filed comments in connection with

the subject application. We <ish to advise you

that the application has been approved. ' In truth

and in fact, the application had been conditionally

approved, but the plaintiff, Bank of Commerce of

Laredo, was never so advised and did not know of

the conditions attached until they were furnished

with copies of the Administrative File by the Court.

(See pages 6 and 7 of the Administrative File).

31. The Comptroller conditionally approved

this application because it was as close an approx-

imation of a branch bank as was feasible under the

circumstances,

32. The Comptroller refused to make

written findings of fact setting forth his reasons for

the conditional approval of the Charter.

33. The entire administrative file shows

-28-

that the Comptroller acted on this application with

undue haste.

34. The administrative file shows that the Re-

gional Administrator expedited the hearing on this

application because he was advised by the defendan

Jacobs, 'that an attorney-promoter is reportedly

getting a group of Mexican Nationals and Lare-

doans together with an intention of filing an ethnic

national bank application. ' (See p. 836 of the

Administrative File).

35. The Administrative File further shows

that the defendant, Jacobs, even requested the

advice of the Regional Administrator in securing

attorneys and economists in the field of bank appli-

cations.

36. The Regional Administrator refused to

take into consideration the fact that charters for

proposed savings and loans to be located in the

same immediate area were pending or were to be

-29-

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applied for prior to his ruling.

37. The defendant, Mandel, the man primar-

ily responsible for the submission of the applica-

tion for the proposed new bank, has testified under

oath that if a charter for a new savings and loan,

as well as a branch savings and loan to be opera-

ted in this same service area were granted, then

the opening of this proposed bank would create

excessive competition. These charters for a

branch savings and loan and for a new and inde-

pendent savings and loan have been granted. The

applicants did not advise the Comptroller of this

development not have they requested a withdrawal

of their application."

Specifically, it was argued to the Court

that the stated location of a proposed bank forms

the basis for the entire economic survey of both the

proponents and opponents of the application and is

the primary factor in establishing need for a new

bank.

-30-

Paragraph Ninth under Representations of the

application for the charter reads as follows:

"NINTH, that the undersigned acknowledge

that any misrepresentation or omission of a ma-

terial fact with respect to the foregoing represen-

tations or with respect to any other documents or

papers submitted by the undersigned to the Comp-

troller of the Currency in connection with the or-

ganization of the said national bank shall, unless

expressly waived by the Comptroller of the Currency

constitute fraud in the inducement and be grounds

for denial of a national bank charter in this or any

other matter, grounds to require the resignation

of the undersigned as dipectone of the said national

bank, and may subject the undersigned to other

legal sanctions, including those provided for in

Section 1001 of Title 18 of the United States Code."

Prior to the hearing on said application, a

letter dated January 7, 1972, was sent to the

defendant, Michael Doman, Regional Administrator

of National Banks, by Horace C. Hall, Ill, as agent

for the applicants. Such letter appears on pages

387-388 of the Administrative File, Vol. 1. The

attention of the Court is particularly directed to

that paragraph of the letter which reads as follows:

‘In addition to the site at the Woolco Shopping

Center referred to in the addendum, and the letter

from Mr. Roy L. Martin and Associates, attached

to this letter, we have been in contact with and

have discussed the possibility of securing either

through purchase or through long term lease, toth

the premises and a bank building built to our speci-

fications on a tract of land consisting of approxi-

mately two (2) acres and located between San Ber-

nardo and the Western access road to Interstate

Highway 35, at the Intersection of Calton Garden

Road. This location would be immediately south

across Calton Garden Road from the new Goodyear

a es

Service Center, would be approximately four (4)

blocks north of the proposed site at the Woolco

Shopping Center, and would be a possibly superior

site to the one in the Woolco Shopping Center. One

of the owners of such site, Mr. Rodolfo Gonzalez,

has indicated that he is securing appraisals of the

subject property, and will advise us in the near

future as to exact figures with respect to both a

sale of the subject site as well as the terms of a

long term lease of the site and a building to be cons

tructed on such site by Mr. Gonzalez and his family

Because of the fact that we do not have any binding

agreements from either of the owners of the above-

referred to sites, we would appreciate your keep-

ing these matters confidential for the present time

until binding options can be obtained at one or the

other location, "' (underlining ours).

The original application was accepted for

filing on the 3rd day of December, 1971. At the

-33-

hearing on the application held before the defendant

Doman, on February 15, 1972, the following conver

sation took place:

"MR. HORNBERGER: May I ask this one thingy?

Should, for example, that Mr. Hall's applicants

decide the bank js not to be located at 4500 San

Bernardo Avenue, if that is the address, then is

the hearing to be reopened and we allowed to pre-

sent additional economic information or would the

hearing be closed and we just--

MR. PARISE: | think if you requested a re-

hearing, we would probably grant it. It depends

on if they decide to change to another location

whether or not that would affect the merits of the

application. If it's just two or three blocks, I

wouldn't necessarily think--

MR. HORNBERGER: Five blocks, I think. 1

don't think the public file will reveal now as to a

question of changing from one location to another.

-34-

It's a question of we don't have a location.

MR. PARISE: I think that's not true. The

applicants have stated thev are proceeding on the

assumption the bank would be located on the 4500

San Bernardo. Is that not right, Mr. Hall?

MR. HALL: That is correct.

MR, PARISE: And our application was based

on that representation and the field investigators

assumed that, so I think--

MR. HALL: I believe the file in connection

with the letter that was marked as Protestant's

Exhibit 4 had attached to it originally a copy of the

letter from the owner at the location of 4500 San

Bernardo advising us that we would come to an

agreement as to location there at that address.

MR. DOMAN: Mr. Hornberger, the applica-

tion filed with the Comptroller requests a vicinity

be stated, which it was done.

MR. HORNBERGER: That the what, sir?

-35-

OF A GSA Ne ey

=, i PI 2

SEELEY AGE LD

PEGS ESE

MR. DOMAN: The application does, in fact,

reflect the vicinity or location. Do you have any

dispute with that, Mr. Hornberger?

MR. HORNBERGER: No, sir.

MR. DOMAN. OK.

MR. HORNBERGER: I think the application

states the location.

MR. DOMAN: The summary of information to

be submitted to the Regional Comptroller of the

Currency in this office within 30 days of filing

requests that a description of the service area be

provided. Do you dispute that this was provided?

MR. HORNBERGER: Well, I dispute what they

set out as a service area is a service area. I don't

dispute these facts that they out of thin air picked

a service area.

MR. DOMAN: Mr. Hornberger, this morning,

then, we are dealing with a specified service area

and location, and I believe that is what the record

h ll

shows ae

MR. HORNBERGER: Yes, sir. Well, then,

what I am getting at, Mr. Doman, is the letter

from Mr. Hall dated January 7th would not be an

amendment to the application. Is that correct,sir?

MR. DOMAN: Mr. Hall, again, the application

as we review it by this office covers a specified

service area, a location within--any individual

location within that service area really more or

less just fulfills the entire application, but we are

dealing with banking needs, the convenience needs

of the public within a specified service area."

(Pages 12 thru 14 of the Transcript-Hearing on the

application).

The appellee bank has now opened in a trailer

house located at 4500 San Bernardo Avenue and

maintains a sign outside that trailer stating spe-

cifically that this is only a temporary location.

The Administrative File clearly shows that the

defendant applicants did not have a fixed location

ot.

BE Ti ES Ee eT EE SE Sa ee oe oe

at the time of thehearing. On the 4th day of May,

1973, the defendant opened its bank in a trailer at

4500 San Bernardo, the stated location, and as is

shown by Plaintiff-Appellant's Brief to the United

States Court of Appeals, placed a sign Quside say-

ing it was a ‘'temporary location."' The public

records of the Regional Administrator now indicate

that on the 3rd day of August, 1973, the Respondents

filed their application to remove the proposed lo-

cation to a point 1.2 miles north of the original

stated location. To further compound the situation,

on or about the Ist day of September, 1973, the

Respondent requested the Regional Administrator

to withhold action on the application for a period

of thirty (30) days from September 4, 1973. To

this date Plaintiff-Petitioner is still not advised

of the permanent location for such proposed bank.

All of these facts lead to the almost inescapable

conclusion that at no time did the applicants intend

~3$.

LOGY LIEN EES BO

< a4 ee eee Ae BI ROPE es _ . .

FPR OR EE OR Ee Ee

ta “~

to locate the bank in the stated location. The Plain

tiff-Petitioner desired to take depositions of the

interested parties to ascertain if, in fact, inten-

tional misstatements in the application had been

made. To deny the Dutisiener this right, on the

facts before this Honorable Court, would permit

future applicants to mislead the public, other

banks, the Comptroller and the Courts to the

extreme detriment of the interests of the banking

industry and the general public.

In Warren Bank v Saxon, 263 FS 34, United

States District Court for the Eastern District of

Michigan, S. D., 1966, the Court stated:

"Plaintiff has the cart before the horse.

Plaintiff wants to depose the Comptroller to ex-

pose wrongdoing. The law is the other way

around. If Plaintiff can show wrongdoing (not

in the sense of proving it, but merely showing

=a.

PIT A ET LEE SNE LE SEE TEI LE ONE EN LALO RNTEALS IBS REE RT LEE

circumstances that to a reasonable view would

indicate sham, subterfuge or similar wrong)

he may then depose the Comptroller as re-

quired. Bank of Dearborn, supra."

