Petition for Writ of Certiorari — Falkner v. National Bank of Commerce (No. 247)

LIDRARY a

2 : : tice Supreme Court, U.S,

SUPREME COURT. U. & | FILED

JUL 21 196

- +

IN THE JAMES R. BROWNING. Clerk

Supreme Court of the United States

OCTOBER TERM, 1960

No. a 2 47?

STATE OF TEXAS ex rel. J. M. FALKNER,

Banking Commissioner of Texas,

Petitioner,

Vv.

NATIONAL BANK OF COMMERCE OF SAN

ANTONIO, TEXAS and BROADWAY

NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

WILL WILSON

Attorney General of Texas

C. K. RICHARDS

Assistant Attorney General

of Texas

COUNSEL FOR PETITIONER,

STATE OF TEXAS

Raldwin Printing Compans, t Doe West Sth Street. Austen, be

INDEX

Page

aCitations to Opinions Below ...-—s—©> =. 2

ERECT SIE CRONE Aes ee EE os 2

Question Presented wscentssoecenseemennnenesecteveesonsenseconeeneeeseecenes 2

I I ie cocans eases hac let pn omnes 3

AER eR a TE

Reas‘ns for Granting the Writ... . 4-9

Conclusion and Certificate of Service... ... . . 9-10

Appendix A—Statutes _... ee

Appendix B—Opinions and Judgments Below.......... 16-41

1 CITATIONS

Cases: Page

Branch v. United States

So sarsbuligehncpamiiemancedaane 5

Coudert v. United _—

175 U.S. 178 . [PONS Cea AC TIED cD OOOO a 5

First National Bank v. .

263 U.S. 640 _. Rh Eee 4

Franklin National Bank v. New York,

347 U.S. 373 . SSRIS SERED TALS lp 4

Standard Oil Co. v. Johnson

316 U.S. 481 - ca ar eee ae

T.I.M.E., Inc. v. United States,

WS oe casa toccecne qT

Statutes:

United States Statutes

Se es, I ici cnesicecsintsicnesenisinntoie 2,5, 6,9

Bit. oe ........: SRO TE Oh is ae RN SE 2, 4, 5,6

12 U.S.C. §265 _.... a aaE Vie = 2, 5, 6

28 U.S.C. §1348 _........ ake 8

TN clint tiie ics ceteeeenenesss te 3

28 U.S.C. §1442(a) (1) . 3

Tezcs Constitution and Statutes

Constitution, Art. XVi, Sec. 16 2,4

Article 342-903, Vernon’s Texas Civil Statutes... 2,4

IN THE

Supreme Court of the Hnited States

OCTOBER TERM, 1960

STATE OF TEXAS ex rel. J. M. FALKNER,

Banking Commissioner of Texas,

Petitioner,

Vv.

NATIONAL BANK OF COMMERCE OF SAN

ANTONIO, TEXAS and BROADWAY

NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS,

Respondents.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

TO THE HONORABLE SUPREME COURT OF THE

UNITED STATES AND THE HONORABLE CHIEF

pick 2S AND ASSOCIATE JUSTICES OF SAID

Petitioner, the State of Texas, respectfully prays

that a writ of certiorari issue to review the judg-

_—

ment of the United States Court of Appeals for the

Fifth Circuit entered in the above entitled case on

May 15, 1961.

CITATIONS TO OPINIONS BELOW

The findings of fact and conclusions of law and

the judgment of the District Court (R. 458-466)

are unreported and are printed in Appendix B

hereto, infra pp. 16-24. The opinion of-the Circuit

Court of Appeals (R. 494-506) has not yet been

officially reported and is printed in Appendix B

hereto, infra pp. 25-37.

JURISDICTION

The judgment of the Circuit Court of Appeals

was entered on May 15, 1961 (R. 507; p. 38,

infra). Rehearing was:denied on June 15, 1961.

(R. 514; p. 39, infra). The jurisdiction of this

Court is invoked under 28 U.S.C. §1254(1).

THE QUESTION PRESENTED

Was the Secretary of the Treasury of the United

States acting within the scope of his authority

under the provisions of 12 U.S.C. 890 and §265 in

authorizing natioral banks to maintain and operate

places of business at which checks are cashed and

deposits received other than at their main banking

houses, which functions constitute the operation of

“branch” banks as defined in 12 U.S.C. 836(f),

which is prohibited by 12 U.S.C. 836(c), and Article

XVI, Section 16, Constitution of Texas, and Article

342-903, Vernon’s Texas Civil Statutes?

— om

STATUTES INVOLVED

The statutory provisions involved are 12 U.S.C.

§36(c) and (f), $90 and $265, Article XVI, Section

16, Constitution of Texas, and Article 342-903,

Vernon’s Texas Civil Statutes. They are printed

in Appendix A, infra, pp. 11-15.

STATEMENT

Petitioner brought actions in the nature of quo

warranto proceedings against respondents, Nation-

al Bank of Commerce of San Antonio and Broadway

National Bank of Alamo Heights, in the District

Court of Travis County, Texas, to determine

whether respondents were exercising powers not

conferred upon them by law and which they were

prohibited from exercising under the Constitution

and laws of the State of Texas. (R. 2, 9). Re-

spondents filed petitions for removal to the United

States District Court for the Western District of

Texas under the provisions of 28 U.S.C. $1441(b)

and ‘1442(a)(1). (R. 15, 21). Petitioner filed mo-

tions to remand the suits to the State Court (R.

37, 40), which motions were overruled (R. 43, 44),

and the District Court assumed jurisdiction and

consolidated the suits for trial. (R. 45). The Dis-

trict Court made findings of fact and conclusions

of law (R. 458-465), and entered judgment that

petitioner take nothing by its suits. (R. 466). The

Court below affirmed the orders of the District

Court overruling the motions to remand, and a

majority of the Court affirmed the judgment of .

the District Court, Judge Hutcheson dissenting.

sissies

(R. 507). Petitioner filed petition for rehearing

(R. 508-511), which was denied June 15, 1961,

Judge Hutcheson dissenting. (R. 514). Petitioner

filed motion to stay the Court’s judgment (R. 515),

which was granted on June 30, 1961, for a period

of 30 days. (R. 516; pp. 40-41; infra).

