Brief of Amicus Curiae State of Utah

8/7/2019 Brief of Amicus Curiae State of Utah

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No. 10-4117IN THE UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

PENI COX, an individual,Plaintiff-Appellant,

v.RECONTRUST COMPANY; BANK OF AMERICA HOME LOANSSERVICING; BANK OF AMERICA; NEW LINE MORTGAGE, DIVISIONOF REPUBLIC MORTGAGE HOME LOANS; MORTGAGE ELECTRONIC

REGISTRATION SYSTEMS, INC.,Defendants-Appellees.

On Appeal from an Interlocutory Order of the United States ,DistrictCourt for the District ofUtah, No. 2:10-CV-00492-CW-SA (Waddoups, J.)

BRIEF OF AMICUS CURIAE STATE OF UTAHIN SUPPORT OF APPELLANT AND REVERSAL

Jerrold S. JensenAssistant Attorney GeneralMARKL. SHURTLEFFUtah Attorney General160 East 300 South, Fifth FloorP. O. Box 140857Salt Lake City, Utah 84114-0857Telephone: (801) 366-0353Attorneys for Amicus Curiae State ofUtah

Appellate Case: 10-4117 Document: 01018587026 Date Filed: 02/16/2011 Page: 1

Courtesy of www.4closureFraud.o


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TABLE OF CONTENTS

PageTABLE OF AUTHORITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 111INTEREST OF AMICUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2ARGlJMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41. THE NATIONAL BANK ACT APPLIES ONLY "WHEN NOT INCONTRAVENTION OF STATE OR LOCAL LAW" . . . . . . . . . . . . . . . . 4

A. The U.S. Supreme Court Has Cited 92a as an Exampleof the National Bank Act Subjecting National Banks to State Law. 4

B. Section 92a(a) and (b) of the National Bank Act. . . . . . . . . . . . . . . . 5C. The Meaning ofCompetitive Equality and Its Application to 92a. 7D. Where a Bank "Acts," Not Where the Bank is "Located," Determines

Which State's Laws Apply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8E. OCC Regulations Are Consistent with the OCC's Interpretive Letter

No.695 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13II. APPLICATION OF SECTION 92a OF THE NATIONAL BANKACT TO THE UTAH TRUSTEE STATUTES...................... 14CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15




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ADDENDAADDENDUM 1 - OCC Interpretive Letter No. 695 entitled "Authority of aNational Bank to Conduct Fiduciary Activities Nationwide Through TrustOffices in Various States." 1996 WL 187825ADDENDUM 2 - Utah Code 57-1-21(3), 57-1-23

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TABLE OF AUTHORITIESPage

CASESBarnettv. Nelson, 517U.S. 25 (1996) .................................. 4Blaney v. Florida Nat'l Bank at Orlando, 357 F.2d 27 (5TH Cir. 1966) . . . . . . . . . 8Cuomo v. The Clearing House Association, L.L.c., 129 S.Ct. 2710 (2009) . . . . . 7First Nat'l Bankv. Dickinson, 396 U.S.122 (1969) . . . . . . . . . . . . . . . . . . . . . . . . 7First Nat'l Bank a/Logan v. Walker Bank and Trust Co., 385 U.S. 252 (1967) .. 7Kleinsmith v. Shurtleff, 571 F.3d 1033 (10th Cir. 2009) . . . . . . . . . . . . . . . . . . . 3,4New Hampshire Bankers Assn v. Nelson, 460 F.2d 307 (lst Cir. 1972) . . . . . . . . . 8

. th .Oklahoma v. Pope, 516 F.3d 1214 (10 Cir.2008) . . . . . . . . . . . . . . . . . . . . . . . . 2St. Louis County Nat'l Bankv. Mercantile Trust Co., N A., 548 F.2d 716 (8 th Cir.1976) ............................................................ 8

CONSTITUTIONAL PROVISIONS, STATUTES, AND RULESUtah Code 57-1-21 ............................................... 15Utah Code 57-1-21(3) .......................................... 1, 14Utah Code 57-1-23 .......................................... 1, 14, 1512 C.F.R. 9.7(e) ................................................. 1312 U.S.C. 92a . . . . . . . . . ; . . . . . . . . . . . . . . 4,5,6,7,8,9, 10, 11, 12, 13, 14, 1512 U.S.C. 92a(a) ........................................ 1,5,6,10,15

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12 U.S.C. 92(b) ........................................... 5, 10, 1528 U.S.C. 2403(b) . . . . . . . . . . . . . . . ; . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2acc Interpretive Letter No. 695 . . . . . . . . . . . . . . . . . . . . . . . . 6, 9, 10, 11, 12, 13

IV




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INTEREST OF AMICUS

The State ofUtah has an interest in protecting the laws of the State in

eliminating unlawful foreclosures, and in keeping its citizens in their homes.Because of companies like ReconTrust, the Utah Legislature has restricted whomay conduct foreclosures of real estate trust deeds. ReconTrust Co., N.A., is anon-depository national bank initiating approximately 4,000 home foreclosures inUtah each year/ in violation ofUtah law.

Under Utah law, trustees of trust deeds with a "power of sale" must bemembers of the Utah State Bar or title insurance companies. Utah Code 57-1-21(3), 57-1-23. (See Addendum 1.) ReconTrust is neither. It justifies itsforeclosure actions in Utah by claiming that Utah's statute dealing withqualifications of trustees is preempted by the Supremacy Clause of the U.S.Constitution through the National Bank Act ("NBA"). And the District Court soheld.

But the section of the NBA governing fiduciary activities of national banksspecifically states that national banks may exercise fiduciary powers "when not in

contravention of State or local law." 12 U.S.C. 92a(a). Clearly, the Supremacy

ICalculated based on number of properties ReconTrust lists on its websitefor Utah. See h t t p : / / w w w . r e c o n t r u s t c o . c o m / u p c o m i n g ~ counties.aspx?state=Utah.

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Clause of the U.S. Constitution does not preempt State law when Congress hasexplicitly stated that federal law is not to preempt State law.

Utah's sole interest in this appeal is the preemption of State law issueinvolving ReconTrust. Whether Judge Waddoups rightly or wrongly dissolved theState court preliminary injunction, whether he retains jurisdiction of the on-goingcase, etc., are not matters of concern to the State and will not be addressed herein.

Upholding Utah law is a matter of great concern to the State.BACKGROUND

Defendants-Appellees are asserting that the Supremacy Clause of the U.S.Constitution preempts the constitutionality of Utah law. As such the AttorneyGeneral of the State ofUtah was entitled to receive notice of the challengepursuant to 28 U.S.C. 2403(b) and Federal Rules of Civil Procedure 5.1. Nonotice was provided to the Attorney General either by Defendants-Appellees orthe District Court. As a result of not being notified, the State ofUtah believes thematter should be remanded to the District Court to give the Attorney General ofthe State ofUtah an opportunity to be heard on the matter, consistent with this

Court's ruling in Oklahoma v. Pope, 516 F.3d 1214 (lOth Cir. 2008).It is important to understand the context in which Judge Waddoups issued

the ruling that is being appealed here, and to understand the shortness of time2




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under which the events unfolded - which probably also explains why the AttorneyGeneral of the State ofUtah was never given notice. Plaintiff below had obtained

a preliminary injunction in State court against ReconTrust conducting anyforeclosures in the State ofUtah. A Notice ofRemoval was filed with the DistrictCourt on May 26, 2010. Doc. 1. A Motion to Vacate the Preliminary Injunctionwas filed June 4, 2010. Doc. 17. A Motion for an Expedited Hearing was filedJune 6, 2010. Doc. 23. The hearing was held on June 10,2010 and the Orderbeing appealed from here was issued June 11, 2010. Given the shortness of time -a total of one week from the time the Motion to Vacate was filed to an Order bythe Court - resulted in the issues involving preemption by the NBA being dealtwith in a very cursory fashion.