In Bank of Dearborn vs Saxon, 244 FS ne

394, United States District Court, for the Eastern

District of Michigan, S.D., 1965, the Court

stated:

''The authorities do not support the

application of the privilege claimed to the

facts before us. This is not the frivolous

claim of an idle mischief maker, This is

a citizen who has presented sufficient facts

to warrant searching inquiry."

In Camp vs Pitts, US _, 36 L Ed 2d 106

9S 5...

the Supreme Court refers at length to the case of

Citizens to Preserve Overton Park, Inc., et al

vs John A. Volpe, Secretary, Department of

-40-

LL PUSS LNE NE RM ENE INGA TAG REPRE RENN NE IL" 8 OF RE

Transportation, et al, 401 US 402, 28 L Ed 2d 136,

91S. Ct. 814. The Overton Park case involved a

decision by the Secretary of Transportation to per-

mit a highway to be constructed through a public

park in Memphis, Tennessee. The announcements

approving the route and design of the highway were

not accompanied by formal findings of fact, nor did

the Secretary state why he believed there were no

feasible and prudent alternative routes or why de-

sign changes could not be made to reduce harm to

the park,

On Certiorari the Court held that:

(1) The Secretary of Transportation was

not required to file formal findings, under either

Sec. 4 (f) of the Department of Transportation Act

of 1966 of Sec. 438 of the Federal-Aid Highway Act

of 1968, that ee were no feasible and prudent

alternatives to routing the highway through the

park prior to his approving the design and route,

-4]-

(2) judicial review of the Secretary's action was

inadequate, however, because it was based solely

on litigation affidavits, (3) petitioners were entitled

to seek judicial review of the Secretary's action

(4) Congress had not sought to prohibit judicial

review nor to restrict judicial review of the secre-

tary's action, (5) the Secretary's actin did not

fall within the exception in Sec. 701 of the Ad-

ministrative Procedure Act prohibiting judicial

review of agency actions committed to — dis-

cretion by law, (6) the use of federal funds for the

construction of highways through parks was barred,

except in the most unusual iremigtitibes, by. the

language of Sec. 4 (f) of the Department of Trans-

portation Act of 1968, (7) Congress intended by those

Acts to give theprotection of parklands paramount

importance and preference over such other Sitinte

as cost and community disruption (8) although a

de novo review was not emidtet: the reviewing

-42-

court should engage in a substantial inquiry as to:

whether the Secretary acted within the scope of his

authority, whether he considered the relevant

factors in reaching his decision, whether there Age

been a ciear error of judgment, and whether the

necessary procedural requirements were followed,

(9) judicial review should be based on the full ad-

ministrative record before the Secretary at the .

time he made his decision, and (10) while inquiry

into the mental processes of administrative de-

cisionmakers should usually be avoided, the

District Court, on remand, could make such an

inquiry if that should prove to be the only way

effective judicial review could be had." ,

In its opinion, the Court in the Overton

case stated as follows:

‘Even though there is no de novo review

in this case and the Secretary's approval of the

route of I-40 does not have ultimately to meet the

--43-

substantial-evidence test, the generally applicable

standards of Sec. 706 ‘aaa the reviewing court

to engage in a substantial inquiry. Certainly, the

Secretary's decision is entitled to a presumption of:

regularity. See e.g. Pacific States box & Basket

Co. v White, 296 U.S. 176, 185, 80 LED 138,146,

56 S.Ct. 159 (1935): United States v Chemical

Foundation 272 US 1, 14-15 71 L ED 131, 142, 143,

41 S.Ct. 1(1926). But that presumption is not to

shidd his action from a thorough, probing, sigs

review."

"Scrutiny of the facts does not end, however,

with the determination that the Secretary has acted

within the scope of his statutory authority. Section

706 (2) (A) requires a finding that the actual choice

made was not ‘arbitrary, capricious, an abuse of

discretion, or otherwise not in accordance with

law.' 5 USC Section 706 (2) (A) (1964 ed. , Supp.

V). To make this finding the Court must consider

-~44-

whether the decision was based on a consideratin

of the relevant factors and whether there has been

a clear error of judgment. Jaffe, Supra, at 182.

See McBee v Bomar, 296 F2d 235, 237 (CA6 1961);

in re Josephson, 218 F2d 174, 182 (CA1l 1954);

Western Addition Community Organization v

Weaver, 294 F Supp. 433 (ND Cal 1968). See also

Wong Wing Hang v Immigration and Naturalization

Serv., 360 F2d 715, 719 (CA2 1966). Although

this inquiry into the facts is to be searching and

careful, the ultimate standard of review isa

narrow one. The court is not empowered to subs-

titute its judgment for that of the agency."

"Undoubtedly, review of the Secretary's action

is hampered by his failure to make such findings,

but the absence of formal findings does not neces-

sarily require that the case be remanded to the

Secretary.

Thus it is necessary to remand this case to

-45-

the District Court for plenary review of the Secre-

tary's decision. That review is to be based on the

full administrative record that was before the

Secretary at the time he made his decision. But

since the bare record may not disclose the factors

that were considered or the Secretary's construc-

tion of the evidence it may be necessary for the

District Court to require some explanation in

order to determine if the Secretary acted within

the scope of his authority and if the Secretary's

action was justifiable under the applicable standard.

''The court may require the administrative

officials who participated in the decision to give

testimony explaining their action. Of course,

such inquiry into the mental processes of adminis -

trative decision-makers is usually to be avoided.

United States v Morgan, 313 US 409, 422, 85

L ED 1429, 1435, 61S.C+t. 999 (1941). And where

there are administrative findings that were made

-46-

ears

at the same time as the decision, as was the case in

Morgan, there must be a strong showing of bad

faith or improper behavior before such inquiry

may be made. But here there are no such formal

findings and it may be that the only way there can

be effective judicial review is by examining the

decisionmakers themselves. See Shaughnessy v

Accardi, 349 US 280, 99 L ED 1074, 75 S.Ct. 746

(1955).

"The District Court is not, however, required

to make such an inquiry. It may be that the Secre-

tary can prepare formal findings including the

information required by DOT Order 5610.1 that

will provide an adequate explanation for his action.

Such an explanation will, to some extent, be a

‘post hoc rationalization' and thus must be viewed

critically. If the District Court decides that

additional explanation is necessary, that could

should consider which method will prove the most

-47-

expeditious so that full review may be had as soon

as possible."

In the Pitts case the Supreme Court stated

"We agree with the Comptroller that the

trial procedures thus outlined by the Court of

Appeals for the remand in this case are unwarran-

ted under present law."

"Accordingly, the proper standard for

judicial review of the Comptroller's adjudications

is not 'the substantial evidence’ test which is

appropriate ‘aia reviewing findings made on a

hearing record. 5 U.S.C. Sec. 706 (2) (E). Nor

was the reviewing court free to hold a de novo

hearing under Sec, 706 (2) (F) and thereafter

determine whether the agency action was ‘un-

warranted by the facts.' It is quite plain from

our decision in Citizens to Preserve Overton

Park v Volpe, 401 U.S. 402 (1971), that de Novo

review is appropriate only where there are in-

-48-

expeditious so that full review may be had as soon

as possible."

In the Pitts case the Supreme Court stated:

"We agree with the Comptroller that the

trial procedures thus outlined by the Court of

Appeals for the remand in this case are unwarran-

ted under present law."

"Accordingly, the proper standard for

judicial review of the Comptroller's adjudications

is not 'the substantial evidence' test which is

appropriate when reviewing findings made on a

hearing record. 5 U.S.C. Sec. 706 (2) (E). Nor

was the reviewing court free to hold a de novo

hearing under Sec. 706 (2) (F) and thereafter

determine whether the agency action was ‘un-

warranted by the facts.' It is quite plain from

our decision in Citizens to Preserve Overton

Park v Volpe, 401 U.S. 402 (1971), that de Novo

review is appropriate only where there are in-

-48-

EOE PRS STE CEI

adequate factfinding procedures in an adjudicatory

pubcesding or where judicial proceedings are

brought to enforce certain administrative actions.

''The appropriate standard for review was

accordingly whether the Comptroller's adjudica-

tion was arbitrary, capricious, an abuse of dis-

cretion or otherwise not in accordance with law, '

as specified in 5 U.S.C. Sec. 706 (2) (A). In

applying that standard, the focal point for judicial

review should be the administrative record al-

ready in existence, not some new record made

initially in the reviewing court. Respondents

contend that the Court of Appeals did not envision

a true de novo review and that, at most, all that

was called for was the type of ‘plenary review'

contemplated by Overton Park, 401 U.S. at 420.

We cannot agree. The present remand instruc-

tions require the Comptroller and other parties

to make an evidentiary record before the District

-49-

Court ‘manifesting opposition, if any, to the new

bank.' The respondents were also to be afforded

opportunities to support their application with any

other relevant evidence.' These instructions seem

to put aside the extensive administrative record

already made and presented to the reviewing court.

"If, as the Court of Appeals held, and as

the Comptroller does not now contest, there was

such failure to explain sietiihtiiiaiecs action as

to frustrate effective judicial review, the remedy

was not to hold a de novo hearing, but, as con-

templated by Overton Park, to obtain from the a-

gency, either through affidavits or testimony, ouch

additional explanation of the reasons for the agency

decision as may prove necessary. We adda

caveat, however. Unlike Overton Park, in the

present case there was contemporaneous explana-

tion of the agency decision. The explanation may

have been curt, but it surely indicated the deter-

-50-

minative reason for the final action taken; the find

ing that a new bank was an uneconomic venture in

light of the banking needs and the banking services

already available in the surrounding community.

