National State Bank of Elizabeth, N.J. v. Smith

Under the National Bank Act, the United States Comptroller of the Currency (the comptroller) (defendant) had the authority to approve the organization of national bank associations. City Federal Savings and Loan Association (City Federal SL) (defendant) was a savings-and-loan association. City Consumer Services, Inc. (City Consumer) (defendant) was City Federal SL’s wholly owned subsidiary. City Trust Services, N.A. (City Trust) was planned to be a wholly owned subsidiary of City Consumer. City Federal SL requested authority from the comptroller for permission to organize City Trust as a national banking association without the authority to receive deposits and make loans. Essentially, City Federal SL sought to operate City Trust as City Federal SL’s own trust department. National State Bank of Elizabeth, N.J. (National State Bank) (plaintiff) and 11 other banks objected to City Federal SL’s application. Regardless, the comptroller granted preliminary approval of City Federal SL’s application to organize City Trust as a national bank with limited powers. National State Bank sued the comptroller, City Federal SL, and City Consumer, among others, alleging, in part, that the comptroller’s approval violated the National Bank Act. The district court declared that the comptroller’s approval of the organization of City Trust was invalid and ordered the comptroller to revoke City Trust’s certificate of authority. The comptroller, City Federal SL, and City Consumer appealed. The appeal was presented to the court of appeals on October 18, 1978. On November 10, 1978, Congress enacted an amendment to the National Bank Act that expressly authorized the comptroller to issue certificates of authority to national bank associations whose operations were limited to those of a trust company. The amendment applied retroactively to the present case.