James J. SAXON (Succeeded in Office by William B. Camp on February 1, 1967), Comptroller of the Currency of the United States of America, Appellant, v. GEORGIA ASSOCIATION OF INDEPENDENT INSURANCE AGENTS, INC., et al., Appellees. The CITIZENS AND SOUTHERN NATIONAL BANK, Appellant, v. GEORGIA ASSOCIATION OF INDEPENDENT INSURANCE AGENTS, INC., et al., Appellees.
Nos. 25050, 25060
United States Court of Appeals Fifth Circuit
Aug. 12, 1968
Rehearing Denied En Banc in No. 25060 Oct. 28, 1968
399 F.2d 1010
Charles L Goodson, U.S. Atty., Slaton Clemmons, Edwin L. Weisl, Jr., Asst. Attys. Gen., Atlanta, Ga., Alan S. Rosenthal, Leonard Schaitman, Attys., Dept. of Justice, Washington, D.C., for appellant Saxon.
Henry J. Miller, John K. Train, III, Atlanta, Ga., for appellant Citizens & Southern Nat. Bank.
E. Smythe Gambrell, Charles A. Moye, Jr., James H. Bratton, Jr., Edward W. Killorin, Gambrell, Russell, Moye & Killorin, Theodore M. Forbes, Jr., J. Arthur Mozley, Atlanta, Ga., for appellees.
Before GEWIN and THORNBERRY, Circuit Judges, and ELLIOTT, District judge.
ELLIOTT, District Judge:
These two actions1 were brought by Appellees (Plaintiffs below) to have declared unlawful Appellant Comptroller‘s 1963 Ruling No. 7110 and to enjoin Appellant Citizens and Southern National Bank‘s insurance agent and agency activities in Georgia cities of over 5,000 population. The individual Appellees are duly licensed independent Georgia insurance agents. The National Association of Insurance Agents, Inc. is an incorporated professional association of approximately 35,000 independent insurance agencies, which includes approximately 150,000 licensed independent insurance agents located throughout the United States. The Georigia Association of Independent Insurance Agents, Inc. is an incorporated professional association of approximately 3,000 licensed independent Georgia insurance agents. The individual plaintiffs and the agent members of the two associations above named engage in their licensed profession for a livelihood and all of them have a substantial interest and investment in their profession in terms of time, money and effort. A considerable portion of the insurance agency business of the individual plaintiffs and of the agent members of the two associations is devoted to the sale and writting as agent of various forms of automobile and home insurance. The individual plaintiffs sue individually and on behalf of all similarly situated licensed independant insurance agents in the State of Georgia and the Associations sue individually and as the representatives of their agent members.
Two provisions of the National Bank Act (
In this statutory setting James J. Saxon (the original defendant below in Case No. 25050)2 was secretary of an Advisory Committee appointed by the United States Senate in 1956 to make a study of the national banking laws and to make suggestions concerning revisions. He and the Advisory Committee drafted and recommended passage of legislation which would have allowed national banks in cities of more than 5,000 population to act as insurance agents if state chartered banks could do so under State law. This legislation was proposed in Congress at the Financial Institutions Act of 1957. After consideration and debate by the Congress this legislative proposal as drafted and recommended by Mr. Saxon and the Committee of which he was a member was rejected by Congress.3--1
In 1961 Mr. Saxon became Comptroller of the Currency and in 1962 Comptroller Saxon created a “National Advisory Committe on Banking Regulatory Policies and Practices“, which committee was composed entirely of persons affiliated with the banking business. Comptroller Saxon asked this committee to make suggestions and recommendations to him for changes in the laws, policies and regulations affecting national banks. In due course Mr. Saxon‘s Advisory Committee recommended with regard to the insurance agency matter that “appropriate legislation should be enacted expressly to permit any National Bank to act as broker or agent in the writing of * * * insurance issued in connection with a loan by the bank, and to participate in premium experience refunds. * * *”4 Instead of asking Congress for the “appropriate legislation” recommended by the committee, Comptroller Saxon in 1963 simply converted that recommendation into an administrative ruling, that being Ruling No. 7110, which is the subject of this inquiry, the full text of which provides:
“Incidental to the powers vested in them under
This ruling was not limited in scope to cities of 5,000 population or less and purported to authorize every national bank, regardless of where located, to enter the insurance agency field and to compete with Appellees and other insurance agents.