The validity of the Comptroller's action must,

therefore, stand or fall on the propriety of that

finding, judged, of course, by the appropriate

standard of review. If that finding is not sustain-

able on the administrative record made, then the

Comptroller's decision nian be vacated and the

matter remanded to him for further consideration.

See SEC vChenery Corp., 318 US 80 (1943). It is

in this samaith that the Court of Appeals should

determine whether and to what extent, in the light

of the administrative record, further explanation

is necessary toa proper assessment of the agency'

decision. 3 :

The petition for certiorari is granted, the

judgment of the Court of Appeals is vacated, and

-51)-

the case is remanded for further proceedings con

sistent with this opinion."

Specific questions to each of the witnesses

were submitted to the Trial Court at his request.

No attempt was made to go far afield of the record

but only to ascertain why this application was

approved in the manner that it was approved.

As was stated by the Court in Bank of

Dearborn v Saxon, supra:

"It would seem that the real public

interest under ouch circumstances is not the

agency's interest in its administration but the

citizen's interest in due process. Indeed it

might be said with considerable force that the

issue before us, a charge of sham and subterfuge

employed by those in high places, is the very kind

of issue with respect to which an aggrieved ad-

ministrator might well insist that his entire file

in the matter under scrutiny (save for what might

-52-

properly be called business secrets) be spread on

the public record so that the falsity of the charge

might be made manifest of all who cared to read.

This the Administrator, however, has refused

to do."'

In Bank of Dearborn v Saxon, supra, the Court

stated:

"And, so far as the Comptroller's claim

of privilege may involve a prohibition against

probing his mental processes, we agree with the

Fourth Circuit that 'the mental process rule is

but'one facet of the general presumption of regu-

larity' which attaches to decisions of administra-

tive bodies, 2 Davis, Administrative Law (1950),

Section ll. 06, 0.63 and that where a prima facie

case of misconduct is shown, ‘Settee requires

that the mental process rule be held inapplicable, '

citing among other authorities, Union Savings

Bank of Patchogue, New York v Saxon, D.C.,

209 F Supp. 319 (1962)."

In Webster Groves Trust Co. v Saxon,

370 F2 381, Court of Appeals, Sixth Circuit, 1966,

the Court stated:

"Therefore, we do not believe the courts

are powerless to protect the public from uncons-

titutional, illegal, or otherwise arbitrary activi-

ties of administrative officials."

The Court further stated:

"The Comptroller is. also asserting that

@ competitor has no standing to object to lawful

competition. With this rule we find no fault, but

the banks surely have the standing to object to

illegal competition. Frost v Corporation Com-

mission of Oklahoma, 278 U.S. 515, 49S. Ct. 235,

73 L.Ed. 483 (1929); National Bank of Detroit v

Wayne Oakland Bank, 252 F2d 537 (6Cir. 1958),

cert. denied 358 U.S. 830, 79S. Ct. 503. There-

fore, when a competitor believes he is being sub-

jected to illegal competition owing to impropriety

-54-

by the Comptroller, the courts should be open to

hear and decide the alleged wrong. The trial

court was vested with jurisdiction over the subject

matter of this litigation.

‘Thus though there is ample authority for

review of the Comptroller's actions in granting

authorization for branch banks, there are no cases

holding a right to judicial review of the Comptroller'

actions in granting a new bank charter. We recog-

nize that this is an expanding field of the law and

that the trend is for the courts to grant some type

of judicial review in many of these administra-

tive type proceedings which concern the granting

of licenses, personal rights, and privileges.

While the courts have generally refused to review

the actions of executive and administrative offi-

cials in the conduct of military and foreign affairs,

Martin v Mott, 12 Wheat. 19, 25 U.S.19, 6 L. Ed.

537 (1827); Orloff v Willoughby, 345 U.S. 83, 73

-55-

S. Ct. 534, 97 L. Ed. 842, (1953); National City

Bank of New York v Republic of China, 348 U.S.

356, 75 S.Ct. 423, 99 L.Ed. 389 (1955) they have,

in areas of commerce (granting licenses, charters

and permits) and in actions involving personal

liberty, (travel, use of the mails) tended to exer-

cise a brand of limited review. Although the lan-

guage may vary from case to case as the situation

demands, still it is clear that courts do, when the

occasion demands, give a limited review to ad-

ministrative actions even though the administra-

tive action is termed ‘discretionary. ' American

School of Magnetic Healing v McAnnulty, 187 U.S.

94, 23 S.Ct. 33, 47 L.Ed. 90 (1902); Kent v Dulles

357 U.S. 116, 78 S.Ct. 113, 2 L. Ed. 2d 1204

(1958); Friedman v Schwellenbach, 81 U.S. App.

D.C. 365, 159 F2d 22 (1946), cert. denied 330 U.

S. 838, 67 S.Ct. 979, 91 L Ed. 1285; Great West-

ern Packers Express, Inc. v United States, 246

-56-

“Eee

F. Supp. 151 (D. Colo. 1965); Union Cartage Com-

pany v United States, 244 F, Supp. 1005 (D. Mass.

1965). The action of the Comptroller herein would

seem to fall into the general commercial area

where discretionary actions are subject to limited

review.

"This belief is supported in part by the

Supreme Court's comments in Whitney National

Bank in Jefferson Parish v Bank of New 8

379 U.S. 411, 85 S.Ct. 551, 13 L Ed 24 386 (1965)

a Bank Holding Company Act case wherein Mr.

Justice Clark, speaking for the Majority, said at

page 423, 85 S.Ct. at page 559:

'We do not say that under no circum -

stances may the Comptroller be restrained in

equity from issuing a certificate to a new

bank, * * ¥!

and by Mr. Justice Douglas's dissent at Pages

427, 428, 85 S.Ct. at page 561, where he touches

=. ms

upon the broad issues involved in this case at bar,

using the following language:

'* * *But, as stated by the Solicitor

General, 'The National Bank Act * * * makes no

provision for an administrative hearing or for

judicial review, and the Comptroller's decisions

are made informally, without an administrative

record.' The courts, however, have held that

judicial cognizance of a controversy with the

Comptroller may be taken and judicial power

exercised to keep the Comptroller within statutory

bounds. Camden Trust Co. v Gidney, 112 U.S.

App. D.C. 197, 301 F2d 521; Union Savings Bank

v Saxon, 118 U.S. App. D.C. 296, 298, 335 F2d

718, 720 and cases cited. That conclusion is

consistent with our holding in Columbia Broad-

casting System Inc. v United States, 316 U.S. 407,

423-424 (62 S.Ct. 1194, 86 L. Ed. 1563), that, ©

absent a congressional design to bar all judicial

-58-

review (Switchmen's Union (of North America) v

National Mediation Board, 320 U.S. 297, (645S.Ct.

95, 88 L. Ed. 61), injunctive relief is available

where administrative remedies are either inappli-

cable or inadequate. This rule keeps the Comp-

troller from being a free-wheeling agency dis-

pensing federal favors; and it gives some assu-

rance that he will render principled decisions

within the rule of law laid down by Congress.

"The Comptroller, however, must be

subordinate to the law from which he received

his authority, and is subject to the limitations

imposed by that law. Therefore, if he acts in

excess of his statutory grant of power, acts arbi-

trarily or capriciously, abuses his discretion, or

unlawfully discriminates in violation of the Cons-

titution, he is certainly subject to restraint by the

courts. Though he may exercise the discretion

the expertise of his office affords him, the con-

-59-

gressional grant of authority does not empower

arbitrary and capricious action, nor does it con-

template abuses of that discretion. Therefore, we

do not believe the courts are powerless to protect

the public form unconstitutional, illegal, or other-

wise arbitrary activities of administrative officials.

The Comptroller is free to exercise his discretion

in the granting of charters, free from any review

on the merits of his action. However, if the Comp-

troller acts in excess or abuse of his legal author-

ity, to this extent his actions are subject to judicial

review, with the burden of proof resting on the

party seeking the review. This holding we believe

to be consistent with Section 10 of the Administra-

tive Procedure Act, 5 U.S.C. Section 1009, be-

cause no statute precludes judicial review, nor is

this the type of enines action that is by law com-

mitted to agency discretion so as to be 'immu-

nized from review by the exemption in the preface

-60-

of Section 1009'. First National Bank of Smithfield

North Carolina v Saxon, supra, at page 270 of

352 F2d. Therefore, subsection 10 (c) of the Act,

5 U.S.C. Section 1009 (c) would be applicable.

This subsection reads:

‘Acts reviewable,

‘(c) Every agency action made review-

able by statute and every final agency action

for which there is no other adequate remedy

in any court shall be subject to judicial review.'"