A history of the legislative amendments leading up to the current Utahstatute governing trustee qualifications can be found in Kleinsmith v. Shurtleff,571 F.3d 1033, 1036-37 (lOth Cir. 2009). In short, beginning in 2001 the Utahlegislature enacted legislation to respond to a growing problem in the State.Trustees, like ReconTrust, were sending Notices ofDefault and Trustee's Sale to

homeowners, stating that their mortgage is in default, and their home will beauctioned for sale. Like ReconTrust, these trustees would provide a telephonenumber in their notices, but when called the number immediately went to a

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Congress has granted an "explicit power with an explicit statement that theexercise of that power is subject to State law." Barnett v. Nelson, 517 U.S. 25, 34

(1996). Two examples were cited: (1) branching, and (2) authorization offiduciary powers. Id. at 34. Then, after citing cases that have allowed for Stateregulation of national banks - without explicit language in the NBA authorizingsuch - the Court said:

[T]hese cases [do not] control the interpretation offederal banking statutes that accompany a grant of anexplicit power with an explicit statement that theexercise of that power is subject to state law. See, e.g.,12 U.S.C. 36(c) (McFadden Act) (authorizing nationalbanks to operate branches, but only where state lawauthorizes state banks to do so); 92a(a) (Comptroller ofCurrency may grant fiduciary powers "by special permitto national banks applying tJ1erefor, when not incontravention of State oflocallaw"). Not surprisingly,this Court has interpreted those explicit provisions tomean what they say.

Id. (Citations omitted.) Thus, the U.S. Supreme Court has specifically identified 92a of the NBA as a section that grants national banks authority to exercisecertain powers subject to State law.

B. Section 92a(a) and (b) of the National Bank Act.Section 92a(a) of the NBA reads:

The Comptroller of the Currency shall be authorized andempowered to grant by special permit to national banks

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applying therefore, when noUn contravention ofState orlocal law, the right to act as trustee, executor, .administrator, registrar of stocks and bonds, guardian ofestates, assignee, receiver, committee of estates oflunatics, or in any other fiduciary capacity in which Statebanks, trust companies, or other corporations whichcome into competition with national banks are permitted to actunder the laws of the State in which the national bank islocated.

(Emphasis added.) Section 92a(b) reiterates the same thing:Whenever the laws of such State authorize or permit theexercise of any or all of the foregoing powers by Statebanks, trust companies, or other corporations whichcompete with national banks, the granting to and theexercise of such powers by national banks shall not bedeemed to be in contravention ofState or local lawwithin the meaning of his section.

(Emphasis added.) The italicized portion of the above quoted statute is what theOffice of the Comptroller of the Currency ("OCC") calls the "state law condition."OCC Interpretive Letter, No. 695, 1996 WL 187285 *2. It is not exactly languageone would be citing for preemption - and ReconTrust hasn't. Though they makenumerous references to 92a(a) throughout their brief and quote portions of ittwice, Appellees' Br. at 34 & 39, they never set out the entirety of either 92a(a)

and (b), and they never provide the Court with the actual language of the "statelaw condition." That language is, however, the critical language upon which theentire issue of preemption of fiduciary powers of national banks pivots.

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C. The Meaning of Competitive Equality and Its Application to 92a.

ReconTrust persuaded the court below of the complete preemptive force ofthe NBA. But such a position is not consistent with 150 years ofbanking law inthis country. As the Supreme Court recently noted, "[n]o one denies that theNational Bank Act leaves in place some state substantive laws affecting banks."Cuomo v. The Clearing House Association, L.L.c., 129 S.Ct. 2710, 2717,;,18(2009). In what the courts call "competitive equality" State and national banks incertain specified areas are to compete on an equal basis. This is done by havingboth State and national banks being subject to the State law. As Chief JusticeWarren Burger put it:

The policy of competitive equality is . . . firmlyembedded in the statutes governing the national bankingsystem. The mechanism of referring to state law issimply one designed to implement that congressionalintent and build into the federal statute a self-executingprovision to accommodate to changes in state regulation.

First Nat 'I Bankv. Dickinson, 396 U.S.122, 133 (1969). See also First Nat 'I BankofLogan v. Walker Bank and Trust Co., 385 U.S. 252,261 (1967).

Further, every court that has ruled on the application of State law to thefiduciary powers ofnational banks - except the ruling by the Utah federal districtcourt on appeal here - has held that competitive equality applies to 92a. The

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Eighth Circuit noted "[t]he policy of competitive equality was incorporated intosection 92a. . . . Therefore, to allow [a national bank] to accomplish what a statebank could not would frustrate the purpose of section 92a." St. Louis County Nat 'IBankv. Mercantile Trust Co., N A., 548 F.2d 716,720 (8 th Cir. 1976). And inBlaney v. Florida National Bank at Orlando, 357 F.2d 27,30 (1966), the FifthCircuit stated that it "is obvious from the most cursory reading of ... 12 U.S.C. 92" that federal fiduciary law places "national banks on an equal competitive basiswith state banks and trust companies in the state where the national bank issituated." See also New Hampshire Bankers Assn v. Nelson, 460 F.2d 307 (1 st Cir.1972).

D. Where a Bank "Acts," Not Where the Bank is "Located,"Determines Which State's Laws Apply.

ReconTrust takes the position that because it does not have a physical officeor building in Utah it is not located in Utah and, therefore, Utah law does notapply to the foreclosures it conducts. Rather, it claims that the State laws thatapply by virtue of 92a are the laws of the State where the national bank is"located." Appellees' Br. at 34. Because ReconTrust is headquartered inCalifornia, ReconTrust claims California law applies to all its foreclosures? In

2But its trust office doing foreclosures in Utah is located in Texas.8




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support of that position it cites several OCC Interpretative Letters which state thata national bank may "market" its product in States other than where it has aphysical office, and such marketing does not require the national bank to complywith the State law of the State in which it is doing the marketing. Appellees Br. at34-35, 40. The State ofUtah takes no issue with the statement oflaw in the OCCInterpretive Letters cited by ReconTrust, but "fiduciary" activities are not the sameas "marketing" activities, and the law governing such is not the same either.

The OCC Interpretive Letter ReconTrust should be citing is InterpretiveLetter No. 695 entitled "Authority of a National Bank to Conduct FiduciaryActivities Nationwide Through Trust Offices in Various States." 1996 WL .187825. (See Addendum 2.) This letter addresses the issue of the application ofState law to fiduciary powers of national banks operating in various States andspecifically addresses the issue ofwhere a bank is "located" for purposes ofconducting fiduciary activities under 92a of the NBA. The letter begins bysaymg:

[I]n our opinion section 92a authorizes a national bankthat has been granted fiduciary powers to exercise thosepowers in any state, provided that within each state, thestate may bar the exercise of such fiduciary powers asthe state also does not allow for its own state-charteredinstitutions. In essence, with respect to national bankfiduciary powers in a given state, we believe section 92a

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applies the same standards to all national banks, boththose headquartered in that state and those that are"outof-state banks" with respect to that state.

Id. at *1. The letter then cites 92a(a) and (b) of the NBA as being the basicauthority for national banks to exercise fiduciary powers. Id. at *2-3. From thereit launches into a detailed discussion of the powers 92a grants to national banks.For example, it says that the NBA does not place geographic limits on where anational bank may offer fiduciary services or have trust offices. Id. at *3. It alsostates that a State may limit national banks from exercising any or all fiduciarypowers in that State if it also limits its own institutions from exercising those samepowers. Specifically, the letter says:

Thus, the effect of section 92a is that in any specificstate, the availability of fiduciary powers is the same forout-of-state national banks or for in-state national banksand is dependent upon what the state permits for its ownstate institutions. A state may limit national banks fromexercising any or all fiduciary powers in that state, butonly if it also bars its own institutions from exercisingthe same powers. Therefore, a national bank with itsmain office in one state may conduct fiduciary businessin that state and other states, depending upon - withrespect to each state - whether each state allows its owninstitutions to engage in fiduciary business.

Id. at *4. Following an historical analysis of 92a, the letter discusses "TheAuthority for a National Bank to Offer Fiduciary Services in a State Is the Same

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Whether the Bank Is In-state or Out-of-state." Id. at *10. In part, it states: "[I]nour view, with respect to a national bank that proposes to offer fiduciary services

in more than one state, section 92a . . . does not imply that Congress intended thatthe provisions of section 92a would apply only to one state for each nationalbank." Id. at *12. Rather, the OCC says the State in which the national bank isoperating is decided on a "state-by-state basis." Specifically:

[S]ection 92a authorizes national banks to offer fiduciaryservices in multiple states, but then conditions the exercise ofthat power with each state on a state-by-state basis under thesame test: is the exercise of fiduciary powers by national banksprohibited by state law, and even if it is, does that state permitits state institutions to exercise these powers or not.

