# Petition for Writ of Certiorari — Chase Manhattan Bank, N. A. v. American Land Title Ass'n > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_1316%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1993 - **Citation:** 508 U.S. 971 ## Text 92-482 No. IN THE : Siuprene Court of the United States OCTOBER TERM, 1992 THE CHASE MANHATTAN BANK, N.A,. Petitioner, V. AMERICAN LAND TITLE ASSOCIATION, NEW YORK STATE LAND TITLE ASSOCIATION, STEPHEN L. STEINBRINK, in his official capacity as ACTING COMPTROLLER OF THE CURRENCY, and THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, an agency of the United States, Respondents. Petition for a Writ of Certiorari to the United States Court of Appeals for the Second Circuit PETITION FOR A WRIT OF CERTIORARI Of Counsel: JOHN D. HAWKE, JR. L. EDWARD SHAW, JR. DENNIS G. LYONS KENT T. STAUFFER ROBERT E. MANNION The Chase Manhattan Bank, HOWARD N. CAYNE * N.A. DAVID F. FREEMAN, JR. New York, New York KATHLEEN KELLY 1200 New Hampshire Ave., N.W. ARNOLD & PORTER Washington, D.C. 20036 Washington, D.C. (202) 872-6700 Attorneys for Petitioner September 1992 * Counsel of Record WILSON - EPES PRINTING Co., INC. - 789-0096 - WASHINGTON, D.C. 20001 v) ~ x - ») 1 j —_ I ) i") \\ } f ) ~ ) _ } QUESTIONS PRESENTED " PF ft nono ASe 4 { ,ie TN¢é eh ~ a af : I } \ £ ) " } ~ 6) N Bal act, 12 U.S. $ 24 TORS IT 190q0 il PARTIES TO THE PROCEEDINGS IN THE COURT BELOW The plaintiffs in the distriet ceurt ease were also the La Ol 1) kon im 4 reat? yer Po * +) ] TL via inti , . pelhants in the court of appeals. The plaintiffs were American Land Tit}: Association ane he New York 7 rm:.7 : . fa hl } c - 4 ss re a m mt nd Title Association. The defendants in the distriet } 2 | bd ? . wt cause were also the appellees in the court of appeals. e defendants were Robert L. Clarke. in his official ca- ity as then Comptroller of the Currency and the Office the Comptroller of the Currency, an avency of the United States, and The Chase Manhattan Bank. N.A.. Int ey) enor-Defendant. LIST OF PARENT CORPORATION AND NONWHOLLY-OWNED SUBSIDIARIES The only parent company of Applicant is The Chose T ’ ‘ ry) ° ‘ .° . . Manhattan {Corporation tne direct and Indirect s DSid- aries of the Applicant ‘other than wholly-owned aries! are Banco Chase Manhattan, S.A Chase Automated Clearing House, In { lanl an \ ! SL~LYat » “tr ‘if ()~ = \ C4 \Ian] nm € ) ( de Se } T +,] (hase Man n Financ S.A ( \] nh: n TA 1) ! (it | ~ T \ i cif () { . Pert ( Vi COE ‘ \ ( male Ch } f nN Ine C racion Me cana de aA eu } \ Nt Ma qual E! nic Payment §$ Kone Ims Imoveis Ltda. O.A. Venezolano de Pulps Vv Papel Panterhaven Ltd. Rating Agency M vsia Berhad Societe de Deve] mpement Regional Ant illes. TABLE OF CONTENTS QUESTIONS PRESENTED PARTIES TO THE PROCEEDINGS IN THE COURT BELOW OPINIONS BELOW JURISDICTION STATUTORY PROVISIONS INVOLVED STATEMENT A. Introduction B. The Statutory and Regulatory Scheme C. Comptroller’s Approval D. The District Court Decision EK. The Court of Appeals Decision REASONS FOR GRANTING THE WRIT I. CONFLICT REGARDING THE CONTINUED EXISTENCE OF SECTION 92 Il. CONFLICT REGARDING WHETHER SEC- TION 92 “IMPLIEDLY BARS” ALL NA TIONAL BANK INSURANCE AGENCY AC TIVITIES NOT EXPRESSLY AUTHORIZED THEREIN Il. THE COURT OF APPEALS’ DECISION CON. TRAVENES NUMEROUS BASIC RULES OF STATUTORY CONSTRUCTION A. Ignoring the Plain Meaning Rule 6b. Ignoring the Rule of Deference to Adminis trative Statutory Construction (ili) Page 20) A. ry | fs ( a hl — {Ek COURT OF TS NATION ANT COMPETI ENDICES Op no ne { Opinion o he Dist) OCC App | Lette 1986 OCC Interpri 1965 OC I rpl Statuto1 P) | Li Title A V. Clarke, 743 F. Supp 19 ] { +) 1) 1" LVS) 5 / { V. Clarke, 865 F.2d 278 (D¢ Cir, 1988) 1d, 16 B Fee i | ye ( dit Bi TR8 F.2d 498 (8th Ci ) ( 179 U.S. 915 (1986 22, 23 Board of Gr of ti Fed. Rese C7, \ Di on Fin. Corp., 474 U.S. 361 (1986) 19, 21 ( V. Pit 111 U.S. 138 (1973) 2() Cheney R.R. Co. v. 1.64 ., 902 F.2d 66 (D.C. Cir.) ( l ls SER OR 4 5919 (1990) 22 { U.S.A. i V. Nat ( R ces Defense ( Live 167 U.S. 837 (1984) passim Vv. wel find | 479 U.S. 388 (1987) 5, 20, 21 ( ( V. Fer al Mine Safety & H Cr 890 F.2d 773 (D.C. Cir.), cert. ( Lli S. ¢ 137 (1990) 22 Deni V. Ma » 1115S. Ct. 599 (1991) 19 De } f Be gy & ¢ } f V. Clarke 809 F.2d 266 (Sth Cir.), « ( d, 483 U.S O10 (1987) 2] Director Vv. Bethleh i Corp., 669 F.2d 187 (4th Cir. 1982) 22 ' eore art Vv. Nie sD j ( hia os GA 2989 (1992) 19 / Vat'l Bi V. daylor, 907 F.2d 775 (8th Cir.) a ( d, 1118S. Ct. 442 (1990) 15, 2] ( ¥.¢ f Sta 3290 U.S. 62 (1968) LO Her) & Macher V. Huddl 159 U.S. 375 (1983) es / dent Ba | FL ann, 613 F.2d 1164 (D.¢ Air: To79%. 4 ae ( 149 IT S. g92 (1980) pa } / / | BR (; 0 vl TABLE OF AUTHORITIES—Continued Page Independent Ins. Agents Vv. Clarke, 955 F.2d 731 (D.C. Cir. 1992) ; passim Investment Co. Inst. Vv. Conover, 799 F.2d 925 (D.C. Cir.), cert. denied, 479 U.S. 939 (1986) 21 Neube rger V. Commissioner, 311 U.S. 83 (1940) 2? Owensboro Nat'l Bank V. Moore, No. 91-2 (E.D. Ky. Aug. 4, 1992) 12 Pauley Vv. BethEnergy Mines, Ine., 111 S. Ct. 2524 g) |S eee 22 Sanford Vv. Garamendi, 284 Cal. Rptr. 897 (Ct. App. 1991) 14, 20 Saxon V. Georgia Ass’n of Indep. Ins. Agents, 399 F.2d 1019 (5th Cir. 1968) 8, 15, 17 Securities Indus. Ass’n V. Clarke, 885 F.2d 1034 (2d Cir. 1989), cert. denied, 493 U.S. 1070 (1990) 21 Southeastern Community College Vv. Davis, 442 U.S. 397 (1979) 22 Variable A nnnity Life Ins. Co. V. Clarhre . 786 F. Supp. 639 (S.D. Tex. 1991), appeal filed, No. 92- 2010 (5th Cir.) passim Statute S° 12 U.S.C. § 21 (1988) 3 12 U.S.C. § 24 (Seventh) (1988 & Supp. II 1990). passim 12 U.S.C. § 92 passim 28 U.S.C. § 1254(1) (1988).............. 2 28 U.S.C. § 2106 (1988) 10) \ct of June 38, 1864, ch. 106, $8, 13 Stat. 101 (1864) passim Act of Sept. 7, 1916, ch. 461, 39 Stat. 752 (1916). passim Act of April 5, 1918, ch. 45, $20, 40 Stat. 506 (1918) passim a (fi slatine Mate / als: 53 Cong. Rec. 11,001 (July 14, 1916) 9,24 DO fh lo IO LO bo —— | Comptro si mim gir —~ lin vil TABLE OF AUTHORITIES—Continued € Mat rials - haa POI E .FLR. § 2.6 (1992) .F.R. § 5.34 (1992) FUR. §$ 5.34(c) (1992) FER. $ 5.34(d) (1) (1992) FR. $ 5.34(d) (1) (iii) (1992) .F.R. § 7.7495 (1992) ‘ed. Reg. 48,518 (1977) ller Interp. Letter No. 277, | 1982-1984 Transfer Binder] Fed. Banking L. Rep. (CCH) Comptroller Interp. Letter No. 283, [1983-84 fer Binder] Fed. Banking L. Rep. © 85,447 (Mar. 16, 1984) Comptroller Interp. Letter No. 331, [1985-87 fer Binder] Fed. Banking L. Rep © 85,501 (Apr. 4, 1985) Comptroller Interp. Letter No. 338, [1985-87 fer Binder] Fed. Banking L. Rep. * 85,508 (Mav 2, 1985) Comptroller Interp. Letter No. 368, [1885-87 fer Binder| Fed. Banking L. Rep. © &5,538 (July 11, 1986) Comptroller Interp. Letter No. 377, [1988-89 fer Binder| Fed. Banking L. Rep. © 85.60] (Feb. 6. ] RT) Comptroller Interp. Letter No. 450, [1988-89 fer Binde Fed. Bankir L. Rep. © 85,674 (Sept. 22, 1988) Comptroller Interp. Letter No. 495 fer Binder Fed. Banking L. Rep * 83,084 (Dec. 22, 1989) ptroller Interp. Letter No. 499, [1989-90 fer Binder] Fed. Banking ] Rep. q § 90 (Feb. 12. 1990) ‘oller of the Currency (Aug. 3, 85,441 (Dec. 21, 1983) Coleman Egerton, Depu Al, 1965) tx, Trans- (CCH) Trans- (CCH) Trans- (CCH) Page ped ~A O P LP A DL or ~m = 14, 15 Tran (CCH) 5, 16, 25 Trans- (CCH) 2, 16 | 1989-90 Trans- (CCH) Trans- (CCH) Comp- 15, Vill TABLE OF AUTHORITIES—Continued Periodicals: Ford Barrett, Remarks to the Third Annual Banks in Insurance Conference, reprinted in 6 OCC J. ae ED Sa by SE ree Cass R. Sunstein, Law and Administration After Chevron, 90 Colum. L. Rev. 2071 (1990) — State Bank Powers, Banking Pol’y Rep., June 1, | > Rene Eee Seo PERO TON Miscellaneous: Oxford English Dictionary 104 (Compact ed. sy SERRA EAR Su anceS ene At PERCE tts eco aaa ae mC uP aa 2A Norman J. Singer, Sutherland Statutory Con- struction §$ 47.25 (Sth ed. 1992 Rev.) Page IN THE Supreme Court of the United States OCTOBER TERM, 1992 No, ——— THE CHASE MANHATTAN BANK, N.A.. Petitioner. V. AMERICAN LAND TITLE ASSOCIATION, NEW York STATE LAND TITLE ASSOCIATION, STEPHEN L. STEINBRINK, in his official capacity as ACTING COMPTROLLER OF THE CURRENCY, and THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, an agency of the United States. Re spond nts. Petition for a Writ of Certiorari to the United States Court of Appeals for the Second Circuit PETITION FOR A WRIT OF CERTIORARI The Chase Manhattan Bank, N.A.. by its undersigned counsel, respectfully petitions for a writ of certiorari to review the judgment of the United States Court of Ap- peals for the Second Circuit in this ease. OPINIONS BELOW The opinion of the court of appeals is reported at 968 M.2d 150 (2d Cir. 1992) and reproduced at Appendix (“App.”) la. The judgment of the district eourt (App. at 17a) is reported at 772 F. Supp. 1353 (S.D.N.Y. 1991). The approval letter from the Office of the Comptroller of the Currency (App. at 30a) is not reported. Introduction ) JURISDICTION }O ws i TORY PROVISIONS STATEMENT () Oc Ba YA ( ’ ? >>? { ( ’ 1 ) yr) t} ) } T> r ¢ A i \s { T é i ‘ ? T t : ( Comptroller's Approval ‘ : bee ree aa * re . : 41 ri r\4 { ge } . 