In National Bank of Detroit v Wayne Oak-

land Bank, 252 F 2d 537, United States Court of

Appeals, Sixth Circuit, 1958, the Court stated:

"As to the standing of The Wayne Oakland

Bank to maintain its suit, it was faced with in-

vasion of property rights, and injury from a

competition which was prohibited by the federal

statutes subjecting national banks to the same

rules of law as cover state banks. The distict

-6l1-

court found, as a fact, that the competition resul-

ting from the opening and operation of a branch

by the National Bank of Detroit would certainly

cause inestimable damage to The Wayne Oakland

Bank. Whether the rights of a party are infringed

by unlawful action of an individual or by exertion

of unauthorized federal administrative power,

it is entitled to have such controversy adjudicated, ""

In Bank of Dearborn v Saxon, supra, the

Court stated:

"To say that an administrator has dis-

cretion does not mean that he can act without

reason, that he may grant or withhold his approvals

as his uncontrolled caprices may dictate. No

official in our system of Government has a power

so awesome. Thus we have inquired into the

Administrator's employment of his powers. Having

so done, the whole plan (which we have heretofore

described) becomes clear. He has abused his

-62-

discretion. Our permanent injunction will follow. "'

It appears that the courts have uniformly

held that when a prima facie case of abuse of dis-

cretion is shown, the discovery processes may be

used. See Warren Bank v Camp, 396 F2d 396,

United States Court of Appeals, Sixth Circuit,

1968, and Bank of Dearborn v Saxon, 244 FS 394,

United States District Court for the Eastern

District of Michigan, S.D., 1965.

The National Banking industry is a quasi-

regulated industry unlike federally sanctioned

monopolies, such as utility companies. In the case

of utility companies, the regulatory authority is

entrusted with the duty and power to create a

monopoly in a relevant market area and to regu-

late, albeit fix maximum prices in the interest

of the consuming public.

In the case of national banks, the Comp-

troller has the function of regulatiny theinput of

-63-

new banks into a relevant market area, with a

view of satisfying a public need and convenience

while at the same time enhacing, or at least

maintaining, a competitive atmosphere in the

relevant market and avoiding probable bank

failures. |

The Congress intended that the Comp-

troller have broad powers to regulate the input

of new banks, and to regulate certain phases of

the operations of banks to protect the public

against bank failures, but Congress has properly

presumed that the Comptroller will be fair and

impartial and not arbitrary and capricious. The

Courts have clearly so held, and the clear trend

is for the Courts to require of the Comptroller

a higher standard of conduct to insure fairness

and impartiality within the bounds of his legally

entrusted administrative powers.

Thus, to paraphrase one of the attorneys

era

for respondents, this case must be put in its pro-

per perspective. Did the acts of the Comptroller

and those of the Regional Administrator and Field

Investigator which must be imputed to him, cons-

titute arbitrary and Capricious conduct and abuse

of his powers? Did the Comptroller arbitrarily

ignore the anti-competitive effect of granting an

affiliate bank charter to the largest bank in Laredo

At the time of the approving of the respon-

dents' application by the Comptroller there were

four banking facilities in Laredo. The Laredo

National Bank of Laredo and its branch facility at

the Laredo Air Force Base, Union National Bank

of Laredo and Petitioner, Bank of Commerce of

Laredo. Laredo National Bank with deposits in

excess of 139 million dollars, owns over 60%

of the total banking assets in the community. It

has interlocking directorate with Laredo Savings

and Loan Association, which owns over 70% of

«65.

the total savings and loan assets of Laredo. Laredo

National Bank and Union National Bank of Laredo

are located in the downtown business area, which

generates more than 60% of the total annual income

in the City of Laredo. Bank of Commerce of

Laredo, Petitioner, is located off the last exit

of the Expressway, immediately north of the

Tex-Mex Railway tracks on the northern outskirts

of the downtown business area.

The location of theproposed new bank is

two miles north of Bank of Commerce of Laredo.

The farthest residential development in the pro-

posed primary service area is 41/2 miles north

of Bank of Commerce of Laredo. The downtown

banks are in fact faced with a problem of traffic

congestion and inadequate parking space. This is

not true of Bank of Commerce of Laredo, which is

free of traffic congestion from any point within

the primary service area, has more than adequate

ELE ETRY LORE

parking space, and is within 5 to 6 minutes driving

time from the farthest point within the service

area; only two minutes from the proposed location,

and only one minute from the southern boundary

of the proposed service area along the Express-

way.

The Laredo Air Force Base is closer to

Bank of Commerce of Laredo than to the proposed

new bank. Its payroll comprised about 21% of

the total annual income of Laredo, the downtown

business area about 60%, and the proposed service

area, at best, some 8% of the total annual income.

None of the residential areas within the service

area, which may be considered a source of

potential bank customers, are more than two

miles or 21/2 minutes driving time farther

from Bank of Commerce of Laredo than from

the proposed location. (NOTE: The Laredo

Air Force Base was ordered closed as of

-67-

September lst, 1973).

Two inter-office memos, dated June 15

and September 22, 1971, reflect that proponents

had several ex-parte meetings with the Regional

Administrator. ,Petitioner does not question the

authority of the Comptroller to hold ex-parte

meetings in pursuance of its investigative and

fact finding function after an application has been

accepted for filing. But the wording of the memos

and unusual number of ex-parte meetings prior

to the filing of the application leave a strong, if

not obvious, implication that the Regional Adminis -

trator rendered such unusual assistance in the

structuring and preparation of the application as

to infer a biased predetermined approval of the

application, making a sham of any subsequent

proceedings. The Regional Administrator did

not display haste until after the application had

-68-

ee 4 “ee Ss

been accepted for filing, that is, from June 15,

1971, until November 26, 1971. Thereafter, as it

related to Petitioner, Regional Administrator

proceeded with undue haste, and his biased, ar-

bitrary and capricious conduct is evident from

all of his biased and arbitrary acts enumerated

herein. If none of these acts, taken alone, cons-

tituted arbitrariness and abuse of power, all of

them taken together, do establish such a clear

prima facie case of biased and arbitrary conduct

and abuse of power by the Regional Administrator,

as to deny Petitioner the fair and impartial treat-

ment required by the due process and equal

protection provision of the Constitution.

The Regional Administrator instructed

his field investigator to commence his investi -

gation on January 24, 1972, even though he knew

that Petitioner had not yet been supplied with a

copy of proponent's economical survey. An

it.

examination of the field investigator's report

clearly reflects that almost all economic and othe

data was copied verbatim, almost without excep-

tion, from proponent's economic survey. The

field investigator adopted such flagrant, false

premises and omissions of crucial information

as to intentionally, or otherwise, deny the staff

of the Comptroller in Washington, D.C., a

correct basis upon which to make a proper deter-

mination. These biased, arbitrary acts by the

field investigator are enumerated herein and

constitute prima facie evidence of arbitrariness

and abuse of power, which must be imputed to

the Comptroller. The Administrative File clear-

ly reveals all of these alleged arbitrary acts on

the part of the field investigator.

While the Comptroller may have not

personally committed these arbitrary acts and

abuses of power, the acts of his subordinates

“30.

Se 82%

are his responsibility and are imputable to him.

As it respects the Comptroller personally,

Petitioner submits that he acted arbitrarily and

abused his powers in ignoring the anti-competitive

effect which will result from the granting of an

affiliate bank charter to the largest bank in the

relevant marker, i.e., the City of Laredo, if,

indeed, the anti-trust statutes do not protect an

existing small bank against the Comptroller giving

the largest bank an undue competitive advantage

over its smaller competitors, he is nonetheless

under a duty not to contribute to an anti- compe-

titive trend which will be highly detrimental to the

smaller competitors, simply to avoid the relative

inconvenience to a substantially few potential

customers within the primary service area of

having to drive not more than two miles or more

than 2 1/2 minutes to an already existing bank

which is free of traffic congestion, has three

93.

drive-in windows, and more than adequate parking

space,

Public need and convenience must be taken

in their proper context. True, a bank at every

corner is obviously convenient to every resident,

but the true context of these terms is the relative

need and convenience to the public in light of

existing, readily available banking facilities

located within 5 1/2 miles from the farthest

point in the primary scinliiaa area.

The question is not whether the Comp-

troller would have arrived at the same decision

even if the alleged arbitrary and capricious acts

of the Regional Administrator and the Field

Investigator had not been committed, but, rather,

whether Petitioner was accorded fair and im-

partial treatment free of biased and arbitrary

conduct on the part of the Comptroller and his

subordjnates.

<e.

TE BET IRS RIE IT BY ONES ELE! LOL LOL MME 5 IMI | AIS NIE BEG

Petitioner submits that the latter and not

the former is the proper issue before this Court ©

and further submits that the administrative file

clearly reflects the arbitrary acts alleged in

Petitioner's petition and supporting briefs are

more than sufficient to establish a prima facie

case of arbitrary abuse of power by the Comp-

troller and his subordinates to support a denial

of Respondents' Motions for Summary Judgment.

The recipient parent bank of an affiliate

bank charter acquires a very valuable asset,

translatable into thousands of dollars, and an

additional competitive leverage, which is without

a question to the detriment of its competing banks.

It is respectfully submitted that the case

at hand falls directly within that statement of the

Court in the Pitts case which requires, when

there is such a failure to explain administrative

action as to frustrate judicial review, the remedy

oF3a

is to obtain from the agency, either through

affidavits or testimony, such additional explana-

tion of the reasons for the agency's decision as

may prove necessary. Unlike the Pitts case, but

like the Overton case, in the present case there

was absolutely no explanation whatsoever. The

charter was granted without a location for the

Proposed bank being known. The economic survey

was based on false and misleading information.

Thirty-seven acts of misconduct are apparent

from the administrative file. It is felt that all of

these acts need clarification and this clarification

can be had only with the use of discovery processes,

That this is not the only case in which the acts of

the former Comptroller, Camp, are questioned

is quite apparent from a number of cases filed

against him all over the United States. While

the language used by Federal Judge Charles R.