In 1964 by an exchange of letters Appellant C & S Bank requested and received Comptroller Saxon‘s specific approval of the Bank‘s entry “into the insurance agency business“, and in 1965 the Bank in its Atlanta offices began selling to borrowers broad forms of automobile, home, casualty and liability insurance, and the program was subsequently extended to its national bank offices in the cities of Athens, Augusta, Macon, Savannah and Valdosta, each of which has a population in excess of 5,000.
To protect their business from what was alleged to be unlawful encroachment by the bank, Appellees brought suit against the Bank, federal jurisdiction being based upon
After overruling Appellants’ motion to dismiss (260 F.Supp. 802), the District Court granted Appellees’ motion for summary judgment (268 F.Supp. 236) And subsequently entered judgments declaring Comptroller Saxon‘s Ruling No. 7110 unlawful and in excess of statutory authority and declaring unlawful the Bank‘s insurance agent, and agency activities in cities of more than 5,000 population.
We affirm the judgments of the District Court.
Two questions are presented for consideration:
(1) Does
Appellants contend that authority for national banks located in cities of over 5,000 population to act as insurance agents may be inferred from the general provisions contained in
Pertinent to consideration of these statutory provisions, we take note of the fact that prior to the 1916 enactment of
“National banks have no express or implied power to write fire, cyclone, liability, or other kinds of insurance.
“* * * writing insurance on commission is in no sense incidental to any of the enumerated powers of a national bank.
“Inasmuch, therefore, as this class of business does not come within either the expressed or implied powers of national banks, an administrative board or officer cannot authorize it. Any such extension of the powers of national banks must be left to the consideration of Congress.” 2 Fed. Reserve Bull. 73, 74 (1916).
Immediately prior to the enactment of
“National banks are not given either expressly nor by necessary implication the power to act as agents for insurance companies. * * *
“It is certainly clear that the Comptroller of the Currency has no right to authorize or permit a national bank to exercise powers not conferred upon it by law.” 53 Cong.Rec. 11001 (1916).
The Comptroller then recommended to Congress that it grant insurance agency power to national banks located in small towns, submitting to Congress a draft of a proposed amendment to the national Bank Act which Congress enacted and is now
In interpreting the meaning of one provision of an act it is proper that all other provisions in pari materia should also be considered. So, in construing the general authority contained in
In Continental Casualty Company v. United States, 314 U.S. 527, 62 S.Ct. 393, 86 L.Ed. 426 (1942), the court stated:
“a ‘legislative affimrative description’ (of certain powers) implies denial of the non-described powers.”
This rule was elaborated upon somewhat in Service Life Insurance Company v. United States, 293 F.2d 72 (8 Cir. 1961), where it was said that:
“As an adjunct to the rule that the specific takes precedence over the general, it is further established as a principle of statutory donstruction that ‘when a statute limits a thing to be done ina particular mode, it includes the negative of any other mode.‘”
Since Congress dealt specifically with the insurance agency power in
There is ample precedent for the conclusion that a power which has been withheld or denied by Congress cannot be found to exist as an “incidental” and “necessary” power and that principle had been applied several times to the National Bank Act. First National Bank in St. Louis v. State of Missouri, 263 U.S. 640, 44 S.Ct. 213, 68 L.Ed. 486 (1924), (establishment of branch banks); Baltimore & Ohio Ry. Co. v. Smith, 56 F.2d 799 (3 Cir. 1932), (pledge of assets).
