Connecticut Nat. Bank v. Iacono, Civ.A. No. 91-0530L.

• Decision Date: 28 February 1992
• Docket Number: Civ.A. No. 91-0530L.
• Citation: 785 F. Supp. 30
• Parties: The CONNECTICUT NATIONAL BANK d/b/a Shawmut Bank of Rhode Island, formerly known as People's Bank, N.A., Plaintiff, v. E. Paul IACONO, Brendan P. Smith, Hugh J. Vaughan, and Leo J. Raymond Jr., Defendants.
• Court: U.S. District Court — District of Rhode Island

785 F. Supp. 30

The CONNECTICUT NATIONAL BANK d/b/a Shawmut Bank of Rhode Island, formerly known as People's Bank, N.A., Plaintiff, v. E. Paul IACONO, Brendan P. Smith, Hugh J. Vaughan, and Leo J. Raymond Jr., Defendants.

Civ.A. No. 91-0530L.

United States District Court, D. Rhode Island.

February 28, 1992.

Douglas J. Rose, McGovern, Noel, Falk, Pannone, Procaccini & O'Leary, Ltd., Providence, R.I., for plaintiff.

John D. Deacon, Flanders & Medeiros, Providence, R.I., for defendants.

MEMORANDUM AND ORDER

LAGUEUX, District Judge.

This matter is presently before the Court on the motion of defendant Leo J. Raymond Jr. to dismiss the action for lack of subject matter jurisdiction, pursuant to Fed.R.Civ.P. 12(b)(1). Defendant Raymond is a resident of Rhode Island.¹ Plaintiff Connecticut National Bank ("CNB") is a federally chartered bank with its principal place of business in Hartford, Connecticut. In its complaint CNB states that this Court has jurisdiction based upon 28 U.S.C. § 1332 because the parties are of diverse citizenship and the amount in controversy exceeds $50,000. Raymond challenges CNB's pleading of jurisdiction on the ground that CNB is a citizen of Rhode Island by virtue of its branch locations in Rhode Island, thereby destroying diversity of citizenship and precluding this Court from exercising jurisdiction over the case. For the reasons that follow, Raymond's motion to dismiss is granted.

I. BACKGROUND

The present action arises from a loan issued to defendants on October 3, 1988, by People's Bank, N.A. ("People's"), a national banking association with its main office in Johnston, Rhode Island and branch offices throughout Rhode Island. Defendants failed to make payments on the promissory note as they became due, and CNB, the current holder of the note, brought suit to recover the balance. CNB became the holder of the note after Shawmut National Corporation, the bank holding company that owned both People's and CNB, effected a complex merger to reorganize its holdings. As a result of the reorganization the offices of People's (renamed Shawmut Bank of Rhode Island in 1990) operate as branches of CNB in Rhode Island.

The issue before the Court is whether a national banking association is a citizen of the state in which it operates its branch offices or, as CNB contends, only where it maintains its principal place of business. After having heard arguments on the motion for dismissal, the Court took the matter under advisement. The motion is now in order for decision.

II. DISCUSSION

National banking associations have been granted limited access to federal courts by virtue of the following statute:

The district courts shall have original jurisdiction of any civil action commenced by the United States, or by direction of any officer thereof, against any national banking association, any civil action to wind up the affairs of any such association, and any action by a banking association established in the district for which the court is held, under chapter 2 of Title 12, to enjoin the Comptroller of the Currency, or any receiver acting under his direction, as provided by such chapter.

All national banking associations shall, for the purposes of all other actions by or against them, be deemed citizens of the States in which they are respectively located.

28 U.S.C. § 1348 (1988) (emphasis added). The purpose of § 1348 is to preclude a national banking association from claiming jurisdiction in the federal courts solely on the basis of its national charter. Burns v. American Nat'l Bank & Trust Co., 479 F.2d 26, 27 (8th Cir.1973). If, however, a national bank can establish diversity of citizenship between the parties, as well as the required amount in controversy, then a federal court may entertain the action. 28 U.S.C. § 1332 (1988).

Whereas § 1332(c)(1) explicitly delineates the citizenship of a corporation, § 1348 fails to clarify the citizenship of a national banking association. As one court stated, "for jurisdictional purposes, a national bank is a `citizen' of the state in which it is established or located, 28 U.S.C. § 1348)...." Cope v. Anderson, 331 U.S. 461, 467, 67 S.Ct. 1340, 1343, 91 L.Ed. 1602 (1947) (emphasis added). It is undisputed that a national banking association is a citizen of the state in which it maintains its principal place of business. Lee Constr. Co. v. Federal Reserve Bank, 558 F.Supp. 165, 170 (D.Md.1982); Landmark Tower Assocs. v. First Nat'l Bank, 439 F.Supp. 195, 196 (S.D.Fla.1977). Whether a national banking association can also be deemed a citizen of the state in which its branch offices are "located" is an issue that has rarely been discussed.