Richey, may not be exactly applicable to this

-74-

Procedure, the Petitioner respectfully contends

‘that it may not be completely inapplicable. In

the case of Wood County Bank vs Camp, No.

127772 on the docket of the United States District

Court for the District of Columbia, Judge Richey

in commenting on the Procedure followed by the

Comptroller which ended with a Federal Charter

stated, "It stinks to high heaven," During an

additional hearing on the matter held on or

about Friday, February 16, 1973, the Court

again said,'"'l think it smells. I thought it when

I heard this case first. It still stinks to high

heaven." He further stated, ''That is one of the

reasons why the public in the United States is

losing confidence in its government. "'

=7S.

SUMMARY

The Petitioner states that this entire

file, including the Comptroller's Administrative

File, the transcript of the proceedings of the

hearing before the Regional Administrator, and

the pleadings on file herein show conclusively

that the Comptroller's decision was arbitrary, -

capricious and otherwise not in accordance with

law, or, at the very least, that the Petitioner

has made a prima facie case of an abuse of

discretion.

The refusal of the Comptroller to

explain his decision--indeed his arbitrary

failure to send to the Petitioner a copy of his

conditional approval instead of a mere letter

stating the application had been approved---

enhance the likelihood that misconduct did occur.

The acts of the Comptroller, his

~— =

RRS ETE SF BE STN ED LATE EP iO

p -~-

employees, agents and representatives require

the closest scrutiny.

The cases heretofore decided by the

Courts of these United States show that the

Comptroller has always felt that the official

files were his own personal property, his con-

duct not subject to any review whatsoever and

that his decisions were above the law of this

country. Gradually, the courts have in no

uncertain terms made it clear that the acts

and the decisions of the Comptroller are sub-

ject to review and that his files are public

property to be seen by reviewing courts under

appropriate circumstances. The Comptroller

has contested every effort of the people of the

United States to make him responsible to the

people and subject to the laws of this country.

Here, again, he is contesting the right of

competition to ascertain under oath, and for

=77-

the record, pertinent facts regarding his deci-

sions. And this, in spite of the fact that this

was obviously a "favored" application. That

the Petitioner did not intent to harass is made

clear by the fact that it submitted for the con-

sideration of the Court and the Respondents

interrogatories which it desired to be pro-

pounded to the various witnesses. The answers

to these interrogatories will clearly show if the

Petitioner has been treated unfairly.

The denial of the use of discovery pro-

cesses permits the Respondents to base their

application on false and misleading statements

and misinformation and further permits the

Comptroller to base his decision on such false

and misleading statements and misinformation,

To permit the taking of the depositions of at

least the applicants can only serve to clarify

the application and the circumstances surround-

Ss -

ing its approval. No harm whatsoever can be

done to either party by the use of discovery

processes, and it is respectfully represented

that the denial by the district court of the

Petitioner's right to the use of such processes

and the denial of its right to have the Comp-

troller explain his decision is a denial of due

process under the Constitution of the United

States. At the risk of being repetitious, and

in the words of Justice Douglas, every effort

must be made by the Courts and by the people

of this country to keep the Comptroller and

other federal agencies from "being a free-

wheeling agency dispensing Shen favors".

Pitts vs Camp, supra, sets out an

orderly procedure to be followed in cases of

this type, and since the decision of the Supreme

Court was rendered after Petitioner's pleadings

were filed, and since that decision clarifys

~.-

EOS Pe RONG TOG SOI I FONE LEE

many of the points previously listed, Petitioner'

prayer for relief is along the lines of the Pitts

decision rather than that originally requested

in its pleadings.

WHEREFORE, petitioner respectfully

requests that a writ of certiorari issue to

review the judgment and opinion of the United

States Court of Appeals for the Fifth Circuit.

Respectfully Submitted,

Laredo, Texas 78040

Tel. AC 512 722-212)

Counsel for Petitioner

CERTIFICATE OF SERVICE

I hereby certify that on the 22nd day of

January, 1974, a copy of Petitioner's Petition for

a Writ of Certiorari was by me mailed to Hall &

Zaffirini, 511 Sames-Moore Building, Laredo,

Texas, 78040, Mann, Castillon, Freed & Kazen,

P.O. Box 820, Laredo, Texas 78040, The Honora-

ble Anthony J.P. Farris, United States Attorney,

P.O. Box 61129, Houston, Texas 77061 and Mr.

Ronald R. Glancz, Attorney, Appellate Section,

Civil Division, Room 3643, U.S. Department of

Justice, Washington, D.C. 20530, attorneys for

Defendants - Respondents. of

EE IE I EF RE EE OB EEO TEE I ABD ET Ee soe

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH COURT

NO. 73-2217

Summary Calendar

BANK OF COMMERCE OF LAREDO

Plaintiff-Appellant,

versus

CITY NATIONAL BANK OF LAREDO, ET AL,

Defendants - Appellees.

Appeal from the United States District Court

for the Southern District of Texas

(September 13, 1973)

Before WISDOM, AINSWORTH and CLARK,

Circuit Judges.

CLARK, Circuit Judge: The Bank of

Commerce of Laredo appeals from the district

court's refusal to set aside the grant of a na-

tional bank charter by the Comptroller of the

App. A-1

a ie

yTe

SE FPR SPREE a

po peng

Currency of the United States to the City Na-

tional Bank of Laredo. The Bank of Commerce

contends that the trial court erred in denying

it access to the discovery process, in refusing

to order the Comptroller to explain the reasons

for his approval of the charter application, and

in granting defendant's motion for summary judge-

ment. We affirm.

City National was organized as an affiliate

of the Laredo National Bank, a competitor of the

Bank of Commerce, which vigorously opposed

the application from the beginning. Pursuant

to City National's application, a national bank

examiner from the Comptroller's office con-

ducted a field investigation of the proposed new

bank, its management and organizers, gathered

and confirmed statistical data, talked to per-

sonnel from the various competitor banks, and

App. A-2

interviewed businessmen in the proposed ser-

vice area. Subsequently, he tendered written

findings, including a comprehensive economic

profile of the service area and its prospects,

and recommended that the application be ap-

proved. At appellant's request, the Regional

Comptroller of the Currency held a public hear-

ing on the application, and following an examin-

ation of additional economic reports and other

information proffered by the interested parties,

he like wise recommended approval, furnishing

written reasons for his action. Thereafter,

the Comptroller and his staff reviewed the en-

tire record and ultimately granted City National

a certificate of authority to commence banking.

After these efforts in the administrative

proceedings had proved unavailing, Bank of

Commerce turned to the court below seeking a

App. A - 3

declaratory judgment that the Comptroller's

approval of the charter application was unlaw-

ful, an injunction prohibiting City National

and its organizers from participating in the

banking business pursuant to the charter, and

a trial de novo on the merits of City National's

charter application. From fourteen grounds

of unlawfulness alleged in plaintiff's wide ranging

complaint, the district court distilled three bases

for the allegation that the Comptroller's action

was arbitray and capricous: (1) the procedure

employed by the Comptroller was illegal;

(2) his approval of the charter application cir-

cumbented the Texas prohibition against branch

banking; and (3) the grant of a bank charter

to City National violated the antitrust laws of the

United States. After dismissing the complaint

against Laredo National Bank and its executive

officers, who had participated in the organiza-

App. A-4 s

tion of City National, and against Michael Doman,

The Regional Administrator of National Banks,

for failure to state a claim upon which relief could

be granted, that court denied appellant's request

for a trial de novo and granted summary judg-

ment for the remaining defendants, City National

Bank, its Organizers, and William B. Camp,

Comptroller of the Currency. Neither ground

(2) or (3) is urged by the Bank of Commerce

on this appeal.

The Bank of Commerce alleges 37 spe-

cific arbitrary and capricious acts by the Comp-

trolier and his staff. Furthermore, appellant

complains that the trial court wrongfully denied

its motion to depose and serve interrogatories

on the Comptroller, several members of his

staff, the organizers of City National, and the

officers of Laredo National Bank who testified

App. A -5

PIR Ser et

in favor of City National's application. Finally,

in an attempt to tailor its appeal so as to invoke

the relief ordered in Camp v. Pitts,

U. S. » 93S. Ct. 1241, L. Ed. 2d

(1973), the Bank of Commerce contends that

the Comptroller so failed to explain his decision

as to frustrate effective judicial review.

In Bank of Dearborn v. Saxon, 244 F.

Supp. 394 (E. D. Mich. 1965), aff'd sub nom.

Bank of Dearborn v. Manufacturers National

Bank of Detroit, 377 F. 2d 496 (6th Cir. 1967),

the Comptroller approved the defendant bank's

new charter application, which when coupled with

the relocation of another established bank, per-

mitted the defendant by sleight of hand to cir-

cumvent a Michigan statute regulating branch

banking. Finding a prima facie case of sham

and subterfuge, the district court overturned the

App. A - 6

Comptroller's approval of the application as an

abuse of discretion and forced disclosure of the

administrative file, denying a claim of privilege

advanced by the Secretary of the Treasury. In

Camp v. Pitts, supra, the Comptroller denied

plaintiff's bank charter application with only a

very cursory explanation. The Supreme Court

held that if ''there was such failure to explain

administrative action as to frustrate effective

judicial review, the remedy was not to hold a

(trial) de novo .... but... to obtain from the

agency, either through affidavits or testimony,

such additional explanation of the reasons for

the agency decision as may prove necessary."’