Although the cases before us seem to represent the first instance in which the issue of whether national banks have insurance agency powers in cities of over 5,000 population has been directly presented, there have been other cases in which this question has been raised collaterally or incidentally, in which cases the courts have concluded that the banks’ power is limited as we here find it to be. The most recent of such cases appears to be Commissioner of Internal Revenue v. Morris Trust, 367 F.2d 794 (4 Cir. 1966), which involved the merger of a state bank into a national bank. At issue was the tax treatment of a preliminary step in the merger by which the state bank divested itself through a “spin-off” of its insurance department. An important question in the case was whether there was a sound business reason (other than tax avoidance) for the spin-off. The Court said:
“For many years, American (the state bank) had operated an insurance department. This was a substantial impediment to the accomplishment of the merger, for a national bank is prohibited from operating an insurance department except in towns having a population of not more than 5,000 inhabitants.3
This Court of Appeals’ decision upheld the ruling of the Tax Court below that:
“The divestment of the insurance department was necessary because of the legal requirement that a national bank, which the consolidated bank was to be, would not be permitted to engage in the insurance business in a city the size of Charlotte.” 42 T.C. 779, 785 (1964).
In Washington Agency, Inc. v. Forbes, 309 Mich. 683, 16 N.W.2d 121 (1944), the Michigan Supreme Court, in deciding a case which involved the relationship by a bank and an insurance agency commented:
“Congress views with none too great favor a national bank acting as insurance agent, forbidding it in places of 5,000 or more population.”
The Massachusetts Supreme Court in Dresser v. Traders’ National Bank, 165 Mass. 120, 42 N.E. 567 (1896), held ultra vires a contract whereby a national bank agreed to act as a sub-agent for an insurance agent. It is to be noted that this case arose before enactment of
If there be any doubt as to the meaning of the statute it is our function to construe the language of the statute so as to give effect to the intent of Congress, and an examination of the legislative history of
“National banks are not given either expressly nor by necessary implication the power to act as agents for insurance companies. * * *
“It is certainly clear that the Comptroller of the Currency has no right to authorize or permit a national bank to exercise powers not conferred upon it by law.
“My investigations lead me respectfully to recommend to Congress an amendment to the national bank act by which national banks located in villages and towns having a population of not exceeding 3,000 may be permitted to act as agents for insurance companies in the placing of policies of insurance-- fire, life, ect. * * *
“It seems desirable from the standpoint of public policy and banking efficiency that this authoirty should be limited to banks in small communities. This additional income will strengthen them and increase their ability to make a fair return to their shareholders, while the new business is not likely to assume such proportions as to distract the officers of the bank from the principal business of banking. Furthermore in many small places the amount of insurance policies written or mortgages to be placed on commission is not sufficient to take up the entire time of an insurance broker, and the bank is not therefore likely to trespass upon outside business naturally belonging to others.
“I think it would be unwise and therefore undesirable to confer this privilege generally upon banks in large cities where the legitimate business of banking affords ample scope for the energies of trained and expert bankers. I think it would be unfortunate if any movement should be made in the direction of placing the banks of the country in the category of department stores. The business is one requiring training, skill, and application, and I think that the profession of banking would suffer if there should be a departure from the principles which should govern and have heretofore governed.
“I enclose with this a draft of a proposed amendment to the national-bank act designed to empower national banks located in towns of not over 3,000 population, under such regulations and restrictions as may from time to time be approved and promulgated by the Comptroller of the Currency, to act as agents for the placing of insurance policies. * * *‘I respectfully recommend and urge the adoption of such an amendment for the reasons I have given.
“I am today writing a letter similar to this to Congressman Glass, chairman of the Banking and Currency Committee of the House of Representatives.” 53 Cong.Rec. 11001 (1916).5
It thus appears to be clear history the contemporaneous legislative history of
In the briefs filed by counsel there is set forth a complete legislative history with respect to subsequent legislation dealing with national banks, particularly the 1933 Glass-Steagall Banking Act (H.R. 5661, 73rd Cong., 1st Sess., 1933), and the proposed Financial Institutions Act of 1957 (S. 1451, 85th Cong., 1st Sess., 1957), and we are impressed that the Congress has never considered that national banks had insurance agency powers except as limited by
Appellants insist, however, that even if the Comptroller‘s order was unauthorized by the statute and the bank‘s insurance activity therefore illegal, the plaintiffs below had no standing to bring these actions. In urging this view Appellants rely on a line of decision concerning public power Authorities and Cooperatives, of which Alabama Power Company v. Ickes, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374 (1938), and Tennessee Electric Power Company v. Tennessee Valley Authority, 306 U.S. 118, 59 S.Ct. 366, 83 L.Ed. 543 (1939), are typical.