REASONS FOR GRANTING THE WRIT

(1) The majority of the Cuurt of Appeals has

decided ar, important state question which conflicts

with the applicable laws of the United States and

the State of Texas by holding that 12 U.S.C. 890

authorizes the Secretary of the Treasury to desig-

nate respondent national banking associations as

agents of the Government to establish and maintain

facilities operating as branch banks in the State

of Texas contrary to Article XVI, Section 16, Con-

stitution of Texas, and Article 342-903, Vernon’s

Texas Civi! Statutes, the validity and enforcement

of which has long been recognized by Congress in

enacting 12 U.S.C. 36 (c)(f) in 1932 as held by

Judge J. C. Hutcheson in his dissenting opinion. (R.

504-506, pp. 35-37, infra). The majority opinion and

judgment of the Court of Appeals is also in con-

flict with the decisions of this Court in Franklin

Nationa! Bank v. New York, 347 U.S. 373, l.c. 378;

First National Bank v. Missouri, 263 U.S. 640, l.c.

659, 660.

The District Court found as a fact (R. 461; pp.

19-20, infra), that the operation of the facilities

authorized by the Secretary of the Treasury under

$90 includes the functions of paying and receiving

ee es = oer er rama ears

ae

individual moneys belonging to and the property

of members of the Armed Forces e2iid certain civil-

lans as differentiated from “public money.” Cou-

dert v. United States, 175 U.S. 178: Branch ».

United States, 100 US. 673. As construed by the

Treasury Department, the Secretary of the Treas-

ury could also authorize the facilities to take uppli-

cations for and make loans to individuals. (R. 116-

117). It is manifest that these facilities are operat-

ing as branch banks as defined by the laws of Texas

and i2 U.S.C. §36(f).

(2) The majority opinion and judement of the

Court of Appeals has decided an important question

of Federal law which has not been but should by

settled by this Court. As stated in the majority

opinion (R. 4983 p. 29, infra), this is a case of

first impression holding that the Secretary of the

Treasury has the authority under 12 U.S.C. s99

and $265 to authorize national banks as agents of

the United States to operate branch banking facil-

ities on military reservations of the United States

under the power of the Government to provide for

national defense, as well as to operate such facil-

ities in buildings owned by agencies of the Gov-

ernment which do not function or operate as a part

(of the national defense system.’ Since the establish-

_

*In Veterans Administration installations (R. 430),

Denver Federal] Center in Colorado, Bureau of Census

Building and National Institutes of Health in Maryland,

and Washington National Airport in Virginia (R. 431).

T2 two facilities operated in Veterans Administration

Center, Temple, Texas, and the facilities operating in

Denver Federal Center, Denver, Colorado, are located in

aii

ment of branch banks is either wholly prohibited

by or unauthorized under the Constitution and laws

of fourteen states, and limited by the laws of six-

teen states, the decision of the Court below vitally

affects the enforcement of the regulatory powers

and laws of more than one-half of the fifty sovereign

states which were recognized by the Congress in

enacting 12 U.S.C. $36(c) and (f) in 1952. There-

fore, the departure by the majority of the Court

of Appeals from accepted constitutional principles

is of sufficient importance to call for the exercise

of this Court’s power of supervision.

(3) The holding in the majority opinion of the

Court of Appeals that 12 U.S.C. $90 must stand

alone without regard to 12 U.S.C. $36 because

nothing in either $36 or $90 indicates that Congress

intended any different result, is contrary to the

history of the amendments proposed by the Treas-

ury Department to 12 U.S.C. $36 in 1942 (R. 149-

151, 434), and to 12 U.S.C. $90 in 1956 (R. 169-

161, 441-445), and the holding that Congress had

long been apprised of the fact that the construc-

tion by the Secretary of the Treasury that S90

and $265 enabled him to designate national banks

to serve as agents of the Government to establish

branch banking facilities on military reservations

and that Congress, in failing to enact legislation

expressly repudiating such practice or placing it in

a definite legislative scheme, indicated that Con-

gress gave tacit approval of such facilities, are

States where the establishment uf branch banks is pro-

hibited by state Constitutions or laws.

anid

contrary to the holding by the Court in 7...E.,

Inc. v. United States, 359 U.S. 464, lc. 477, 478.

In addition, the holding by the majority of the

Court of Appeals that since 1942 the Secretary of

the Treasury has construed §90 and $265 as en-

abling him to designate national banks to serve

as agents of the Government to perform the func-

tions of branch banks on military reservations is

contrary to the record as shown by statements of

officials of the War and Treasury Departments in

their request for the opinion of the Attorney Gen-

eral of the United States (R. 862-368) that the

establishment under 12 US.C. §90 and $265 of

branch banking facilities upon military reservations

in states prohibiting the operation of branch banks

was authorized under the First War Powers Act

of 1941 in connection with the prosecution of the

war, and therefore doubt existed as to whether such

authority still existed after the cessation of hos-

itilities (R. 367), and that since the continuation

of such facilities under War Depavtment author.

‘zation expired January 3, 1941, no p*ovision ex-

isted for the establishment of such facilities (R.

363-364}. The opinion of the Attorney General of

the United States dated January 20, 1948 (R. 397-

_ 403), constituted the first official interpretation

of the power and authority of the Secretary of the

Treasury to designate national banks as agents of

the Government to operate facilities on military

reservations performing the functicns of branch

banks.

a wen

(4) The majority opinion of the Court of Ap-

peals holding that since Army post exchanges are

arms of the Government essential to the perform-

ance of Government functions (Standard Oil Co. v.

