ST. LOUIS COUNTY NATIONAL BANK et al., Appellees, v. MERCANTILE TRUST COMPANY NATIONAL ASSOCIATION and James E. Smith, Comptroller of the Currency of the United States, Appellants, 548 F.2d 716

STEPHENSON, Circuit Judge. Mercantile Trust Company National Association (Mercantile) appeals from the district court’s judgment which enjoined Mercantile from any further operation of its trust office in Clayton, Missouri. The two issues raised on this appeal are: (1) whether Mercantile’s trust office is a branch within the meaning of 12 U.S.C. § 36, and (2) whether Mercantile’s trust office constitutes a violation of 12 U.S.C. § 92a. We affirm. Mercantile is a national banking association whose principal office is located in St. Louis, Missouri.

Mercantile is engaged in the banking business and operates a trust department. In February of 1970 Mercantile opened a trust office in Clayton, Missouri, a suburb of St. Louis. Prior to opening the Clayton office, Mercantile received notice from the Comptroller of the Currency of the United States approving the establishment of the trust office as long as deposits were not accepted, loans made, or checks paid. According to the Comptroller, if deposits were accepted, loans made, or checks paid, then the trust office would fall within the definition of a branch as set forth in 12 U.S.C. § 36(

f) and a certificate of approval from the Comptroller’s office would be needed. On the date that Mercantile opened its trust office Mercantile issued a press release stating that the trust office would provide added convenience for existing as well as future customers. Five full-time employees of Mercantile staffed the Clayton office. From the spring of 1970 until March of 1973 the overall administration of approximately 500 living and testamentary trusts, managing agency and safekeeping accounts were handled by a trust administrative officer at the trust office.

During this period no checks were paid, no money was lent, and no deposits were received at the Clayton trust office. The Clayton office was not a separate corporation but rather an office operated by Mercantile as part of its organization. ■ This action was commenced by St. Louis County National Bank for a declaratory judgment that Mercantile’s Clayton trust office was illegal. An injunction was also sought against Mercantile’s continued use of the Clayton office. James E. Smith, the then-Comptroller of the Currency of the United States, was joined with Mercantile as a defendant.

Clayton Trust Company and William R. Kostman, Director of the Division of Finance for the state of Missouri, were permitted to intervene as plaintiffs. One June 18, 1976, the district court enjoined and restrained Mercantile from further operating its branch trust office. On August 2, 1976, our court granted Mercantile’s application to suspend injunction pending appeal until further order of the court. After a hearing on August 5, 1976, our court ordered that the injunction be stayed until further order of the court.

Appellant Mercantile’s first contention is that its Clayton trust office does not constitute a branch as defined by 12 U.S.C. § 36(f). The question concerning whether the trust office is a branch is important since a branch may be established only when, where, and how state law would authorize a state bank to establish and operate such a branch. 12 U.S.C. § 36(c); First Nat’l Bank v. Dickinson, 396 U.S. 122, 130, 90 S.Ct. 337, 24 L.Ed.2d 312 (1969); First Nat’l Bank of Logan v. Walker Bank & Trust Co., 385 U.S. 252, 87 S.Ct. 492, 17 L.Ed.2d 343 (1966).

In this case it is clear that a state chartered bank would be unable to operate the same type of facility as Mercantile’s Clayton trust office. See St. Louis Union Trust Co. v. Pemberton, 494 S.W.2d 408 (Mo.App.1973). Therefore, if the Clayton office is a branch under 12 U.S.C. § 36(f), it would be illegal under 12 U.S.C. § 36(c).

Section 36(

f) defines a branch as follows: 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 * * * at which deposits are received, or checks paid, or money lent. Appellant Mercantile’s argument simply stated is that since no deposits are received, or checks paid, or money lent at the Clayton trust office, it is not a branch. Recent cases interpreting

section 36(

f) have cautioned, however, about giving the definition of branch a too restrictive meaning. Chief Justice Burger has observed for the Supreme Court that: [W]hile Congress has absolute authority over national banks, the federal statute has incorporated by reference the limitations which state law places on branch banking activities by state banks.