Id. at *12. As if addressing the R e c o n T r ~ s t argument in the present case directly,the OCC embarks on a detailed discussion of the meaning of the word "located" asused in 92a. As the letter notes, the U.S. Supreme Court has said there is no"enduring rigidity about the word 'located' as used in" the NBA. Id. at 13. Theletter says::

Other federal statutes also refer to the places where anational bank is "located" "situated" "existing" or of, ,which it is a "citizen." The United States Supreme Courthas made clear that the locationallanguage.in thesestatutes should be flexibly construed, taking full accountof changes in the banking system, to suit the underlyingpurposes ofeach provision, and has emphasized that"[t]here is no enduring rigidity about the word 'located'"

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as it is used in these provisions. Citizens & SouthernNational Bank v. Bougas, 434 U.S. at 44. Hence theSupreme Court, lower federal courts, and the OCCconsistently have held that, for purposes of thesestatutes, a national bank is not located only in the placeof its main office but can be "located," "situated" or"existing" in, or be a "citizen" of, multiple cities,counties, or states.

Id. at *13. (Citations omitted.) In the next paragraph, the letter states that a bankis to be considered located in a State where it is "merely doing business - andtreated under the statute in the same manner as any other national bank in thestate." Id. at *13. Certainly conducting 4,000 foreclosures a year in Utah wouldqualify ReconTrust as "doing business" in the State, and hence subject it to theState law applicable to both State and national banks.

In wrapping up Section I of Interpretive Letter 695, the OCC says that aState has the authority to restrict national banks from exercising fiduciary powersif it also restricts these powers for its own State institutions:

Therefore, we conclude that section 92a authorizes a. national bank that has been granted fiduciary powers toexercise those powers in any state, including having trustoffices in any state, except that the bank may not offersuch services in a state that prohibits it and in which thestate does not authorize or permit its state banks, statetrust companies or other corporations that compete withnational banks to offer such services. An out-of-statenational bank has the same authority under section 92a tooffer fiduciary services in a state that in-state national

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banks have. The state has the authority to restrictnational banks from exercising these powers only if itrestricts these powers for its own state institution. * * *Only state laws that bar any or all fiduciary activities toall corporate fiduciaries, in particular including thestate's own state banks, state trust companies, and othercorporations, can limit out-of-state national banks undersection' 92a.

Id. at *16. So, rather than preempting State law, as ReconTrust contends, the OCCclearly takes the position that a national bank's fiduciary powers are restricted inthe State in which it is "doing business" if that State also restricts the exercise ofthose same powers to that State's own financial institutions.

E. OCC Regulations are Consistent with the OCC's InterpretiveLetter No. 695.

ReconTrust also cites OCC regulations for the proposition that a trustee isauthorized to act in all fifty states in accord with the laws of the State where thebank is "located" - meaning a physical office. They cite 12 C.F.R. 9.7(e) asauthority. Appellees' Br. at 40. But again, that is not what the regulation says,and they do not quote it. Section 9.7 (e) uses the word "acts" for determiningwhere a bank is located, and hence which State's laws apply. 12 C.F.R. 9.7(e)states:

(1) State laws used in section 92a. The state laws thatapply to a national bank's fiduciary activities by virtue of

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12 U.S.C. 92a are the laws of the state in which the bankacts in a fiduciary capacity.(2) Other state laws. Except for the state laws madeapplicable to national banks by virtue of 12 U.S.C. 92a,state laws limiting or establishing preconditions on theexercise of fiduciary powers are not applicable tonational banks.

(Emphasis supplied.) Thus, rather than the OCC regulations saying that the onlystate laws that may be applied to fiduciary activities of a national bank are thelaws of the state where the national bank is physically located, Appellees' Br. at39, the regulation actually says the State laws that apply to national banks arethose of the States where the bank "acts.,,3 That is a far different criterion thanwhere the bank has a physical building.II. APPLICATION OF SECTION 92a OF THE NATIONAL BANK ACT

TO THE UTAH TRUSTEE STATUTES.

The Utah trustee qualification statute limits the trustees who have a powerof sale to foreclose a trust deed to members of the Utah State Bar and titleinsurance companies with offices in the state. See Utah Code 57-1-21(3),57-1-23. (Addendum 1.) Both State and national banks may be a trustee ofa trust

3"State laws limiting or establishing preconditions," as used in 9.7(e)(2),refers to laws other than those governing fiduciary duties under 92a. Those lawswould include such things as establishing a minimum net worth, who can be anofficer of the bank, who may be on the bank's board of directors, etc. Thesepreconditions are the exclusive province of the ace.

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deed, but neither possess the "power of sale" necessary to foreclose a trust deed.Thus, the Utah statute treats both State and national banks equally - achieving the

desired goal of "competitive equality" - consistent with the State law condition of 92a.

CONCLUSION

The grant of an explicit power by Congress to national banks to exercisefiduciary powers is also accompanied by an explicit statement that those powersare subject to State law. 12 U.S.C. 92a(a) and (b). As a result, this Court shouldhold that 92a of the National Bank Act does not preempt Utah's law governingtrustee qualifications, Utah Code 57-1-21 and 57-1-23, and that ReconTrust isnot a qualified trustee for purposes of conducting trustee foreclosures in Utah.

Dated this 16th day of February, 2011.

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Is/Jerrold S. JensenJerrold S. JensenAssistant Attorney GeneralAttorney for Amicus Curiae




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CERTIFICATE OF ELECTRONIC FILING AND SERVICE

I hereby certify that on this 16th day ofFebruary, 2011, the foregoingBRIEF OF AMICI CURIAE OF THE STATE OF UTAH was electronicallyfiled with the Clerk of the Court, and the following were served electronically viathe Court's CMJECF system:E. Craig Smay174 E. South TempleSalt Lake City, UT 84111Tel: (801) 539-8544Cameron Soran (Law Student)40 N. 300 E. #101St. George, UT 84771Tel: (253) 250-9449

Richard F. EnsorVantus Law Group, P.C.3165 East Millrock Drive, Suite 160Salt Lake City, UT 84121Tel: (801) 833-0500Fax: (801) 931-2500Roy W. Arnold (Admitted Pro HacVice)Reed Smith LLP225 Fifth AvenuePittsburgh, P A 15222Tel: (412) 288-3131Fax: (412) 288-3063

Michael Huber8170 S. Highland Drive, Suite E5Sandy, UT 84093

J ames MartinReed Smith LLP225 Fifth AvenuePittsburgh, PA [email protected]: (412) 288-3131David BirdReed Smith LLP225 Fifth AvenuePittsburgh, PA [email protected]: (412) 288-3131Amir Shlesinger (Admitted Pro HacVice)Reed Smith LLP355 South Grand Avenue, Suite 2900Los Angeles, CA 90071-1514Tel: (213) 457-8000Fax: (213) 457-8080

Is/Sherri L. Cornell




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CERTIFICATE OF DIGITAL SUBMISSION

THIS IS TO CERTIFY THAT:

(1) All required privacy redactions have been made, and with theexception of those redactions, every document submitted in digital form orscanned PDF format, and(2) The digital submissions have been scanned for viruses with the most

recent version of a commercial virus scanning program (McAffee Virus ScanEnterprise Version 8.S.0i with virus definitions updated daily) and, according tothe program, are free ofviruses.