4 mited type or coverage tnat protects tne " ) , / >) (>| | ‘ 1 rar — ne i}@) ‘ L)] ‘ ) TY ) 7 ] 2 ~ ( 4) S Su] ) , 7 , ° . +) t ) Nat } Dal " i ‘ . - . ¢ ~ ** ¥ I , or DA ~ OQ? ‘.) > } 1 t 4 f ‘ ‘ . ‘ >1) " 4 i \ Ze) : f } OC] } Phe (Court of \ppeals Decision i 7 Y J ()*) 4 1 | ~ 4 l > s (39 (D.C. Cir. 1992), that “section 92 has ceased to exist” due to Congress’ omission of section 92 when it revised ind reenacted section 5202 of the Revised Statutes in Its. According to the D.C. Circuit. even “lilf the letion of section 92 was a mistake, it is one for Congress to correct, not the courts.” Td. The Second Circuit flatly rejected the D.C. Circuit’s ruling, holding instead that section 92 remains in full force and effect. The Second Circuit said: “{clontrary to the view of the D.C. Cireuit, we believe that this omission Was Inadvertent and thus we do not interpret it as having effected a repeal of section 92.” App. at 5a. After ruling that section 92 “remains valid law,” the Second Circuit took up ALTA’s contention that “section 92 imphedly prohibits national banks from selling insur- ance—including title insurance—in towns with more than 5,000 inhabitants.” App. at lla. While acknowledg- ing that section 92 “obviously provides no explicit limita- tion on national bank activity,” the court of appeals never- theless concluded that section 92 should be interpreted to “impliedly bar|| national banks in towns with more than 5,000 inhabitants from engaging in insurance agency ac- tivities in general,” a holding which it applied to the title insurance agency business in particular. App. at 11a, I4a (emphasis added). In attempting to bolster this ruling with its analysis pun; of two letters from what it called the “sparse” legislative history of section 92,'' the court ignored the plain Jan- guage of section 92 in which Congress unambiguously In reaching this conclusion, the court relied upon the quesiion- able principle of ¢ press:o unius est exclusio alterius as applied, or mis:pplied, in the widely questioned decision in Savon V. Geargis Ass’n of lide pe ndent Insurance Agents, 399 F.2d 1010, 1013 14 5th Cir. 1968). M App. at 12a. These documents consisted of a letter from counse! to the Federnl Reserve Dourd to a governor of the Board and i letter from the Comptroller to the Senate Banking Committee. declared that the powers granted by section 92 were “in addition to the powers now vested by law in national banking associations.” '* In disregard of this determina- tj viun!l statement of congressional intent on the precis miestion at issue, the court found “that the anguage of section 92 evinces Coigress’ intent to bar national banks thet fall outside of the provision’s geo- graphical restrictions from acting as insurance agents.” App 1 [2a The court of appeals never reached the issue whether 1) Insurance ageney activities are incidental to the busi- ss of | ing under section 24 (Seventh), saying that “thlased on ur interpretation of section 9? we see no need to determine the scope of section 24 (Seventh:.”’ \pp. at 48 [In parsing these letters for the barest glimmers ntent, the court ignored the fact that the Comptro! ler’s ‘ett n whieh it relied stated that the purpose of secti 92 ' to “enl e” the powers of small town banks in order to im their profitability. 53 Cong. Rec, 11,001 (July 14, 1916). Nor did the court consider the contrary legislative analysis of the Eighth Cireulit in Jnd end a | rance Agents \ Board of Gove Oo? he | 1 Rese System, 726 F.2d 468, 477 n.6 (8th Cir. 1984 tihe | slative histor of section 92 ndicates that Congress ! I 1) r\ | ¢ H | ( h} b ] i 1) dd Momo « A wit] hibiting city banks fre q e” (empl dded I) ht letermination that section 92 cleariy evinces ( Y) n? i } pe irt reviewer the OCC’s consiructio? of eP¢ A vz the first prong of Ch on and declined to accord any Pe a 4 tha OC ( 1] ne. stating that tla defer to the OC( n this mild flout Congressional intent omething w ren I ! lin 1 (1é \ D. al 162 , | } ( , tern t t } it ction 92 d , t ex , it ( 3 of limit national banks’ incidental powers under { 1 24 si ntl the ( rt Mav reman | this « \ the Second ‘termination of this issue. Alternatively this Court J te} T of | rari ) yy y’’ nd In ] rht of t} ’ dist t mpe ng analvsis of this issue, wish to determine 10 ; . ’ , ; ’ aes App. at loa. Havine determined that section 92 im- as Independent Ins. Agents Vv. Clarke, 955 F.2d 721. 729 (D¢ Cir. 1992) 11 Ass'n V. Hetmann, 613 F.2d 1164, 1169 (D.C. Cir. 1979), cert. Conred, 449 US, 823 (1980)."" Although the Second ‘ircuit did not explicitly acknowledge this conflict, the court clearly failed in its strained attempt to distinguish feouann based on its flawed understanding of the nature of credit life and title insurance. See p. 17 n.29. —_ The decision of the Second Circuit sharply curtails the fundamental statutory authority of all national banks to exercise those “incidental powers” under section 24 (Seventh: that are necessary to carry on the business ; ‘ing. Enacted as part of the original NBA in 1864, this essential! statutory authority has played a critical role in the long-term success and viability of the national banking system. The decision below directly un- dermines the authority of national banks to continue to in 2 broad range of activities that are both con- venient and necessary to their continuing viability and The Second Circuit’s decision squarely contravenes the pinin language of section 92 and mistakenly relies on isolated snippets of ambiguous legislative history taken ut of context to override the plain meaning of an un- ambiguous statutory declaration of congressional intent on tne precise question at issue in this litigation—whether ‘constitutes a supplement to or limitation on national bunks’ incidental powers under section 24 (seventh!. Further, the court of appeals failed to accord ne Comptroilei’s interpretation of sections 92 and 24 Seventh! the “substantial deference” that this Court + vtien has stated is required. As a consequence, the Second Circuit has put those national banks within iis jurisdiction at a distinct com- etitive disadvantage both as to other types of financial institutions. and possibly as to national banks located in The /leimann court “presumed” the continuing validity of J2. See Independent Ins. Agents Vv. Clarke, 955 F.2d at 737. 12 other circuits that have not construed section 92 as im- pliedly barring the exercise of statutory powers granted elsewhere in the national honkine statutes." The ¢ireuit c courts have reached an irreconcilable impasse on this Issue. Guidance from this Court is urgent!y needed te ny! 4 ae as al {* afrsas ~~ . e+ oy} ’ anenc to neariy 25 years of confusion end uncertainty ()s) ai “\acliyer 4 wletinwmot a . ete "ie 7 ¥- 4 revarding the Petacionsnlp oeltween section 02 and section ‘ Cis 4] Pog: = 1 RHR, Fee Snr anda Pas 24 (Seventh), and, indeed, to resolve the issue of section 2s existence. Both are issues of substantial Importance te the national banking system I. CONFLICT REGARDING THE CONTINUED EX- ISTENCE OF SECTION 92 The D.C. Circuit recently decided the same issue ini- ially faced by the Second Cireuit in this exse—-whether Congress repealed section 92 jn 1918——and reached the opposite conclusion, ruling that “Congress has stricken | section 92] from the statute hooks,” Lndependent lis Agents, 955 F.2d at 729. The Second Cirenit, as noted above, expressly rejected the ruling of its sister cireuit and held that App. at 10a. ss ‘ section 92 remains valid law.’ ’ Resolution of this issue of substantial and recurring '* national importance may easily dispose of the longstand- v7 Before the district court, ALTA sought a nationwide injunction against the Comptroller’s authorizing national banks in general to act as agent in the sale of title insurance: the court of appeals, in reversing the district court’s dismissal of the complaint, re- manded the case to the distriet court with instructions “to enter summary judgment for the appellants.” App. at 162. Thus, the po sibility Of an 1D] netive order of nationwide appleability pur- porting to restrain the Comptroller from permitting any national bank to act as agent for the sale of title insurance is presented, is See () hOMSDOLrO AU ! ff Ba }: \ Moo ‘ No. 4] “4 slip ( }. at 16 E.D. Ky. Aug. 4, 1992), in which the district court recently adopted the anslvsis of the Second ¢ reu) Its own in ho ling that Con gress did not repeal section 92. 13 ing controversy ovcr che relationship between section 92 and section 24 (Seventh). If this Court determines that Congress did in fact repeal section 92, this nonexistent statute obviously no longer could be held impliedly to bar the exercise by national banks of powers granted by an- other statulory provision-—section 24 (Seventh). In the event of such a ruling, the only issue remaining would be Whether the broad grant of powers in section 24 (Sey- enth!, considered in and of itself and in the light of its consistent interpreiation by the OCC, would authorize the sale of title insurance as agent by national banks as in- cidental to the business of banking." Little elaboration is necessary to make the point that the question of the continued existence of an Act of Con- gress—-a question admittedly answered in contradictory terms by two contemporaneous decisions of two courts of appeals-—is a question worthy of this Court’s attention. The considerations in favor of this Court’s review become all the more compelling where the Act in question not only provides an important authority of its own but has been the source of conflict between the federal courts of ap- peals concerning whether it, by negative implication, ne- banks which would otherwise rates powers of national! @XI1St. Il. CONFLICT REGARDING WHETHER SECTION 92 “IMPLIEDLY BARS” ALL NATIONAL BANK IN- SURANCE AGENCY ACTIVITIES NOT EX- PRESSLY AUTHORIZED THEREIN The Second Circuit ruled that section 92, which does hot require that the Imsvrance agency powers exercised pursuant thereto be incidental to the business of banking, “impliedly bars national banks in towns with more than 5,000 Inhabitants from engaging in insurance agency ac- tivities in general.” App. at Ida. It applied this rul- ing to ali pational banks in places with more than 5.000 "We submit that the answer to this question is clearly “yes"; the court of ; ppeals, however, did not reach it. 14 inhabitants without considering whether specific insurance agency activities—such as credit life or title insurance are incidental to the business of banking and therefore permissible under section 24 (Seventh). It thus adopted a position consistently rejected by the Comptrol’er, and re- jected by the D.C. Cireuit and other federal courts”. In reaching its decision, the Second Circuit relied primarily on the statutory analysis contained in the Fifth Circuit's pre-Cherron decision in Savon v. Georgia Ass'n of Inde pendent Insurance Agents, 399 F.2d 1010 (oth Cir, 1968: ("Savon"), In Savon, the Fifth Cireuit overturned an administrative ruling of the OCC that “National Banks have t! surance which is incident to banking transactions.” Jd. at 1012. According to the Saxon court, “|s}/ince Congress dealt specifically with the insurance agency power in See- tion 92, the evpressio unins rule negates the existence of le authority to act as agent in the issuance of in- any other power to act as an insurance agent under the general provisions of Section 24(7)." Jd. at 1014. During the 24 years that have elapsed since the Savon decision, the OCC and a number of federal courts have disagreed with and refused to follow it. The OCC long has taken the position that Savon was wrongly de- cided, and has repeatedly ruled that section 92. “does not prohibit a national bank from conducting insurance- related activities if the activities are otherwise authorized by the National Bank Act.” Comptroller Interp. Letter No. 331, [1985-87 Transfer Binder] Fed. Banking L. Rep. (Ahn) 7 SO.901, al 77,776 (Apr. 4. 1985). See also Comptroller Interp. Letter No. 283, {1983-S4 Transfer Binder] led. Banking L. Rep. (CCH) © 85 147, at 77,609 (Mar. 16, 1984) (“{A] national bank may act as agent “In addition, a California Court of Appeal has interpreted a Culifornia banking statute, that was copied virtually word-for-word from section 92, as not imposing any restrictions upon the incidents! “uthority of state banks to offer insurance products outside of towns of 5.000 or fewe} persons, Sant wad V. Cra side nad 28.4 { cll, Rpti 897, 903 (Ct. App. 1991). ici Yr) (ils t CA } ‘>” OMY) Cl } +\ + 4cil { : \ i \ i 1 —_ 2? } ) ) } cll r) , ‘ ~ ‘ 7 ()? 1)* } 46] " +) } } ra | i } 1 \ cla I y ck a O'¢ Lot , 37 {} ? 1& | ] ; iis rt re J ) } Sone | S te ; | 7 j F i } »¢) Ss ~ } *f J i ri {)} Late S.D Tex. 199 ] ’ rt signaler even witl roiuers dete P Pon en (36 | , »* ncre IS 5 le 4 lVe ! \ , } t s I | + fe . eath ) Ts = " the re ral ??) se'¢ Mat at} + ] LOOK Lat ie } 1 ») ’ a ) ) on 9 ) , > lai note 1OeS NT owns . 99 ; ics r } | CSP t iti +1 ." Cir- i il +} ; ldl a (, n& t en I ; ; ; 2 } ant ¢ y ; } ] I LK > ; a n \ T\ ’ , } , 1 W s -. “i St, — a = — ‘ os oe ae) al = ~ “~~ ¢ o _ oi ¥ > —_ f - j - f a f , _ 3 Y ae ~ é — a] I, ww ~| - f = _ ° + ~ — ae . _ A : 5) ere ~ Z Lf ‘e ban + Sa o~ f om: “s = nn a f -_+ _ ~ ~~ ov , 4 =_ eal zm » s +4 ° VY 4 } clear as to he beyvo | i} t LP Se a It vit creasing, or augmenting. Oxford Epo- Vv 104 (Compact ed. 197] B ! 9? is an express o 1} Ol iddi O - l} ) limited class of national banks bb. lenoring the Rule of Deference to Administrative Statutory Construction { ( ~ i { { I ~ ~ 7.) "7 2 | Ed Tow A iv i t ‘ ' ~ t { | j ~ — 1 4 ] t I { 1/ | ~ { / \ tf!) i A f ~ ice ( { | | ~ y ) } 99) a 4 ‘ utory Interpretation that is contrary to the “clear ing of a statute as revealed by its language, purpose , TAL ye Vv. Davis. Mz U.S. 397, $1] (1979) (quoting I) i¢ rnational Bid, of Peansters V. Daniel, 489 U.S. 551, 566 n.20 (19791), ne agency’s interpretation need not be shown to be the nly permissible view, Chevron, 467 U.S. at 843 n.11. story,” Southeastern Community ¢ C. Abuse of “Expressio Unius’” Maxim The court of appeals also erred in relying on the dis- credited maxim of expressio unius to override the plain meaning of the statutory language. Courts repeatedly have recognized that the maxim is unreliable at best and in any event should not be applied where it would produce a result in contravention of clear statutory language ora consistent administrative statutory construction. Of direct relevance to this case, the courts have held the expressio unius maxim “should not prevail when a nonexclusive reading [of the statute] . . . allows thi CX reise of inedental authority 1eCESSArY to a CV pre ssed wer” OF right.” Bailey V. Federal Intermediate Credit Banl:, T88 F.2d 498, 500 (8th Cir.), eert. denied. 475 ‘Sec, e.g., Herman & MacLean v. Huddleston, 459 U.S. 275. 