Joinson, 316 U.S. 481, 485), there is not sufficient

difference between the banking facilities operated

by respondents and post exchanges to say that the

Government may operate one and not the other,

fails to recognize that the operation of post ex-

changes upon military reservations is not and can-

not be prohibited by state laws, while the maint-

enance of facilities operating as branch banks by

respondents as citizens of Texas (28 U.S.C. $1348),

has been and is prohibited both by the laws of the

United States and the Constitution and laws of

Texas. The sole question of law decided by this

Court in Standard Oil Co. v. Johnson, supra, was

that since post exchanges are integral parts of the

War Department under War Department regula-

tions, and arms of the Government, they were im-

mune irom state taxation except where Congress

had specifically consented thereto (49 Stat. 1519,

1521, amended 54 Stat. 1059, 1060-1061). Here,

Congress has specifically upheld the right of the

State of Texas to prohibit the operation by national

banks as citizens of the State of Texas from estab-

lishing and operating places of business other than

at their own main banking houses where checks are

cashed and deposits received (12 U.S.C. ‘36(c) (f),

As stated by Judge Hutcheson in his dissenting

opinion, ‘“‘the state of Texas is a sovereign state

and... its laws bind federal officers and agents

just as they do everybody else, unless they conflict

a

with overriding federal constitutional principle or

law.” In the instant case the laws of the State of

Texas do not conflict with but, on the contrary,

are expressly recognized and ratified by federal

law. As a result, the majority decision of the Court

of Appeals which is based upon the decision of this

Court in Standard Oil Co. v. Johnson, supra, has so

far departed from the accepted and usual course

of judicial proceedings as to call for an exercise of

this Court’s power of supervision.

CONCLUSION

For the foregoing reasons this petition for writ

of certiorari should be granted.

Respectfully submitted,

WILL WILSON

Attorney General of Texas

C. K. RICHARDS

Assistant Attorney General

of Texas

COUNSEL FOR PETITIONER,

STATE OF TEXAS

Capitol Station

Austin 11, Texas

CERTIFICATE OF SERVICE

I, C. K. Richards, certify that I am a member of the Bar

of the Supreme Court of the United States and one of the

attorneys of record for petitioner herein. I do further cert-

ify that copies of the foregoing petition for writ of certior-

ari have been forwarded by United States mail, postage pre-

= en

paid, to the following named attorneys of record for re-

spondents: Ireland Graves and Robert S. Hearon, Jr.,

Capital National Bank Building, Austin, Texas; J. W. Park-

er, Jr., Fort Worth National Bank Building, Fort Worth

2, Texas; and John J. Cox, National Bank of Commerce

Building, San Antonio 5, Texas; and to William H. Orrick,

Jr., Assistant Attorney General, Civil Division, Depart-

ment of Justice, Washington 25, D. C., for the United

States as amicus curiae.

C. K. Richards

Assistant A‘torney General

of Texas

oe

APPENDIX A

UNITED STATES STATUTES

12 U.S.C. §36.

Branch banks

“The conditions upon which a national banking

association may retain or establish and operate a

branch or branches are the following:

(c) A national banking association may, with

the approval of the Comptroller of the Currency,

establish and operate new branches: (1) Within the

limits of the city, town or village in which said

association is situated, if such establishment ani

operation are at the time expressly authorized to

State banks by the law of the State in question ; and

(2) at any point within the State in which said

association is situated, if such establishment and

operation are at the time authorized to State banks

by the statute law of the State in question by lang-

uage specifically granting such authority affirma-

tively and not merely by implication or recognition,

and subject to the restrictions as to location im-

posed by law of the State on State banks... .

(e) No branch of any national banking associa-

tion shall be established or moved from one location

=

to another without first obtaining the consent and

approval of the Comptroller of the Currency.

(f) The term “branch” as used in this section

shall be held to include any branch bank, branch

office,, branch agency, additional office, or any

branch place of business located in any State or

Territory of the United States or in the District of

Columbia at which deposits are received, or checks ©

paid, or money lent .. . R. S. 85155; Feb. 25, 1927,

ce. 191, §7, 44 Stat. 1228; June 16, 1933, c. 89, $23,

48 Stat. 189, 190; Aug. 23, 1935, c. 614, $305, 49

Stat. 708. As amended June 15, 1952, c. 753, $2(b),

66 Stat. 633.

12 U.S.C. 890

Depositaries of public moneys and financial ag-

ents of Government

All national banking associations, designated for

that purpose by the Secretary of the Treasury, shall

be depositaries of public money, under such regula-

tions as may be prescribed by the Secretary; and

they may also be employed as financial agents of

the Government; and they shall perform all such

reasonable duties, as depositories of public money

and financial agents of the Government, as may be

required of them. ... R. S. $5153; Mar. 3, 1901, c.

871, 31 Stat. 1448; Mar. 4, 1907, c. 2913, §3. 34

Stat. 1290; Dec. 23, 1913, c. 6. 827, 38 Stat. 274;

—)]3—

Aug. 4, 914, c. 225, 38 Stat. 682; June 25, 1930,

c. 604, 46 Stat. 809.

12 U.S.C. §265

Insured banks as depositaries of public money:

duties, security; discrimination hetween banks

prohibited; repeal of inconsistent laws

All insured hanks designated for that purpose

by the Secretary of the Treasury shall he deposi-

taries of public money of the United States (in-

cluding, without being limited to, revenues and

funds of the United States, and any funds the de-

posit of which is subject to the control or regulation

of the United States or any of its officers, agents,

or employees, and Postal Savings funds), and the

Secretary is authorized to deposit public money in

such depositaries, under such regulations as may

be prescribed by the Secretary; and they may also

be employed as financial agents of the Government:

and they shall perform all such reasonable duties,

as depositaries of public money and financial age

ents of the Government as may be required of them.

. ++ June 11, 1942, ¢. 404, $10, 56 Stat. 356. As

amended Sept. 3, 1954, ¢. 1263, $26, Stat. 1235.

TEXAS CONSTITUTION AND STATUTES

VERNON’S TEXAS CONSTITUTI ON

(Vol. 3, p. 170)

avin

Art XVI, 816. Corporations with banking and

discounting privileges.

Sec. 16. The Legislature shall by general laws,

authorize the incorporation of corporate bodies with

banking and discounting privileges, and shall pro-

vide for a system of State supervision, regulation

and control of such bodies which will adequately

protect and secure the depositors and creditors

thereof.

No such corporate body shall be chartered until

all of the authorized capital stock has been sub.

scribed and paid for in full in cash. Such body

corporate shall not be authorized to engage in busi-

ness at more than one place which shall be desig-

nated in its charter.

