FIRST NATIONAL BANK OF SMITHFIELD, NORTH CAROLINA, Appellee, v. James J. SAXON, Comptroller of the Currency of the United States, Appellant; FIRST NATIONAL BANK OF SMITHFIELD, NORTH CAROLINA, Appellee, v. FIRST NATIONAL BANK OF EASTERN NORTH CAROLINA, Appellant, 352 F.2d 267

ALBERT V. BRYAN, Circuit Judge: The Comptroller of the Currency’s approval of the establishment of a branch of a National bank is ex facie invalid, the District Court has held, if it is issued by the Comptroller without a hearing conforming to the requirements of the Administrative Procedure Act. In this view we think the Court was mistaken. Throughout it must be remembered that we are not deciding whether it would be advisable or more equitable for the Comptroller to grant a hearing. We are deciding only that the law does not require it.

This is not to say that there may not be judicial review of the Comptroller’s action. We hold, too, that the bank’s competitors-have standing to seek the review, not because of the potential sharpening of competition, but because they have an immediate concern, apart from the public generally, to prevent an approval contrary to law. Thus they are “interested” within the purpose of § 1004(b), APA. The First National Bank of Eastern North Carolina applied to the Comptroller of the Currency on July 11, 1963 for authorization to establish a branch in the Town of Smithfield, North Carolina.

The applicant has its principal office at New River, North Carolina and eleven branches in the east end of the State. In a field investigation made by the Comptroller preparatory to consideration of Eastern’s request, an examiner called upon the First National Bank of Smith-field, North Carolina. Thereupon the latter sought and obtained a conference with the Comptroller’s office, on August 5, 1963, where its representatives pressed objection to the advent of a new bank in town. Eastern was not present or heard at that time.

Approval was given the Eastern application by the Comptroller on August 19, 1963, without a formal statement of fact findings, conclusions of law or opinion. However, no certificate of authority then issued. The Bank of Smith-' field brought this action on September 9, 1963 to have the Comptroller’s determination declared illegal and its effectuation enjoined.

The bank denied any need or necessity for Eastern’s branch, predicted irreparable damage to follow from the permitted entry of another bank in the Town and averred that the approval was illegal because arbitrary, , capricious and contravening the Comptroller’s own regulations. In limine the complaint charged the Comptroller’s procedure violative of the Administrative Procedure Act and abridging the rights of the Smithfield Bank without Constitutional due process of law.

More specifically in this regard, it alleged that the Comptroller’s ruling was an adjudication under § 1004, APA, which could not be made without notice and a full-dress hearing. This primary position the District Court upheld. The Banking Act in pertinent part, 12 U.S.C. § 36(c) (1964 Ed.) , provides: “(

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 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 specifically 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 North Carolina statute, to be read under the reference in the Banking Act, is G.S. § 53-62.

It permits the establishment of bank branches with the approval of the Commissioner of Banking which “may be given or withheld [by him] in his discretion”. In this judgment he is required to consider stated relevant factors. Assuming that the Comptroller is an “agency”, that the approval by the Comptroller is a “license” and that the consideration by him of the application is an “adjudication”, all within the meaning of § 1001, still no requirement is found in the APA of the hearing now claimed by the Bank of Smithfield. The provision on which appellee relies is § 1004, but that

section compels an agency hearing only when the “adjudication [is] required by statute to be determined on the record after opportunity for an agency hearing,” and there is no such compulsion here. The District Judge thought that the implication of the APA was to command an adversary hearing before the Comptroller. This inference, we think, is unwarranted. Not only is statutory foundation wanting for it, but the legislative history of the APA discloses that Congress expressly disavowed any" intent that the .Act demand a hearing except where, already required by some other statute.

