Bechtel v. Liberty Nat. Bank

• Decision Date: 12 April 1976
• Docket Number: No. 74-2236,74-2236
• Citation: 534 F.2d 1335
• Parties: Harry BECHTEL and Cathleen Bechtel, husband and wife, Appellees, v. LIBERTY NATIONAL BANK, a National Banking Association et al., Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1335

534 F.2d 1335 Harry BECHTEL and Cathleen Bechtel, husband and wife, Appellees,
v.
LIBERTY NATIONAL BANK, a National Banking Association et
al., Appellants. No. 74-2236. United States Court of Appeals,
Ninth Circuit. April 12, 1976.

Page 1337

John P. Frank (argued), of Lewis & Roca, Phoenix, Ariz., for appellants.

Robert J. Welliever (argued), of Welliever, Smith & McVay, Phoenix, Ariz., for appellees.

OPINION

Before BARNES, ELY, and WALLACE, Circuit Judges.

ELY, Circuit Judge:

In March, 1971, appellee (Bechtel), ¹ the buyer of a 6,460-acre farm in Cochise County, Arizona, instituted this suit for fraud in the Arizona Superior Court for Maricopa County against Liberty National Bank (now Lovington National Bank), a New Mexico

Page 1338

corporation, Roy Jones, et ux., ² and Winford Carlile, et ux. ³ Bechtel claimed that those defendants, appellants here, had made material and false representations concerning the production capacity and lift of three irrigation water wells on the property. ⁴ The bank, which had acquired ownership of the farm in early 1967 by means of a "deed in lieu of foreclosure" executed by the former owner, had entered into a contract of sale in November, 1967, with Bechtel and two partners, Donald Davidson and George Wake, in which the buyers agreed to a purchase price of $245,000, including a down payment of $25,000.

In the fall of 1968, after a crop failure attributed to lack of sufficient water, Bechtel took over all the obligations and assets of the farm from his two partners. Lacking funds to plant a 1969 crop, he leased the farm to one Bookwalter for three years at $35,000 per year. At the same time, one year after Bechtel and his partners had bought the property for $245,000, Bechtel and Bookwalter executed a contract under which Bookwalter acquired an option to purchase the property for $395,000. However, Bookwalter's crops failed, this failure also attributed to an inadequate supply of water, and in late 1969, Bookwalter abandoned the farm. Thereafter, Bechtel obtained a $45,000 personal loan from Lovington National Bank, secured by the Bookwalter lease, in order to meet his, Bechtel's, 1970 payments on the land and some of his other expenses. ⁵ He subsequently turned over to the bank $20,000 that he had obtained in compromise of a claim based upon Bookwalter's alleged breach of his lease agreement.

When Bechtel's payments on the farm became due in early 1971, he was unable to meet them, whereupon the bank instituted forfeiture proceedings against him in Arizona, obtained an order from the Arizona Superior Court for Cochise County appointing a receiver for the land, and also secured a judgment against Bechtel for the amount of the debt evidenced by the personal note. On March 4, 1971, before completion of the forfeiture was recorded in Cochise County on May 14, 1971, appellee filed his suit in the state court. On March 16, 1971, appellants removed the action to the District Court for the District of Arizona, pursuant to 28 U.S.C. § 1441. Then, on April 29, 1971, they moved to dismiss the action for the claimed failure of the complaint to state a claim upon which relief could be granted and for failure to join Donald Davidson and George Wake as indispensable parties. On July 8, 1971, prior to a hearing on this motion, the bank filed an amended motion to dismiss, adding as a ground for dismissal that under 12 U.S.C. § 94, there was lack of venue. At a hearing conducted on November 22, 1971, the District Court denied the motion, holding that the bank had waived its claim in respect to venue. The case proceeded to trial in March, 1974. The jury

Page 1339

found for appellee and assessed compensatory damages in the amount of $260,000 against the bank and also against Carlile and his wife individually. In a separate, special verdict, the jury found that no punitive damages were awardable. Judgment was entered pursuant to the jury verdict, and this appeal followed.

Appellants urge several grounds for reversal: (1) improper venue as to the bank; (2) failure to prove, as to both the bank and Carlile, all the requisite elements of fraud under Arizona law; and (3) failure to apply the proper measure of damages under Arizona law.

Having carefully reviewed the entire record in this case, we have concluded that the finding of liability in favor of Bechtel must be upheld. Under proper instructions, the jury resolved the necessary questions germane to liability, and we cannot fairly say that the evidence was insufficient to support its determination. ⁶ We are convinced, however, that the suit against the bank should have been dismissed for lack of venue. Moreover, we have an even stronger conviction that the amount of damages awarded was grossly excessive, based on the application of improper standards without adequate support in the proof, and consequently unsustainable. We note in this connection that the jury refused to award exemplary damages, thus finding by implication that appellants had not engaged in oppressive conduct.

VENUE

The appellant bank is a national bank. In suits against such institutions, venue is fixed by 12 U.S.C. § 94, which provides:

Actions and proceedings against any association under this chapter (National Banks) may be had in any district or Territorial court of the United States held within the district in which such association may be established, or in any State, county, or municipal court in the county or city in which said association is located having jurisdiction in similar cases.

The statute is mandatory, Mercantile National Bank v. Langdeau, 371 U.S. 555, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963), and has generally been construed narrowly and strictly. See, e. g., Helco, Inc. v. First National City Bank, 470 F.2d 883 (3d Cir. 1972); First National Bank of Boston v. United States District Court, 468 F.2d 180 (9th Cir. 1972); United States National Bank v. Hill, 434 F.2d 1019 (9th Cir. 1970); Nevada National Bank v. Superior Court, Los...