No foreign corporation, other than the national

banks of the United States shall be permitted to

exercise banking or discounting privileges in this

State. As amended Nov. 8, 1904; Aug. 23, 1937.

VERNON’S TEXAS CIVIL STATUTES

(Vol. IA, p. 510)

Art. 342-903. Branch Banking Prohibited

No state, national or private bank shall engage

in business in more than one .place, maintain any

branch office, or cash checks or receive deposits ex-

cept in its own banking house. For purposes of this

_ wm

Article, “banking house” means the building in

whose offices the business of the bank is conducted

and which is functionally one place of business,

including office facilities whose nearest wall is lo-

cated within five hundred (500) feet of the nearest

wall of the central building and is physically con-

nected to the central building by tunnel, passage-

way or hallway providing direct access between

the central building and the connected office fa-

cility or by pneumatic tube or other similar carrier,

. .. The entire banking house shall for all purposes

under the law be considered one integral banking

house. Acts 1943, 48th Leg., p. 164, ch. 97, subch.

IX, art. 3; Acts 1957, 55th Leg., p. 448, ch. 220,

$1. As amended Acts 1959, 46th Leg., p. 213, ch.

123, §1.

|

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APPENDIX B

FINDINGS OF FACT AND CONCLUSIONS OF LAW

FINDINGS OF FACT

1. Since 1942 limited banking facilities have been

operated at certain military installations in the

United States by national banking associations and

state banks, as agents of the Federal Government,

pursuant to the directions of the Secretary of the

Treasury. These facilities are frequently authorized

to provide a range of banking services, including

furnishing cash to and accepting deposits from

miiltary finance officers, and cashing checks for

and accepting deposits from officers, enlisted per-

sonnel, civilian employees, and dependents of the

military service concerned, acting in their indivi-

dual capacities. The determination of whether a

particular military insta!lation should have a bank-

ing facility and, if so, what services it should

render, is made by the Secretary of the Treasury

in cooperation with the military department con-

cerned.

2. The bank chosen by the Secretary of the Treas-

ury to operate the facility is designated (if it has

not been previously) as a depositary and financial

agent of the United States under 12 U.S.C. 890 (ap-

plicable to national banks) or 12 U.S.C. $265 (ap-

plicable to all banks insured by the Federal De-

posit Insurance Corporation, which includes na-

tional banks) and as such is authorized to perform

the particular services set forth in the letter of au-

= =

thoritv. The necessity for the facility and the range

of services performed is reviewed periodically by

the Treasury, and the facility is terminated, or

services curtailed or expanded, as the judgment of

the Treasury dictates.

8. The quarters for the facility, utilities, guards

and janitor service are furnished by the military

post. The operating bank furnishes to the Treasury

Department and to the Installation Commander un-

der whose jurisdiction the banking facility exists

detailed monthly reports showing income and expense

items attributable to the facility. Usually the fa-

cilities are operated at a loss, and this loss is offset

by a deposit of Treasury funds, the earning value

of which is equal to the operating loss.

4, The Treasury Department, The Comptroller of

the Currency, the War Department, the Depart-

ment of Defense, and the Attorney General of the

United States have, since 1942, construed 12 U.S.C.

$90 and 12 U.S.C. $265 to authorize the Secretary

of the Treasury to direct banks which have been

designated as depositaries and financial agents of

the United States to operate limited banking facili-

ties. These administrative officials have also con-

cluded that restrictions in the national banking laws

dealing with commercial bank branches do not ap-

ply to such facilities. This construction of the Fed-

eral statutes, and the fact that banking facilities

have been and are being operated and maintained,

have been called to the attention of Congress on

several occasions.

—18— a

5. The defendant National Bank of Commerce of

San Antonio was designated as a depositary and

financial agent of the United States Government

under 12 U.S.C. §265 on February 2, 1943, for the

purpose of operating a limited banking facility at

the San Antonio Aviation Cadet Center (now known

as Lackland Air Force Base) for the duration of

the emergency and operated such a facility until

it was closed on June 30, 1946, pursuant to the

request of the Treasury. Since February 1, 1949,

the defendant National Bank of Commerce of San

Antonio, pursuant to its designation under 12 U.S.C.

$265 as a depositary and financial agent of the

United States and further specific authority from

the Secretary of the Treasury, has operated a bank-

ing facility at Lackland Air Force Base, a military

installation west of San Antonio, Texas. The defen-

dant Broadway National Bank of Alamo Heights,

Texas, was designated as a depositary and finan-

cial agent of the United States Government under

12 U.S.C. $265 on Februaiy 2, 1943, for the purpose

of operating a limited banking facility at Randolph

Field for the duration of the emergency and oper-

ated such a facility until it was closed on April

30, 1946, pursuant to the request of the Treasury,

Since March 2, 1949, the defendant Broadway Na-

tional Bank of Alamo Heights, pursuant to its desig-

nation under 12 U.S.C. 8265 as a depositary and

financial agent of the United States and further

specific authority from the Secretary of the Treas-

ury, has operated a banking facility at Randolph

Air Force Base, a military installation northeast

of San Antonio, Texas. The banking houses of each

= on

of the defendants are a considerable distance from

the military installations concerned.

6. Exclusive jurisdiction over the areas occupied

by Lackland and Randolph Air Force Bases has-

been ceded by Texas to the United States.

7. The operation of the two defendant banks of

the respective banking facilities is by them as de-

positaries and financial agents of the United States,

and is entirely in accordance with the instructions

and authorizations of the Treasury Department.

No services are performed other than those au-

thorized by the Secretary of the Treasury. In gen-

eral, the following services have been so authorized:

(1) Paying and receiving banking facilities for

officers, airmen, and civilian employees, including

dependents of the Department of the Air Force act-

ing in their individual capacity, and individuals

and concerns employed by or attached to USAF

installations.

(2) Paying and receiving bankine service for

custodians of non-appropriated funds acting in such

eapacity.

(3) Furnishing cash to finance officers of the

Department of the Air Force (including pavyo!l

requirements when determined desirable),

(4) Acceptin, deposits from finance officers of

the Department of the Air Force for credit to the

account of the Treasurer of the United States.