93 S. Ct. at 1244. The Bank of Commerce asks

this court to reverse and remand with instruc-

tions that the district court elicit further com-

mentary from the Comptroller explaining his

App. A-7

SE BEL Ee NES LE EEE IEE ITE BP RD LOR ARIE

decision and accord appellant access to the dis-

covery process.

Appellant's reliance on these decisions,

however, is misconceived.

The preponderant weight of judicial pre-

cedent bars plaintiffs from deposing the Comp-

troller or requiring him to answer interroga-

tories. U.S. v. Morgan, 313 U. S. 409, 422,

ol, S. Ct. 999, 1004-05, 85 L. Ed. 1429 (1941);

Warren Bank v. Saxon, 263 F. Supp. 34 (E.D.

Mich. 1966), aff'd sub non. Warren Bank v.

Camp, 396 F. 2d 52, 56 (6th Cir. 1968); Klanke

v. Camp, 320 F. Supp. 1185 (S.D. Texas 1970).

The Supreme Court recently affirmed this policy

in Camp v. Pitts, supra, stating that'the focal

point for judicial review should be the adminis-

trative record already in existence, not some

new record made initially in the reviewing court."

App. A- 8

restricted the use of €x parte methods to obtain

information from the banks and parties involved,

even if such methods are utilized after a hearing

has taken place. First National Bank of Fair-

banks v. Camp, 465 F. 24 486, 603-04 (D.C. Gir.

1972), cert. denied, U.S. . S.

Ct. » L. Ed. 2d (1973); Sterling

National Bank of Davie v. Camp, 431 F. 2d 514,

516 (5th Cir. 1970), cert, denied, 401 U. S. 925,

S.Ct. 879, 27 L.Ed. 2d 829 (1971); Ramapo

Bank v. Camp, 425 F. 2d 333, 347-8 (3d Cir. ),

cert. denied, 400 U. S. 828, 91S. Ct. 67 L. Ed.

2d 58 (1970); Citizens Rank of Hattiesburg

v. Camp, 387 F. 2d 375 (5th Cir. 1967), Cert.

denied, 391 U. S. 904, 88S. Ct. 1652, 20L.

Ed. 2d 418 (1968). Here, the Bank of Commerce

was afforded the opportunity of a public, albeit

nonadversary, hearing in which to register its

protest. The administrative file was left open

App. A - 10

for exparte submissions by anyone so interes-

ted for five days thereafter. Furthermore, the

refusal to grant a continuance was well within

the ambit of the Comptroller's discretion.

Viewed in their overall context, these assertions

simply do not warrant the conclusion that the

procedure before the Comptroller was a sham

and subterfuge. Thus, we accept the observa-

tion of the district judge that " the real crux of

the matter is simply that (the Bank of Commerce)

disagrees with the Comptroller's finding; ....

(appellant) seeks to persuade this court that it,

rather than the Comptroller, has the right ans-

wers."'

Similarly, in Warren Bank v. Saxon, su-

pra, the same district court strictly limited

application of its prior decision in Bank of Dear-

Born v. Saxon, supra, which the Bank of Com-

App. A- 11

merce cites as controlling.

The case, then does not go to the ex-

treme argued for it by plaintiff. What the plain-

tiff is actually arguing, with respect to deposing

the Comptroller, is that if a plaintiff merely

alleges the Comptroller to be arbitrary, he can

thereupon question him to see whether or not

he really is arbitrary, despite a showing in the

administrative file of the exercise of a careful

and conscientious discretion. There is no pre-

cedent for such a course of action, it is not

warranted in the statutes, and it wine be utter-

ly destructive of the manifested Congressional

intent to vest a broad discretion to the expertise

of an administrative official in this sensitive

and complex area of banking. Plaintiff has the

cart before the horse. Plaintiff wants to depose

the Comptroller to expose wrongdoing. The law

App. A- 12

is the other way around. If Plaintiff can show

wrongdoing (not in the sense of Proving it, but

merely showing circumstances that to a reason-

able view would indicate sham, subterfuge or

Similar wrong) he may then depose the Comp-

troller as required,

263 F. Supp. at 39,

A punctilious review of the administrative

record, which of course is the same as was

before the court below, also fails to indicate any

such paucity of administrative explanation as

would frustrate effective judicial review of the

Comptroller's action. The district court cor-

rectly deferred to the Comptroller's expertise

where the administrative record adequately ex-

plained and justified his decision to grant a na-

tional bank charter. See First National Bank of

Southaven vy. Camp, 471 F. 2d 1322, 1326-27 (Sth

Cir. 1973). Here that voluminous record surely

App. A - 13

pie oe Paes

SCS ORES REC ETE

1 ape

WP SIF LOPLI RATE PE EET

indicated the determinative reason for the final

agency action: a finding that the new bank was

soundly organized, capitalized and managed and

constituted a sound economic venture in light

of the banking needs and services already a-

vailable in the surrounding community. When

findings of fact, rendered contemporaneously

with the concomitant administrative decision,

are subsequently available, a reviewing court

may not require the agency officials who parti-

cipated in that decision to give testimony ex-

plaining their action unless there has been a

strong showing of bad faith or improper behavior.

Citizens to Preserve Overton Park, Inc. v.

Volpe, 401 U. S. 402, 420, 91 S.Ct. 814, 825,

28 L. Ed. 2d 136 (1971). As stated by the Court

in Camp vy. Pitts, supra, also relied on by appel-

lant:

App. A- 14

FEE %

The validity of the Comptroller's action

must, therefore, stand or fall on the propriety

of that finding, judged, of course, by the appro-

priate standard of review. If that finding is

not sustainable on the administrative record

made, then the Comptroller's decision must

be vacated and the matter remanded to him for

further consideration. It is in this context that

the court of Appeals should determine whether

and to what extent, in the light of the adminis-

trative record, further explanation is necessary

to a proper assessment of the agency's decision.

(citation omitted) 93S. Ct. at 1244,

The appellant's assertions of misconduct

and collusion are wholly refuted by the record.

Lastly, the Bank of Commerce contends

that the Comptroller abused his discretion in

approving City National's charter application

App. A - 15

ee Er SAB 2

OE EI EB LE CLG BE LEVEE IEE OOS te IOI

and that this charge was inappropriate for sum-

mary disposition by the court below. When re-

viewing a case disposed of under Fed. R. Civ.

P. 56, an appellate court must apply the same

general standard as that initially employed by

the trial court--whether there is any genuine

issue as to any material fact and whether the

movant is entitled to judgment as a matter of

law. 10C., Wright & A. Miller, Federal Practice.

and Procedure § 2716, at 430 (1973). Moreover,

when a plaintiff who has no right to a trial de

novo brings an action to review an administra-

tive record which is before the reviewing court,

“the case is ripe for summary disposition, for

whether the order is supported by sufficient evi-

dence, under the applicable statutory standard,

or is otherwise legally assailable, involve mat-

ters of law." 6 J. Moore, Federal Practice

App. A - 16

ae beat = EOS FESS FY TEP IE NOLES amy SNe

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PANS,

9 56.17 (3), at 2472 (1965). The appropriate

legal standard for conducting such review is

that established by the legislation authorizing

the agency action and the appurtenant provisions

of the Administrative Procedure Act.

The National Banking Act, 12 U. S. C.

§ 21 £t seq. (1970), which authorizes the Comp-

troller to grant new certificates of authority

to commence banking, accords him broad dis-

cretion to approve or reject new charter appli-

cations. See 12U. S. C. § 26, 27 (1970). Since

neither the National Banking Act nor the Admin-

istrative Procedure Act, 5 U. S. C. § 701-06

(1970), requires the Comptroller to conduct a hear-

ing or make formal findings when Passing upon

new bank charter applications, 5 U. S. C.

§ 557 (1970); 12 U. S. Cc. § § 26, 27 (1970), the

appropriate standard for judicial review is not

App. A -17

the "substantial evidence'' test, which applies

when findings made on a hearing record are

to be reviewed, 5 U. S. C. § 706 (2) (E) (1970);

rather, the inquiry is whether the Comptroller's

adjudication was “arbitrary, capricious, an abuse

of discretion, or otherwise not in accordance

with law."" 5 U. S.C. § 706 (2) (A); Camp

v. Pitts, supra; Sterling National Bank of

Davie v. Camp, supra; Citizens Bank of Hat-

tiesburg v. Camp, supra. See Investment Com-

pany Institute v. Camp, 401 U. S. 617, 626, 91

S. Ct. 1091, 1097, 28 L. Ed. 2d 367 (1971).

After reviewing the Comptroller's administra-

tive file and appellant's pleadings and briefs

the district court applied the required test in

haec verba, finding " that the Comptroller's

decision was not arbitrary, capricious, or other-

wise not in accordance with law.'' Our inde-

App. A - 18

LRQA ce Tee De

a aa

Pendent review of the entire record on appeal,

including the administrative file and other

exhibits, confirms that this decision was clearly

correct,

Since the record provided a substantial

basis for the agency action and foreclosed the

existence of any material fact issues, the entry

of summary judgment dispositions are the form

commonly employed in reviews of similar Comp-

troller action. See Camp v. Pitts, supra; First

National Bank of Southaven V, Camp, supra; First

National Bank of Crown Point v. Camp, 463 F.