See: Statement of the Chairman of the Drafting Subcommittee, 92 Cong.Rec. 5651, 5655; Sen.Rept. No. 752, 79th Cong., 1st Sess., pp. 6, 7, 16 (1945); H. Rept. No. 1980, 79th Cong., 2d Sess., pp. 10, 18, 26 (1946). For compilation see Sen.Doc. No. 298, 79th Cong., 2d Sess., pp. 192, 193, 202, 244, 252, 260, 359, 370 (1946). Furthermore, the uniform administrative practice of the Comptroller for a hundred years has sanctioned his present course. True, his own regulations had permitted an adversary hearing, but resort. to these rules was entirely at his option. 12 C.F.R. § 4.8(d), (e) (1963).

It is stipulated that when Eastern’s application came before the Comptroller, these regulations were in suspense pending revision — they had been rescinded on February 20, 1963, 12 C.F.R.

Part 4 (Cum.Supp.1965), and were not republished until June 9, 1964, 12 C.F.R. § 4.1 et seq. (Cum.Supp.1965). The practice in the Comptroller’s office has not gone unquestioned, but it has never been disapproved. Northwest Bancorporation v. Board of Governors, 303 F.2d 832, 843 (8 Cir. 1962), citing Davis, Administrative Law Treatise, § 4.04, pp. 247-248. This strongly argues its validity. Zemel v. Rusk, 381 U.S. 1, 85 S.Ct. 1271, 14 L.Ed.2d 179 (May 3, 1965); Paragon Jewel Coal Co. v. Commissioner, 380 U.S. 624, 85 S.Ct. 1207, 14 L.Ed.2d 116 (April 28, 1965).

Procedural due process is not of- . fended by the Comptroller’s practice. The absence of a hearing provision in the Banking Act raises no Constitutional question, for the omission was within the power of Congress. Bridgeport Fed. Sav. & Loan Ass’n v. Federal Home Loan Bank Bd., 307 F.2d 580, 581 (3 Cir. 1962), cert. den., 371 U.S. 950, 83 S.Ct. 504, 9 L.Ed.2d 499. However, all apprehension is dissipated by the APA’s grant in § 1009 of a review of the Comptroller’s decision in the District Court to any party in interest. Lichter v. United States, 334 U.S. 742, 791, 68 S.Ct. 1294, 92 L.Ed. 1694 (1948); cf.

Federal Communications Comm. v. WJR, 337 U.S. 265, 274, 69 S.Ct. 1097, 93 L.Ed. 1353 (1949).

Abundant authority, with which we agree, holds that the Comptroller’s determination in the present area is not immunized from review by the exemption in the preface of § 1009, APA, reading, “Except so far as * * * agency action is by law committed to agency discretion.” Any discretion vested in the Comptroller in passing upon applications for approval of bank branches is not the type of discretion to which action has been “committed by law” but is rather one of the character expressly made reviewable by § 1009(e) (1). 4 Davis, Administrative Law Treatise, §.28.16; Community National Bank of Pontiac v.

Saxon, 310 F.2d 224 (6 Cir. 1962); Whitney Nat. Bank v. Bank of New Orleans & Trust Co., 379 U.S. 411, 428, 85 S.Ct. 551, 13 L.Ed.2d 386 (1965) (dissenting opinion of Justice Douglas); Commercial Security Bank v. Saxon, 236 F.Supp. 457 (D.D.C.1964). Protestant, Smithfield Bank, also contends that the Comptroller’s approval is contingent upon his compliance with the inquiries and ascertainments required of the State Commissioner of Banks by the North Carolina statute, G.S. § 53-62 supra.

It stipulates: that no branch shall be permitted save upon the approval of the Commissioner of Banks, which “may be given or withheld by * * * [him] in his discretion”; that “in exercising such discretion, [he] shall take into account, but not by way of limitation, such factors as the financial history and condition of the applicant bank, * * its future earnings prospects, and the general character of its management”; and that the approval shall not be given until the Commissioner shall have “ascertained to his satisfaction (

i) that the establishment of such * * * will meet the needs and promote the convenience of the community to be served by the bank, and (ii) 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 Federal statute, the protestant continues in argument, incorporates all of these requirements and exacts analagous compliance with them by the Comptroller.