We regard these cases as being clearly distinguishable as they involved federally financed competition by a new competitor who was lawfully authorized to compete with the power companies. That is not the situation in the case before us. Here we have new competition that is in and of itself unlawful because, as we have seen, a national bank cannot legally act as an insurance agent ina city of more than 5,000 population. We find no fault with Appellants’ argument that the plaintiffs in the court below, who are licensed professional insurance agents, have no legal right to be free from lawful competition by other licensed agents who are lawfully and properly empowered to engage in the insurance business, but they do have a legal right to be protected from unlawful competition by national banks.
In recent years a number of the Comptroller‘s rulings and the activity purportedly authorized by them have been challenged in the courts, and in each instance the Comptroller has contended that the plaintiffs had no standing to bring the suits, with results as hereafter indicated.
For many years the Federal Reserve Board and the office of the Comptroller of the Currency had construed the National Bank Act as prohibiting national banks from underwriting local government securities not backed by the taxing power. In 1963 Comptroller Saxon reversed the position adopted by his predecessors and ruled that
“The gravamen of the plaintiffs’ claim for relief is that they are being subjected to competition by illegal activities of national banks. While no one may maintain a suit to restrain lawful competition merely because he is suffering an economic detriment, nevertheless, a person has a standing to complain against illegal competition, or specifically, against competition on the part of a person who lacks the legal right or power to pursue the competitive activities.” 261 F.Supp. at 248.
The Court held the Comptroller‘s ruling unlawful.
In an even more recent case involving unlawful national bank competition and the Comptroller of the Currency, Investment Company Institute v. Camp, 274 F.Supp. 624 (D.C.C., 1967), a suit was brought by several “open-end” investment companies (mutual funds) and their national trade association, The Investment Company Institute, to have declared unlawful another ruling issued by Comptroller Saxon in 1963 by which he purported to authorize national banks to establish and operate “collective investment funds“. Here again the Comptroller raised the issue of standing to sue, claiming that the plaintiffs had no legal right to object to the new national bank competition which was brought about by his ruling. The Court held that the plaintiffs had standing to complain against unlawful competition and that the public power and urban renewal cases relied upon by the Comptroller were not in point. The Court held the Comptroller‘s ruling unlawful.
In both of the cases immediately above cited the plaintiffs predicated their procedural right to judicial review upon the declaratory judgment and injunctive provisions of Section 10 of the Administrative Procedure Act as is done in this case, there being no specific judicial review provision in the National Bank Act.
These two district court decisions are in harmony with the decision of the Supreme Court in Frost v. Corporation Commission, 278 U.S. 515, 49 S.Ct. 235, 73 L.Ed. 483 (1929), in which it was held that one engaged in a licensed business has standing to sue to enjoin unlawful competition.
Without dwelling on the point further, it may be observed that the arguments advanced by Appellants against Appellees’ standing to sue appear to be the same arguments that have been rejected in a large number of other “unlawful competition” cases in which the Comptroller and the national banks have been involved.6
A review of the cases footnoted shows that in at least four different areas of purported Comptroller action under the National Bank Act the federal courts have rejected the Comptroller‘s argument that competitors lack standing to challenge his actions, these areas being: (a) unlawful approval of branch banks; (b) unlawful chartering of new national banks; (c) unlawful approval of securities and underwriting; and (d) unlawful approval of “commingled investment accounts“. In most of the cases footnoted the federal courts have ruled that competitors occupying a position comparable to that of the Appellees here had standing to challenge both the unlawful action by the Comptroller and the unlawful competition by the national banks.
