Post on 06-Jan-2016
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 1/8
COPY
X-6321
400
COURT OF APPEALS OF TBB DISTRICT OF COLUMBIA
Charles L . Apfel, Stephen B . Gibbons,
Bertrand A . Unger, Joseph Sheldon,
Henry Green, Henry
M.
Susswein,
Edmund J . Horwath, a n d Milo Ogden Frank,
Appellants,
v s .
Andrew W. Mellon, J . W. Mcintosh,
Roy A.
Young, Edmund P i a t t , Adolph
C .
Miller , Charles
S .
Hamlin, Edward
H .
Cunningham,
a n d
George
R .
James,
a s
Members
of t he
Federal Reserve Board,
Appellees.
No. 4837
Appeal from
t h e
Supreme Court
of the
D i s t r i c t
o f
Columbia.
Before Martin, Chief Ju st ic e, an d Robb and Van Orsdel, Associ-
a t e Ju s t i c e s .
This i s an appeal from a f ina l order of t he lower court d i s -
missing t h e a ppe l l a n t s ' pe t i t i on f o r a wri t o f mandamus upon t h e a l l e ga -
t ions of t he p e t i t i o n a n d answer.
The case arises under the Act of Congress o f December 24, 1919,
( 4 1 S t a t . 3 7 8 ) , commonly known a s t h e "Edge A c t , f i r s t enac ted a s S e c -
t i on
2 5 ( a ) o f t h e
Federal Reserve
A c t . See
T i t l e
X I I ,
Sect ions
611 to
631,
U.S.C.A.
The Act
provid es tha t corporat ions
may be
organized
f o r t h e
purpose
of
engaging
i n
i n t e rna t i ona l
o r
foreign banking
o r
o the r in te r -
na t ional o r fore ign f inancia l opera t ions, an d may be formed by any number
of natural persons n o t le s s than fi ve ; tha t such persons sha ll ent er into
a r t i c l e s of as so ci at io n which sha l l s pecif y i n general terms th e objects
f o r which t h e a s soc i a t i on i s formed, an d shall execute a n organizat ion
ce r t i f i ca te which sha l l s e t o u t t h e name assumed b y t h e corporat ion,
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 2/8
X-6321
4 0 1
th e p lace o r places where i t s operations sure to he ca r r i ed on , the place
i n t h e
United States where
i t s
home office
i s t o he
located ,
t h e
amount
o f i t s
capi ta l s tock
a n d t h e
number
of
shares into which
i t
s h a l l
h e
ivi e
t h e
names
a n d
p laces
of
business
o r
res idence
o f t he
persons
executing
t h e
c e r t i f i c a t e
a n d t h e
number
of
shares
t o
which each
h a s s u b -
scr ibed , a n d t h e fact that t h e c e r t i f i c a t e i s made t o enable t h e s u b -
sc r iber s and their successors t o avail themselves of the advantages o f
t h e A c t . I t provides also that no corporat ion shal l be organized under
t h e A c t
with
a
capi ta l s tock
of
loss than $2,000,000,
one
quar ter
of
which shall
be
p a id
i n
before
t h e
corporation
may be
organized
to
begin
business; that
th e
persons signing
th e
o rgan iza t ion cer t i f ica te sha l l
duly acknowledge
t h e
execution thereof ,
a n d
forward
i t t o t h e
Federal
Reserve Board,
a n d
t h a t a f t e r
th e
a r t i c l e s
of
a s s o c i a t i o n
and an
organiza-
t i o n c e r t i f i c a t e a r e duly made a n d f i l e d , a n d " a f t e r t h e Federal Reserve
Board h a s approved t h e same a n d issued t h e permit t o begin business, t h e
association shall become and be a body corporate", with certaiti specified
powers including
i n
general
t h e
r igh t
t o
engage
i n
i n t e r n a t io n a l
o r
foreign
banking
o r
o ther f inancia l operat ions .