For this contention reliance is placed upon the clause in 12 U.S.C. § 36(c), supra, directing that the establishment of a National bank branch be “subject to the restrictions as to location imposed by the law of the State on State banks”. We disagree with the argument. Assuming arguendo that the North Carolina statute does demand as a condition precedent to the approval of a branch, an ascertainment of need and convenience, with discretion in decision nevertheless always retained by the Commissioner, in our judgment this command has not been extended to the Comptroller by the National Banking Act.

That the phrase “restrictions as to location” does not advert to economic factors of need and convenience, but refers exclusively to a geographical determination is quite plain from the legislative history of the Act. In Congress, debate on the bill which became the heart of the current Act, 12 U.S.C. § 36(c), supra, was between advocates of unlimited National bank branching and those favoring its equation with the branch privileges of State banks. Generally the latter had been confined to the municipality of the parent bank, to immediately adjacent areas or to other territorial regions.

By way of compromise the present clause was added with the intent of restricting National branches to the city-wide, county-wide or State-wide delimitation circumscribing the State banks. There was no other reason for the words “subject to the restrictions as to location imposed by the law of the State on State banks.” H.Rept. 83, 69th Cong., 1st Sess., pp. 2, 4-7 (1926); 68 Cong.Rec. 5816; McFadden Act, 44 Stat. 1228; S.Rept. 584, 72d Cong., 1st Sess., pp. 1-6, 11; S.Rept. 77, 73d Cong., 1st Sess., pp. 11, 16-17; 77 Cong.Rec. 3726, 5896; Banking Act of 1933, 48 Stat. 189, 12 U.S.C. § 36(c).

For the court review no evidential record need first be developed before the Comptroller. No such prerequisite is exacted by the APA; plainly it envisions instances where the evidence initially is to be taken in a suit reexamining the agency action. To this end the Act gives the court jurisdiction to “hold unlawful and set aside agency action * * * found to be * * * unwarranted by the facts to the extent that the facts are subject to trial de novo * * § 1009(e) (6). Nothing in the statute precludes the court from discovering the facts for the first time.

The court will not be held to the substantial-evidence rule, that is it will not be limited to the ascertainment of whether, on the record as a whole, there is substantial evidential and factual support for the Comptroller’s action. Cf. 4 Davis, Administrative Law Treatise, supra, § 29.01; Universal Camera Corp. v. N. L. R. B., 340 U.S. 474, 71 S.Ct. 456, 95 L.Ed. 456 (1951). We have said the Comptroller did not act arbitrarily in not allowing a hearing.

However, a necessary consequence of his unilateral procedure is that the facts on which the Comptroller presumably acted should not be given the preferred position accorded by the substantial-evidence rule. The rule would declare them indisputable if some reasonable basis for them may be found in the evidence. Applied here, the plaintiff would be bound by evidence offered in a proceeding in which it was not heard. Hence, there is no place in the review for an opening-presumption of correctness of any fact which it may appear to the Court was adopted by the Comptroller for his decision.

This is the necessary and plain intent of the APA in § 1009(e) (6) just quoted. The Banking Act, 12 U.S.C. § 36(c), in permitting bank branching “with the approval of the Comptroller of the Currency” intended, we think, to allow the Comptroller to consider as a factor in his decision to grant or refuse approval, the public interest, need and necessity, and, subject to court review, to exercise his discretion in determining such interest, need or necessity. Apfel v. Mellon, 59 App.D.C. 94, 33 F.2d 805, 806, 807 (1929), cert. den., 280 U.S. 585, 50 S.Ct. 35, 74 L.Ed. 634 (1929).

On the remand of this case, the plaintiff may adduce evidence demonstrating the impermissibility of the ■ Comptroller’s approval of a branch bank at Smithfield. Testimony to the contrary will be receivable from the Comptroller. The Court will then find the facts. Thereon, it will judge de novo the validity, in fact and in law, of the Comptroller’s final action. The standards by which the Comptroller’s action will be measured are, first, the criteria enumerated in the Banking Act, 12 U.S.C. § 36(

c) supra, viz: whether the establishment of the branch is “authorized to State Banks” and the location conforms to the restriction of State laws. The capital requirements of the statute have, concededly, been met. If after the court has made its fact findings, it then appears that the decision of the Comptroller is dependent upon an exercise of discretion, the Court cannot substitute its discretion for the Comptroller’s. However, it can set aside such a determination if, in the light of the facts found by the Court, it concludes that the Comptroller has abused, exceeded or arbitrarily applied his discretion.