/s/Sherri L. Cornell




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ADDENDUM 1Utah Code 57-1-21, 57-1-23




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U.C.A. 1953 57-1-21

West's Utah Code Annotated CUlTentnessTitle 57. Real Estate"J Chapter 1. Conveyances (Refs & Annos) 57-1-21. Trustees of trust deeds--Qualifications

(l)(a) The trustee ofa trust deed shall be:

Page 1

(i) any active member of the Utah State Bar who maintains a place within the state where the trustor or otherinterested parties may meet with the trustee to:

(A) request information about what is required to reinstate or payoff the obligation secured by the trust deed;

(B) deliver written communications to the lender as required by both the trust deed and by law;

(C) deliver funds to reinstate or payoff the loan secured by the trust deed; or

(D) deliver funds by a bidder at a foreclosure sale to pay for the purchase of the property secured by thetrust deed;

(ii) any depository institution as defined in Section 7-1-103, or insurance company authorized to do businessand actually doing business in Utah under the laws of Utah or the United States;(iii) any corporation authorized to conduct a trust business and actually conducting a trust business in Utahunder the laws ofUtah or the United States;

(iv) any title insurance company or agency that:

(A) holds a certificate of authority or license under Title 31A, Insurance Code, to conduct insurance business in the state;

(B) is actually doing business in the state; and(C) maintains a bona fide office in the state;

2011 Thomson Reuters. No Claim to Orig. US Gov. Works.

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Page 3 of 4

U.C.A. 1953 57-1-21

(v) any agency of the United States government; or

(vi) any association or corporation that is licensed, chartered, or regulated by the Farm Credit Administration o r its successor.

(b) For purposes of this Subsection (1), a person maintains a bona fide office within the state if that personmaintains a physical office in the state:

(i) that is open to the public;

(ii) that is staffed during regular business hours on regular business days; and

(iii) at which a trustor of a trust deed ma y in person:

(A) request information regarding a trust deed; or

(B) deliver funds, including reinstatement or payoff funds.

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( c) This Subsection (1) is not applicable to a trustee of a trust deed existing prior to May 14, 1963, nor to anyagreement that is supplemental to that trust deed. .

(d) The amendments in Laws of Utah 2002, Chapter 209, to this Subsection (1) apply only to a trustee that isappointed on or after May 6, 2002.

(2) The trustee of a trust deed may not be the beneficiary of the trust deed, unless the beneficiary is qualified tobe a trustee under Subsection (l)(a)(ii), (iii), (v), or (vi).

(3) The power of sale conferred by Section 57-1-23 may only be exercised by the trustee of a trust deed if thetrustee is qualified under Subsection (l)(a)(i) or (iv).

(4) A trust deed with an unqualified trustee or without a trustee shall be effective to create a lien on the trustproperty, but the power of sale and other trustee powers under the trust deed may be exercised only if the beneficiary has appointed a qualified successor trustee under Section 57-1-22.

CREDIT(S)Laws 1961, c. 181, 3; Laws 1963, c. 110, 1; Laws 1969, c. 162, 1; Laws 1985, c. 64, 1; Laws 1996, c.182, 25, eff. July 1, 1996; Laws 2001, c. 236, 2, eff. April 30, 2001; Laws 2002, c. 209, 1, eff. May 6,


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U.C.A. 1953 57-1-21

2002; Laws 2004, c. 177, 1, ef f May 3, 2004; Laws 2008, c. 250, 41, efT. May 5, 2008.

Current through 2010 General Session, including results from the November 2010 General Election.Copr (c) 2010 Thomson ReuterslWest. No claim to orig. U.S. govt.END OF DOCUMENT


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15 OCC Q.J. 147, 15 NO.1 OCC Q.J. 147, OCC Inter. Ltr. 695, Fed. Banking L. Rep. P 81,010, 1996 WL187825 (O.CC.)Office of the Comptroller of the Currency (O.CC)

Interpretive Letter

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*1 AUTHORITY OF A NATIONAL BANK TO CONDUCT FIDUCIARY ACTNITIES NATIONWIDETHROUGH TRUST OFFICES IN VARIOUS STATES

Laws12 U.S.C 92A(a)12 US.C. 92AlSteven Alan Bennett, Esq. .Senior Vice President and General CounselBanc One Corporation100 East Broad StreetColumbus, Ohio 43271-0158

Interpretive Letter No. 695December 1995

March 1996

Re: Authority of a National Bank to Conduct Fiduciary Activities on a Nationwide Basis through Trust Officesin Various States .Dear Mr. Bennett:This is in reply to your letter of August 28, 1995, requesting the opinion of the Office of the Comptroller of theCurrency (OCC) on your position that 12 US.C 92a authorizes a national bank that has been granted fiduciarypowers to conduct fiduciary activities through limited purpose trust offices in multiple states, on a parity withthe state-chartered institutions in each state. You also ask our views on the manner in which the requirement forthe deposit of securities in 12 US.C 92a(f) would apply to such a national bank.As set out below, in our opinion section 92a authorizes a national bank that has been granted fiduciary powers toexercise those powers in any state, provided that within each state, the state may bar the exercise of such fiduciary powers as the state also does not allow for its own state-chartered institutions. In essence, with respect tonational bank fiduciary powers in a given state, we believe section 92a applies the same standards to all nationalbanks, both those headquartered in that state and those that are "out-of-state banks" with respect to that state.Hence, we are in general agreement with your conclusion regarding the scope of section 92a(a) & 92a(b). Wealso agree with your view that, for a national bank administering trust assets at offices in more that one state, thesecurities deposit requirements of section 92a(f) apply on a state-by-state basis, i.e., for each state, only on thebasis of those trust assets the bank administers from offices in that state.


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BackgroundThe Proposal

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Banc One Corporation ("the company") is a registered, multi-bank holding company headquartered in Columbus, Ohio, that has a total of 65 bank subsidiaries in 11 states. Currently, the company conducts fiduciary business in these states through two limited purpose trust companies and the trust departments of several of the company's banks. The company wishes to combine all its fiduciary business in one entity. The present structure prevents the company from taking full advantage of economies of scale and creates obstacles to centralized management and administration. You also believe you could serve customers better as one integrated fiduciary operation. You propose consolidating all of your fiduciary activities nationwide under a single national bank charter(the "trust bank"). The trust bank may be one of the company's existing' national banks, or you may organize anew bank for that purpose. You propose initially to seek approval to conduct fiduciary business and operate trustoffices in each of the 11 states in which the company currently has one or more bank subsidiaries and conductsfiduciary business: Arizona, Colorado, Illinois, Indiana, Kentucky, Ohio, Oklahoma, Texas, Utah, West Virginia, and Wisconsin. You also contemplate seeking approval to conduct fiduciary business and operate trust offices in Louisiana and New York. In the future, trust bank may also seek approval for operations in other states.*2 You relate that many states - including several of the states in which the proposed trust bank would have trustoffices - have statutes that would prohibit, limit, or condition certain national banks (namely, national banksheadquartered in other states) from conducting fiduciary business in their states, either in general or with respectto various specific kinds of fiduciary appointments. You also state that some states require that a national bankseeking to conduct fiduciary business or accept fiduciary appointments in those states first register or make filing with, or obtain the approval or certification of, state officials. And the laws of some states at least appear torequire that an out-of-state national bank qualify to do business as a foreign corporation before conducting fiduciary business there.You request the OCC's confirmation of your views on the following positions: (1) A national bank may conductfiduciary business and have trust offices in more than one state under 12 U.S.c. 92a; and such offices, if limitedto fiduciary services, are no t covered by the McFadden Act. (2) Section 92aauthorizes a national bank, including an out-of-state national bank, to conduct fiduciary business in a state on a parity with that state's own statechartered institutions. (3) Section 92a preempts any state laws that deny or restrict the right of national banks toconduct fiduciary business on this basis, and national banks' exercise of fiduciary powers under section 92a isnot subject to state approval requirements. And (4) any securities deposit a national bank must make in any stateunder section 92a(f) is based on the trust assets the bank administers from offices in that state, and not on thebank's total trust assets nationwide.StatutesThe basic authority for national banks to exercise fiduciary powers is contained in 12 U.S.c. 92a(a) and 92a(b):(a) Authority of Comptroller of the CurrencyThe Comptroller of the Currency shall be authorized and empowered to grant by special pennit to nationalbanks applying therefor, when not in contravention of state or local law, the right to act as trustee, executor,administrator, registrar of stocks and bonds, guardian of estates, assignee, receiver, committee of estates oflunatics, or in any other fiduciary capacity in which state banks, trust companies, or other corporationswhich come into competition with national banks are permitted to act under the laws of the state in whichthe national bank is located.

