Central Bank v. Superior Court

• Decision Date: 28 February 1973
• Court: California Court of Appeals Court of Appeals
• Parties: CENTRAL BANK, NATIONAL ASSOCIATION, a national banking association, Petitioner, v. SUPERIOR COURT FOR the COUNTY OF SACRAMENTO, Respondent; DESERT PALMS LANDS, a limited partnership, et al., Real Parties in Interest. CENTRAL BANK, N.A. and United Communities Corporation, Petitioners, v. SUPERIOR COURT FOR the COUNTY OF SACRAMENTO, Respondent; RANCHO RIVIERA INVESTMENTS, a limited partnership, Real Parties in Interest. Civ. 13596, 13742.

Page 912

106 Cal.Rptr. 912

30 Cal.App.3d 962

CENTRAL BANK, NATIONAL ASSOCIATION, a national banking association, Petitioner, v. SUPERIOR COURT FOR the COUNTY OF SACRAMENTO, Respondent;

DESERT PALMS LANDS, a limited partnership, et al., Real Parties in Interest.

CENTRAL BANK, N.A. and United Communities Corporation, Petitioners, v. SUPERIOR COURT FOR the COUNTY OF SACRAMENTO, Respondent;

RANCHO RIVIERA INVESTMENTS, a limited partnership, Real Parties in Interest.

Civ. 13596, 13742.

Court of Appeal, Third District, California.

Feb. 28, 1973.

Hearing Denied April 25, 1973.

FitzSimmons & Hawthorne, Oakland, for petitioners.

Rogers, Majeski, Kohn, Bentley & Wagner, Redwood City, Miller, Starr & Regalia, Oakland, Leroy F. Parker, Stockton, Dahl, Hefner, Stark, Marois & James, Sacramento, Christenson, Hedemark & Langum, San Jose, Frank Cliff, Palo Alto, Cresswell, Martin & Lamborn, Oakland, for real parties in interest.

FRIEDMAN, Acting Presiding Justice.

In these two mandate proceedings Central Bank, a national bank, invokes section 94 of title 12, United States Code, which provides: 'Actions and proceedings against any association under this chapter 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.'

Having been named as one of a group of defendants in two separate but similar lawsuits in the Superior Court of Sacramento County, the bank moved for changes of venue to Alameda County, the location of its main office and principal place of business. The motions were denied and the bank filed the present actions, requesting us to order the changes of venue. (Code Civ.Proc., $ 400.) In this opinion we consolidate the two mandate proceedings for decision.

The venue direction of section 94 is mandatory. (Mercantile Nat. Bank v. Langdeau (1963) 371 U.S. 555, 562, 83 S.Ct. 520, 9 L.Ed.2d 523; Monarch Wine Co. v. Butte (1952) 113 Cal.App.2d 833, 839, 249 P.2d 291.) It does not extend to local, In rem actions. Casey v. Adams (1880) 102 U.S. 66, 26 L.Ed. 52.) A number of decisions adhere to the proposition that a national bank is 'located' only at its principal place of business as set forth in its charter. ¹ The venue privilege of national banks is a personal one, which may be waived; state courts are competent to inquire and decide whether a waiver has occurred. ² Some courts hold the bank to an implied waiver by local participation in the transactions giving rise to the lawsuit; others reject that position. ³ Some view the establishment of a branch bank in the locality (usually in combination with other local activities) as a waiver of the right to be sued elsewhere. ⁴ Other courts disagree, holding that expansion into branch banking activity does not debilitate the bank's privilege to be sued only at its home office. ⁵

The briefs debate two questions: first, whether the superior court lawsuits are local or transitory; second, whether the bank waived its venue privilege. In these actions separate groups of plaintiffs allege that they were victims of a fraudulent 'investment conspiracy,' resulting in their purchase of overvalued limited partnership interests in separate apartment house developments or in the underlying real estate. The defendants are the project developers, real estate brokers and financing institutions. The litigation files reveal that Central Bank had originally financed construction of the apartment houses and had held first deeds of trust and assignments of rent as security. The bank sold the loans and assigned its security interests to other financial institutions before the lawsuits were filed. The plaintiffs seek receiverships, restraints on the exercise of default privileges, rescission of their purchase of participating interests, adjudication of title to the property, general and punitive damages. These various kinds of relief are sought from Central Bank as well as the other defendants.