Congress has deliberately settled upon a policy intended to foster “competitive equality.” * * * State law has been utilized by Congress to provide certain guidelines to implement its legislative policy. ****** [The] Act reflects the congressional concern that neither system have advantages over the other in the use of branch banking. ****** The mechanism of referring to state law is simply one designed to implement that congressional intent and build into the federal statute a self-executing provision to accommodate to changes in state regulation. ****** In short, the definition of “branch” in § 36(

f) must not be given a restrictive meaning which would frustrate the congressional intent this Court found to be plain in Walker Bank, supra. ****** Because the purpose of the statute is to maintain competitive equality, it is relevant in construing “branch” to consider, not merely the contractual rights and liabilities created by the transaction, but all those aspects of the transaction that might give the bank an advantage in its competition for customers. First Nat’l Bank v. Dickinson, supra, 396 U.S. at 131, 133, 134, 136-37, 90 S.Ct. at 342, 343, 345 (citations and footnote omitted).

In this circuit we have likewise recognized that “The preservation of competitive equality is the pervasive underlying principle of the McFadden Act.” Nebraskans for Independent Banking, Inc. v. Omaha Nat’l Bank, 530 F.2d 755, 759 (8th Cir.) (citation omitted), vacated and remanded for reconsideration in light of subsequent state legislation, 426 U.S. 310, 96 S.Ct. 2616, 48 L.Ed.2d 658 (1976).

Further, we have stated “It is settled that the McFadden Act, which, as amended, is the controlling statute here, was ‘intended to place national and state banks on a basis of “competitive equality” insofar as branch banking was concerned.’ ” Driscoll v. Northwestern Nat’l Bank, 484 F.2d 173, 175 (8th Cir. 1973) (citations omitted). Similarly, the Tenth Circuit has stated: [Section 36(f)] declares that the term “branch” shall include any branch place of business where deposits are received or checks paid, or money lent.

In this regard the Supreme Court in Dickinson commented as follows: Although the definition may not be a model of precision, in part due to its circular aspect, it defines the minimum content of the term “branch”; by use of the word “include” the definition suggests a calculated indefiniteness with respect to the outer limits of the term. However, the term “branch bank” at the very least includes any place for receiving deposits or paying checks or lending money apart from the chartered premises; it may include more.

In line with the foregoing, then, accepting deposits, or paying checks, or lending money are not the only indicia of branch banking. The typical bank of the present time provides many other services. State of Colorado ex rel. State Banking Board v. First Nat’l Bank of Fort Collins, 540 F.2d 497, 499 (10th Cir. 1976). Likewise, the District of Columbia Circuit has recently observed: After the Act’s passage, Representative McFadden placed in the Congressional Record a section-by-section analysis of the statute. In this analysis he described the scope of

section 36(f)’s definition as follows: [Section 36(f)] defines the term “branch.” Any place outside of or away from the main office where the bank carries on its business of receiving deposits, paying checks, lending money, or transacting any business carried on at the main office, is a branch if it is legally established under the provisions of this act. ****** Clearly, Congress intended to include within its definition not only the typical brick-and-mortar branch bank, but also lesser bank agencies which provide only some of the services available at a traditional branch, i. e., agencies which accept deposits, cash checks, lend money, or transact any business generally carried on at the main office.

Independent Bankers Ass’n of America v. Smith, 534 F.2d 921, 931-32 (D.C. Cir. 1976) (footnote omitted). In light of the legislative history of

section 36(

f) and recent case

interpretation of that section, we conclude that the three routine banking functions delineated in

section 36(

f) are not the only indicia of branch banking. In our view each case must be considered on its own facts to determine if a branch exists. North Davis Bank v. First Nat’l Bank, 457 F.2d 820, 824 (10th Cir. 1972). Turning to the record before us we note that Mercantile’s main office in St. Louis conducts a substantial amount of trust business.