(b) Grant and exercise ofpowers deemed not in contravention of state or local law


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Whenever the laws of such state authorize or permit the exercise of any or all of the foregoing powers bystate banks, trust companies, or other corporations which compete with national banks, the granting to andthe exercise of such powers by national banks shall not be deemed to be in contravention of state or locallaw within the meaning of this section.12 U.S.c. 92a(a) and 92a(b). As discussed in Part II-B below, in subsection (a), by the clause "when not in contravention of state or local law," Congress has conditioned the grant of fiduciary powers to national banks. Inour discussion, this clause is referred to as the "state law condition." Then, in subsection (b) Congress has limited the state law condition in the manner set out.*3 Section 92a also imposes a number of administrative requirements. Among them is:Whenever the laws of a state require corporations acting in a fiduciary capacity to deposit securities with thestate authorities for the protection of private or court trusts, national banks so acting shall be required tomake similar deposits and securities so deposited shall be held for the protection of private or court trusts,as provided by the state law.12 U.S.c. 92a(f)(frrst sentence).Discussion

1. Authority for a National Bank to Exercise Fiduciary Powers in Different States.A. Federal law does not place geographic limits on where a national bank may offer fiduciary services or havetrust offices.Section 92a does not contain any language that limits where a national bank may conduct its fiduciary business.(For some states, the state law condition may have the effect of creating a geographic limit. That is discussed insection B below. Here we are considering whether the fiduciary power as granted by federal law is itself geographically limited). That is, if a national bank is authorized under section 92a to act in any or all of the listed fi-duciary capacities, there is nothing in section 92a that imposes any limitations on the places where, or the customers for whom, the bank may so act.lFN1J If there is a federally imposed geographic limit on national banks'fiduciary powers it must lie elsewhere.The only provision in the national banking laws that arguably could impose a geographic limit is the McFaddenAct, 12 U.S.c. 36. The McFadden Act limits where national banks may have branches. However, in order to bea branch and so subject to the McFadden Act, a bank facility must, among other things, be a branch as defmed in12 U.S.c. 36(j): it must perform at least one of the core banking functions of receiving deposits, paying checks,or lending money. The locational limitations of 12 U.S.c. 36 and 81 are not intended to reach all activities inwhich national banks are authorized to engage, but only core banking functions. See Clarke v. Securities In-dustlY Association, 479 U.S. 388 (1987). Fiduciary activities under section 92a are not such core banking functions. Indeed, the treatment of the trust function in section 92a as something segregated from the "commercialside" of the bank: reflects this. Thus, a national bank office. that provided only fiduciary services would not besubject to geographic limitations under the McFadden Act. OCC staff have consistently taken this position. See,e.g., Letter from William B. Glidden, Assistant Director (January 28, 1992) (unpublished); Letter from James M.Kane, District Counsel (June 5, 1990) (unpublished).One court reached the opposite result and found that a trust office was subject to the McFadden Act. See St.Louis County National Bank v. Mercantile Trust Company, NA., 548 F.2d 716 (8th Cir. 1976), cert. denied, 433U.S. 909 (1977). The court based this conclusion on the position that what could be a branch for McFadden Act


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purposes was not limited to offices performing the functions in section 36(j) but could include other functions.We believe this analysis has been superseded by the Supreme Court's decision in Clarke v. SIA, emphasizing thecentrality of the core banking functions in the defmition of branch under section 36(i). Similarly, another earliercase that ruled a national bank from Missouri could not have a trust office in Illinois because the office would bea branch and therefore impermissible under the McFadden Act is also superseded. See B o a t m e n : ~ National BankofSt. Louis v. Hughes. 385 Ill. 431,53 N.E.2d 403 (1944).*4 Therefore, just as with the securities brokerage powers at issue in Clarke v. SIA, there is no inherent geographic limitation to the fiduciary powers granted by federal law under section 92a. Accordingly, solely as amatter of federal law without regard to the state law condition, a national bank (such as the proposed trust bank)with its main office in one state may offer fiduciary services to customers anywhere, including at trust offices inother states.B. The states have only a limited authority to restrict the geographic scope of national banks' fiduciary powers:a state may prevent national banks from offering fiduciary services in the state only if it also does not permit itsown state institutions to offer those fiduciary services.Thus, a national bank with fiduciary powers is authorized to offer those services without geographic limit, bothin the state of its main office and in other states. You point out that many states have laws prohibiting or restricting out-of-state fiduciaries, including out-of-state national banks, from providing fiduciary services or havingtrust offices within their state. You ask whether those laws would apply to prohibit an out-of-state national bankfrom offering fiduciary services in such a state or whether the national bank may offer such services, and havetrust offices, under section 92a.This question hinges upon the scope and effect of the state law condition in section 92a (the clause, "when not incontravention of state or local law"). In this clause, Congress has conditioned national banks' exercise of fiduciary powers on state law, thereby giving the states a power to limit national banks that the states would not otherwise have.fFN2] It might be argued that this provision allows a state to prohibit or limit out-of-state nationalbanks from exercising fiduciary powers in that state. However, as set forth below, the statutory language, legislative history, and circumstances surrounding the adoption of the language make it absolutely clear that, if astate permits its own state institutions to exercise certain fiduciary powers, then national banks are authorized toexercise those fiduciary powers in that state, and the state may not limit them. Section 92a does not limit the application of this principle only to national banks whose main office is in the state in question. We discern nobasis in the statutory language to apply section 92a in a different manner to a national bank's proposed trust office or other proposed fiduciary business in a state depending upon whether the national bank also has its mainoffice in that state or not.Thus, the effect of section 92a is that in any specific state, the availability of fiduciary powers is the same forout-of-state national banks or for in-state national banks and is dependent upon what the state permits for itsown state institutions. A state may limit national banks from exercising any or all fiduciary powers in that state,but only if it also bars its own institutions from exercising the same powers. Therefore, a national bank with itsmain office in one state (such as the proposed trust bank) may conduct fiduciary business in that state and otherstates, depending upon - with respect to each state - whether each state allows its own institutions to engage infiduciary business.1. The language, legislative history, and statutory development of section 92a show how the state law condition is limited.


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*5 As originally enacted in 1913, the state law condition was apparently unlimited in scope. But in 1918 Congress added the second paragraph (now codified at section 92a(b with the express intention of specifically limiting it. Whenever a state permits its state institutions to exercise fiduciary powers, then by the rule of law setout in section 92a(b), the exercise of fiduciary powers by national banks shall not be deemed in contravention ofstate or local law and therefore automatically meets the state law condition for the exercise of powers. Any otherlaws of the state that would prevent national banks from exercising those powers therefore conflict with section92a and are preempted. Burnes National Bankv. Duncan, 265 U.S. 17 (1924).National banks were first authorized to engage in fiduciary activities in 1913. Congress included this power insection 11(k) of the Federal Reserve Act. See Act of December 23, 1913, Pub. 1. No. 63-43, 11(k), 38 Stat. 251,262 (1913). At the time, administration of this provision was placed with the Federal Reserve Board, rather thanthe OCC. This original version of section 92a was very short. As originally enacted, section 11(k) simply empowered the Federal Reserve Board:To grant by special permit to national banks applying therefor, when not contravention of state or local law,the right to act as trustee, executor, administrator, or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.Congress included this provision to enhance national banks' power to compete with state-chartered institutionswhich, "by reason of their broader functions, had shown ability to cut into the fields presumably appropriated tothe national banks." H. Parker Willis & William H. Steiner, Federal Reserve Banking Practice 680 (1926). Seealso 51 Congo Rec. 883-84 (1913).This original version contained the basic state law condition ("when not in contravention of state or local law").I t also listed four, and only four, specific fiduciary capacities in which national banks could act. We have foundno legislative history in 1913 explaining the purpose of the state law condition, but in light of subsequent developments, its purpose clearly was to limit the newly granted fiduciary powers to national banks in states wherestate institutions had fiduciary powers. That is, without the state law condition, the statute would have been asimple, absolute grant of the power to act in the four listed fiduciary capacities, and national banks in any andevery state would have had that power, even in a state that did not permit its own state banks, trust companies orother corporations to engage in any or all of the four activities. If granted in this absolute manner, it would havebeen like the power of a national bank to engage in any of its other federally authorized powers: the federalpower cannot be prohibited or curtailed by the states. See note 2 above.*6 The 1913 statute was immediately controversial in some states. In a case arising in Michigan, the SupremeCourt upheld the constitutionality of section 11 (k). First National Bank of Bay City V. Fellows, 244 U.S. 416(1917). A national bank in Michigan had obtained fiduciary powers from the Federal Reserve Board, but fivestate trust companies brought action in state court to question the right of the national bank to act as trustee, executor, administrator, and registrar of stocks and bonds. The Michigan Supreme Court held, first, that it was notin contravention of state law for a national bank to be granted such powers, because Michigan law allowed foreign corporations to act as fiduciaries in Michigan, but second that section 11(k) was invalid under the U.S.Constitution because Congress did not possess the power to convey fiduciary powers on any corporation including national banks. See Fellows V. First National Bank of Bay City, 192 Mich. 640, 150 N.W. 335 (1916).Trusts, estates, and other fiduciary affairs were particularly matters of local concern and thus were exclusivelyreserved for the states.