The Ac t
provides "that except such
a s i s
i n c id en ta l
a n d
prel iminary
t o i t s
organizat ion
no
such corporation
shal l exercise
any of the
powers conferred
by
th i s se c t ion un t i l
i t h a s
been duly authorized by t he Federal Reserve Board t o commence business a s
a corporation organized under t h e provis ions o f th i s sec t ion" . I t p i so
provides that such a corporat ion may e s t ab l i s h a n d maintain branches o r
agencies i n foreign countr ies a t such places as may be approved by t he
Federal Reserve Board
a n d
under such rules
a n d
r egu la t ions
a s t h e
Board
may
p r e s c r ib e .
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 3/8
X-6331 4 2
I n t h e
instant case
th e
appe l lan ts ,
a s
relators below, f i led
the i r pe t i t ion aga ins t t h e appel lees a s membere of t he Federal Reserve
Board, alleging that
t h e
r e l a t o r s
h a d
duly executed
a n d
f i l ed w i th
t he
respondents, a c e r t i f i c a t e f o r t h e organizat ion of a corporation under
t h e foregoing A c t f o r t h e purpose of engaging i n i n t e r n a t io n a l o r
foreign "banking under t h e name "Foreign Financing Corporation", a n d that
t h e c er t i f i c a t e fu l l y conformed with t h e requirements of th e A ct ; but
that
th o
respondents nevertheless
h a d
wrongfully refused
t o
approve
of
t h e
same
o r t o
itieud
a
permit
t o
r e l a t o r s
t o
"begin "business
a s a
"body
corporato under
t he A c t . The
re la tors prayed
f o r a
wr i t
of
mandamus
tb
corapol
t h o
respondents acting
a s t h e
Federal Reserve Board
t o
approve
t h e
a r t i c l e s
o f
incorporat ion
and t he
o rgan iza t ion cer t i f ica te a fo re -
said ,
and t o
permi t r e la to r s
t o
"begin "business
a s a
"body corporate under
t h e
name "Foreign Financing Corporation",
i n
accordance with
t h o p r o -
vis ions
o f t he A c t .
The
respondents filed their answer admitting that
th e
a r t i c l e s
of
a s s o c i a t i o n
a n d
o rgan iza t ion cer t i f ica te f i l ed wi th
t h e
Board
by r e -
lators were
i n
proper legal form,
b u t
s ta t ing tha t
t h e
Board
h a d
refused
to
approve
t h e
same
en the
following grounds:
"That
t h e
Federal Reserve Board
a s a
board,
and
t h e
respondents
a s
members thereof, deem
i t
their duty
c a r e f u l l y t o inquire into t h e q u a l i f i c a t i o n s of the
organizers
of
such proposed cor pora tio ns
and t o
refuse
t o approve t h e a r t i c l e s of assoc ia t ion a n d organization
c e r t i f i c a t e s
of
such proposed corp ora tio ns
and to
issue
a permit f o r such proposed corporations to do business,
unle ss a f t e r inve sti gat ion, said Board
i s o f t h e
opinion
tha t t h e f in anc ia l res pons ib i l i ty , exper ience, t ra in ing ,
a n d
o ther qua l i f ica t ions
of the
organizers
of
such
p r o -
posed corporations a r e such as may reasonably b e ca lcu l -
a t ed
t o
hold premise
o f t he
f inancial soundness, reliable
a n d competent management, a n d proper a n d successful oper-
a t i o n
of
such proposed co rp ora ti on. "
- 3 -
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 4/8
X-6321
* * *
tha t re la t o rs
do no t
possess
th e
qualif icat . ions
reasonably necossary
t o
assure
t h e
financial soundness,
r e l i a b l e
a n d
competent management,
o r t h e
proper
o r
successful operat ions
of a
corporation organized under
Sect ion
25 (a ) of th e
Federal Reserve
Ac t to
engage
i n
t h e h igh ly t echn ica l ac t iv i t i e s of i n t e rn a t i o n a l o r
foreign "banking o r o ther in te rna t ional o r fore ign
f inancia l opera t ions a n d t h a t i t would b e detrimental
t o t h e pub l ic in t e re s t t o approve such articles of
a s s o c i a t i o n o r o rgan iza t ion ce r t i f i ca te a n d t o issue
a prel iminary permit f o r such proposed corporation to.
commence business;
a n d
tha t , the re fo r e ,
th e
said Board
re fused
t o
approve
th e
a r t i c l e s
of
a s s o c i a t i o n
a nd the
o rg a n i z a t i o n c e r t i f i c a t e
an d
re fused
t o
i ssue
a
permit
t o
sa id proposed corpo rati on
t o
begin business .