—20—

|

(5) Selling savings bonds and stamps for cash.

(6) Payment of persona: utility bills.

(7) Selling banking paper, such as cashier’s

checks, bank money orders, and traveler’s checks.

8) Redemption of savings bonds.

These services are those listed in paragraph 40108,

Air Force Manual 173-10, 12 November 1956, as

the general services which a banking facility will

normally be authorized to perform.

8. The services rendered by the banking facili-

lities here involved are beneficial to the United

States in that they, inter alia, aid in the proper

handling of the official and semi-official funds, re-

duce absenteeism, and promote morale and person-

nel efficiency. The services rendered by the banking

facilities here involved are deemed necessary by

the Secretary of the Treasury and the Department

of the Air Force.

9. The duty of maintaining a banking facility,

such as those operated by the defendant banks, is a

reasonable one within the meaning of 12 U.S.C.

$90 and 12 U.S.C. 8265.

10. The State of Texas, acting by its Attorney

General at the behest of its Banking Commissioner,

has objected to the operation of banking facilities

by state or national banks in Texas on the ground

that branch banking is not authorized in Texas to

state banks, and the Federal:law consequently de-

— eon

nies the power to maintain branches to national

banks as well, asserting that banking facilities suen

as are here described are “branch banks.”

11. Because of, and out of respect toward, the

attitude of the Texas officials the Secretary of the

Treasury has not authorized state banks in Texas

to maintain banking facilities, althouch state banks

are utilized in other states.

12. These actions in the nature of quo warranto

proceedings were brought in the State Court seeking

a declaration that the operation by the defendant

national banks of “additional offices or places of

business” (the banking facilities herein described»

violated Section 16, Article XVI of the Constitution

of Texas and Article 342-903, Vernon’s Civil Stat-

utes, and a permanent injunction against the opera-

tion of any office at which checks are cashed or de-

posits received other than at its banking house was

also sought. They were removed to this Court on

the theory that the petition disclosed a Federal ques-

tion and because the actions are against the defend-

ants as agencies of the United States for acts and

services rendered as depositaries and financial ag-

ents of the United States. nts

CONCLUSIONS OF LAW

1. This Court has jurisdiction of the parties and

of the subject matter herein, This case was properly

removed to this Court and removal jurisdiction ex-

ists under 28 U.S.C. §1441()b and $1442(a) (1).

a,

2. The Secretary of the Treasury is authorized

by 12 U.S.C. 890 and 12 U.S.C. §265 to employ de-

positaries of public money such as the two defend-

ant banks as financial agents of the Government,

and may require the defendant banks, as financial

agents, to perform all such reasonable duties as

may be required of them.

3. The designations by the Secretary of the Treas-

ury of the defendant banks as depositaries and

financial agents of the Government under 12 U.S.C.

$265 are proper and in accordance with the statutes.

4. The duty of maintaining at Lackland Air

Force Base or at Randolph Air Force Base a bank-

ing facility at which checks are cashed and deposits

received and other financial functions performed,

such as those set out in paragraph 40108, Air Force

Manual 173-10, 12 November 1956, is a reasonable

one within the meaning of 12 U.S.C. $265. There-

fore, the Secretary of the Treasury has the authority

to authorize and direct the defendant banks to op-

erate bankiny facilities where the above functions

are performed at each of the military installations

concerned.

5. The use of such a banking facility need not be

limited to those having custody of public moneys

of the United States, but may also be extended to

officers, enlisted personel, civilian employees, de-

pendents, and others having an integral connection

with the military installation concerned.

—23—

6. The determination by the Secretary of the

Treasury (made in cooperation with the Depart-

ment of the Air Force) that the banking facilities

here involved are needed and that the services they

are directed to perform are necessary and reason-

able involves an exercise by the Secretary of the

Treasury of an official function vested in him by

law. Such authorized discretionary act on his part

is not reviewable and may not be reviewed de novo,

or otherwise, in a proceeding such as this.

7. The provisions of 12 U.S.C. $36 do not limit

the authority of the Secretary of the Treasury un-

der 12 U.S.C. $90 and 12 U.S.C. $265 to impose

upon defendants the duties challenged by the plain-

tiff in this case which have been so imposed on them.

8. The Secretary of the Treasury is empowered

by 12 U.S.C, $90 and 12 U.S.C. $265 to impose upon

defendants the duties challenged herein by plain-

tiff. The action of the Secretary of the Treasury in

imposing such duties falls within the legitimate

scope of operation of those statutes.

Entered this 6th day of October, 1960.

s/ Ben H. Rice, Jr.

FINAL JUDGMENT

This action came on to be heard on April 25,

1960, on final trial on the merits, and the parties

appeared by their attorneys and submitted to the

Court without the intervention of a jury the mat-

ters in controversy, as well of fact as of law, and

|

the pleadings, the evidence, and the arguments of

counsel, including briefs filed by the parties both

before and after trial, having been heard and fully

considered, it is the opinion of the Court that the

law and the facts are with the defendants.

It is accordingly ORDERED, ADJUDGED, and

- DECREED that plaintiff take nothing by its suit,

and that defendants go hence with their costs with-

out day and that execution issue in their behalf for

their said costs, to all of which the plaintiff in open

court duly excepted.

Entered this 6th day of October, 1960.

s/ Ben H. Rice, Jr.

ENTERED: Civil Order Book, Vol. No. 9, Page 263.

cui

IN THE

United States Court of Appeals

FOR THE FIFTH CIRCUIT

No. 18747

STATE OF TEXAS ex rel. J. M. Falkner,

Banking Commissioner of Texas,

Appellant,

versus

NATIONAL BANK OF COMMERCE OF SAN

ANTONIO, TEXAS, and BROADWAY

NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS,

Appellees.

APPEAL FROM THE UNITED STATES DISTRICT

COURT FOR THE WESTERN DISTRICT

OF TEXAS

(May 15, 1961.)

Before TUTTLE, Chief Judge, and HUTCHESON

and BROWN, Circuit Judges.

TUTTLE, Chief Judge: Appellant brought actions

in the nature of quo warranto proceedings against

—26—

the appellees, the National Bank of Commerce of

San Antonio and the Broadway National Bank of

Alamo Heights, in the District Court of Travis.