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analysis first set forth in lv1cCulloch v. Maryland, 17 U.S. (4 Vvneat.) 316 (1819) and Osborn v. Bank (?f theUnited States, 22 U.S. (9 Wheat) 738 (1824), Congress has the implied power to charter national banks as ameans to carry out any of the enumerated powers of the federal govermnent, and this includes the power to grantnational banks the authority to engage in purely private functions if Congress judges the possession of suchfunctions meet for making the bank successful and so able to carry out its public functions. Fellows, 244 U.S. at418-20. And, in the Court's analysis, it was in the discretion of Congress to determine what private powersshould be given to national banks, and so the grant of fiduciary powers in section 11(k) was lawfuL Fello'ws, 244U.S. at 424.Moreover, the Court also offered an additional, narrower analysis for Congress's authority which later becamethe basis for the 1918 amendments to section 11(k). Even if Congress's discretion to add additional powers tonational banks is not unlimited and can include only certain powers, it must include the power to grant to national banks whatever powers a state has conferred on state banks and state corporations that compete with nationalbanks. By granting a power to such competing state institutions, the state has rendered that power one reasonably needed for the successful operation of a national bank, and so Congress can convey it to national banks.Fellows, 244 U.S. at 425-26. Section lICk) met this circumstance because it granted the fiduciary powers onlywhen not in contravention of state law, and so it was clearly within Congress's lawful powers. The Court's summation of this point became the basis for the critical 1918 amendments:

*7 [Section ll(k)] authorizes the exertion of the particular functions by national banks when not in contravention of the state law, that is, where the right to perform them is expJ;essly given by the state law or whatis equivalent is deducible from the state law because that law has given the functions to state banks or corporations whose business in a greater or less degree rivals that of national banks, thus engendering from thestate law itself an implication of authority in Congress to do as to national banks that which the state lawhas done as to other corporations ....244 U.S. at 426.In Fellows the Court held that Congress could grant fiduciary powers to national banks. However, although itsreasoning also virtually declared that a state could not prohibit a national bank from exercising fiduciary powersif the state allowed state institutions to do so, the case did not directly reach that issue, since Michigan's law didnot raise it. Michigan law both permitted Michigan corporations to act in fiduciary capacities and did not prohibit other corporations from also so acting. Thus, this situation met the Court's narrower test for when Congresswould have the power to grant national banks fiduciary powers (i.e., if the state granted them to competing stateinstitutions), but it did not raise the question whether, under the authority of the "when not in contravention"clause, the same state could also ban national banks from exercising those powers.In 1917, shortly after Fellows, this issue was addressed in an opinion of the United States Attorney GeneraL Thequestion was asked whether national banks located in New York could act as trustee, executor, and administrator. Unlike Michigan, the laws of New York empowered only trust companies organized under New York law toact in fiduciary capacities and expressly forbade any other corporation from doing so. The Attorney-General determined that granting fiduciary powers to a national bank in New York would thus be in contravention of statelaw and so not permitted under the express language of section ll(k). The opinion noted that the decision in Fel-lows demonstrated that Congress had the authority to grant fiduciary powers to national banks, even if state lawsforbade it, but declared that Congress had not yet done so in section ll(k):The language [in Fellows] demonstrates the power of the National Legislature to confer authority upon national banks to act as trustee, executor, and administrator, where such powers are exercised by state trustcompanies, even though the state law discriminates against the national agencies in this regard. The power


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of Congress to determine how far national banks may be subject to state control is settled, and state regulations which conflict with the congressional enactments are invalid. (Davis v. Elmira Bank, 161 U.S. 275;Easton v. Iowa, 188 U.S. 220; Van Reed v National Bank, 198 U.S. 554.) But in this case Congress has notexerted its power. By section 11 (k) it has explicitly constituted the local statutory provisions as the criterionof the corporate capacity of national banks. The New York statute, therefore, can not fairly be said to denyto national banks operating in New York a power Congress intended they should have.

*831 Op. U.S. Att'y Gen. 186, 188 (November 26,1917) (citations in original).In 1918, Congress completely revised section l1(k). See Pub. L. No. 65-218, 2, 40 Stat. 967, 968-69 (1918).First, Congress added the language that is now 12 U.s.c. 92a(b). This language was expressly added to limit thestate law condition ("when not in contravention of state or local law") so as to achieve the result adumbrated inFellows: a national bank could exercise fiduciary powers in a state, even if state law prohibited it, as long as thatstate permitted those powers to its own state institutions.Section 2 moreover sets forth that it shall not be deemed to be "in contravention of state or local law" topermit the exercise of such powers by national banks whenever the laws of the particular state authorize orpermit the exercise of such powers by state banks, trust companies, or other corporations competing withnational banks. Under a recent decision of the United States Supreme Court it is clearly settled that Congress has the power to confer authority upon national banks to act in these fiduciary capacities, where suchpowers are exercised by trust companies, state banks, or other competing corporations, even though the statelaw discriminates against national banks in this regard. The terms of section 11(k) are extended, therefore,to permit such powers to be granted to national banks in those states in which the state law discriminatesagainst national banks in this respect.H.R. Rep. No. 479, 65th Cong., 2d Sess. 2 (1918). Second, Congress expanded the list of expressly specified fiduciary capacities to the current eight and added the final power to act in any other fiduciary capacity permittedto state institutions in the state in which the national bank is located. See id. Finally, Congress also added a number of substantive provisions governing national banks' conduct of fiduciary powers now codified in 12 U.S.c.92a( c -92a(i).lFN3]Shortly after the 1918 amendments, the General Counsel of the Federal Reserve Board issued an opinion interpreting the state law condition, the new paragraph, and the relationship between them. This opinion reiteratedthat under the state law condition, a fiduciary power could be granted to a national bank, even if state law didnot allow it for state institutions, as long as state law did not prohibit it for national banks (e.g., state law was silent on the power); and that the new paragraph acted only to limit the state law condition and did not decreasethe situations in which national banks could be granted fiduciary powers:The phrase "when not in contravention of state or local law" is the only restrictive clause applicable in thisdiscussion, for it is apparent that the succeeding paragraph is permissive rather than restrictive and operatessolely as an exception to the restrictive clause of the [lIst paragraph. The purpose of this exception wasmerely to insure to a national bank the right to exercise fiduciary powers in any case where a state bank,trust company, or other competing corporation is permitted under the state law to exercise those powers,even if the state laws should contain an express provision either directly or by necessary implication prohib-iting national banks from doing so ..... .*9 The restrictive phrase "when not in contravention of state or local law" was retained in the [lIst paragraph [the current section 92a(a)] without change and the second and supplementary paragraph [the currentsection 92a(b)] was inserted solely to protect national banks from any possible discrimination on the part of

state legislators. In short, while giving to the legislature of each state in the [lIst paragraph, the right ex-

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pressly to prohibit national banks from exerclsmg fiduciary powers, Congress, in the second paragraph,eliminates the possibility of discrimination against national banks by providing, as a rule of law, that nostate statute shall be construed to prohibit a national bank from exercising any fiduciary power which a statebank, trust company, or other competing corporation can exercise.It is respectfully submitted, therefore, that the Federal Reserve Board may legally approve the application ofany national bank to exercise any of the fiduciary powers authorized by section l1(k) unless there is an express statute of the state in which the national bank is located which either directly or by necessary implication prohibits a national bank from exercising those powers, and that even in the case where there is such anexpress statute, the Board may approve the application if any state bank, trust company, or other competingcorporation in that state is permitted to exercise the powers applied for by the national bank.5 Fed. Res. BulL 363-64 (March 31, 1919). See also Annual Report of the Comptroller of the Currency 13(1918) ("Under its terms [section 11(k) as amended in 1918] States are in effect prohibited from denying to them[national banks] the right to exercise trust powers where such powers are exercised by state corporations .")