One case that has addressed this issue is American Surety Co. v. Bank of California, 44 F.Supp. 81 (D.Or.1941), aff'd, 133 F.2d 160 (9th Cir.1943). In American Surety Co. the defendant bank maintained branch offices in Oregon, where one of the plaintiffs resided. The bank contended that there was no diversity between the parties because both were citizens of Oregon. The District Court disagreed, holding that the bank was not a citizen of Oregon. 44 F.Supp. at 83. Analogizing the citizenship of a national banking association to that of a national corporation, the District Court stated that "a national bank should be considered as a citizen of the state where it has its principal place of business, irrespective of the fact that it has authorized branches in other states." Id. Accordingly, the District Court found that diversity jurisdiction existed. Id.

Although American Surety Co. appears to have settled the matter in 1943, this Court is not content to rely upon that holding because of an important Supreme Court decision in 1977 and a subsequent revision in the law regarding national banking associations.

Before 1982 the following statute governed venue in actions against national banking associations:

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.

12 U.S.C. § 94 (1982), amended by 12 U.S.C. § 94 (1988) (emphasis added). The federal courts universally agreed that a national banking association was "established" for federal-court venue purposes only at the place designated in its charter. See Northside Iron & Metal Co. v. Dobson & Johnson, Inc., 480 F.2d 798, 799-800 (5th Cir.1973); First Nat'l Bank v. United States Dist. Ct. for Cent. Dist. of Cal., 468 F.2d 180, 183 (9th Cir.1972); United States Nat'l Bank v. Hill, 434 F.2d 1019, 1020 (9th Cir.1970); Buffum v. Chase Nat'l Bank, 192 F.2d 58, 60 (7th Cir.1951), cert. denied, 342 U.S. 944, 72 S.Ct. 558, 96 L.Ed. 702 (1952); Leonardi v. Chase Nat'l Bank, 81 F.2d 19, 22 (2d Cir.), cert. denied, 298 U.S. 677, 56 S.Ct. 941, 80 L.Ed. 1398 (1936). The state courts, however, had reached differing conclusions regarding where a national banking association was "located." Some state courts determined that "established" and "located" were functionally synonymous, both terms indicating the principal place of business designated in the bank's charter. See Ebeling v. Continental Ill. Nat'l Bank & Trust Co., 272 Cal.App.2d 724, 726-27, 77 Cal.Rptr. 612, 615 (1969). Other state courts distinguished between the two words, holding that "established" meant only the place specified in the charter, whereas "located" meant anywhere that the bank maintained a branch office. See Holson v. Gosnell, 264 S.C. 619, 623, 216 S.E.2d 539, 540-41 (1975), cert. denied, 423 U.S. 1048, 96 S.Ct. 774, 46 L.Ed.2d 636 (1976). Still other courts held that a national bank presumptively waived the restriction of § 94 by maintaining a branch office beyond its charter site, thereby permitting a plaintiff to bring suit where the branch was "located." See Lapinsohn v. Lewis Charles, Inc., 212 Pa.Super. 185, 193, 240 A.2d 90, 94-95, cert. denied sub nom. First Camden Nat'l Bank & Trust Co. v. Lapinsohn, 393 U.S. 952, 89 S.Ct. 376, 21 L.Ed.2d 363 (1968).

The Supreme Court granted certiorari in Citizens & Southern National Bank v. Bougas, 434 U.S. 35, 98 S.Ct. 88, 54 L.Ed.2d 218 (1977), to resolve the inconsistencies among the state courts.²Id. at 37, 98 S.Ct. at 90. Considering the legislative history of § 94, the Court stressed that Congress could not have contemplated the modern system of banking, with its widespread branch offices, when it enacted the National Bank Act of 1864. Id. at 43, 98 S.Ct. at 93. Whereas "established" and "located" would have led to the same venue result in those early days, the Court recognized the distinction between the terms as they pertained to the modern system. Id. at 44, 98 S.Ct. at 93-94. Accordingly, the Court held that state-court venue was proper where the bank maintained an authorized branch, i.e., where the bank was "located." Id.; see also First Nat'l Bank v. District Court, El Paso County, Colorado, 653 P.2d 1123, 1125 (Colo.1982); At- torney Gen. v. Industrial Nat'l Bank, 380 Mass. 533, 534, 404 N.E.2d 1215, 1217 (1980).

In Bougas the Supreme Court noted the appearance of the word "located" in two other federal statutes pertaining to national banking associations, one being § 1348. 434 U.S. at 36 n. 1, 98 S.Ct. at 89 n. 1. This suggests that if the Supreme Court were constructing the word "located" as used in § 1348, it would probably find that a national banking association is "located" for diversity jurisdiction purposes in those states where it maintains its branch offices.³ There are several considerations that support this premise.

First, prior to its revision in 1982, § 94 precluded a plaintiff from joining two or more defendant banks in federal court if the banks maintained their principal places of business in different districts. The Supreme Court...