## Facts

- Indiana law permitted a bank branch only if it was (1) in the same county as the main office, (2) “located in a city or town,” and (3) in a city or town with no other bank.
- A national bank applied to the Comptroller of the Currency to open a branch about one-eighth mile outside the corporate limits of Winamac, Indiana, in an unincorporated area along a highway.
- The surrounding locality had several commercial operations (including a veterinary clinic, plant nursery, farm-supply store, and cattle lot) and roughly 25 homes, but no general retail businesses serving daily needs and no recognized community name.
- The Comptroller approved the branch, concluding the site was in a “town” under Indiana’s statute.
- A nearby state-chartered bank operating in Winamac sued for declaratory and injunctive relief, arguing the approval violated state branching limits incorporated by federal law.
- The district court remanded for a fuller agency explanation; after the Comptroller reaffirmed the “town” finding, the district court granted summary judgment to the Comptroller and the national bank.

## Issues

1. Whether the Comptroller’s determination that the unincorporated locality constituted a “town” under Indiana branch-banking law was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law under the APA.
2. How federal branching law, which conditions national bank branching on state authorization, constrains the Comptroller’s interpretation and application of state-law branching prerequisites.

## Decision

- The Seventh Circuit affirmed summary judgment for the Comptroller and the national bank.
- The court held the Comptroller’s conclusion that the proposed site was in a “town” under Indiana law was not arbitrary or capricious and was supported by the administrative record.
- The court declined to substitute its judgment for the agency’s on a mixed question of law and fact where state law did not clearly foreclose the Comptroller’s interpretation.

## Legal Principles

- National bank branching is permitted only to the extent state law authorizes comparable branching by state banks; the Comptroller may not approve a branch if state-law prerequisites are unmet.
- In applying state branching conditions through federal law, the Comptroller’s determinations are reviewed under the APA’s deferential “arbitrary and capricious” standard.
- When state branching statutes use open-ended terms (e.g., “city or town”) without a precise definition, the Comptroller may reasonably apply a functional, fact-based approach, including whether the area has a sufficient “nucleus” of residential and commercial activity.
- Courts uphold the Comptroller’s branch-approval decisions when the agency considered relevant factors, grounded its conclusion in record evidence, and did not act contrary to clear state-law commands.

## Conclusion

The Seventh Circuit upheld the Comptroller’s approval of a national bank branch, finding that Indiana law did not clearly restrict “town” to incorporated places and that the Comptroller reasonably treated an unincorporated area with clustered residences and commercial activity as a “town” under deferential APA review.


First Union Bank & Trust Co. v. Heimann, 600 F.2d 91 (7th Cir. 1979)