NationsBank of North Carolina v. Variable Annuity Life Insurance Co.

Under the National Bank Act, national banks could exercise all incidental powers necessary to carry on the business of banking. The Office of the Comptroller of the Currency (the comptroller) (defendant) was charged with administration of the National Bank Act. NationsBank of North Carolina, N.A. (NationsBank) (defendant) applied to the comptroller for permission for NationsBank’s brokerage subsidiary to act as an agent in the sale of annuities. An annuity is a contract to make a series of payments to a beneficiary in exchange for payment of a premium. Annuities may be fixed or variable. Annuities have similar features to other types of investments. The comptroller interpreted the National Bank Act to authorize national banks to deal in investment securities as an incidental power to the business of banking. Further, the comptroller determined that annuities were investment securities rather than insurance. Thus, the comptroller approved NationsBank’s plan for its brokerage subsidiary to act as an agent for the sale of annuities. The Variable Annuity Life Insurance Company (VALIC) (plaintiff), a seller of annuities, challenged the comptroller’s decision in the district court. The district court entered judgment for the comptroller and NationsBank. The court of appeals reversed the judgment of the district court, finding that banks outside of small towns were barred from selling insurance under 12 U.S.C. § 92 and that the comptroller’s interpretation that annuities are not insurance was unreasonable. The comptroller and NationsBank appealed.