In 1924, the Supreme Court [mally decided Congress's power to authorize national banks to exercise fiduciarypowers even over directly conflicting state law. Burnes National Bank v. Duncan, 265 U.S. 17 (1924). A national bank in Missouri was named executor in a will, but the state courts denied appointment on the grounds thatunder Missouri law only state trust companies could so act and thus by the laws of Missouri national banks werenot authorized to act as executors. The Supreme Court, in an opinion by Justice Holmes, first noted that underthe first paragraph alone, with the state law condition, the state court result might be final, but that Congress hadadded the second paragraph to limit the first:This says in a roundabout and polite but unmistakable way that whatever may be the state law, nationalbanks having the permit of the Federal Reserve Board may act as executors if trust companies competingwith them have the power.265 U.S. at 23. In the case at hand, the criteria in the second paragraph were met, "and thus the naked questionpresented is whether Congress had the power to do what it tried to do." Id.To this question, the Court reasoned Fellows already provided the answer: if Congress has the authority to granta power to national banks and has granted the power, then the states may not deprive national banks of thatpower (except as Congress may have allowed), even if the subject area is one characteristically within the domain of the states. The power ofCongress to confer a power on national banks:

*10 "excluded the power of the state in such case, although it might possess in a general sense authority toregulate such business, to use that authority to prohibit such business from being united by Congress withthe banking function." 244 U.S. 425. Now that Congress has expressed its paramount will this language ismore apposite than ever. The states cannot use their most characteristic powers to reach unconstitutionalresults. . . There is nothing over which a state has more exclusive authority than the jurisdiction of itscourts, but it cannot escape its constitutional obligations by the device of denying jurisdiction to courts otherwise competent. ... So here - the state cannot lay hold of its general control of administration to deprivenational banks of their powers to compete that Congress is authorized to sustain.265 U.S. at 24 (quotation from Fellows; other citations omitted).Since 1918, the provisions granting national banks the authority to engage in fiduciary activities - currently codified at 12 U.S.c. 92a(a) and 92a(b) - have remained substantively unchanged. In 1962, Congress .transferredadministration of the provision from the Federal Reserve Board to the OCe. Former section 11(k) of the FederalReserve Act was repealed, and its provisions reenacted (with the OCC substituted for the Board) as a separatelaw. See Pub. 1. No. 87-722, 76 Stat. 668 (1962) (codified at 12 USc. 92a); S. Rep. No. 2039, 87th Cong., 2d


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Sess. 1 (1962) ("No change would be made from the substantive provisions of section 11(k), other than thetransfer of authority [to the OCC], so that there is no alteration of existing law regarding national banks acting infiduciary capacities.") JFN4]In sunnnary, several fundamental propositions are evident from the statute, its legislative development, and basic concepts of national banking law reflected in the principal cases. First, Congress has the authority to grant fi-duciary powers to national banks. Second, if Congress grants a power to national banks, the states cannot prohibit, impede, or restrict national banks from exercising it. Thus, third,but for the state law condition, nationalbanks could exercise the fiduciary powers granted in section 92a(a) notwithstanding state lawJFN5] Fourth, inthe state law condition, Congress has made national banks' power to act in fiduciary capacities contingent uponstate law. But, [mally, Congress has limited the state law condition by declaring that if a state allows its state institutions to exercise fiduciary powers, then national banks may exercise those powers, notwithstanding statelaws to the contrary.2. The authority for a national bank to offer fiduciary services in a state is the same whether the bank isin-state or out-of-state.Your proposal raises one fundamental question: if a national bank proposes to offer fiduciary services and hastrust offices both in its home state, i.e., the state of its main office, and in other states, in what manner do thestate laws of the other states allowing or limiting the exercise of fiduciary powers apply to such a national bankunder section 92a? In particular, if one of the other states has laws prohibiting or limiting out-of-state fiduciariesfrom conducting fiduciary business in that state and the state law treats an out-of-state national bank as an outof-state fiduciary, may that state law be applied to an out-of-state national bank such as the proposed trust bank?We believe section 92a clearly establishes that such state laws may not prevent national banks from exercisingfiduciary powers in a state in which state law permits the state's banks, trust companies or other corporations toexercise such powers. This determination was set into section 92a in 1918, and it applies equally to state lawslimiting out-of-state national banks as it does to state laws limiting in-state national banks. This result is logically dictated by the statute and is consistent with similar provisions elsewhere.a. Section 92a gives no greater authority to state laws limiting out-aI-state fiduciaries than to other state laws.*11 Simply as a matter of pure logic under the given statutory framework, state laws limiting out-of-state fiduciaries must be subject to the same standards as other state laws. On the one hand, a state law restricting outof-state fiduciaries from conducting fiduciary business in the state could apply to an out-of-state national bankonly if the state law is within the authority conveyed upon the states in the state law condition in section 92a(a).If this type of state law were not within the state law condition, then it could not apply to restrict national banksfrom exercising their congressionally authorized fiduciary powers. And so, national banks from other statescould conduct fiduciary business in the state.lFN6]And, on the other hand, if a state law restricting out-of-state fiduciaries is within the state law condition in section 92a(a), then it is also within the limitation of section 92a(b). The provision in section 92a(b) was expresslyadded to limit the scope of the state law condition. It is linked to the state law condition in its very language. Itmandates that if a state permits its .state institutions to exercise fiduciary powers, then national banks' exercise ofthem is not in contravention of state law, even if there are other state laws that purport to bar national banks.Thus, even if a state has laws barring out-of-state fiduciaries, those laws do not bar out-of-state national banks ifthe state permits its state institutions to exercise fiduciary powers.We believe this conclusion is inescapable under the statute. In order to find that state laws barring out-of-state


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fiduciaries in such a state (i.e., one that permitted its state institutions to exercise fiduciary powers) could be applied to out-of-state national banks, we would have to conclude that a state law could both apply because of thestate law condition and yet escape the rule of construction Congress placed on the state law condition. Such aninterpretation of the statute is certainly not a "plain" one and indeed is highly implausible. By contrast, the interpretation that section 92a applies to these state laws in the same way it applies to others arises directly from thestatutory language.Since section 92a(b) was enacted to limit the state law condition, the clear meaning is that every purported instance of the exercise of fiduciary powers by a national bank being in contravention of state law is subjected tothe protective standard added in section 92a(b). Textually, the introductory phrase ("whenever the laws of suchstate ...") is a reference to that state the laws of which it is asserted the grant of fiduciary powers would be incontravention of. That is, "such state" is the state referred to in the state law condition ("when not in contravention of state or local law"). The phrase may also be a reference to "the state in which the national bank is located" in the immediately preceding sentence. But all three of these terms refer to the same state: the state inwhich the national bank proposes to engage in fiduciary activities. In other words, the same level of contact witha state that is sufficient to make a national bank potentially subject to that state's laws under the state law condition in section 92a(a) also makes the bank located in that state for other section 92a(a) purposes.EFN7J*12 Moreover, Congress's purpose in adding section 92a(b) was to prevent states from preventing national banksfrom exercising fiduciary powers through prohibitory laws while allowing their own state banks and trust companies to have these powers. The statutory language encompasses all national banks in this protection from astate's discrimination. It is not limited only to national banks headquartered in the state. If the exercise of fiduciary powers by a national bank is asserted to be in contravention of state law, the standard of section 92a(b) applies whether the alleged contravention is of a state law barring all national banks or of a state law barring onlysome national banks (e.g., out-of-state national banks). Nothing in the statute or legislative history suggests thatstate laws that bar only a certain class of national banks are treated differently. Indeed, if section 92a is interpreted to allow states to discriminate against out-of-state banks but not against in-state banks, that would make itan instance of Congress allowing the states to discriminate in an area of interstate commerce.EFN8J But such action on Congress's part is not lightly inferred. See, e.g., Wyoming v. Oklahoma, 502 U.S. 437, 458 (1992); Mainev. Taylor, 477 U.S. 131, 139 (1986). There is no evidence of such congressional intent here, and so we believesection 92a may not be construed to allow such discrimination against out-of-state national banks.Thus, in our view, with respect to a national bank that proposes to offer fiduciary services in more than onestate, section 92a applies equally for each and every state. The use of a singular term in section 92a ("wheneverthe laws of such state ..."; "the laws of the state in which the bank is located") does not imply that Congress intended that the provisions of section 92a would apply only to one state for each national bank. Generally, legislative terms which are singular in form may apply to multiple subjects or objects, and plural terms to single. See1 U.S.c. 1; First National Bank in St. Louis v. Missouri, 263 U.S. 640, 657 (1924); Johnston v. Penrod DrillingCo. 803 F.2d 867, 870 (5th Cir. 1986). See generally 2A Sutherland Statutes and Statutory Construction 47.34(5th ed. 1992). In particular, there is no historical basis to attach significance to the use of singular nouns in the'National Bank Act. See R. Robertson, The Comptroller and Bank Supervision: A Historical Appraisal 82 (1968).Moreover, the Supreme Court rejected such an interpretation when construing an earlier version of section 94,and said the use of the singular noun in the statute was not persuasive. Citizens & Southern National Bank v.Bougas, 434 tLS. 35,45 (1977).b. The state-by-state application ofsection 92a is consistent with other statutes.