387 n.23 (1988) ‘rejecting application of maxim and noting maxim must be subordinate to doctrine that courts will construe detai an act in conformity with its dominating general purpos: Pauley V. BethEnergy Mines, Inc., 111 S. Ct. 2524, 2537-38 (1991 maxim ‘‘is a questionable one in light of the dubious reliabilits of inferring specific intent from silence’” (quoting Cass R. Sun- stein, Law and Administration After Che ‘ron, 90 Colum. | Ri 2071, 2109 n.182 (1990))); Director vy. Bethlehem Mines C 669 F.2d 187, 197 (4th Cir. 1982) (“maxim is to be applied witl great caution and is recognized as unreliable’); Newherger Vv. Con missioner, 311 U.S. 83, 88 (1940 maxim can never override cleat and contrary evidence of Congress’ intent): Chern fim. Co. \ 1C.C., 902 F.2d 66, 68-69 (D.C. Cir.) (agen View overcor erpressio unius canon), cert. denied, 111 S. Ct. 519 (1990) = Cline) field Coal Co. vy. Federal Mine Safety & Health Comm'n. 895 F.2d 773, 779 (D.C. Cir.) (maxim not applied to override Chervro, cert, den ed, Lit BS. rot 1990). 99 US. 815 (1986) Cemphasis added). See also 2A Normar kf Sine r Naif fi, yl) ad Nfatuto) / (" pes é rod ve } . ¥parn os» =f 2 ‘ ay TL, a4 P lg P TaN} 4 foth ed. 1992 Rev.). The court of appeals ignored ne very substantial limitations on the use of this maxim of questionable validity ard incorrect!y re'ied on it 2s the , . " ,* . . . 2 . . basis for disregarding the plain meaning of the explicit tutorv language of section 92. Moreover, even if the maxim were pertinent here, the court of appeals’ application of the expressio unius maxim Was incorrect. As applied to section 92, the maxim would at most suggest that national banks in places of greater than 5,000 inhabitants cannot engave in the full range of general insurance agency activities authorized by section 92; the maxim does not have any application with respect to specific insurance agency activities that are incidental to banking under section 24 (Seventh). Accordingly, even assuming argvendo that the expressio unius maxim were applicable in this case, the Second Circuit’s Interpretation of that canon was improper. D. Misuse of Legislative History Finding no basis in the plain lanvuage of section 92 to displace the Comptroller’s approval of Chase’s Notification Letter, the court of appeals mistakenly interpreted iso- lated documents from section 92’s extremely limited legis- lative history as supporting an implied limitation on sec- tion 24 (Seventh)’s broad grant of “incidental powers.” The meager and ambiguous legislative history that exists does not contradict the section 92 text and the Comptrol- i] ’ er’s Interpretation of it as a supplemental powers provi- jon. The courts have recognized that section 92 was origin proposed by the Comptroller to provide an addi- tional source of revenue for national banks located in 31) towns and not t rohibit city banks from selling surance where i} ental to banking transactions. l cn: Sd 9 F 2 24 In recommending adoption of section 92, then- Comptroller Williams stated in a letter to the Chairmen of the Senate and House Banking Committees that “| flor some time I have been giving careful consideration to the question as to how the powers of the national banks migh! he enlarged so as to provide them with additional sources of revenue....” ** 53 Cong. Ree. 11,001 (July 14, 1916). Similarly, Senator Owen, the Chairman of the Senate Banking Committee, described Comptroller Williams’ pro- posed amendment as “giving some additional powers to the small banks to act as agents in insurance.” Jd. at 11,153 ‘emphasis added). Nowhere in the legislative his- tory is there any reference to a Congressional intent to bar or limit powers already authorized under section 24 (Seventh). 1V. THE COURT OF APPEALS’ DECISION SURJECTS NATIONAL BANKS TO SIGNIFICANT COMPETI- TIVE INEQUALITIES The Second Cireuit’s decision places national banks at a significant competitive disadvantage to siate banks, savings and loan associations, and other financial institu- tions that are able to offer various types of insurance Life Ins. Co., 786 F. Supp. at 641 (legislative history indicates see- tion 92 proposed to provide additional source of revenue). “’ The Second Circuit’s heavy reliance on Comptroiier William's letter as “provid!ing| evidence that Congress intended to with- hold from national banks, located in towns with over 5,000. in- habitants, the authority to sell insurance,” plainly is misplaced. App. at 13a. As the OCC explained in promulgating its regulations governing the sale of credit life insurance by national banks. “lallthough the Comptroller assumed in requesting | the enactment of section 92] that national banks lacked incidental pewer under 12 U.S.C. 24 (Seventh) to act as a full seale insurance agent neither the language nor the legislitive history of the section sue- gests that national banks would not possess ample authority under the incidental powers clause of 12 U.S.C. 94 (Seventh) te nrocide feredit life insurance!.” 42 Fed. Reg. 48,518 (19775. 25 products.** Substantial competitive disruptions may occur as a result of the conflict among the courts of appeals produced by this decision. National banks located in states outside of the Second Circuit could continue to en- gage in insurance activities incidental to the business of banking, while national banks located within the Second Circuit would be precluded from engaging in such activities. Moreover, all national banks will be significantly af- fected by the court of appeals’ decision if the district court, Which has been directed to enter summary judg- ment for ALTA, issues the nationwide injunction against the OCC requested in ALTA’s complaint. For example, national banks currently engaged in the sale of credit life insurance, municipal bond insurance, and annuities will be faced with significant uncertainty as to the con- tinuing legality of these activities. It is unlikely that national banks seeking to obtain the Comptroller’s ap- proval to offer such products would be able to obtain that approval. A i The increasing competition posed by nonbank financial institutions to the banking industry dictates that national bunks not be judicially restrained from exercising the full range of their available statutory powers. To deny na- tional banks the power to engage in those insurance-re- lnted activities that the OCC reasonably has determined are incidental to the business of banking will eliminate important business opportunities and thereby diminish See Comptroller Interp. Letter No. 368, [1985-87 Transfer Binder !, Fed. Banking L. Rep. (CCH) © 85,538, at 77,839 (July 11, LOR6 noting savings and loan associations are authorized to act as agents In sale of title insurance); State Bank Powers, Banking Pol'y Rep., June 1, 1992, at 4 (fifteen states permit state banks to engage insurance activities); Ford Barrett, Remarks to the Third An- ypual Banks in Insurance Conference, re printed in 6 OCC J., at 36-37 (Mar, 1987 several major insurance companies not only provide banking services, but actually own banks). CONCLUSION Of Co JOHN D HAWK] iR L. EDWARD SHAW. J] DENNIS G. Lyo KENT T. STAUFFER ROBERT E — The Cha Vian} Ral IIo ' XT N.A. yA » | ey " | New Yi N \ Kx ILEEN Kk] 1200 New H ve, NY ARNOLD & Po \V ry ¢ Washington, D.( (PNY) 2794 ' 1/ 1 September 1992 nse R APPENDICES la APPENDIX A COURT OF APPEALS TTY. 7 { )} | UNITED STATES COURT OF APPEALS POR THe SECOND CIRCUIT AMERICAN LAND TITLE ASSOCIATION, -EW YORK STATE LAND TITLE ASSOCIATION, Plainti ffs-A ppe lla nts, Roper? L. CLARKE, in his official capacity as Comptroller of the Currency, OFFICE OF THE COMPTROLLER OF THE CURRENCY, an agency of the United States, Defendants- Appellees, TH CHAsk MANHATTAN BANK, N.A.,, [ntervenor-De fe ndant-A pp lee. January 7, 1992, Argued and submitted Tune 15, 1992, Decided JUDGES: Before: OAKES, Chief Judge, MESKILL and ae : OPINION: OAKES, Chief Judas a as Ms a it abd : e in th appeal is Whetner two provisions of | \ ss YT) } 54 ) re ’ es Oo ama @ ‘ . 