R e-
spondents
sa y
that this determination
by the
Federal
Reserve Board
was
unanimous; that
i t wa s
adopted after
impart ia l inves t iga t ion a n d f u l l a n d impart ia l c o n -
s i d e ra t i o n o f a l l t h e f a c t s ; a n d that respondents b e -
l ieved then and now belie ve th at i t would be contrary
t o publ ic pol icy a n d contrary t o t h e duty of respondents
a s p u b l i c o f f i c e r s to approve said art ic les o f a s soc ia -
t i o n a n d s a id o rgan iza t ion ce r t i f i ca te or to i s sue a
preliminary permit
to the
r e l a t o r s
to
begin business
a s a
body corporate."
The
r e l a t o r s f i l e d
a
demurrer
t o t h e
answer
of
respondents.
The
lower cour t ove rr ul ed
t h e
demurrer,
a n d ,
r e l a t o r s e l e c t i n g
t o
stand
upon their demurrer, t h e court dismissed t h e p e t i t i o n , a n d t h e re la to rs
appealed.
I t i s contended by appellees that t h e statute imposes t h e duty
upon
t h e
Federal Reserve Board
of
exerc is ing
i t s
judgment
a n d
d iscre t ion
With respect
t o t h e
approval
o r
disapproval
o f the
a r t i c l e s
of
a s soc ia -
t i o n
a n d
organiza t ion cer t i f ica tes made
a n d
f i led under
t h e A c t , a n d
that
t h e Board ' s ac t ion i n this instance i s wi th in t h e l i m i t s o f tha t author i ty .
On the o th er hand ap pe ll an ts contend th at "Congress h a s n o t undertaken t o
delegate t o t h e Board t h e d i s c r e t i o n i t h a s assumed t o exerc ise" .
We
agree with
t h e
contention
o f the
appe l l ees .
The
s t a tu te
provides that
a n
association formedMinder
t h e A c t
sha l l
n o t
become
a
body
4 8
- 4 -
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 5/8
X-6321
: 404
corpora te un t i l a f te r th e a r t i c l e s of a s s o c i a t i o n an d organizat ion c e r -
tificate have been duly made
a n d
f i l e d ,
a n d
a f t e r
t h e
Federal Reserve
Board h a s approved t h e same and issued a permit to i t to "begin business.
The
word "approved" naturally imports
t h e
exercise
of
judgment
a n d d i s -
cre t ion ;
and t he
power
t o
approve ordinarily implies
a
power
t o
disap-
prove.
To
"approve
1
o r
give "approval"
i s i n i t s
es s en t i a l a n d most obvious meaning t o confirm,
r a t i f y , s an c t io n ,
o r
consent
t o
some
a c t o r
thing done by another . The word "approve" does
n o t , e x v i termini, necessarily import t he ex -
e r c i s e
o f
d i s c r e t i o n ,
b u t
from
th e
connection
i n which th e term i s used i t of te n involves the
idea of d i s c r e t i o n a n d ad jud ica t ion , and i s
seldom construed
a s
r equ i r ing
a
mere minister ial
a c t .