Mastrapasqua v. Shaughnessy, 180 F.2d 999, 1002 (2 Cir. 1950). A competitor qua a competitor is not ineligible to seek the review. Admittedly, threat of competition is not ground for rejection of the application. Tennessee Electric Power Co. v. T. V. A., 306 U.S. 118, 139, 59 S.Ct. 366, 83 L.Ed. 543 (1939). Nevertheless a competitor has an obvious interest sufficient to warrant his insistence that no branch bank be established through procedures or upon grounds not acceptable under the permissive statutes. Alabama Power Co. v.

Ickes, 302 U.S. 464, 484, 58 S.Ct. 300, 82 L.Ed. 374 (1938); Union Savings Bank of Patchogue v. Saxon, 118 U.S.App.D.C. 296, 335 F.2d 718 (1964); National Bank of Detroit v. Wayne Oakland Bank, 252 F.2d 537, 544 (6 Cir. 1958), cert. den., 358 U.S. 830, 79 S.Ct. 50, 3 L.Ed.2d 69; North Arlington Nat. Bank v. Kearny Fed. Sav. & Loan Ass’n, 187 F.2d 564 (3 Cir. 1951), cert. den., 342 U.S. 816, 72 S.Ct. 30, 96 L.Ed. 617.

With the Smithfield Bank we think the Comptroller is obliged to “state and currently publish in the Federal Register” the “general course and method by which [his] functions are channeled and determined” and “publish” or “make available to public inspection all final opinions or orders in the adjudication of cases” (except when confidential) and “all rules”, as directed by the APA, § 1002. This requirement applies to “every agency”.

Save for the temporary suspension, already mentioned during which the approval in suit was sought and obtained, the Comptroller apparently did promulgate and publish advices of his procedures. No complaint can be made that word of his intention to grant the approval did not seasonably reach the Smithfield Bank. The intermission of the rules and regulations did not flaw the Comptroller’s actions during that period, for the only penalty of the statute for the omission is to excuse compliance by outsiders with the requisite procedure.

Furthermore, in view of our conclusion that the Smith-field Bank was not, in any event, entitled to a formal hearing before the Comptroller, the temporary absence of an outline of the procedure before him could not have prejudiced the bank. The District Court overturned the Comptroller’s approval solely because of the absence of an APA hearing before him; it did not resolve the merits of the complaint. Upholding the jurisdiction of the District Court of this suit, we will request the Court to review de novo the action of the Comptroller.

To this end the order annulling and enjoining his issuance of a certificate of approval to the First National Bank of Eastern North Carolina will be vacated and the case remanded, the District Court being empowered to reinstate its injunction pendente lite if it should be so advised. Whitney Nat. Bank v. Bank of New Orleans & Trust Co., supra, 379 U.S. 411, 85 S.Ct. 551. Reversed and remanded. . Banking Act of 1933, 48 Stat. 189, 190, as amended, 12 U.S.C. § 36(c), (e) (1964 Ed.). . -60 Stat. 237 (1946), as amended, 5 U.S.O. § 1001 et seq. (1964 Ed.).

Section reference hereinafter will be to U.S.O. (1964 Ed.). . First Nat. Bank of Smithfield, N. C. v. First Nat. Bank of Eastern, N. C., 232 F. Supp. 725 (E.D.N.C.1964). .

Section 36(e), also, provides: “No branch of any national bank; ssociation shall be established or moved from one location to another without first obtaining the consent and approval of the Comptroller of the Currency.” . But cf. Whitney Nat. Bank v. New Orleans Bank & Trust Co., 379 U.S. 411, 423, 85 S.Ct. 551 (1965) posing the query whether the action of the Comptroller in granting an original charter is more than routine.