2d 595 (7th Cir. 1972); Sterling National Bank

of Davie v. Camp, supra; Warren Bank v. Camp,

Supra; Warren Bank v, Camp, supra.

The decision of the district court is

AFFIRMED.

App. A - 19

eC ED a ee ,

aS Tale

A true copy

Test: EDWARD W. WADWORTH

Clerk, U. S. Court of Appeals, Fifth Circuit

By /s/ Maryette Farley

Deputy

NOV 2 1973

New Orleans, Louisiana

App. A - 20

OTITIS FEO ETI ts ES RP RHI PRY, COALS ter ae caeede) CLOT Tg PINT RD FD RT EN

U. S. Court of Appeals

FILED

OCTOBER 25, 1973

Edward W. Wadsworth,

Clerk

IN THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 73-2217

Summary Calendar

BANK OF COMMERCE OF LAREDO,

Plaintiff - Appellant,

versus

CITY NATIONAL BANK OF LAREDO, ET AL,

Defendants-Appellees.

Appeal from the United States District Court

for the Southern District of Texas

On Petition for Rehearing

(October 25, 1973)

Before WISDOM, AINSWORTH AND CLARK,

Circuit Judges.

Per Curiam:

It is ordered that the petition for rehearing

filed in the above entitled and numbered cause

be and the same is hereby denied.

App. B - 21

RT ee PEE ENT OPER

ON PETITION FOR REHEARING

( OCTOBER 25, 1973 )

Before WISDOM, AINSWORTH and CLARK,

Circuit Judges.

PER CURIAM:

IT IS ORDERED that the petition

for rehearing filed in the above entitled and

numbered cause be and the same is hereby

DENIED.

App. B - 22

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MEMORANDUM AND ORDER

(Number and Title Omitted)

Filed April 25, 1973

Pl aintiff Bank of Commerce of Laredo

seeks a declaratory judgment that the approval

by the Comptroller of the Currency (hereafter

Comptroller") of an application for a national

bank charter for City National Bank of Laredo

was unlawful. It also seeks an injunction ere-

hibiting City National and its organizers from

carrying on banking business pursuant to the

approval of the said charter application. Plain-

tiffs also prayed for a trial de novoin this Court

on the merits of City National's charter applica-

tion. Named as Defendants are City National

Bank and its organizers, Hall, Sanchez, Magnon,

Guerra, and Zuniga; Michael Doman, individu-

ally and as Regional Administrator of National

Banks; William B. Camp, Individually and as

App. C - 23

al ODES LEM LAM

Comptroller of the Currency of the United States;

Laredo National Bank; Max Mandel and Gary

Jacobs, executive officers of Laredo National

Bank,

As to Laredo National Bank, Mandel,

and Jacobs, Plaintiff 's complaint complains of

their Participation in the Organization of City

National Bank; however, the complaint fails to

state a claim for which relief can be granted

against those Defendants, and indeed seeks no

relief against them,

Therefore, Plaintiff's

complaint is hereby dismissed as to Defendants

Laredo National Bank, Max Mandel and Gary

Jacobs.

The Defendant Doman is a subordinate

employee of the Comptroller, who has no

authority to grant or deny bank charter appli-

cations. Although he did conduct the hearing

on the application,

the final decision was not his.

App. C - 24

Plaintiff's complaint fails to state a claim for

which relief can be granted against Doman: there-

fore, the complaint is hereby dismissed as to

Defendant Michael Doman, Individually and as

Regional Administrator of National Banks.

Plaintiff's request for a trial de novo

must be denied. In Camp v Pitts, No. 72-864,

the Supreme Court, in an opinion dated March

26, 1973, enunciated clearly the standard for

judicial review of the Comptroller's decision

as to bank charters, stating on pages 4-5,

The appropriate standard for review

was accordingly, whether the Comptroller's ad-

judication was ‘arbitrary, capricious, an abuse

of discretion or otherwise not in accordance with

law' as specified in 5 U.S.C. » Sec. 706 (2) (A).

In applying that standard, thefoca] point for judi-

cial review should be the administrative record

already in existence, not some new record made

App. C - 25

initially in the reviewing court. "'

and so specifically rejected the idea of a trial

de novo before a District Court. The substantial

evidence test was also rejected as being inappro-

priate in cases such as the one before this Court.

Plaintiff alleged fourteen "grounds of

siiieaiiibiiacat s the decision, but several of

them are mere conclusions. It appears to the

Court that Plaintiff has actually alleged three

bases for its conclusion that the decision was

"arbitrary, capricious, and otherwise not in

accordance with law. "' First, Plaintiff contends

the procedure followed by the Comptroller was

illegal. Second, Plaintiff contends the approval

of the application contravenes the Texas pro-

hibition of branch banking. Third, Plaintiff

contends the approval was in violation of the anti-

trust laws of the United States and Texas. The

remaining Defendants have filed their respective

App. C - 26

mM TIO OE LOS Hk OE IS SM

motion for summary judgment,

Plaintiff contends the entire procedure

was a sham and subterfuge. It objects to the

ex parte meetings between the Comptroller's

staff and City National's organizers, and says

it did not have an adequate opportunity to oppose

the granting of the charter, and hints at collu-

sion. The answer to these complaints is clear.

Section 27 of Title 12 of the United States Code

gives the Comptroller the authority to approve

applications. The Fifth Circuit, in Sterling

National Bank v, Camp, 431 F. 2d 514 (1971),

has rejected the necessity of an adversary hear-

ing, and makes it clear that, even after a hear-

ing, obtaining information from the banks involved,

ex parte, is not improper. Such further investi-

gation does not constitute collusion so as to war-

rant this Court in finding the Comptroller's

approval is arbitray or capricious. Rompu

App. C- 27

Bank v. Camp, 425 F. 2d 333 (3rd Cir. 1970),

Plaintiff is also unhappy because the

hearing officer refused to grant a continuance.

In view of the fact that a hearing is not required,

the refusal to grant a continuance, for whatever

reason, while perhaps annoying, does not seem

legally objectionable. It is also relevant to note

at this point, that following the hearing, the

public file was kept open for several days. It

was open for anyone to examine and add to. It

appears to this Court a full investigation was

made and that the real crux of the matter is sim-

ply that plaintiff disagrees with the Comptroller's

findings; and Plaintiff seeks to persuade this

Court that it, rather than the Comptroller, has .

the right answers. The Court is not to substi-

tute its opinion of the merits for that of the Comp-

troller's. Citizens Bank of Hattiesburg v. Camp,

App. C - 28

387 F. 2d 375 (5th Cir. 1967), cert. den. 391

U. S. 904 (1968),

Plaintiff contends that the admitted affi-

liation of City National Bank with the existing

Laredo National Bank creates a violation of the

Texas prohibition of branch banking. This posi-

tion is without merit. A Texas court has said

that the mere fact that stockholders of one bank

were also the majority stockholders of a new

bank does not require the conclusion that the new

bank is in reality just a branch of the existing

bank. Bank of North America v., State Banking

Board, 468 S. W. 2d 529 (Civ. App. 1971), no

writ history. In Camden Trust Co. v. Gidney,

301 F. 2d 521 (D. Cc. Cir. 1962), cert. den. 369

U. S. 886 (1962), the Court held that the Comp-

troller was authorized to issue a certificate

of authority to a national Bank to commence busi-

ness, where the new bank was an affiliate of an

App. C - 29

existing bank, and issuance of such charter was not pr

cluded on the theory that the new affiliate bank

was a branch bank not authorized by state and

federal law. We quote with approval the follow-

ing statement from the Court's opinion:

"It is not within our province to pass upon

the desirability vel non of permitting a national

bank to have an '‘affiliate,' as the appellant

has here used the term. If such an affiliate is to

be denied status, Congress must clearly say so.

It is sufficient for our disposition of the present

controversy to observe that what was done was

within the authority conferred by existing statutes."

Camden Trust Co. v. Gidney, supra, p. 525.

Plaintiff also contends the Comptroller's decision

was not in accordance with law because it contra-

venes the antitrust laws of the United States, 15

U. S. C., Sec. 1, et seq. Plaintiff alleges the

App. C - 30

result tends to restran competition in the bank-

ing business, since one group of named persons

would then have a substantial interest in three

Laredo financial institutions. Plaintiff's argu-

ment fails to convince us for two reasons. To

begin with, 12 U. S. C., Sec. 27, does not state

that the Comptroller is to look to other United

States laws in considering charter applications,

while the Bank Merger Act specifically directs

the Comptroller to consider the antitrust laws

in making his decision as to a merger. The fact

that Congress directed the Comptroller to look

to the antitrust laws in one instance, but not in

the other, indicates that the Comptroller is not

required to consider the antitrust laws when ap-

proving bank charter applications. The Court in

National Bank of McKeesport v. Saxon, 268 F.

Supp. 720 (W. D. Pa. 1967), was cbntteaelal with

a contention similar to the one advanced by this

App. C - 31

Plaintiff. That Court. stated,

".... if the Plaintiffs are attempting to

plead a private antitrust cause of action, the

pleading is defective because the Comptroller

of the Currency is improperly joined as a par-

ty-defendant. Nowhere in the statute or case

law do we find any authority for bringing an

antitrust action against a Federal Agency. If

the plaintiffs wish to pursue a private antitrust

action against the (City National Bank) they -

should do so ina otuaxtbe action against that

defendant alone." (p. “T24) 7

The Comptroller's action was not "not in accord

ance with law” because of a failure to consider

the antitrust laws.