4 he National Bank Act, 12 U.S.C. $$ 92 and 24 (Seventh) IMSS), permit nation winks to engage in the title t i ! ati ) he Ay American Land Title Association and the New York State Land Title Association (collectively - pa and ti, of a fO— - han SS wh ] ) \) {ii ( « na VU cl cil “4 =U «a Ci! i NOL appyy im the case of any liability incurred by such association under the provisions of the War Fi- hance Corporation Act. This provision does not ap- pear In the Senate Bill. ihe conterees Adopt tne When the Senate version of this conference report, S. Doe. ng., 2d Sess. (1918), was submitted to te by Senator Simmons, the Senator explained he significant amendments incorporated from the House sion of the bill, but he did not address the addition section 20, 76 Cong. Rec. 4376-79 (statements of Sen. immons!. Ultimately, both the Senate and House agreed to chact the conierees’ version of the bill. No mention of the insurance powers of national banks exists in the legislative history. Thus, the legislative his- v indicates that the sole purpose of the revision was to ensure that section 5202 did not apply to liabilities in- curved by a national bank in connection with the War ihis view or the purpose of section 2O is supported by the text of the provision, which shows that the only sub- , re PHS : i er : ae ees. ~ ors stantive addition to the existing version of section 5202 the following paragraph: “Sixth. Liabilities in- curred under the provisions of the War Finance Corpora- tion Act.” In sum, it is obvious from a reading of both section 20 in its entirety, and its legislative history, that the amendment was designed to further the general pur- pose of the Act by ensuring that national banks could ance Corporation without ~~ obtain funds from the War Fi 9a running afoul of the requirement, contained in the open- ing paragraph of section 5202, that certain bank liabili- ties not exceed the capital requirements set forth in the section, Given the purposes of the Act as a whole and section 20 in particular, we believe that Congress did not intend to alter the insurance agency powers of national banks w hen it enacted section 20. First, on a general level, it would de wholly incongruous for Congress to repeal a provision regarding the totally unrelated matter of insurance agency powers in an emergency measure directed at win- ning the war. Second, on a more s pecifie level, it is highly unlikely that Congress’ intent to render existing limits on national bank liabilities consistent With the operations of the War Finance Corporation would just happen to coincide with an intent to repeal provisions a rding national banks’ insurance agency powers. urd, we cannot believe that Congress intended to make ania changes to national banks’ insurance agency powers in an act that by its terms would virtually self- destruct six months after the conclusion of. the war. Fourth, if it actually was Congress’ intent to effect such a permanent change to an unrelated area of law, we would « pect some clue to this intent to appear some- where in ie legislative history, but we have searched and it does not. Fifth, it would be—at least arguably— inconsistent for Congress to repeal a provision that, as we explain below, bars national banks in large towns from engaging in insurance agency activity when the [ of the War Finance Corpora- tian Act was to orient national bank activity. toward financing War Industries . ? p } eee ; ‘5 . ++ We also note that the structure Of section 2O supports our View that section 92 was inadvertently omitted. The ‘curs precisely after the insertion of the new paragraph entitled “Sixth’—the provision that rendered the War linance Corporation Act consistent with exist- OMISSION O¢ 10a ing national banking law. This gives rise to the infer- elice that the drafters of section 20 forgot to include the remainder of section 5202 after they inserted the new paragraph. or these reasons, we believe the only rational inter- pretation of the words ‘amended so as to read as fol- lows” is that, contrary to the general rule, they do not effect a repeal of 12 U.S.C. $92. Thus, section 92 re- mains valid law. We now turn to the issues raised by the ‘ ; . Dak Lies, B. Standard of Review ALTA first questions the district court’s application of the principles of deference to agency action set forth In Cherron SA: ic. - ©, Natural Resources Defense Council, lne., 467 U.S. 837, 842-45 (1984). because the OCC's decision to permit Chase Manhattan to sell title in- surance took the form of an interpretive ruling rather than a regulation, as was the case in Chevron. We dis- agree. An OCC ruling interpreting a statute that it is charged with enforcing is entitled to deference in accord- ance with Chic CPOR, See, Ces larke ve. Securities lidust Ass’n, 479 U.S. 388, 403-04 (1987) (citing Chevron with approval and deferring to the Comptroller's interpreta- tion of the National Bank Act, given that the provision in question was ambiguous and the Comptroller's inter- pretation was reasonable); sce also Securities Indust. Ass'n v. Clarke, 885 F.2d 1034, 1042 (2d Cir. 1989) (acknowledging applicability of principles of deferential review to Comptroller's decision}, cert. di nied, 493 U.S. L070 (19900; American Tins. Ass'n x. Clarke, 865 F.2d 278, 280-81 (D.C. Cir. 1988). Thus, the test set forth in Chevron is fully applicable to the OCC decision at issue in this case. oF 7 ‘7 . a 4 ~hheed } . teres | +] ’ " . LC nadaer Che; roi, We must firs decide Whether Co) yess las direetly spoken to the precise question at issue.” Ciceron 467 U.S. at 842. If, however, the statute is lla id, at 843, then we will uphold the OCC’s interpretation provided it is reasonable and not “arbitrary, capricious. or manifestly contrary to the statute.” Jd. at 844. “silent or ambiguous with respect to the specific issue,” C. Section 92 ALTA argues that the district court erred in uphold- ing the OCC’s view that 12 U.S.C. § 92 places no limita- tion on national banks’ incidental powers under 12 U.S.C. s 24 (Seventh). ALTA contends that section 92 Impliedly prohibits national banks from selling insuranece—inelud- ing title insurance—in towns with more than 5.000 in- habitants. To det termine the scope of section 92, we turn first to the relevant statutory neaaaes- That in addition to the powers now vested by law in national banking associations organized under the laws of the United States any such wntepainics lo- cated and doing business in any place the p ypulation of which does not exceed five thousand inh: ok as shown by the last preceding decennial census. may, under such rules and regulations as may be prescribed by the Comptroller of the westerien A act as the agent for any fire, life, or other insurance company. . This provision obviously provides no explicit limitation on national bank activity. But the maxim of eapressin unius est exclusio alterius, used as an aid to construe- tion, leads to the conclusion that Congress intended to prohibit national banks located and doing business in towns with orer 5,000 inhabitants from engaging in the Mmsurance ne cy business. See, e.g... Water Tyans »), Ass'n v, CC. “722 F.2d 1025, 1029 (2d Cir. 1983). Applying this principle, had Congress intended to orant national banks located in towns with large sae a the authority to sell insurance, it would never have Jim- 12a ited the grant of authority in section 92 to national banks in locations with under 5,000 inhabitants. And if at the time of enactment Congress believed that all national banks—regardless ef loecation—already possessed the au- thority to sell insurance, this provision would have been superfluous. Thus, we believe that the language of sec- tion 92 evinces Congress’ intent to bar natienal banks that fall outside of the provision’s geographical restrie- tions from acting as insurance agents. This statutory construction, of course, would have to “yield to clear contrary evidence of legislative intent.” National RR, Passenger Corp. v. National Ass'n of RR. Passengers, 414 U.S. 453, 458 (1974), Bunt here. the legislative history lends support to our view of the statute. Although the legislative history of section 92 is sparse, two documents in particular shed light on the backdrop to Congress’ enactment of this legisiation in September 1916. The first document, published by the Federal Re- serve Board in February 1916, is a letter from its counsel to the Governor of the Federal Reserve Board, opining that the insurance business did “not come within either the expressed or implied powers of national banks.” 