First-citizens Bank and Trust Company, Appellant, v. William B. Camp, Comptroller of the Currency of the United States, Defendant, First Union National Bank of North Carolina, Intervenor, Appellees.first-citizens Bank and Trust Company, Appellant, v. William B. Camp, Comptroller of the Currency of the United States, Defendant, and North Carolina National Bank, Intervenor, Appellees, 409 F.2d 1086 (4th Cir. 1969)

Plaintiff, First-Citizens Bank and Trust Company ("First-Citizens"), sued to restrain the opening of branch banks by First Union National Bank of North Carolina ("FUNB") and North Carolina National Bank ("NCNB") in the North Hills Shopping Center, Raleigh, North Carolina. The suits were against the Comptroller of the Currency, who approved the establishment of the branches, and FUNB and NCNB intervened.

When the consolidated cases first came before the district court on the merits, it, conceiving that the intervening decision in First Nat. Bank of Logan, Utah v. Walker Bank & Trust Co., 385 U.S. 252, 87 S. Ct. 492, 17 L. Ed. 2d 343 (1966), required the Comptroller to follow the North Carolina statutes, particularly N. C.Gen.Stat. § 53-62(b), in passing on branch applications,¹  remanded the case to the Comptroller for further hearings and findings in regard to the criteria established by state law. The Comptroller conducted further hearings, in which First-Citizens participated and made further findings, reaffirming his original determination to permit the branches to be established. The district court then considered the matter, on cross-motions for summary judgment, in the light of the Comptroller's redetermination. Judgment was granted for the Comptroller and the intervenors. We affirm.

On appeal, plaintiff makes three major contentions. First, it is claimed that plaintiff was not afforded a hearing on the crucial issue in the case — namely, that two new branches should be approved simultaneously. Second, it is asserted that the Comptroller and the district court improperly applied certain state standards for the approval of branches which were obligatory upon them. Third, it is argued that, under the proper standard of review (an issue itself in dispute) the approvals of the Comptroller cannot be permitted to stand. We deal with these issues, and the facts upon which they arise, seriatim.

— I —

First-Citizens is a state chartered bank, which operates a branch (opened in November, 1964, in a trailer) within the North Hills Shopping Center. Wachovia Bank & Trust Company ("Wachovia") also operates a branch in the center. When FUNB, on October 16, 1964, filed an application with the Comptroller to establish a branch in the same shopping center, First-Citizens filed a notice of protest with the Comptroller, together with a request for certain information and a request for a hearing. A conference was arranged but not held, and First-Citizens initiated litigation in the district court on January 14, 1965.

While the law suit was pending and following our decision in First National Bank of Smithfield, North Carolina v. Saxon, 352 F.2d 267 (4 Cir. 1965), the Regional Administrator of National Banks invited FUNB and other protestants to present evidence in the matter in Richmond. This was done on April 13, 1966.

In the meantime, NCNB, on March 17, 1966, filed an application for authority to open a branch in the North Hills Shopping Center, and First-Citizens filed a protest and request for information and hearing with regard thereto. A hearing was held on May 2, 3, 1966, in Richmond before the Regional Administrator, at which NCNB, First-Citizens and another protestant presented evidence. On June 6, 1966, First-Citizens filed a second suit in the district court seeking declaratory and injunctive relief with regard to the NCNB application, and, on September 29, 1966, the Comptroller approved the simultaneous opening of both branches.

The Richmond hearings were conducted separately on each application. The proceedings were not consolidated as such, although the Comptroller granted both approvals in a single opinion which discussed both applications.

When the district court remanded the proceedings to the Comptroller, the reconvened hearing on the FUNB application was held on April 10-11, 1967, and on the NCNB application on April 12-13-14-27 and 28, and May 17-18-19, 1967. Again, the proceedings were conducted separately on each application and, again, in an opinion dated November 28, 1967, the Comptroller combined the applications and granted his approval as to both.

First-Citizens disavows any claim that the manner in which the Comptroller conducted the original and reconvened hearings denied it due process of law. Rather, it complains that the hearings were not "fair," essentially because the Comptroller conducted no hearing on the simultaneous opening of the two branches and, secondarily, because the personnel comprising the hearing panel shifted from session to session.