Plaintiffs’ standing to sue is also supported by the fact that the legislative history of the National Bank Act manifests a Congressional intent to protect insurance agents from an invasion of their insurance agency business by national banks in cities of over 5,000 population. Indeed, we can conceive of no reason why Congress would have limited such activity to communities of less than 5,000 population if it were not for the specific purpose of protecting those in the position of the Appellees in these cases. The limitation was imposed so that national banks in larger cities would not be “likely to trespass upon outside business naturally belonging to others“. 53 Cong.Rec. 11001 (1916). A strong Congressional concern for the protection of insurance agents against unwarranted competition by national banks is again reflected in the legislative histories of the 1933 and 1957 attempts to overhaul the National Bank Act. In 1933 Congress recognized that national bank competition with insurance agents was “unfair competition” and that “it certainly is unfair to the man in the insurance business“. 77 Cong.Rec. 4048. And in 1957 one of the stated purposes for the refusal of Congress to expand the insurance agency power of national banks was the Congressional desire to “consider the independent insurance businessmen, so that we don‘t do something that would be harmful to them“.7
So, in addition to their legal right to protect themselves from unlawful competition, the insurance agents who instituted these actions had a “statutory aid to standing“. See Hardin v. Kentucky Utilities Company, 390 U.S. 1, 88 S.Ct. 651, 19 L.Ed.2d 787 (1968).
Nothing said here conflicts with this Court‘s previous pronouncements in the public power cases, of which Rural Electrification Administration v. Central Louisiana Electric Company, 354 F.2d 859 (5 Cir., 1966), is typical. In that case it was said:
“Under Section 10(a) of the Administrative Procedure Act,
5 U.S.C.A. 1009 , it seems to be settled in a case of this kind that if Congress has failed to give an appellant standing to sue by express or implied provisions of statute * * * mere economic competition made possible by governmental action (even if allegedly illegal) does not give standing to sue to restrain such action.”
That case was not a case of this kind and this case is not a case of that kind. The cases here decided involved neither federally sponsored power projects nor federally sponsored urban renewal projects. Neither do they involve the spending of federal funds or lawful competition. Instead, these cases involve unlawful competition by a national bank from which the power to compete has been withheld by Congress. Moreover, the plaintiffs in these cases had a “statutory aid to standing“.
Viewing the matter as we do, we agree that consideration of secondary factual issues was unnecessary and the grant of summary judgment was proper.
Affirmed.
On Petition for Rehearing En Banc
Before GEWIN and THORNBERRY, Circuit Judges, and ELLIOTT, District Judge.
PER CURIAM:
The Petition for Rehearing is denied and no member of this panel nor Judge in regular active service on the Court having requested that the Court be polled on rehearing en banc, (Ruld 35 Federal Rules of Appellate Procedure; Local Fifth Circuit Rule 12) the Petition for Rehearing En Banc is denied.
THORNBERRY, Circuit Judge (concurring specially):
Inasmuch as I agree with the majority that the insurance agents have standing to sue, it is with some reluctance that I venture my own thoughts on what the Supreme Court has called “a complicated specialty of federal jurisdiction.” See United States ex rel. Chapman v. Federal Power Commission, 1953, 345 U.S. 153, 156, 73 S.Ct. 609, 612, 97 L.Ed. 918. Nevertheless, I feel that I should do so because I am not persuaded that appellees have a statutory aid to standing and am troubled by Alabama Power Co. v. Ickes, supra, and Tennessee Electric Power Co. v. Tennessee Valley Authority, supra, two very difficult cases.
If it were clear that one of the purposes of
I understand the majority to say that cases like Alabama Power, Tennessee Electric, and Rural Electrification Administration v. Central Louisiana Electric Co., 5th Cir. 1966, 354 F.2d 859 involved federally financed competition by a new competitor lawfully authorized to compete with the power companies whereas the insurance agents here are challenging new competition that is in itself unlawful. This same distinction was perceived by Judge Holtzoff in Baker, Watts & Co. v. Saxon, supra:
The line of cases on which the Government relies and that are well represented by Alabama Power Co. v. Ickes, 302 U.S. 464, 58 S.Ct. 300, 82 L.Ed. 374, and other similar decisions, are distinguishable. Their progenitor is a doctrine enunciated in Commonwealth of Massachusetts v. Mellon, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078, to the effect that a person may not maintain a suit to enjoin the use of Government funds, even if such use is claimed to be in violation of law. The fact that the plaintiff is suffering an economic detriment from competition assisted by a loan or grant of Government funds, does not give him a standing to sue. This doctrine is entirely different from the principle that permits one to bring an action to enjoin an illegal activity on the part of a competitor, or to restrain the illegal authorization by the Government of an unlawful competitive undertaking.