2 Fed. Res. Bull. 73, 74 (Feb. 1916). The letter concluded with the following statement: “Any such extension of the powers of national banks must be left to the consideration of Congress.” Jd, The second document is a June 1916 letter from the then Comptroller of the Currency, John Skelton Williams, to the Senate Banking Committee, in which he proposed an amendment to the National Bank Act. 53 Cong. Ree. 11001 (1916). In the letter, the Comptroller explained that “{n]ational banks are not given either express!y nor by necessary implication the power to act as agents for insurance companies.” Jd. Enclosed with the letter was a draft of a proposed amendment “designed to empower national banks located in towns of not over 3,000 popula- tion... to act as agents for the placing of insurance 13a policies.” Jd. The Comptroller explicitly stated that “from the standpoint of public policy and banking efficiency this authority should be limited to banks in small com- munities.” /d. This letter was entered into the Con- gressional Record by the Chairman of the Senate Banking Committee, Sen. Robert L. Owen. Jd. The Comptroller’s amendment was ultimately enacted, albeit with the modi- fication that national banks in towns wit ch populations up to 5,000 could sell insurance. Jd. at 1115 These two documents indicate that when Congress en- , It did so in the belief that under existing banking law (specifically 12 U.S.C. $24 (Seventh)) na- tional banks had no authority to engage in insurance avency activities. Furthermore, the Comptroller’s letter provided evidence that Congress intended to withhold from ake tA Ya! SEL vt ion Q? national banks, located in towns with over 5.000 inhabi- tants, the authority to sel] insurance. Accordingly, the legislative history supports our construction of the statute Our view of the statute derives further support from Savon i. Georqa “Ass wT Op Fired ji nde} iyi - Age nts, 399 h.2d 1610 (sth Cir. 1968). In Savon, the court relied on section 92 to deciare unlawful Comptroller Saxon’s ruling that permitted a national bank to sell its bor- rowers “broad forms of automobile, home, casualty and ability insurance.” Savon, 399 F. at at 1012. The court 7° ‘ . . ’ 2 . . ] . applied the principle of exrpressio untus est cxrclusio Te aoe : 1 +] leojsiati history t interpret QTCRTUS, and analy LEG ne 1e€91Sic VC StUl © iterpre section 92 such that “national banks have no power to act as Insurance agents in cities of over 5,000 population. Id. at 1013. The OCC contends that Savon is irrelevant to the issn hefore us." The OCC attempts tingul the ground that it did not involve a form of insurance, like title insurance, that is essential to a bank’s ability to 8’ The OCC also contends that Saxon was wrongly decided. We disagree rh the court sta terms, the statute does tional banks in larger it Nsurance con ife Insurance rather tl 2 impliedly operates activity. Thus ryt a) n Q9 a town With over panies.” a “4 1170 . os as a bi , we see RES BS ] ayes ‘ar bank from selling credit life insura = ) mmo rete 4 } ‘ - »000 Inhabitants. /d. at 1170. n In a 1oO~nOote that “|oOIV It not address the authority of COWNS Or elties to act as agent . » «tl o have based its decision largely on the nature of er +), , , 5 , ‘ > lan on the Issue of whether sec + —_ - ~= 10 reason to depart Trom our ' Having determined that section 92 im»pliedly bars tional banks in towns with more t . Prom en i 4 i the conclusion that appiy to “any ance company surely ) } Nnsurance com) ) } i lan »9 000 inhabit Im Insurance avency activitle In wen - } nN particular section 92 a) ‘tas tne aver OY avy 7 \ . 1? | S ( (ys) ) Insurance company,” and a tith Ss an insurance company. / section 92 impliedly bars national banks from en In the title insurance agency business, The OCC again relies on Heima », asserting U eredit life insurance. Itle Insurance activities are out > ) + ; Q ection 92's limits on national bank activity. In up- OCC 1 uations at issue in Heimann. the ! ? l-e other fi rn O1 INSU hee verage . . . credit life insurance is a limited special type of coverage written to protect loans. In no way does he operations of a general life insurance busi- Hoimann, 613 F.2d at 1170. iteimann, however, does not persuade us that section ‘2 1s inapplicable to a national bank’s title insurance les, First, as the Heimann court pointed out, eredit ife insurance is unique in that it protects only the lender’s interest by insuring that his loan will be repaid even if orrower dies. When a bank sells credit life insur- ince, it is similar to the bank demanding a higher price ‘or the loan to compensate for its assumption of a risk inherent in any extension of credit made pursuant to a borrower's promise to pay—-the risk that the borrower's leath will render him personally incapable of repaying the loan. Title insurance, by contrast, insures the bor- rower'’s equity in the property as well as the bank’s inter- in the mortgage it holds. Second, Heimann’s persua- siveness is further eroded by its scant analysis of section 2 and its failure to discuss the provision’s legislative hi Thus, /efmann is not dispositive of section 92’s bearing on a national bank’s power to sell title insurance. D. Section 24 (Seventh) lion to the express powers granted national banks by the National Bank Act, Section 24 (Seventh) of the Act grants them “all such incidental powers as shail he necessary to carry on the business of banking.” The OCC contends that under judicial interpretations of this provision, a bank’s sale of title insurance. as agent, is “Incidental” to the banking business within the meaning of section 24 (Seventh), and thus the OCC’s decision is eonsistent with the National Bank Act. } pmtarriie ~ P Mi Based on our interpretation of section 92, we see no ope of section 24 (Seventh). We l7a APPENDIX B PINION OF THE DISTRICT COURT UNITED STATES DISTRICT COURT OUTHERN DISTRICT OF NEW YORK yr) -~ \ = ~ T> a ] j NOBERT | { K n He capacity _:9 ! roll ] )] t Hk © On PROLI ‘ | | OF THE Cul n Agenc\ the Un i: Det ( mn cia ‘ > a79 ‘i \ \ BA vik, \ \ ry l / r-D) } Tr\% 4 , y1>] ND ORDER } \ ry 7 A Ai tS i l ri I Y) 7 2. 7 MARY JOHNSON LOw] D..J Bef } { } ntifte’ y ] ot ® io 4 } ) Mole | LO pDursual K'ed I ( P 6 fo) ) oO) ey O} nts @ — IIS] ! | i \ Pr LZ ) 7 he reason h } W, nts ! ranted nd plaintiffs’ m n is denied > ) BAC KGROI ND I} ()( ¢ 1¢ I, ) haraad UW ] Ae , Al Ll 4 i i re na n of national banks and thi Imi? ~ c he proposed plan would inelude procedures that would guarantee the subsidiaries’ compliance with ail federal and state laws and regulations applicable to title insur- ance activities. ) By letter dated June 20, 1989, the Comptroller ap- proved Chase Manhattan’s proposal. In granting ap- proval, the Comptroller relied upon two provisions of the Act: 12 U.S.C. § 24 (Seventh)? and 12 U.S.C. § 371.3 The Comptroller specifically found that title insurance falls within the incidental powers of a national bank. noting that title insurance agency activities are both con- venient and useful io the bank’s express power to make eal estate loans and that there has been judicial recog- nition that certain forms of insurance related to tradi- tional lending activities of banks are within the incidental powers of a bank. Plaintiffs challenge the validity of the Comptroller’s ruling. They argue that the sale of tilde insurance is outside the scope of authority conferred on national benks by the NBA, and is contrary to judicial precedent. They contend that 12 U.S.C. $92, which permits national banks doing business in towns with populations of less than 9,000 to “aci as the agent for any fire, life, or other in- ” surance company,’ prohibits national banks in larger ” ‘ ° ’ ‘>¢ CY A. or\r act . | “12 U.S.C. § 24 (Seventh) provide r perunent part, that na- .: | 1 ae —_- } . = e } ) tional banks n \ CANCECINE : all such incidentai powers as shall , . . - ; , De TOK ary tO Car} on the business of banking. : . ° 1 . ’ : + ‘ > y , P ' ; +3. towns trom engaging in the business ol] nsurance ] t ) ' 7 ; ‘ 1 r . ‘ " n eope og war § be sm [+6 Intins Seen a GUeClaFaALOPY Cig Fy hn «i Li% ‘ : 1} é 4 } , | f ; — } ] Co 1} ) I LeCQ L ic 4 ris cope OF autno) y ana t 4. \ { + NY! f2 A } ’ ’ ‘ ) ry Contrary ) he a DA Vy Lit nN He vy Nn Cit appre ct ‘. \T ] 4 1 «3 ) ’ } “7 , +7) ) } are Vy Ore ore t Sle aricl Wa an LU Op) a FG hol © i | sic — eng yO In Ait 1) i > ° . r 7 ) > n ate ol Pere 6 | noe LLS INsUurs 11Ce . 