At the outset, we note that at the administrative stage, First-Citizens lodged no objection to the successive scheduling of hearings on the two applications, nor the composition of the hearing panel. Its right to raise at the judicial level procedural objections not advanced before the administrative agency is suspect, because, ordinarily, a litigant is not entitled to remain mute and await the outcome of an agency's decision and, if it is unfavorable, attack it on the ground of asserted procedural defects not called to the agency's attention when, if in fact they were defects, they would have been correctible at the administrative level. United States v. L. A. Tucker Truck Lines, 344 U.S. 33, 73 S. Ct. 67, 97 L. Ed. 54 (1952); Brotherhood of R. Trainmen v. Chicago, Milw., St. P. & P. R. Co., 127 U.S.App.D.C. 58, 380 F.2d 605, cert. den., 389 U.S. 928, 88 S. Ct. 289, 19 L. Ed. 2d 279 (1967); Bower v. Eastern Airlines, 214 F.2d 623 (3 Cir.), cert. den., 348 U.S. 871, 75 S. Ct. 107, 99 L. Ed. 685 (1954); Marquette Cement Mfg. Co. v. F. T. C., 147 F.2d 589 (7 Cir. 1945), aff'd. on other grounds, Federal Trade Commission v. Cement Institute, 333 U.S. 683, 68 S. Ct. 793, 92 L. Ed. 1010 (1948); Red River Broadcasting Co. v. F. C. C., 69 App.D.C. 1, 98 F.2d 282, cert. den., 305 U.S. 625, 59 S. Ct. 86, 83 L. Ed. 400 (1938). Moreover, it would seem from United States v. Pierce Auto Lines, 327 U.S. 515, 66 S. Ct. 687, 90 L. Ed. 821 (1946), that the failure to consolidate the hearings on the two applications was not error.

A more basic answer with regard to the Comptroller's failure formally to consolidate the two applications is that, as a practical matter, they were considered together, so that it cannot be said that First-Citizens suffered prejudice by what occurred. First-Citizens main evidence in opposition to the grant of the two applications, an economic and marketing research analysis of the need for and economic feasibility of a new branch bank in the North Hills Shopping Center, presented in both proceedings, discussed the feasibility of two additional banking offices and concluded that "sufficient business would exist at a considerably later date for one additional office (but not two)." That the Comptroller treated the two applications as interrelated is manifest from his opinions. In his first opinion, dated September 29, 1966, in which he concluded to grant both applications, the Comptroller noted the filing of applications by FUNB and NCNB and stated, " [e]ven though each application must stand on its own merits, they are considered together in this opinion because the relevant economic data and banking factors are nearly identical and because the action taken on each application was a factor in the consideration of the other." (Emphasis supplied.) In his second opinion, dated November 28, 1967, after remand by the district court, the Comptroller reiterated the same approach.²  Thus, contrary to First-Citizens' contention, in proof and in decision, the issue of the simultaneous opening of the two new branches was raised and decided.

Assuming that First-Citizens may be heard on that issue at this time, we do not find merit in the contention that the "fairness" of the hearings was destroyed by changing personnel in the hearing panel. In First National Bank of Smithfield we held that in considering an application for a branch bank the Comptroller is not bound to the requirements of § 7 of the Administrative Procedure Act, 5 U.S.C.A. § 556.³  Thus, the argument misconceives the function of the panel. It does not constitute a hearing officer or trial examiner such as play an important part in the administrative process of other agencies amenable to the Act. It is simply an investigatory or fact-gathering organ, not having any fact-finding function. The decision was made by the Comptroller who had initiated the practice of rendering a written opinion exposing the basis of his determination. Bloom, Hearing Procedures of the Office of the Comptroller of Currency, 31 Law and Contemp.Problems 723 (1966). Of course, even in a fact-gathering procedure, due regard should be had for a party to know and meet opposing evidence with explanation or rebuttal evidence. 1 Davis, Administrative Law Treatise, § 4.04 (1958 Ed. and 1965 Supp.); § 7.16, at p. 180 (1965 Supp.). But the record shows that First-Citizens was fully afforded this opportunity.