County, Texas, by which actions it sought to deter-

mine whether the appellees were exercising powers

not conferred upon them by their charters and al-

legedly prohibited by the Constitution and laws of

the State of Texas. The appellees filed petitions for

removal to the United States District Court for the

Western District of Texas, claiming their right to

do so under 28 U.S.C.A. §§1441(b) and 1442(a) (1),'

and that court assumed jurisdiction, overruling ap-

pellant’s motions to remand the suits to the state

court. The two suits were consolidated for trial.

Before proceeding to a recital of the facts which

gave rise to the issues presented on this appeal, it

will be convenient to dispose of the question as to

' “Any civil action of which the district courts have

original jurisdiction founded on a claim or right arising

under the Constitution, treaties or laws of the United States

shall be removable without regard to the citizenship or

residence of the parties. Any other such action shall be

removable only if none of the parties in interest properly

joined and served as defendants is a citizen of the state in

which such action is brought.” 28 U.S.C.A. §1441(b).

“A civil action or criminal prosecution commenced in=~

a State court against any of the following persons may be

removed by them to the district court of the United States

for the district and division embracing the place wherein it

is pending:

“(1) Any officer of the United States or any agency

thereof, or person acting under him, for any act under color

of such office er on account of any right, title, or authority

claimed under any Act of Congress for the apprehension or

punishment of criminals or the collection of the revenue.”

28 U.S.C.A. §1442(a).

—27—

the jurisdiction of the District Court to hear this

case. We think that the petitions for removal showed

at the least a colorable claim that the appellees were

acting under an officer of the United States and

that the appellees were acting under color of law,

as agents of the United States within the meaning

of $1442(a)(1) supra. Accordingly, the District

Court had jurisdiction to entertain this suit, and

acted properly in overruling the motions to remand.

See DeBusk v. Harvin, 212 F.2d 143 (5th Cir.).

For almost two decades, limited banking facilities

have been operated at various military installations

by national banking associations and by state banks;

those facilities have been under the direction of the

Secretary of the Treasury and are operated as

agents of the federal government. They are design-

ated as depositories and financial agents of the

United States under 12 U.S.C.A. ‘90, if national

banks, and under 12 U.S.C.A. $265, if banks insured

by the Federal Deposit Insurance Corporation. Each

bank so designated is authorized to perform only

those functions enumerated in the letter granting

it authority to act. As found by the District Court,

“The necessity for the facility and the range of

services performed is reviewed periodically by the

Treasury, and the facility is terminated, or services

curtailed or expanded, as the judgment of the Treas-

ury dictates.”

Each bank herein involved was designated a de-

pository and financial agent of the United States

on February 2, 1943, the National Bank of Commerce

operating facilities at what is now Lackland Air

—23—

Force Base and the Broadway National Bank at

what is now Randolph Air Force Base. The National

Bank of Commerce facility was closed by the Sec-

retary on June 30, 1946,and was reopened, pursuant

to the same authority, 890, supra, on February 1,

1949; it has been continuously operated since that

date. The Broadway National Bank facility was

closed on April 30, 1946, but it was reopened, under

the same section, on March 2, 1949, and has since

remained open. Each facility is physically located

within an area in which exclusive jurisdiction has

been ceded by the State of Texas to the United

States, and in each case the facility occupies quarters

furnished by the military post, from which it also

receives utilities, guards, and janitorial services.

Each facility furnishes to the Treasury Department

and to the base commander a detailed monthly re-

port showing those income and expense items which

properly may be attributed to the facility. The Dis-

trict Court found with respect to similar facilities

in general that “Usually the facilities are operated

at a loss, and this loss is offset by a deposit of Treas-

ury funds, the earning value of which is equal to

the operating loss.”

As found by the District Court, the functions

which the facilities in question perform are limited

to:

(1) Paying and receiving banking facilities

for officers, airmen and civilian employees, in-

cluding dependents of the De ent of the

Air Force acting in their individual capacity,

and individuals and concerns employed by or

attached to USAF installations.

siilies

(2) Paying and receiving banking service for

custodians of non-appropriated funds acting in

such capacity.

(3) Furnishing cash to finance officers of the

Department of the Air Force (including payroll

requirements when determined desirable).

(4) Accepting deposits from finance officers

of the Department of the Air Force for credit

to the account of the Treasurer of the United

States.

(5) Selling savings bonds and stamps for cash.

(6) Paying of personal utility bills.

(7) Selling banking paper, such as cashier’s

——— bank money orders, and travelers’

checks.

(8) Redemption of savings bonds.

In what appears to be a case of first impression,

the appellant contended in the District Court and

contends here that the banking facilities now in

question are operated in contravention of the Con-

stitution of Texas, which does not allow branch

banks.’ In pursuance of this constitutional pro-

hibition, the Texas Legislature has provided that:

The applicable provisions of the Constitution of Texas

are as follows:

“The Legislature shall by general laws, authorize the

incorporation of corporate bodies with banking and dis-

counting privileges, and shall provide for a system of state

supervision, regulation and control of such bodies which

will adequately protect and secure the depositors and

creditors thereof.

“No such corporate body shall be chartered until all

of the authorized capital stock has been subscribed and

paid for in full in cash. Such body corporate shall not be

=—

“No state, national or private bank shall en-

gage in business in more than one place, main-

tain any branch office, or cash checks or receive

deposits except in its own banking house.”

V.A.T.S. Art. 342-903.

- On this appeal, therefore, the appellant argues that

the prohibitions apply to the banking facilities here

in question because of their connection with state

banking institutions domiciled in and incorporated

under the laws of Texas, regardless of the appellee’s

_ relationship to the Federal government. The ap-

pellees, and the Federal government by way of

amicus curiae brief, claim that they are exempt, by

virtue of their federal connection, from the opera-

tion of the Texas constitution and statute. They base

their authority to act on §90 which provides:

- “All national banking associations, designated

for that purpose by the Secretary of the Treas-

ury, shall be depositaries of public money, under

such regulations as may be prescribed by the

Secretary; and they shall perform all such rea-

sonable duties as depositaries of public money

and financial agents of the Government, as may

be required of them. * *”

In effect, the question for our consideration is

largely one of the applicability vel non of 12 U.S.C.A.