7 7 , = ; ‘ 17 ’ P - , * + 4 + ate’ i ¢ , ) | Defendan sk that the Court uphold t! ( pirower s i i 2371) : he +4) y 46} ee ’ 13 ] rune tha Iie insurance actlVItl are not pronipitead 1 a Oe eee ar 3 ee ; (ae ae +] daa clit? «)] ley DV lf Uw.l. § va, are related to the tradivional 1ding > rye > he i» a «i ) Pil be 613 i.2d 1164 (D.C. Cir. 1979), cert. denied. 449 U.S is consistent in all material respects with +] ] Lon ‘ s>) P1913" : ++ . Y oy: : Lne } iv ( h Was approved 1h) l. L@} No. YOO. SimMnce a ah om vee Talpe a + ae Oe ee 8 .o4 permits a national bank to eneage in . . y) pern xihl ( LU} thr eh in oneratine s } }«y# 1 ) ] }2 } sen . rr regulatory concerns, the Bunk may } + Y . . pro q@ with its proposal to estabilsh one) nes ; 1] : ' Tey ics ) st i AN Li i 1? . al vent Sin rely s’ J. Michael Shepherd J. MICHAEL SHEPHERD Senior Deputy Comptroller for Corporate and Economie Procrams ‘T° } ] . The if mn reac) lin Le ter N 68 ha n imp r ruler ng in A ni] Tit ( A87-CA-108 (WD. 1 I July &. 1987 ruled ! I OC ( ot rh ie | l nor is | } th nN YY)? ‘ 11)? ] Y) 1? rs 33a APPENDIX D 1986 OCC INTERPRETIVE LETTER al Advisory William B. Glidden, Assistant Director, Lee 1986. Inter- services Division. Letter No. 368. July 11, preting 12 U.S.C. § 24(7) ; 12 U.S.C. § 371. This is in response to your request for an opinion as to Whether vour client, (“Bank”), or its operating subsid- ‘ iiry may perform certain activities related to the sale of | title Insurance. From correspondence and conversation with vou, it is our understanding that the Bank is seek- ] ‘mission to engage in the following three activities: agent in the sale of title insurance, to enter into entnge lease and employee sharing arrangement with a title insurance agency. and to acquire a franchise from a title insurance agency to prepare and distribute policies for title insurance. In ord to delay any further our response, you agreed, In a discussion with Nancy E. Chase, an attorney with this Office, to limiting 4 } + + 4 me to tne A vour request at this ity listed, with the Office givine you genera] regarding the permissibilitv of engaging in maining activities. This precedure would avoid upplyine the Office with specifie information. re- } tractual arrangements contemplated under } ty pronvosals—information that the Office would need in analyzing the activities and that Ms. Chase understood was not currently available. Title insurance is a unique type of insurance. Its pur- se is to reduce the risk of loss resulting from title de- ects or encumbrances existing on property at the time the policy is issued. It does not protect the insured from events that happen after the contract is written. ) SS + . ? Title surance can protect, venerally through separate i policies, both the owners of the property and the ‘mort- the rly ventures into title insuran ’ hanks and trust companies who comb surance function with the lending of n See Title Insurance Companies ‘(Philo Smith } also Public Regulation of Title Insurance i¢ Abstracters 0.10.30. (Villanova Press. E.F. R 1961) (“Villanova Treatise’). The first title Insurance pol delphia in 1876 by the Real Estate Title Insurance Trust Company. More title insurance companies established soon thereafter “practically all of which sisted of title insurance departments of banks and companies.” Villanova Treatise at 14 n.2. It is Sbrsett lise +3 71 or f+. F ae : W1ITNT! ne foliowlng hity vVealrs rac alive every } - 2 ° ) ee ,é Marl ¢ , 0 and Lr’us company in | nhiiade pnia haa AL an veae' the title in real estate acquired with the bank’s own . + . 2 + + ys + ict at . t\ ‘ c or tor tne account OF 1ts trust estates oO} cu } , cas , , . . AS a result OF rallure OI DaNnkS and !? rigage ou WINAN?} 131 . +] 1) ne ' 4 : ( PMS Gur Lne wepression, Many eS 4 . . . : > 2 were dives ed ing naepenae} | CON i} ' % , + a | ’ i or) 7 ’ . On'V In tn 1uie Insurance DusiIness Were ( ! : ‘ states NCW Stric Dallas TromM envgayl in) T ‘ : 1) { ANCE S¢ \MIemorandum ( poard OL &u No} rs , ) + - > >» Federal Reserve System from Fed Rese R ‘ . ies ( ¢ | . Philade bid Aug 1, 19% ) rO\ iEf) Ni { gid ae J oad ~ ‘ , / oJ 7 , at a a . — ~— fa Be) a. -m~™s, YS - el s = _ ~y ned ~ - ss oo ¢; me CG — . ~ WW. J Cc ro — j a a: a - ” , a nd / — “ / ges tal Y = oS = — = y a — -. - © “ ~~ / - = os ane ieee f ° we - —_— ‘ y * : ~ fn > = - a ~ ~ we y f r 5 ‘ $ o— - — fo ~ J / - f , ~ — f - 4 f a = + in I. 44a space leased te the ageney by the Bank, a partnership or ‘aint venture may be created if the persons performing the clerical services are considered to be dual employees ef the Bank and the insurance agency, 45a APPENDIX E 1965 OCC INTERPRETIVE LETTER Name and address of addressee redacted in publicly-available copy This will confirm the telephone conversation of July 22, 1965, between you and a member of our legal staff regarding your letter of July 2, 1965, in which you in- quire whether the First National Bank, |name redacted in publicly-available copy of letter] may act as an agent for, or organize and have an interest in, a title insurance and abstract company. |Name of town redacted] accord- ing to the 1960 census, has a population of less than 5,000 persons. Under 12 U.S.C. § 92, a National Bank is authorized to act as a general agent for any fire, life or other insurance company in any place the population of which does not exceed 5,000 inhabitants, according to the last decennial census. Accordingly, so long as the population of |name of place redacted] does not exceed 5,000, the First Na- tional Bank may act as a general agent in the issuance of title insurance. In addition, a National Bank, wherever located, may, under its corporate powers contained in paragraph Seventh of 12 U.S.C. 24, act as an agent in the issuance of title insurance which is incident to a bank- ing transaction. Very truly yours, s R. Coleman Egertson Deputy Comptroller of the Currency 46a APPENDIX F Upon duly making and filing articles of association ; , nat y ( ) { ) ? } ? S - ’ , ’ } . Clallon h; ti pecome as ] | { ( { QO] ON, ] On ray . } ts rzanization ( heat Qa bod te, nd ~ ? » | ’ , Suen ind in tne name (| Be ead in tne ()} a . { ; } 11 1 . Ce} 114 ( Lsnhali Way * % a6 - . . a 1 . seventh. To CIs ri] tors or ¢ } ) . " : + +7 ‘ r ) | na) (| Lice ini Suc | } lantéa] ’ Hiciqde i ah ¢} is ' i al } ? ting i Wo} , ] . ane } ’ OUSINeSS i bankit 1 mn (j } } ( } ) . +17 — ] { } promisso notes, drat ne yt he evidences of debt hy preg Yr 4 ) _ ’ ane ne and } no ) > *)) ] } } } ‘ r¢ ON e. ( In ’ } > ae ’ | rsonal security: and } bic Bae ee ere ee personal CUULTILYV , Alii ry 4 ‘ [ts stdil { ? : ; . : : ; + + onn . , . + a) , 4 ‘ «) “s 47 Ing notes according the pi e | > —-— ton tay4 ." | Re vised Statutes. — ~ + . ¥ \ct of Sept. Sa 17a (, 1916, ch. 461, 39 Stat. 752. 