261 F.Supp. at 249. Baker, Watts & Co. is more closely in point than the so-called branch-banking cases (see footnote 6 of the majority opinion) because there a non-bank party was given standing to challenge the legality of competition that had been undertaken by national banks with the authorization of the Comptroller. As I see it, the critical point is that the rule of no-standing invoked by the Supreme Court in Tennessee Electric and Alabama Power rests on the philosophy of Frothingham v. Mellon, 1923, 262 U.S. 447, 43 S.Ct. 597, 67 L.Ed. 1078 that not just anyone should have standing to assert the invalidity of a federal program.2-1 To the rule for taxpayer-suits announced in Frothingham, the later cases add that there is a lack of standing even where a plaintiff alleges that as a result of an unlawful federal program he is suffering economic injury from increased, though lawful, competition. The distinguishing factor in the instant case, as in Baker, Watts & Co., is that plaintiffs-appellees allege that as a result of the Comptroller‘s ruling they are suffering economic injury from unlawful competition with a national bank. Setting the administrative decision to one side, the essence of this case is an allegation by insurance agents that a national bank is selling insurance in violation of the National Bank Act. More is involved than the bare allegation that a certain federal program or federal administrative decision is unconstitutional or in violation of statute. Since more is involved, Alabama Power and Tennessee Electric are not controlling.3
I would be the first to concede that the distinction drawn between Alabama Power and the instant case is a fine one and not altogether satisfactory, but I believe it to be valid. Any rule of no-standing, whether it be the one enunciated in Frothingham, Alabama Power, or some other case, must stem from the conclusion that the particular plaintiff does not present a dispute in a concrete adversary context and in a form historically viewed as susceptible of judicial resolution. As stated in Flast v. Cohen, 1968, 392 U.S. 83, 88 S.Ct. 1942, 1952-1953.
The “gist of the question of standing” is whether the party seeking relief has “alleged such a personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination of difficult constitutional questions.” Baker v. Carr, 369 U.S. 186, 204, 82 S.Ct. 691, 703, 7 L.Ed.2d 663 (1962). Thus, in terms of Article III limitations on federal court jurisdiction, the question of standing is related only to whether the dispute sought to be adjudicated will be presented in an adversary context and in a form historically viewed as capable of judicial resolution. It is for that reason that the emphasis in standing problems is on whether the party invoking federal court jurisdiction has “a personal stake in the outcome of the controversy,” Baker v. Carr, supra, 369 U.S. at 204, 82 S.Ct. at 703, 7 L.Ed.2d 663, and whether the dispute touches upon “the legal relations of parties having adverse legal interests.” Aetna Life Insurance Co. (of Hartford, Conn.) v. Haworth, supra, 300 U.S. (240) at 241, 57 S.Ct. (461) at 464 (81 L.Ed. 617). In Alabama Power and Tennessee Electric, the Court must have been persuaded that the power companies were not bringing a conventional legal action but were merely attempting to air generalized grievances about the conduct of government or the allocation of power in the federal system. Flast confirms that a plaintiff in this posture has no standing to sue. 88 S.Ct. at 1956.4-1
In the instant case, on the other hand, the insurance agents are face to face in the business world with formidable but allegedly illegal competitors. It is inarguable that they have a sufficient personal stake in the outcome of the controversy to assure concrete adverseness.
As for the merits of the case, I have little to add to what the majority have said. From an economic standpoint, it may be unfortunate that this Court is interfering with the expansion of national banks into the area of credit-related insurance, but the banks should look to Congress, not the Comptroller.