Upon reviewing the administrative file and

Plaintiff's pleadings and briefs, the Court con-

cludes that the Comptroller's decision was ane

arbitrary, capricious, or otherwise not in

App. Cc > 32

accordance with law. For this reason, the

several motions for summary judgment filed by

the respective Defendants must be, and hereby

are, granted. Counsel for the Defendants shall

prepare a form of final judgment in accordance

with the foregoing Memorandum and Order,

and present same to the Court within fifteen (15)

days from this date. The Clerk shall furnish

the appropriate counsel with copies hereof.

Signed this 24th day of April, 1973.

/s/ OWEN D. COx

UNITED STATES DISTRICT JUDGE

FINAL JUDGMENT

(Number and Title Omitted)

Filed: May 16, 1973

The Court, having heard the respective

Motions for Summary Judgment, or in the al-

ternative for Judgment on the Pleadings of

William B. Camp and Michael Doman, indivi-

dually and in their official Capacities, and the si-

milar motions of the private defendants, the

City National Bank of Laredo, Horace C. Hall,

Ill, Ramiro Sanchez, Alberto H. Magnon, Jr.,

Armengol Guerra, Jr., Carlos A. Zuniga, Max

A. Mandel, Gary G. Jacobs, and the plaintiff's

opposition thereto, and finding, on the basis set

out in the Memorandum and Order filed herein

on April 25, 1973, that the motions of such

defendants should be granted, it is accordingly

ORDERED, ADJUDGED AND DECREED

that the Bank of Commerce of Laredo shall have

App. D aad 34

and take nothing against the above-named defen-

dants; that this Civil Action and the same is

hereby

DISMISSED WITH PREJUDICE; and that

the costs of these proceedings are hereby

adjudged against the plaintiff, Bank of Commerce

of Laredo.

DONE at Corpus Christi, Texas, this

15th day of May, 1973.

/s/ OWEN D. Cox

UNITED STATES DISTRICT JUDGE

APPROVED AS TO FORM:

/s/ HORACE C, HALL II

HORACE C. HALL, III

Sames-Moore Building

Laredo, Texas 78040

/s/ GEORGE KAZEN

GEORGE KAZEN

Mann, Castillon, Freed & Kazen

P.O. Box 820

Laredo, Texas 78040

App. D - 35

er a ae ee ee

/s/ J. G. HORNBERGER

J. G. HORNBERGER

915 Victoria Street

Laredo, Texas 78040

ANTHONY J. P, FARRIS

United States Attorney

By: /s/ WILLIAM L, BOWERS, JR.

WILLIAM L, BOWERS, JR.

Assistant United States Attorney

May 23, 1972

Mr. Horace C. Hall, III

Post Office Box 207

Laredo, Texas

Dear Mr. Hall:

We are pleased to inform you that the

Comptroller of the Currency has granted pre-

liminary approval of the application submitted

by you and your associates to organize a Na-~

tional Bank as follows:

Title: "City National Bank of Laredo"

Location: 4500 San Bernardo Avenue,

Laredo, Texas

Capital Authorized - $ 345,000

Shares of Stock - 34, 500

Capital Issued - $ 300,000

Issued - 30, 000

Surplus - $ 150,000

Par Value - $ 10.00

Undivided Profits - $ 150,000

Sale Price =e 20.00

In addition to the aforementioned, this

approval is granted subject to the following

conditions:

1. That executive management accepta-

ble to this office will be provided.

2. It is understood that 51% of the stock

of the new bank will be offered to shareholders

of the Laredo National Bank on a pro-rata share-

for-share basis and no one individual or his

interests holding in excess of 5%.

3. Any individual or his interest who

will hold 5% of the stock will file Financial

and Biographical Reports.

4. It should be understood that subscrip-

tion funds collected during the organization of the

bank may only he invested in United States Govern-

App. E - 38

ment Securities.

5. That the use of free service charge

accounts at the opening of the bank will not be

permitted without the prior approval of this

office. 2

6. If a buy or sell agreement is contem-

plated between the directors or incorporators,

the proposed agreement should be forwarded to

this office for review.

7. That all organization expenses in con-

nection with the organization of the bank will not

be capitalized, but will be charged directly to

the Undivided Profits Account of the bank on

the General Ledger on the date the bank opens

for business. .

8. That the bank's books will be main-

tained on an accrual method acceptable to this

office.

9. That legal fees in connection with the

App. E - 39

organization of the bank will not exceed a maxi-

mum of $5,000. In addition, a complete log must

be kept showing the date, hours worked, nature

of the work and fee charged.

10. An offering Circular in connection

with the issuance of the Capital stock must be filed.

11. Stock certificates shall not be issued

prior to the date the bank opens for business, it

being understood that all stock will be issued

immediately following the opening of the bank.

12. In addition to regular coverage, the

bank will have in force $1,000,000 excess Fi-

delity Bond the date it opens for business. This

should be reflected in the minutes of the meet-

ing at which regular coverage is purchased.

13. Land and building will be owned by

the bank and the investment in fixed assets should

not exceed $240, 000.

14. Correspondent bank balance of the

App. E - 40

new bank should not be used to support borrow-

ings of the organizers and proposed directors in

connection with the stock acquisition of the new

bank.

15. That the active senior executive

officer will serve as a member of the Board of

Directors.

16. Within one year from the date the

bank opens for business any new director or

officer must file Financial and Biographical

Reports with the Regional Administrator prior

to assuming the responsibilities of the position.

Directors: At the organization meeting of

the incorporators, the following names should

be submitted for election as interim directors:

Armengol Guerra, Jr,

Horace C, Hall III

Alberto H. Magnon, Jr.

Ramiro Sanchez

App. E = 41

Carlos A. Zuniga

Officers:

Alberto H. Magnon, Jr. -President-

$16,000 per annum

Ramiro Sanchez-Chairman of the Board-

no remuneration

«$e

Financial and Biographical Reports of any

officers or additional directors should be for-

warded to Regional Administrator of National

Banks, Michael Doman.

Banking Quarters: Please submit data with res-

pect to a definite location, with information as

to the terms and cost of the investment in or

lease of bank premises and the estimated cost

of furniture, fixtures and equipment at this site

to this office.

The "Comptroller's Manual for National

Banks" will be mailed to you under separate

App. E - 42

cover,

Forms and instructions to be used in the

Organization procedure are enclosed. We invite

your attention to Page l, Paragraph 3 of the

Instructions wherein the first phase of the

organization should be completed within fifteen

days.

Your attention is invited to the enclosed,

Banking Circular No. 31, dates October 22,1970.

This circular should be presented at the meeting

of the Interim Board and each director should be

apprised of the contents of the circular.

We assure you that we shall be pleased

to have you communicate with us at any time

we can be of help to you and your associates in

completing the organizational plan.

Very nae yours,

(Signed, Thomas G. DeShazo)

Thomas G. DeShazo

Deputy Comptroller of the

Currency

Enclosures

jab

TITLE 12 U.S.C. SECTION 21

Section 21. Formation of national bank-

ing associations - Incorporators - Articles of

association - Associations for carrying on the

business of banking under this Title may be formed

by any number of natural persons, not less in

any case than five. They shall enter into arti-

cles of association, which shall specify in gen-

eral terms the object for which the association

is formed, and may contain any other provisions,

not inconsistent with law, which the association

may see fit to adopt for the regulation of its business

and the conduct of its affairs. These articles

shall be signed by the persons uniting to form

the association, and a copy of them shall be for-

warded to the Comptroller of the Currency, to

be filed and preserved in his office. (R. S. § 5133)

App. F - 45

TITLE 12 U. S. C. SECTION 26

Comptroller to determine if associations

can commence business. - Whenever a certificate

is transmitted to the Comptroller of the Currery,

2s provided in this Title, and the association

transmitting the same notifies the Comptroller

that all of its capital stock has been duly

Paid in, and that such association has complied

with all the provisions of this Title required

to be complied with before an association shall

be authorized to commence the business of bank-

ing, the Comptroller shall examine into the con-

dition of such association, ascertain especially the

“mount of money paid in on account of its capital,

the name and place of. residence. of each of its

directors, and the amount of the capital stock of

which each is the owner in good faith, and gener-

ally whether such association has complied with

App. F- 46

all the provisions of this title required to entitle

it to engage in the business of banking; and shall

cause to be made and attested by the oaths of

@ majority of the directors, and by the president

or cashier of the association, a statement of all

the facts necessary to enable the Comptroller to

determine whether the association is lawfully

entitled to commence the business of banking.

(R. S. § 5168; Sept. 8, 1959, P. L. 86-230,

§ 2, 73 Stat. 457.)

TITLE 12 U. S. C. SECTION 27

Certificate of authority to commence

banking. -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 other-

wise, it appears that such association is law-

fully entitled to commence the business of banking,

the Comptroller shall give to such association a

certificate, under his hand and official seal,

that such association has complied with all the

provisions required to be complied with

before commencing the business of banking, and

that such association is authorized to commence such

business. But the Comptroller may withhold

from an association his certificate authorizing

Sti ceaiinlaiailandiital of business, whenever he has

reason to suppose that the shareholders have formed

the same for any other than the legitimate objects

contemplated by this Title. (R. S. § 5169.)

App. F - 48

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