7 » Sen ceeds Of which have been use . ee ae ; [ poses, tne | eqdera!l Rese} I ie Cnatl } . a : 4S ; is ei1lgzibie Tor discount Witnin tn Ac \ Ine 1? s Act « ntained | - ] . ( Brey f Ve) qd. ninetee} nunared ant ] \ loc] . Wee i re, { \ Ai tit wu a iUVi +s , 7 , | | 4 I e¢ { ind : op Gy f menaded Ay Keds reserve Dank may recelve from anv of : : ’ n kc a } } ] ed States. ce SIts of { ] c 4 } 4 _ ent funds in lawful money, national-bank notes. Fed- ] . ] 4 ah! 1 sf e notes, ( enecKs, and drafts ivable upon — } { ] ea motraeina hilla« ‘ e 1}1¢ SO, LOOP COLectlo MatuUrINe Hillis: O} QO} vposes OF exenange or or ecollection, mav re- ‘ j } it reds eS rye oan a aie \OS]I Oj Clu}'- ») , ‘ ) } t yt) ~*~ }_] nile , 4 ; oh kk ‘ Il ie Vils iQ) a Ila VUliditValin TIOLeS, O CLICCKS ' ’ , ‘ rederal eserve Danks and CNeCKS and drafts, . — = i aarti ban giltuad ‘ nd matnr LAIGK ‘ dil PT CSt LLI¢ é| ) iil ius CIStYl¢ . £ | ma u \ r) ) ith: if , Trie \ WVIthAIin ALS ( | re) Ue : ] i ‘ x . ] . e indorsemen f any of its member banks. h sh; e deemed a waiver of demand, notice and t hy 1? ] lL | Qe + } va . Y) yf 17 . )\ U¢ DAN 5 to - OW nadorse el e@Xcliuslvely, . , 1 ] ss . rt : a I eserve Dank may discount notes, drafts, and . , a | . sh 2 i e@ O arising ou rt actual commercial rans- 4 ac ey : h . ~ s, notes, GdtralIts and Ollis OF execnange issue d t soypjenitural indnetrial 1 area 117° ‘ AUT abricuicubdai, INGUSTYlal, OF COMMere! pur- ch id, or are to ; > - ae Ve Board LO 48a Wares, or merchandise from being eligible for such dis- count; dut such definition shall not include notes, drafts. bills covering merely investments or issued or drawn the purpose of carrying or trading in stocks, bonds, or other investment securities, except bonds and notes of the Government of the United States. Notes, drafts, and bills admitted to discount under the terms of this paragraph must have a maturity at the time of disccunt of not more than ninety days, exclusive of days of grace: Provided, That notes, drafts, and bills drawn or issued for agricul- tural purposes or based on livestock and having 2 matur- itv not exceeding six months, exclusive of days of grace, may be discounted in an amount to be limited to a per- centage of the assets of the Federal reserve bank. to be ascertained and fixed by the Federal Reserve Board. ‘The aggregate of such notes, drafts, and bills bearing the signature or indorsement of any one borrower, Whether a person, company, firm, or corporation, redis- counted for any one bank shall at no time exceed ten per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values. “Any Federal reserve bank may discount acceptances of the kinds hereinafter described, which have a maturity at the time of discount of not more than three months’ sight, exclusive of days of grace, and which are indorsed by at least one member bank. “Any member bank may accept drafts or bills of ex- change drawn upon it having not more than six months’ sight to run, exclusive of days of grace, which grow out of transactions involving the importation or exportation of goods: or whieh grow out of transactions involving the domestic shipment of goods provided shipping documents conveying or securing title are attached at the time of acceptance; or which are secured at the time of accept- ance by a warchouse receipt or other such document con- 49a veving or securing title covering readily marketable staples. No member bank shall accept, whether in a for- eign or domestic transaction, for any one person, com- pany, firm, or corporation to an amount equal at any time in the avgregate to more than ten per cent of its paid-up and unimpaired capital stock and surplus unless the bank is secured either by attached documents or by some other V 41 Un actual security growing out of the same transaction as the acceptance and no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half of its paid-up and unimpaired capital stock and surplus. “Any Federal reserve bank may make advances to its member banks on their promissory notes for a period not exceeding fifteen days at rates to be established by such Federal reserve banks, subject to the review and determi- nation of the Federal Reserve Board, provided such prom- issory notes are secured by such notes, drafts, bills of exchange, or bankers’ acceptances as are eligible for redis- count or for purchase by Federal reserve banks under the provisions of this Act, or by the deposit or pledge of bonds or notes of the United States.” Section fifty-two hundred and two of the Revised Stat- utes of the United States is hereby amended so as to read as follows: “No national banking association shall at any time be indebted, or in any way liable, to an amcunt exceeding the amount of its capital stock at such time actually paid in and remaining undiminished by losses or otherwise, exceyt on account of demands of the nature following: “First. Notes of circulation. “Second. Moneys deposited with or collected by the as- sociation. “Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. 5I BY “Fourth. Liabilities to the steckholders of the associa- tion for dividends and reserve profits. “Iifth. Liabilities incurred under the provisions of the Federal reserve Act. “The discount and rediscount and the purchase and sale by any Federal reserve bank of any bills receivable and of domestic and foreign bills of exchange, and of ac- cepiances authorized by this Act, shall be subject to such restrictions, limitations, and regulations as may be im- posed by the Federal Reserve Board. “That in addition to the powers now vested by law in national banking associations organized under the laws of the United States any such association located and doing business in any place the population of which does not exceed five thousand inhabitants, as shown by the last. preceding decennial census, may, under such rules and regulations as may be prescribed by the Comptroller of the Currency, act as the agent for any fire, life, or other insurance: company authorized by the authorities of the State in which said bank is iocated to do business in said State, by soliciting and selling insurance and collecting premiums on policies issued by such company; and may receive for services so rendered such fees or commissions as may be agreed upon between the said association and the insurance company for which it may act as agent; and may also act as the broker or agent for others in making or procuring loans on real estate located within one hundred miles of the place in which said bank may be located, receiving for such services a reasonable fee or commission: Porided, however. That no such bank shall in any case guarantee either the prin- cipal or interest of any such loans or assume or guar- antee the payment of any premium on insurance policies issued through its agency by its principal: And provided further, That the bank shall not guarantee the truth of any statement made by an assured in filing his ap- plication for insurance. 5la “Any member bank may accept drafts or bills of ex- change drawn upon it having not more than three months’ sight to run, exclusive of days of grace, drawn under regulations to be prescribed by the Federal Reserve Board by banks or bankers in foreign countries or de- pendencies or insular possessions of the United States zor the purpose of furnishing dollar exchange as required by the usages of trade in the respective countries, de- pendencies, or insular possessions. Such drafts or bills may be acquired by Federal reserve banks in such amounts and subject to such regulations, restrictions, and limitations as may be prescribed by the Federal Reserve Board: Provided, however, That no member bank shall accept such drafts or bills of exchange referred to this paragraph for any one bank to an amount exceeding in the aggregate ten per centum of the paid-up and unim- paired capital and surplus of the accepting bank unless the draft or bill of exchange is accompanied by documents conveying or securing title or by some other adequate security: Provided further, That no member bank shall accept such drafts or bills in an amount exceeding at any time the aggregate of one-half of its paid-up and unim- paired capital and surplus.” * * * * 52a War Finance Corporation Act of 1918, ch. 45, 40 Stat. 906 (1918). * SEC. 20. Section fifty-two hundred and two of the Re- vised Statutes of the United States is hereby amended so as to read as follows: “SEC, 5202. No national banking association shall at any time be indebted, or in any way liable, to an amount exceeding the amount of its capital stock at such time actually paid in and remaining undiminished by losses or otherwise, except on account of demands of the nature following: “First. Notes of circulation. “Second. Moneys deposited with or collected by the association. “Third. Bills of exchange or drafts drawn against money actually on deposit to the credit of the association, or due thereto. “Fourth. Liabilities to the stockholders of the associa- tion or dividends and reserve profits. “Fifth. Liabilities incurred under the provisions of the Federal Reserve Act. “Sixth. Liabilities incurred under the provisions of the War Finance Corporation Act.” - * * » --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386011_1316%3A1. Public record. Not legal advice.