## Facts

- Independent motor-vehicle leasing companies sued national banks (and their leasing subsidiaries) and the Comptroller of the Currency over bank-sponsored motor-vehicle leasing programs.
- The banks’ programs commonly operated through arrangements with car dealers: the dealer originated customer leases under an understanding that the bank (or subsidiary) would lease the vehicle to the customer.
- Lessees generally bore operating costs and operational risks, while the bank’s economic role was to provide financing backed by the leased vehicle.
- The Comptroller had issued interpretive rulings (including regulations codified in 12 C.F.R.) stating that national banks may engage in personal-property leasing as part of their “incidental powers” under 12 U.S.C. § 24 (Seventh).
- The plaintiffs sought declaratory and injunctive relief to invalidate the Comptroller’s authorization as applied to motor-vehicle leasing and to bar the banks from continuing the activity.
- The district court held the banks’ motor-vehicle leasing was not authorized by § 24 (Seventh) and entered judgment restricting the banks’ leasing operations.
- The banks and the Comptroller appealed.

## Issues

1. Whether personal-property leasing, particularly motor-vehicle leasing conducted by national banks and their subsidiaries, falls within national banks’ “incidental powers” under 12 U.S.C. § 24 (Seventh).
2. Whether the Comptroller’s interpretive rulings authorizing bank personal-property leasing are a valid construction of § 24 (Seventh).
3. Whether the banks’ leasing programs, as structured, are sufficiently connected to traditional banking functions (e.g., secured credit extension) to qualify as part of the “business of banking.”

## Decision

- The Ninth Circuit reversed the district court in substantial part.
- The court upheld the Comptroller’s interpretation permitting national banks to engage in personal-property leasing as within § 24 (Seventh).
- The court held that the challenged motor-vehicle leasing programs, as structured, were within national banks’ incidental powers because they functioned as secured financing transactions rather than operation of a general rental business.
- The district court’s restrictions on the banks’ leasing activities were largely set aside.

## Legal Principles

- Under 12 U.S.C. § 24 (Seventh), “incidental powers” may include modern financial arrangements that are functionally related to core banking activities, even if not expressly enumerated in the statute.
- When evaluating whether an activity is within the “business of banking,” courts may look to the transaction’s economic substance; a lease program that operates as secured credit extension can qualify as a banking function.
- Courts may give substantial weight to the Comptroller of the Currency’s reasonable interpretive rulings concerning permissible national bank activities under the National Bank Act.
- Competitive impact on nonbank firms does not, by itself, determine statutory validity; the central inquiry is whether the activity is sufficiently tied to authorized banking functions and risk characteristics.

## Conclusion

The Ninth Circuit held that the Comptroller could permissibly authorize national banks to conduct personal-property leasing and that the banks’ motor-vehicle leasing programs, structured as secured credit transactions with lessees bearing operating risks, fell within national banks’ incidental powers under 12 U.S.C. § 24 (Seventh).


M & M Leasing Corp. v. Seattle First Nat’l Bank, 563 F.2d 1377 (9th Cir. 1977)