4 C . J . 1464 .
I n t h e case of S t a t e ex r e l . Dodd v . B i l l , Banking Commissioner,
84 W. 7 a . , 468 , t he
Supreme Court
of
West Virginia deals with
a
s ta tu te
which provid ed tha t " he re af te r
no
char ter shal l
be
issued
to any
bank
t o
d» business i n t h i s s t a t e u n t i l t h e app l ica t ion there fo r h a s been approved
i n
w r i t i n g
by the
commissioner
of
banking". Acting under t hi s st at ut e
t he
commissioner
of
banking
h a s
r e fused
t o
issue such
a
char te r
to the
appe l l -
ants, upon t h e ground that, f o r t h e p r o t ec t io n of the pub l ic , h e h a d care-
fully considered
t h e
proposed location
o f t he
bank,
t h e
t e r r i t o r y co n t r i -
butory thereto, i t s p o s s i b i l i t i e s a n d p rob ab i l i t i e s f rom a banking stand-
po in t , a n d other questions connected therewith, a n d tha t i n t h e exercise
o f h i s
best judgment
as an
o f f i c e r
h e h a d
a r r iv ed
a t t h e
conclusion that
t h e appl icat ion should no t be approved. I n denying a wr i t ef mandamus
t o compel t h e commissioner t o issue a char te r t h e court held that t he
s ta tu tory provis ion aforesaid ves ted
i n t h e
commissioner discretionary
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 6/8
X-6321
405
power
t o
approve
o r
reject such
a n
app l i ca t ion ,
a nd
t h a t
th e
commissioner's
dec is ion was no t subjec t to j ud ic ia l review unle ss i t clearly appeared that
h e h a d "v / i l fu l ly an d a r b i t r a r i l y di s regarded h i s duty, o r tha t h i s decision
was due to
capr ice , pass ion, par t ia l i ty-or corrupt ion".
I n t h e
People
e x r e l .
Schweder
v .
Brady, Auditor
of
Public
A c-
counts, 268 111 . 192 , the Supreme Court of I l l i n o i s h e l d i n r e l a t i o n to
s imi la r l eg i s l a t ion tha t a s t a tu te au thor iz ing th e State Auditor to wi th-
hold
t h e
f i n a l c e r t i f i c a t e
of
organiza t ion
o f a
hank when
h e i s n o t
s a t i s -
f i e d as t o t he personal character and standing of the o f f i c e r s or d i rec tors
o r whon h e h a s reason t o "believe that t h e hank i s organized f o r a n y purpose
other than that contemplated by the Act , i s no t uncons t i tu t iona l on the
ground that
i t
c o n f e r s - j u d i c i a l
o r
legis la t ive power
on the
Auditor.
S ee
First Rational Bank
v .
Union Trust Company,
24 4 U. S . 4 16 .
In t ho instant case i t i s clear that Congress was providing a
means
f o r
conferr ing spec ia l
an d
important privileges upon such corporations
a s
should
be
organized under
t h e
Edge
A ct . An
abuse
by any
corpora t ion
of
th e powers thus granted t o i t might involve grave consequences to our public
se rv ice . I t i s reasonable t o believe that Congress intended that a careful
inves t iga t ion should
be
made
by t he
Federal Reserve Board concerning
t he
charac tor
a n d
competency
of tho
incorpora tors
of
such
a n
e n t e rp r i s e ,
as one
of tho
ncans
of
determining whether
t o
grant
o r
withhold their approval
of
t h e a p p l i c a t i o n f o r in co rp or at io n. Moreover i t should be noted that the Act
repeatedly provided,
f o r a n
"approval"
by t he
Board
a s a
p r e r e q u i s i t e
t o
proceedings authorized thereunder,
a nd i n a l l
such instances
t h e
term plainly
implies t h e exe rc i se o f consideration, judgment, a nd d i s c r e t i o n by t he Board.
The Act provides in te r a l i a tha t any such corporation may at any time -within
the two
years next previous
t o t he
date
of the
exp i ra t ion
of i t s
corporate
- 6 -
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 7/8
X-6321
existence , by a vote of the shareholders owning two-thirds o f i t s stock ^ . Q 0
apply
t o t h e
Federal Reserve Board
f o r i t s
approval
t o
extend
the
per iod of i t s corporate existence f o r a term of not more than twenty
years , a n d upon cert i f ied approval of t he Board such corporation shall
have i t s corporate existence f o r such extended pe ri od . The Board, a c -
cordingly,
may
exerc ise
i t s
judgment
and
discret ion with respect
t o
what
i s
p r a c t i c a l l y
a
renewal
of the
corporate ch ar te r . This fa ct
i s
signi f icant ly Consis tent wi th th e view that t h e Board ps ss es se s a similar
power over t h e g ran t ing of t he f i r s t c ha r t e r .
