## Facts

- NCNB Corporation, a North Carolina bank holding company, owned North Carolina National Bank, a national bank with a trust department that served South Carolina residents, including as testamentary trustee under South Carolina wills.
- South Carolina enacted legislation restricting who could serve as executor, administrator, or testamentary trustee for estates of South Carolina decedents, including restrictions tied to corporate domicile and ownership.
- To conduct trust business in South Carolina, NCNB formed American Trust Company, Inc., a South Carolina corporation.
- Federal banking law required NCNB to obtain Federal Reserve Board approval before American Trust could commence trust operations; NCNB applied for approval.
- While the application was pending, South Carolina enacted additional provisions that effectively disqualified American Trust from serving in key fiduciary roles because it was owned by an out-of-state parent corporation.
- The Federal Reserve Board approved the application only “to the extent permitted by South Carolina law,” leaving state restrictions as the operative barrier.
- The challenged provisions included S.C. Code § 8-580 and portions of §§ 19-472 and 19-494, which, as applied, excluded American Trust and similar entities from fiduciary appointments based on foreign corporate ownership.

## Issues

1. Whether South Carolina violated the Equal Protection Clause by disqualifying a South Carolina-chartered, locally regulated trust company from serving as executor, administrator, or testamentary trustee solely because it was owned or controlled by an out-of-state corporation.
2. Whether the ownership-based exclusion in S.C. Code § 8-580 and portions of §§ 19-472 and 19-494 had a rational relationship to legitimate state interests in regulating fiduciary services and estate administration.

## Decision

- The three-judge district court held that the statutory scheme, insofar as it barred American Trust and similarly situated entities from fiduciary service based solely on out-of-state ownership, violated the Equal Protection Clause.
- The court declared the challenged provisions unconstitutional to the extent they imposed that ownership-based disqualification.
- The court enjoined state officials from enforcing the provisions to bar American Trust from acting as executor, administrator, or testamentary trustee solely because of its foreign corporate parentage.

## Legal Principles

- Economic and business classifications generally receive rational basis review under the Equal Protection Clause; a classification must be rationally related to a legitimate governmental interest and not be arbitrary.
- A state may regulate fiduciary and trust services, but it may not disqualify an otherwise qualified, locally incorporated and locally regulated entity solely because its parent corporation is domiciled out of state absent a rational connection between that fact and the state’s asserted objectives.
- When a state-chartered entity is subject to the state’s regulatory control, exclusion based only on out-of-state ownership is presumptively suspect under rational basis review if it functions as protectionism rather than serving a regulatory purpose.

## Conclusion

The court invalidated and enjoined South Carolina’s ownership-based restrictions as applied to a South Carolina-chartered trust company, concluding that disqualifying it from fiduciary appointments solely due to out-of-state corporate ownership lacked a rational relationship to the state’s asserted regulatory interests and denied equal protection.


Am. Tr. Co., Inc. v. S.C. State Bd. of Bank Control, 381 F. Supp. 313 (D.S.C. 1974)