Nationsbank of North Carolina, N.A. v. Variable Annuity Life Insurance Company

PETITIONER: Nationsbank Of North Carolina, N. A., et al.
RESPONDENT: Variable Annuity Life Insurance Co. et al.
LOCATION: U.S. District Court for the District of New Mexico

DOCKET NO.: 93-1612
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 513 US 251 (1995)
ARGUED: Dec 07, 1994
DECIDED: Jan 18, 1995

ADVOCATES:
David Overlock Stewart - on behalf of the Respondents
David O. Stewart - for the respondents
Edward C. DuMont - on behalf of the Petitioners Ludwig, et al
Steven S. Rosenthal - on behalf of the Petitioners NationsBank, et al

Facts of the case

Question

Media for Nationsbank of North Carolina, N.A. v. Variable Annuity Life Insurance Company

Audio Transcription for Oral Argument - December 07, 1994 in Nationsbank of North Carolina, N.A. v. Variable Annuity Life Insurance Company

Audio Transcription for Opinion Announcement - January 18, 1995 in Nationsbank of North Carolina, N.A. v. Variable Annuity Life Insurance Company

Ruth Bader Ginsburg:

The second opinion, I will announce covers the consolidated cases NationsBank v. Variable Annuity Life Insurance Co. and Ludwig v. Variable Annuity Life Insurance Co.

We hold in this unanimous decision that national banks may serve as agents in the sale of annuity.

Annuities are contracts under which the issuer receives premiums from the purchaser in exchange for a continuing series of payments.

The Comptroller of the Currency, who is the officer Congress charged with superintendence of national banks, determines that Federal Law permits annuity sales as a service to bank customers.

Variable Annuity Life Insurance Company, a company engaged in the sale of annuities challenged the Comptroller's decision.

The United States District Court for the Southern District of Texas upheld Comptroller's ruling, but the Court of Appeals for the Fifth Circuit disagreed and declared that the controller had incorrectly interpreted the National Bank Act.

We granted the petitions for review of the Comptroller and Nations Bank, the national bank given permissions to broker annuities and we now reverse the decision of the Fifth Circuit.

When the interpretation of an expert administrator such as the Comptroller fills a statutory gap in a way that is reasonable in light of Congress’ revealed design Courts respect the administrator’s judgment.

The Comptroller we conclude reasonably typed annuity sales as incidental to the business of banking under the relevant provision of the National Bank Act.

Further, he reasonably classified annuities as investments not insurance under the statutory prescription in point.

As the Comptroller found by making an initial payment in exchange for a future income stream, the bank customer who purchases an annuity from the bank is deferring consumption, setting aside money for retirement, future expenses, a trip around the world or a rainy day.

For her, an annuity is like putting money in a bank account, a debt instrument, or a mutual fund and attending to those investments for customers is plainly within “the business of banking.”

As the comptroller further found, the customer’s investment objectives distinguished annuity from insurance, the primary purpose of which is to indemnify loss, because the comptroller’s reading of a national bank Act, is reasonable.

We defer to that reading.