An
examination
of
congressional legislat ion with regard
t o
hank-
i n g
since
1864
shows that Congress
h a s
consistently used various forms
of
t h e word "approve" in t ho sense of conferring discret ion upon th o Comptrol-
l e r o f t h e Currency, t h e Secretary of t he Treasury, or t ho Federal Reserve
Board. Such
a
cons i s t en t
u s e o f t h e
term
i n
s t a t u t e s
i n
yari materia
i s
persuasive. Marks
v .
United States,
161 U. S . 2 97 .
The
s t a t u t e s r e l a t i ng
t o t h e
organiza t ion
of
national "banks
a r e
analogous t o those now in quest ion. I t i s the ref ore proper t o note that
t h e
Comptroller
of t he
Currency
h a s
p resc r ibed
th e
fol lowing
a s one of th e
regulat ions governing
t h e
inves t iga t ions
to he
made
by th e
examiners
r e -
l a t i n g t o a pp l i c a t i ons f o r national bank charters;
I n making this invest igat ion t h e examiner i s
i n s t ruc t e d
t o
give full const-deration
t o a l l
fac tors
enter ing into
t h e
pr op os it io n. Among oth er mat ter s
t o he considered a r e ; F i r s t ; th e general character
a n d
experience
of the
organizers
and of the
proposed
o f f i c e r s of the new hank; second, t h e adequacy of
ex i s t ing hanking fac i l i t i e s a n d t h e need of fu r the r
hanking ca pi ta l ; t hir d,
th e
outlook
f o r t h e
growth
a n d development of the town o r c i t y i n which t h e hank
i s t o h e
loca ted; four th ,
th e
methods
a n d
hanking
p ra c t i c e s of the existing hank o r "banks, t h e i n t e r e s t
rates which they charge t o customers, a n d t h e character
of t he
service which
a s
quasi -publ ic inst i tu t ions they
a r e render ing t o their community; fifth, t h e reasonable
prospec t s f o r success of the new bank i f e f f i c i e n t l y
managed." Instructions
Sa . 4 o f t he
Comptroller
o f
7/17/2019 frsbog_mim_v30_0400.pdf
http://slidepdf.com/reader/full/frsbogmimv300400pdf 8/8
t h e
Currency, Regulations Promulgated June
31, 1927,
Digest
of
Rulings
of the
Federal Reserve Board with
Appendices (1928) pages 394-395.
S ee
McCormick
v .
Market Bank,
165 U. S , 538 ,
551-2.
I n t h e p re se nt ca se mandamus w i l l n o t l i e t o con t ro l the
exerc i se
of the
Board 's d iscret ion .
I t i s a f r equen t ly asse r ted a n d .un iversal ly recog-
nized rule that mandamus only lies
t o
onforce
a
min i s t e r i a l
a c t o r
duty;
i n
this sense
a
mi nis te r ia l du ty
may he
b r i e f ly
def ined t o be some duty imposed expressly by law , no t by
con t rac t
o r
a r i s in g n eces s a r i l y
a s an
incident
to t he
o f f i c e ,
involv ing
no
d i s c r e t i o n
i n i t s
exercise ,
b u t
mandatory
and
imperat ive . The d is t inct ion between merely minis ter ia l and
j u d i c i a l
a n d
o th e r o f f i c i a l a c t s
i s
that where
th e
l a
p r e -
s c r ib e s
a n d
defifces
th e
duty
to be
performed with such prer-
c i s io n
a n d
c e r t a i n l y
a s t o
leave nothing
t o t h e
exercise
of
d i s c r e t i o n o r judgment, t h e a c t i s m i n i s t e r i a l ; b u t where
t h e a c t t o b e
done involves
t h e
exercise
of
d i s c r e t i o n
o r
judgment,
i t i s no t t o be
deemed merely ministerial
18 R.L.C. 116 .
The
judgment
of the
lower court
i s
aff irm ed with co st s .
(Signed) George
E .
Martin,
Chief Justice, Court of Appeals of
t h e D i s t r i c t of Columbia.
X-6321
: 4 7