§36(c), which provides:

authorized to engage in business at more than one place

which shall be designated in its charter.

“No foreign corporation, other than the national banks

of the United States, shall be permitted to exercise bank-

ing or discounting privileges in this State.” Article XVI,

Section 16, Constitution of Texas. (Emphasis added.)

alti

“A national banking association may, with

the approval of the Comptroller of the Currency,

establish and operate new branches: (1) Within

the limits of the city, town or village in which

said association is situated, if such establish-

ment and operation are at the time expressly

authorized to State banks by the law of the

State in question; and (2) at any point within

the State in which said association is situated,

if such establishment and operation are at the

time authorized to State banks by the statute

law of the State in question by language speci-

fically granting such authority affirmatively

and not merely by implication or recognition

and subject to the restrictions as to location

imposed by the law of the State on State banks.

* *))

The State of Texas thus hases its position on the

pari materia argument that the provisions of {90

go only so far as is permitted by ‘36, i.e., that bank-

ing facilities authorized by ‘90 may, under ‘36, be

opened only where state law permits them. The ap-

pellees and the government, on the other hand, urge

that .90 is not in any Way limited to ‘36.

Upon careful consideration of the statutory pro-

visions thus placed before us, we are led to the con-

clusion that Section 90 must stand alone. We find

nothing in either Section 36 or Section 90 to indicate

that Congress intended any different result. It does

in fact appear that the legislative history is such

that it requires the construction of Section 90 as

an independent statute.

-——s

-—

Admittedly, the power of the Secretary to act as

he has done in the instant case was initially based

upon his construction of Section 90. Since 1942, the

Secretary has construed that statute as enabling

him to designate national banks, and in the case

of Section 265, banks insured by the Federal De-

posit Insurance Corporation, to serve as depositories

and financial agents of the vovernment on military

installations. It is clear from the government’s brief

in this case that Congress has long been appraised

of this construction, and the fact that Congress has

failed to enact legislation specifically repudiating

the practice or placing the practice in a definite

legislative scheme is sufficient indication that Con-

gress has given its tacit approval to such facilities.

We mention this legislative history principally be-

cause it is treated so extensively by the parties

rather than as a basis for our decision.

Conceding, as we must, that Congress has the

power to determine the conditions under which

national banking associations shall operate, the

power of Congress to enact such legislation cannot

seriously be questioned. The section before us gives

the Secretary of the Treasury the power to employ

as government financial agents any national bank-

ing association, and, having designated a banking

association so to act, the Secretary may demand

that it perform all such “reasonable duties” as may

be required of it. Clearly this is what the Secretary

has done in the present case. The requirement thai

these national banks open and maintain banking

facilities on these military installations is a reason-

able imposition of one of the duties which may be

= =

reanired of them under Section 90. Nor does it ap-

pear that the Secretary, operating in behalf of the

government, has exceeded the authority granted

to him by Section 90 and approved, as construed by

him, by the Congress.

We think that the view we take of this case

squares with those decisions, covering almost a score

of years, which uphold the power of the government

to establish similar facilities on military bases, as 4

result of which it is well settled that the government

may operate, Or have operated, on these military

establishments facilities which may have little or no

direct relation to the base as a military installation

and whose existence may be justified in large part

solely on the basis of necessity or even of con-

venience. Thus in Standard Oil Company v, Johnson,

316 U.S. 481, at 485, the Supreme Court observed

that “post exchanges * * are arms of the Gov-

ernment deemed by it essential for the performance

of governmental functions. They are integral parts

of the War Department, share in fulfilling the duties

entrusted to it, and partake of whatever immunities

it may have under the Constitution and federal

statutes.” Other facilities, generally for food service,

have been held to be such integral parts of the

governmental scheme as tO become arms of the

government, gee, @.£-, Nimro v. Davis, 204 F.2d 734

(D. C. Cir.), cert. den. 346 U.S. 901, Aubrey v:

United States, 254 F.2d 770, United States v. For-

fari, 268 F.2d 31.

While they quite obviously perform totally dif-

ferent functions there does not seem to us to be a

=e

sufficient difference between the banking facilities

and post exchanges for us to say that the govern-

ment under its power to provide for the national

defense may operate or cause to be operated one and

not the other. Suffice it to say that the airfields

are so located, necessarily away from places in which

usual banking facilities would otherwise be avail-

able, that the Secretary could reasonably come to the

conclusion that such facilties were necessary and

reasonable adjuncts of the military installations.

Having come to this conclusion and having exercised

the power which had been delegated to him, it must

follow that he had the right to authorize these na-

tional banking associations to act as government

agencies and to require of them that they perform

all those duties which might be reasonably imposed

upon them.

We do not now hold that Article XVI, Section 16,

of the Constitution of Texas or the statutes enacted

in pursuance thereof are invalid. We merely hold

that the law of Texas must in these circumstances

give way slightly and only in the case of these bank-

ing facilities and others similar to them, for, once it

is established that the government has the right so

to contract with these corporate entities, then the

state may not place limitations upon persons—corpo-

rate or real—so as to impair the free exercise of

the power to contract. We do not think that by so

holding we @o any real violence to the law of Texas

or to those objectives which it seeks to achieve by

the statutory scheme before us.

=

We think also that our decision in this matter

is consistent with that of the District Court for the

Northern District of Texas in United States v.

Papworth, 156 F.Supp, 842, aff’d on other grounds,

256 F.2d 125, cert. den. 358 U.S. 854, rehearing den.

958 U.S. 914, in which the defendant was indicted

for robbing a similar banking facility located at

the Carswell Air Force Base. He claimed that the

indictment did not allege any offense under 18 U.S.C.

§2113(a) because the facility was 4 branch bank

prohibited by the Texas Constitution and Article

342-903, supra, and that since it had no valid exist-

ence as a branch bank he could not be charged with

the federal offense of taking funds by force from a

bank or banking institution. The trial court held

the facility not to be a branch bank but an arm or

agency of the federal government, and as such, a

military banking facility which was 2 bank or bank-

ing institution within the meaning of 18 U.S.C. $371,

and the motion was denied. That court commented

that “Even if it were to be conceded, which it is not,

that the operation of these facilities constitute a

technical violation of state law, the enforcement of

such law would handicap efforts to carry out the

plans of the United States, and the state enactment

must give way.” 156 F.Supp. 845.