The lawsuits are not local, not In rem, but transitory. An In rem action seeks to adjudicate interests in property or in a status; an In personam suit, to establish personal liability. (Estate of Radovich (1957)48 Cal.2d 116, 120, 308 P.2d 14; Title etc. Restoration Co. v. Kerrigan (1906) 150 Cal. 289, 308, 88 P. 356.) Primary objectives of the present lawsuits are damages and rescission of the purchase of limited partnership interests. One segment of the prayer, seeking settlement of the parties' property interests, is subordinate to the main relief and does not alter the lawsuits' essentially transitory character. (Ebeling v. Continental Illinois Nat. Bank & Trust Co., supra, 272 Cal.App.2d at p. 727, 77 Cal.Rptr. 612.) The plaintiffs want to rid themselves of property interests, not establish them. 'By its very nature, this is a considerably different kind of suit from the one to determine interests in property at its situs which was involved in Casey v. Adams.' (Michigan Nat. Bank v. Robertson, supra, 372 U.S. at p. 594, 83 S.Ct. at p. 915.)

A national bank's venue privilege may be waived by lack of timely assertion. (First Nat. Bank of Charlotte, north Carolina v. Morgan (1889) 132 U.S. 141, 10 S.Ct. 37, 33 L.Ed. 282.) Early in both lawsuits Central Bank and the other defendants stipulated to the appointment of a receiver to manage the apartment houses, receive rents and pay current obligations. In response to the stipulation, the Sacramento Superior Court appointed a single receiver to take charge of the properties involved in both lawsuits. The plaintiffs view the bank's assent to the Sacramento court's receivership order as a waiver of its venue privilege. We decline so to hold. The bank was present in the lawsuit primarily to respond to the plaintiffs' damage claims. It had sold its security interests in the buildings, land and rents and had no real interest in the other parties' interim management concerns. The receivership was an orderly and sensible arrangement resolving a problem Pendente lite. Aside from preserving its venue position, the bank had no valid reason to burden the other parties or the court with resistance to the receivership. The courts should not transform this sensible, interim arrangement into a jurisdictional trap. The bank's participation in the stipulation did not waive its federally bestowed privilege.

We take judicial notice, as a matter of common knowledge in this locality, that Central Bank operates a branch bank in downtown Sacramento through which it conducts a general banking business in the County of Sacramento. (Cal.Evid.Code, § 452, subd. (g).) As we understand the facts, the Central Bank's main office in Alameda County, not its Sacramento branch, financed construction of the Sacramento apartment houses involved in the two lawsuits. Although independent of each other, the two kinds of activity--the conduct of a general banking business and financing the construction projects--might be viewed as a waiver of the statutory privilege. We prefer to base our decision on another ground. In our view section 94, properly construed, places the venue of actions against a national bank in any county where it has a branch for the conduct of its general banking business.

Leonardi v. Chase Nat. Bank, supra, 81 F.2d 19, is the leading case to the contrary (see fn. 5, Ante). The federal appellate court there denied that the Chase National Bank was 'established' in a federal court district embracing Brooklyn, where the bank had a branch; rather, the court held, the bank was established only in the federal court district which included Manhattan, the principal place of business fixed by the bank's charter. The Leonardi opinion relied primarily on two precedents: Manufacturers' Nat. Bank v. Baack (C.C.S.D.N.Y.1871) 16 Fed.Cas. p. 671, No. 9,052, which long antedated branch banking, and National City Bank v. Domenech (1st Cir. 1934) 71 F.2d 13, which dealt with a national bank's 'location' under a tax statute and had no connection with the congressional intent underlying section 94, the venue statute.

The federal Supreme Court has not considered the venue problem in the context of a branch banking situation. A number of other courts have uncritically followed the Leonardi doctrine. (See cases cited fns. 1 and 5, Ante.) That doctrine denies that a national bank is 'established' or 'located' wherever it establishes a branch office to conduct general banking business. In our view Leonardi and its progeny read the statute erroneously, ignore the realities of modern commercial practices and violate congressional intent. State courts are bound by the Federal Supreme Court's interpretation of federal statutes, but decisions of lower federal courts are merely persuasive and will not bind the state courts where their reasoning appears erroneous. ⁶

Section 94 refers to the geographic area within which a bank is 'established' or 'located.' The Leonardi decision construes the statute as though the quoted words refer to a single place, the bank's headquarters as conceived by its charter. Used in reference to a geographic locality, the two words denote no more than physical placement, unclouded by conceptualistic exhalations. The Leonardi opinion, we suggest, injects unnecessary ambiguity into a straightforward statute. For the sake of demonstration, one may hypothesize a measure of ambiguity, hence some need for interpretation. At that point statutory history and statutory purpose combine to illumine meaning, producing an interpretation at odds with Leonardi and similar decisions.

After the 1836 demise of the Second Bank of the United States, banking by nationally chartered banks was reinstituted by the National Banking Act of 1863, which in turn was replaced by the National Banking Act of 1864. (Mercantile Nat. Bank v. Langdeau, supra, 371 U.S. at...