— II —

The authority of the Comptroller to permit the opening of a branch bank is contained in 12 U.S.C.A. § 36(c), the text of which is set forth in the margin.⁴  North Carolina law would permit FUNB and NCNB, since they are both located in Raleigh, North Carolina, to establish a branch or teller window elsewhere in that city, if certain conditions are met, so that, pursuant to 12 U.S.C.A. § 36(c), it is also to the statute of North Carolina — N.C.Gen.Stat. § 53-62(b)⁵  — to which we must turn to determine the conditions precedent to the opening of the branch. Essentially, they are two: (a) that the establishment of the branch "will meet the needs and promote the convenience of the community to be served by the bank" and (b) "that the probable volume of business and reasonable public demand in such community are sufficient to assure and maintain the solvency of said branch * * * and of the existing bank or banks in said community."

The Comptroller urges that in resorting to state law he is bound only by state capitalization and state location requirements, but he is not bound by North Carolina's "need and convenience" and "solvency of the branch" criteria. Support for this view is claimed in our previous decision in First National Bank of Smithfield. We reject the contention. To the extent that First National Bank of Smithfield supports the Comptroller's argument, its authority has been vitiated by First Nat. Bank of Logan, Utah v. Walker Bank & Trust Co., 385 U.S. 252, 87 S. Ct. 492, 17 L. Ed. 2d 343 (1966). Certiorari was granted in that case because of "a conflict between [the decisions there reviewed] * * * and the decision in First National Bank of Smithfield * * *" with a holding on the merits, that the views contrary to First National Bank of Smithfield should prevail and language in the opinion making the path we should follow here apparent.⁶  We, therefore, hold that the Comptroller was bound by North Carolina's "need and convenience" and "solvency of the branch" criteria.

In considering whether the Comptroller properly construed and applied North Carolina's "need and convenience" and "solvency of the branch" criteria, we note at the outset the absence of any definitive State interpretation of these nebulous concepts. The Comptroller's construction of the North Carolina "need and convenience" criterion is to be inferred from his findings on this issue, which he concluded supported his ultimate finding that the needs and convenience of the community would be met by authorization for the opening of the two branches.⁷  Similarly, in regard to the ultimate finding on solvency, the Comptroller set forth what he considered the pertinent considerations.⁸ 

First-Citizens' contentions, summarized, with regard to North Carolina's "need and convenience" criterion relate to four aspects. First, it is said that the Comptroller incorrectly applied the North Carolina law by failing to make a definitive finding of the proper service area to be considered. First-Citizens contends that the area should only be that from which will be drawn 70-75% of accounts, and it claims that on the basis of its experience and that of Wachovia, proven before the Comptroller, the proper service area under the test it advocates is approximately that encompassed by census tract #26 which is the area in close geographical proximity to the North Hills Shopping Center. Secondly, First-Citizens complains of the Comptroller's lack of specific finding as to the deposit or loan potential for a properly defined service area, and it claims that it alone offered such proof to show that the potential was not great enough to support additional branch banks. Thirdly, First-Citizens contends that the Comptroller had before him no proof of a present need for any additional bank and, indeed, had scientific proof, based on random samples, to show that an additional bank was not needed. Lastly, First-Citizens complains that the Comptroller failed to take into consideration the quality and quantity of existing bank services.

In assessing these contentions, we underscore that neither the North Carolina statute nor any decided cases provides any degree of specificity as to the factors, proof of which would show the presence or absence of "need and convenience" for a new branch bank. In many of First-Citizens' contentions on this issue, there is implicit the concept that the Comptroller must view a given locality as a static concept. This the Comptroller did not do. He viewed the area, particularly because of the rapid growth and expansion to the north, as a dynamic community and, not unreasonably, we believe, undertook to predict future needs and conveniences, as well as those existing at the time that the applications were before him.⁹  In this we find no error. The grant of an application to open a branch bank is significant not only for today but also for tomorrow. Manifestly, it is proper to consider tomorrow in concluding what should be done today.

Nor do we find error in the Comptroller's failure to make definitive specific findings with regard to the service area, economic feasibility, public needs, and quality and quantity of existing service. From what he said, it is obvious that he considered the service area to be greater than that advocated by First-Citizens, ultimate economic feasibility of another bank or banks of sufficient future potential to warrant granting applications to open them and future public need sufficient to support them. The North Carolina law does not specify the extent to which, if at all, any one or more of the factors urged on us by First-Citizens is to be considered or the weight to be given thereto. Overall, we cannot say that the Comptroller's construction of the North Carolina law was unreasonable.