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Thus, section 92a authorizes national banks to offer fiduciary services in multiple states, but then conditions theexercise of that power within each state on a state-by-state basis under the same test: is the exercise of fiduciarypowers by national banks prohibited by state law, and even if it is, does that state permit its state institutions toexercise these powers or not. This result is consistent with other banking statutes that treat a single national bankas present in different states for purposes of that statute.*13 Other federal statues also refer to the places where a national bank is "located," "situated," "existing," or ofwhich it is a "citizen." [FN9] The United States Supreme Court has made clear that the locational language inthese statutes should be flexibly construed, taking full account of changes in the banking system, .to suit the underlying purposes of each provision, and has emphasized that "[t]here is no enduring rigidity about the word'located'" as it is used in these provisions. Citizens & Southern National Bank v. Bougas, 434 U.S. at 44. Hencethe Supreme Court, lower federal courts, and the OCC consistently have held that, for purposes of these statutes,a national bank is not located only in the place of its main office but can be "located," "situated" or "existing"in, or be a "citizen" of, multiple cities, counties, or states. See, e.g., Bougas (venue); Fisher v. First NationalBank of Omaha, 548 F.2d 255 (8th Cir. 1977) (interest rates); Fisher v. First National Bank of Chicago, 538F.2d 1284 (7th Cir. 1976), cert. denied, 429 U.S. 1062 (1977) (interest rates); Seattle Trust & Savings Bank v.Bank ofCal(fornia N.A., 492 F.2d 48 (9th Cir. 1974), cert. denied, 419 U.S. 844 (1974) (establishing branches);Bank of New York v. Bank of America, 853 F.Supp. 736 (S.D.N.Y. 1994) (citizenship for diversity jurisdiction);Connecticut National Bank v. Iacono, 785 F.Supp. 30 (D.R.I. 1992) (original jurisdiction); Decision on the Applications of American Security Bank, N.A., Washington, D.C., and Maryland National Bank, Baltimore, Maryland (OCC Corporate Decision No. 94-05, February 4, 1994), reprinted in [1993-1994 Transfer Binder] Fed.Banking L. Rep. (CCH) 89,695 (establishing branches, and mergers with other banks); OCC Interpretive Letter.No. 686 (September 11, 1995), reprinted in Fed. Banking L. Rep. (CCH) 81-001 (interest rates); OCC Interpretive Letter No. 654 (December 19, 1994), reprinted in [1994-95 Transfer Binder] Fed. Banking L. Rep.( C C H ) ~ 83,602 (directors' residency qualification).In these other instances, just as with section 92a here, the statutes were similarly applied to the bank on a stateby-state basis. The bank was considered present in each state - through a branch, another type of office, ormerely doing business - and treated under the statute in the same manner as any other national bank in the state.Moreover, in the recent interstate branching statute Congress has provided a similar system for the application ofstate law to the interstate branches of national banks: within each host state, a branch of an out-of-state nationalbank is treated as an in-state national bank for purposes of applying that state's laws. See Riegle-Neal InterstateBanking and Branching Efficiency Act of 1994, Pub. L. No. 103-328, 102(b)(I), 108 Stat. 2338, 2350 (1994)(codified at 12 U.S.c. 36()(2. These Riegle-Neal Act provisions do not directly apply to the authority to havetrust powers, since the authority to have trust powers is governed by federal law in section 92a, not state laws.Nevertheless, since Congress has created a similar rule for the general applicability of state law to nationalbanks' interstate branches when state law is applicable to national banks, it is reasonable to interpret section 92aas applying in a similar state-by-state manner for national banks' interstate fiduciary activities. Indeed, if theRiegle-Neal Act's applicable law provisions do apply to how state law applies to the fiduciary activities of anout-of-state national bank at a branch in a host state, supplementing section 92a in this regard, then clearly a hoststate could not prevent an out-of-state national bank from providing fiduciary services at a host state branch onthe same basis as an in-state national bank. In many respects, our interpretation of section 92a simply makes thetreatment of fiduciary activities at an interstate trust office the same as it indisputably would be at an interstatebranch. FNI 0]


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*14 This interpretation of the statute also fosters desirable public policies. First, every national bank offering fiduciary services in a given state will have the same authority to conduct fiduciary business. A national bank conducting fiduciary business and administering trust assets at a trust office will be subject to the same standards irrespective of whether the office is part of an in-state national bank or an out-of-state national bank. Second,there will be a level playing field for enhanced competition in the provision of fiduciary services within eachstate, because more potential providers will be able to compete on similar terms.We are aware that one federal district court reached a result inconsistent with this analysis. In Americall TrustCompany, inc. v. South Carolina State Board of Bank Control, 381 F.Supp. 313 (D.S.C. 1974) (three-judgecourt), the court upheld the application to North Carolina National Bank of South Carolina statutes that barredfrom South Carolina fiduciary appointments any corporation domiciled or licensed to do business in any statecontiguous to South Carolina. This court held that a state could bar an out-of-state national bank from acting infiduciary capacities in the state, even though its state institutions were permitted to act in those capacities.However, North Carolina National Bank did not raise the issue that section 92a preempted the South Carolinalaw; instead, it based its case on the due process and commerce clauses. In rejecting the commerce clause argument, the court viewed section 92a as a statute in which Congress has allowed the states to impose burdens oninterstate commerce: "Since South Carolina's ban on foreign testamentary trustees operates equally against stateand national banks located in North Carolina, the exclusion of North Carolina National is not an impermissibleburden on interstate commerce; Congress has allowed it by enacting section 92a." 381 F.Supp. at 323.We believe this reasoning and result were clearly mistaken. First, it completely ignored the statutory languageand legislative history of sections 92a(a) and 92a(b) discussed earlier, and instead based its construction of thestatute solely on an oversimplified generalization that the statute is intended to create "competitive equality."Second, in using the state law condition to reach its result, the court misused the limit placed on it in section92a(b). Instead of comparing how a state treats national banks with how it treats its own banks, the court compared how South Carolina treated North Carolina state banks and North Carolina national banks. Third, there isno evidence in the language or legislative history of section 92a that Congress intended to grant the states thepower to discriminate in interstate commerce in trust services. But it is well settled that Congress must manifestits unambiguous intent before a federal statute will be read to authorize state action that would otherwise be inviolation of the commerce clause. See, e.g., Wyoming v. Oklahoma, 502 U.S. 437, 458 (1992); Maine v. Taylor,477 U.S. 131, 139 (1986).

Documents

Brief of Amicus Curiae State of Utah