Cheshire National Bank v. Smith

The McFadden Act of 1927 permitted national banks to operate branch banks only to the extent that state banks were permitted to operate branch banks under state law. After the act was passed, certain branch banks were eligible to continue operations under the grandfather clause of 12 U.S.C. § 36(a) despite noncompliance with state or federal law. The grandfather clause permitted a branch bank to be maintained if it had been continuously operated for a period of more than 25 years immediately preceding 1927 and if the national bank invoking the grandfather clause had only one branch that qualified. In 1865, Keene National Bank of Keene (Keene Bank) was chartered as a national bank association. Keene Bank had continuously conducted business since 1865. At that time, national bank associations were allowed only one office location. However, starting in 1872, Keene Bank’s board of directors authorized Josiah Bellows to hold $500 in Walpole, New Hampshire, to provide various banking services like cashing checks or making loans. Keene Bank employed an agent in Walpole until May of 1975. For most of that time, Keene Bank’s business was conducted at the office of the Savings Bank of Walpole (Walpole Bank). The employee was paid by both Walpole Bank and Keene Bank. Due to changes in banking laws in 1974, Walpole Bank gained the ability to offer checking services similar to Keene Bank. As a result, Walpole Bank evicted Keene Bank from Walpole Bank’s premises in May 1975. Keene Bank notified the United States Comptroller of the Currency, James Smith (defendant) that it was being evicted. The comptroller temporarily permitted Keene Bank to relocate its services from Walpole Bank pending an administrative review. Upon review, the comptroller found that Keene Bank’s Walpole operations satisfied § 36(a), so the operations at Walpole were grandfathered as a legal branch bank of Keene Bank. Cheshire National Bank of Keene and Connecticut River National Bank of Charlestown (plaintiffs) sued the comptroller, seeking the invalidation of the comptroller’s approval of Keene Bank’s relocation of its Walpole operations.