As to First-Citizens' "solvency of the branch" argument, again, there is a lack of definitive direction in the North Carolina statute.¹⁰  The Comptroller manifestly considered the capitalization of the applicants, because he made a specific finding that each had capital in excess of North Carolina statutory requirements. He considered, also, the effect of competition on First-Citizens, because he found that the competition generated by the grant of the applications would not cause First-Citizens' assets to become insufficient to pay its liabilities to depositors and other creditors. He found that the "continued solvency of the existing financial institutions is not in doubt," and implicit in his findings in his second opinion on remand, and explicit in his first opinion, was the conclusion that all four banks [First-Citizens, Wachovia, FUNB and NCNB] "can survive and prosper without difficulty in this growing market area." Indeed, he found, specifically, that First-Citizens' deposits at its North Hills branch could be expected to increase by the addition of either or both of the new branches for which permission was sought.

We cannot say that the Comptroller unreasonably construed the North Carolina statute, or that the North Carolina statute required consideration of any factor on which a specific finding was not made.

— III —

Any consideration of the correctness of the Comptroller's findings and ultimate conclusion to grant the applications must begin with a statement of the scope of judicial review in a case such as this. First-Citizens argues that it was entitled to a judicial determination de novo, or, at least, that there should be an independent full-scale reexamination and weighing of the evidence. Alternatively, First-Citizens appears to accept the "substantial evidence" rule applied by the district court. FUNB and NCNB argue that the correctness of the district judge's conclusions should be measured by the "clearly erroneous" test. The Comptroller argues that in no event should he be subject to review on a standard as rigorous as the substantial evidence rule, and he suggests a lesser burden, whether it has been shown that his determination was arbitrary, capricious or beyond the bounds of governing statutes.

In First National Bank of Smithfield we effectively denied resort to a determination de novo, except in those instances in which the Comptroller failed to conduct an adversary hearing. Since we have concluded that First-Citizens was afforded the right to an adversary hearing and exercised it, there could not be a hearing de novo or an independent full-scale reexamination and weighing of the evidence. In First National Bank of Smithfield we suggested resort to the substantial evidence rule where an adversary hearing had been held and a record made subject to the qualification that where the decision of the Comptroller is dependent upon an exercise of discretion, the reviewing court cannot substitute its discretion for the Comptroller's, unless the Comptroller has abused, exceeded or arbitrarily applied his discretion. Since the decision in Walker Bank from which we have concluded that the Comptroller is bound by the North Carolina statute, and since the Comptroller has exercised his discretion to permit both branch banks, this exception to the general rule can have little application to the present case. We conclude that the scope of review should not be more rigorous than the substantial evidence rule. Cf. United States v. Carlo Bianchi & Co., 373 U.S. 709, 83 S. Ct. 1409, 10 L. Ed. 2d 652 (1963); American Trucking Assns. v. United States, 344 U.S. 298, 73 S. Ct. 307, 97 L. Ed. 337 (1953); Webster Groves Trust Co. v. Saxton, 370 F.2d 381 (8 Cir. 1966); Bridgeport Federal Savings & Loan Assn. v. Federal Home Loan Bank Board, 199 F. Supp. 410 (E.D. Pa. 1961), aff'd., 307 F.2d 580 (3 Cir. 1962), cert. den., 371 U.S. 950, 83 S. Ct. 504, 9 L. Ed. 2d 499 (1963).

We do not find it necessary to put a more precise label on the scope of review to be afforded in this case because, under the substantial evidence rule, and a fortiori under any less rigorous standard, we think that the findings of the Comptroller and his conclusions to grant both applications are fully supported. As we have shown, we do not think that the Comptroller unreasonably or impermissibly construed the North Carolina statute by which his action was bound. While it is true that the proof of First-Citizens was presented in more systematic form than that of the applicants, the detailed findings of the Comptroller were based upon evidence that was before him, and these findings, as we have previously indicated, mount up to adequate support for his conclusion to grant both applications. It is no proper ground for objection that the Comptroller found certain disputed evidence more persuasive than that which controverted it. We concur in the ultimate conclusion of the district judge "that the Comptroller's findings and conclusions are substantially and rationally supported, and are neither unfair, arbitrary, nor capricious." First Citizens Bank & Trust Company v. Camp, 281 F. Supp. 786, 793 (E.D.N.C. 1968).

Affirmed.