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First Bank of Oak Park v. Avenue Bank and Trust Co.

decided: September 12, 1979.

FIRST BANK OF OAK PARK, PLAINTIFF-APPELLANT,
v.
AVENUE BANK AND TRUST COMPANY OF OAK PARK AND FEDERAL DEPOSIT INSURANCE CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 78 C 118 -- Bernard M. Decker, Judge.

Before Tone, Circuit Judge, Kunzig,*fn* Judge, and Bauer, Circuit Judge.

Author: Kunzig

This appeal is the result of a suit arising out of the efforts by two competing banks to increase business through expanded banking facilities. Plaintiff-appellant First Bank of Oak Park contends that in approving an application for an additional banking facility for a rival bank, the Regional Director of the Federal Deposit Insurance Corporation (FDIC) (a defendant-appellee) exceeded the statutory and regulatory authority given him. The rival bank, defendant-appellee Avenue Bank and Trust Company, answers that for the limited type of banking operation it sought to add an "adjunct" facility rather than a full-service "branch" the Regional Director did indeed have the requisite regulatory authority delegated to him by the FDIC Board of Directors. We hold that the Regional Director had the necessary authority to approve defendant's application.

Both banks involved here are state banks insured under and subject to regulation by the FDIC. Both are located in Oak Park, Illinois. Plaintiff First Bank applied to the FDIC on January 4, 1977, for permission to build and operate a new banking facility at the southwest corner of Humphrey and North Avenues in Oak Park. Without objection, and using the same regulatory authority at issue in this instant case, the FDIC Regional Director approved the application on February 2 of that same year.

On January 21, 1977 while the First Bank application was pending defendant-appellee Avenue Bank applied for FDIC approval for a banking facility on North Avenue between Humphrey Avenue and Austin Boulevard. The site was to be immediately across a small side street from the proposed First Bank site. On its application, Avenue Bank described the facility as a "walk-up/drive-up" facility, with the only business to be the receipt of deposits, the cashing of checks, drafts and money orders, the changing of money and the receipt of loan payments. All actual processing was to be done at the main bank. The new facility itself was to have no deposits or income.

On May 6, 1977, after appropriate hearing, the FDIC Regional Director issued an order approving the Avenue Bank application. First Bank subsequently filed suit in the Northern District Court of Illinois, January 12, 1978.

District Judge Bernard Decker in a Memorandum Opinion and Order entered October 27, 1978, dismissed the action. On appeal, First Bank presses only one of its original arguments, that the Regional Director did not have the authority to grant Avenue's application. All other arguments have been abandoned.

We concur with Judge Decker.

Before examining the parties' arguments, a look at the applicable statutory and regulatory language is in order. Our starting point is the Federal Deposit Insurance Act, 12 U.S.C. § 1811 Et seq. (1976). The Act provides that state banks which are not members of the Federal Reserve System need FDIC approval for all branch operations.*fn1 12 U.S.C. § 1828(d) (1976). The Act then defines the word "branch" as follows:

"The term "branch' includes any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State of the United States or any Territory of the United States, Puerto Rico, Guam, American Samoa, or the Virgin Islands at which deposits are received or checks paid or money lent." 12 U.S.C. § 1813(O ) (1976).

All parties agree that this definition of a branch is broad, in effect requiring virtually every new banking outlet to receive FDIC sanction. To facilitate granting such approval, the FDIC has set up a regulatory and operating framework within which limited grants of authority were delegated to FDIC Regional Directors across the country. Two of these regulatory provisions are the focus of this dispute, because the meaning given to them determines whether the regional director here had the authority he needed to approve Avenue's application.

The relevant provisions of the two regulations are as follows:

(1) Application for the prior written consent of the Corporation to establish and operate any new teller's window, drive-in facility, or any like office, as an adjunct to a main office or a branch office (including offices not considered branches under State law), or to move its main office or any branch from one location to another; . . .

(7) Applications for the prior written consent of the Corporation to establish and operate any new branch; Provided, however, That this authority shall extend to the approval but not to the denial ...


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