The activities performed by Mercantile at its Clayton office are summarized as follows: (1) consults with customers and prospective customers about the trust services offered by Mercantile; (2) discusses accounts with principals and beneficiaries of existing trusts; (3) reviews with customers and their representatives proposed trust instruments; (4) provides a place for persons to execute wills and trusts which named Mercantile as fiduciary; (5) reviews wills on file for present customers; and (6) researches estate and trust problems and discusses such problems with customers and their representatives.

It is apparent that these enumerated activities are also carried on routinely at Mercantile’s main office. This alone would clearly bring Mercantile’s Clayton office within the branch definition as declared by Representative McFadden’s own analysis of

section 36(

f) at the time of its adoption. See State of Ill. ex rel. Lignoul v. Continental Ill. Nat’l Bank and Trust Co., 536 F.2d 176, 178-79 (7th Cir. 1976). Furthermore, the permanent staff’s duties are to obtain new customers for the trust department of Mercantile. The service offered increase the convenience to Mercantile’s customers. In light of these factors, we hold that the establishment of such a permanent place of business as undertaken by Mercantile is a branch as contemplated by

section 36(f). It should be emphasized that this holding is based on our

interpretation of the language of

section 36(

f) as explained by its own author’s analysis, its construction given by other courts, and the purpose for its Congressional enactment. We do not rely on the state of Missouri’s definition of branch in determining the content of branch in

section 36(f). Our holding is reinforced by 12 U.S.C. § 92a.

Section 92a(

a) reads as follows: (

a) The Comptroller of the Currency shall be authorized and empowered to grant by special permit to national banks applying therefor, when not in contravention of State or local law, the right to act as trustee, executor, administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates of lunatics, or in any other fiduciary capacity in which State banks, trust companies, or other corporations which come into competition with national banks are permitted to act under the laws of the State in which the national bank is located.

Section 92a(

b) reads as follows: (

b) Whenever the laws of such State authorize or permit the exercise of any or all of the foregoing powers by State banks, trust companies, or other corporations which compete with national banks, the granting to and the exercise of such powers by national banks shall not be deemed to be in contravention of State or local law within the meaning of this section. The policy of competitive equality was incorporated into

section 92a. Blaney v. Florida Nat’l Bank, 357 F.2d 27, 30 (5th Cir. 1966); American Trust Co. v. South Carolina State Board of Bank Control, 381 F.Supp. 313, 323 (D.S.C.1974); New Hampshire Bankers Ass’n v. Nelson, 336 F.Supp. 1330, 1334 (D.N.H.), aff’d, 460 F.2d 307 (1st Cir.), cert. denied, 409 U.S. 1001, 93 S.Ct. 320, 34 L.Ed.2d 262 (1972). It is equally clear that a state bank in Missouri would be prohibited from operating more than one place of business for the exercise of fiduciary powers. Mo.Ann.Stat. §§ 362.105 subd. 1(1) and 362.107 subd. 2(5) (Vernon); St. Louis Union Trust Co. v. Pemberton, supra.

Therefore, to allow Mercantile to accomplish what a state bank could not would frustrate the purpose of

section 92a. The First Circuit, in construing

section 92a, stated: Implicit in the state’s power to proscribe national banks from acting as executors, we think, is the power to permit them to act as executors while precluding them, in.a nondiscriminatory way, from advertising that fact. New Hampshire Bankers Ass’n v. Nelson, supra, 460 F.2d at 308. Similarly, we conclude that the state’s power to nondiscriminately limit the location where fiduciary powers may be exercised is implicit in the state’s power to proscribe national banks from acting as executors. It follows that Mercantile’s exercise of fiduciary powers at its Clayton trust office is in contravention of state law within the meaning of

section 92a. Affirmed. . The Honorable John K. Regan, United States District Judge for the Eastern District of Missouri. . 12 U.S.C. § 36(

c) provides in relevant part: (

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. .

Mercantile held nearly two billion dollars of fiduciary assets as of December 31, 1973.