First National Bank v. Fellows Ex Rel. Union Trust Co.

1917-06-11

Headline: Federal law allowing national banks to act as trustees and estate administrators is upheld, and a state court’s ruling blocking those powers is overturned, making it easier for national banks to offer trust services when state law permits.

Holding: In the case, the Court reversed the state decision and held that Congress may authorize national banks to act as trustees and estate administrators when state law permits, and state courts may decide those state-law questions.

Real World Impact:

Allows national banks to seek permits to provide trust and estate services where state law allows.
Authorizes state courts to decide if federal bank activities conflict with state law.

Topics: national banks, trust services, state law limits, federal versus state authority

Summary

Background

The dispute involves a national bank in Bay City that received a Federal Reserve Board permit to act as trustee, executor, administrator, and registrar of securities. Competing Michigan trust companies asked the State Attorney General to challenge the bank’s authority through a quo warranto action in Michigan’s highest court. That court ruled the federal statute granting those powers was unconstitutional and enjoined the bank.

Reasoning

The Supreme Court reviewed whether Congress could authorize national banks to exercise those trust powers and whether a state court could decide if the powers conflicted with state law. Relying on earlier cases about implied federal powers for national banks, the Court said Congress can attach private functions to a federal bank when they are relevant to the bank’s operations, especially where state law already permits similar activities. The Court also held that because the statute grants the powers only "when not in contravention of State or local law" and subjects them to Reserve Board rules, state courts may determine whether state law bars the activity. The Court reversed the Michigan decision.

Real world impact

National banks may obtain Federal Reserve permits to offer trust and estate services where state law allows, and state courts can test whether those services violate state law. The case sends disputes about state-law limits on such federal permissions back to state courts for resolution.

Dissents or concurrances

Justice Van Devanter dissented, arguing a quo warranto against a federal corporation must be brought in federal court or by the United States, and that the state proceeding lacked jurisdiction.