The judgment of the District Court is AFFIRM-

ED.

—_

HUTCHESON, Circuit Judge, Dissenting:

While I concur in the opinion that the court below

correctly held that ‘t had jurisdiction to hear and

— oo

determine the case, I think the judgment against the

State was wrong and I dissent from the opinion of

the majority affirming it.

It seems clear to me that the district judge was

wrong in nis view that the state was not entitled to

prevent what was going on here, action, in my

opinion, which was clearly in violation of the state

constitution and statutes.

With deference, the opinion of the majority, that

the Secretary has the right, as he did here, to over-

ride state statutory constitutional provisions and

the long standing recognition thereof by congress

in its practices and its acts, completely emasculates

12 U.S.C.A., Sec. 36(c), which fully recognizes the

validity and enforceability of state statutes of the

kind in question here. It also disregards and nullifies

the long history of the controversy over the establish-

ment of branch banks and the attitude of congress

toward that controversy, and, by what seems to be

an operation bootstrap, scems to hold that the Sec-

retary, by the invocation and use of 12 U.S.C.A.,

Sec. 90, which clearly authorizes the Secretary of the

Treasury to designate national banking associations

as depositories of public money and authorizes him

no further, can evade and avoid the branch bank

limitations imposed upon banks by the Texas con-

stitution and statutes. In assuming, as it does, that

the authority given the Secretary under Section 90,

to establish depositories, impliedly nullifies and re-

peals Section 36(c), 12 U.S.C.A., the opinion refuses

to face up tothe realities of the case which the

counsel for the State of Texas met when he correct-

_— oe

ly answered the question, how the Secretary could

exercise the authority granted in Section 90, with-

out doing what he did here, saying: “He doesn’t

have to designate a branch bank, indeed, he has no

authority to do so.”

I have no real understanding of, or sympathy with

the state prohibition against branch benks. I do

know, though, that the State of Texas is a sovereign

state and that its laws bind federal officers and

agents just as they do everybody else, unless they con-

flict with some overriding federal constitutional

principle or law. Here no one points to either a

principle or a statute which overrides these Texas

banking laws, and the law of Texas in the matter

in question is sovereign and must be oheyed, no

matter who in the federal government seeks to evade

or defy it.

The judgment of the district judge was, in my

opinion, not in accordance with our constitutional

system. The opinion of the majority, in my opinion,

is not in such accord. J, therefore, DISSENT from

it.

(SEAL)

A true copy Test: EWARD W. WADSWORTH, Clerk,

U.S. Court of Appeals, Fifth Circuit, New Orleans

Louisana.

—_

JUDGMENT

Extract from the Minutes of May 15, 1961

No. 18747

STATE OF TEXAS, ex rel, J. M. FALKNER,

Banking Commissioner of Texas,

versus

NATIONAL BANK OF COMMERCE OF SAN

ANTONIO, TEXAS, and BROADWAY

NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS.

This cause came on to be heard on the transcript

of the record from the United States District Court

for the Western District of Texas, and was argued

by counsel;

ON CONSIDERATION WHEREOF, It is now

here ordered and adjudged by this Court that the

judgment of the said District Court in this cause

be, and the same is hereby, affirmed;

It is further ordered and adjudged that the ap-

pellant, State of Texas, ex rel. J. M. Falkner, Bank-

ing Commissioner of Texas, and the surety on the

appeal bond herein, American Surety Company of

New York, be condemned, in solido, to pay the costs

of this cause in this Court for which execution may

be issued out of the said District Court.

“Hutcheson, Circuit Judge, Dissenting.”

ni

FILED

15th day of June, 1961

Eaward W. Wadsworth

United States Court of Appeals

FOR THE FIFTH CIRCUIT

——

No. 18,747

THE STATE OF TEXAS ex rel. J. M. FALKNER,

Banking Commissioner of Texas,

_ Appellant,

Vv

NATIONAL BANK OF COMMERCE OF SAN

ANTONIO, TEXAS, and BROADWAY

NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS,

Appellees.

Appeal from the United States District Court for the

Western District of Texas

(June 15, 1961).

ON PETITION FOR REHEARING

Before TUTTLE, Chief Judge, HUTCHESON and

BROWN, Circuit Judges.

n for rehearing

It is ORDERED that the petitio

d and numbered cause be,

filed in the above style

and the same is, hereby DENIED, Hutcheson, Cir-

cuit Judge, dissenting.

—40.—

United States Court of Appeals

FOR THE FIFTH CIRCUIT

No. 18,747

STATE OF TEXAS, ex rel., J. M. FALKNER,

Banking Commissioner of Texas,

Appellant,

NATIONAL BANK OF COMMERCE OF

SAN ANTONIO, TEXAS, and BROAD-

WAY NATIONAL BANK OF ALAMO

HEIGHTS, TEXAS,

Appellee.

ON CONSIDERATION OF THE APPLICA-

TION of the Appellant in the above numbered and

entitled cause for a stay of the mandate of this court

therein, to enable Appellant to apply for and to

obtain a writ of certiorari from the Supreme Court

of the United States, IT IS ORDERED that the is-

sue of the mandate of this court in said cause be and

the same is stayed for a period of thirty days; the

stay to continue in force until the final disposiion of

the case by the Supreme Court, provided that with-

in thirty days from the date of this order there shall

-be filed with the clerk of this court the certificate

of the clerk of the Supreme Court that certiorari

petition and record have been filed. It is further

ordered that the clerk shall issue the mandate upon

the filing of a copy of an order of the Supreme Court

denying th iration of thirty

days from the dat ss the above-

mentioned certificate

of this court within that time.

DONE AT NEW ORLEANS, LA., this 30th day of

June, 1961.

/s/ ELBERT P. TUTTLE

United States C ircuit Judge.

ORDER STAYING MANDATE, FILED: June

30th, 1961.