First Nat. City Bank New York v. Smith

• Decision Date: 14 January 1975
• Docket Number: No. 48008,48008
• Parties: Fed. Sec. L. Rep. P 94,945 FIRST NATIONAL CITY BANK NEW YORK, a National Banking Association, Petitioner, v. The Honorable Richard W. SMITH, Judge of the District Court of Ottawa County, Thirteenth Judicial District, State of Oklahoma, and Security Bank and TrustCompany, an Oklahoma Corporation, Respondents.
• Court: Oklahoma Supreme Court

Page 321

531 P.2d 321

Fed. Sec. L. Rep. P 94,945

FIRST NATIONAL CITY BANK NEW YORK, a National Banking Association, Petitioner, v. The Honorable Richard W. SMITH, Judge of the District Court of Ottawa County, Thirteenth Judicial District State of Oklahoma, and Security Bank and TrustCompany, an Oklahoma Corporation, Respondents.

No. 48008.

Supreme Court of Oklahoma.

Jan. 14, 1975.

Sam P. Daniel, Jr., Tulsa, for petitioner.

John R. Wallace and Robert S. Gee, Miami, for respondents.

DOOLIN, Justice.

We assume jurisdiction, accept Petitioner's (National City's) Application and Petition seeking extraordinary relief of mandamus and prohibition by virtue of Article VII, Section 4 of the Constitution of the State of Oklahoma which grants to us general superintending control over all the courts of Oklahoma.

The duality of Federal and State court systems as to jurisdiction and venue is tested by this action, and we are called upon to decide whether State courts have been granted venue of an action authorized under the Securities Act of 1933, 15 U.S.C.A. § 77a et seq., particularly 15 U.S.C.A. § 77v, when measured against the specific provisions of 12 U.S.C.A. § 94. ¹

A condensed statement of the facts alleged in the original Petition or complaint as filed in the trial court of Ottawa County, Oklahoma, reveals Plaintiff/Respondent here (Oklahoma Bank) purchased a note ² from Family Loan, Inc. in the amount of $300,000.00, and this on or about March 3, 1974. National Guaranty Insurance Company had issued a surety agreement insuring payment of any indebtedness of Family Loan, Inc. and a copy of such agreement was given to the Oklahoma Bank at the time of purchase as an inducement therefor. The note was not paid when due.

The Oklahoma Bank alleged that Family Loan, Inc., National Guaranty Insurance Company and certain other Defendant corporations were subsidiaries of Standard Life Corporation (parent company). It further alleged that Standard Life Corporation, operating through its various subsidiaries, officers and directors, was controlled by National City, and thus National City was liable to the Oklahoma Bank under the Securities Act of 1933 (15 U.S.C.A. § 77o) ³ the specific allegation contained in Plaintiff's Petition being:

'The Defendant First National City Bank, New York, by virtue of a loan and other financial transactions, unknown to the Plaintiff but known to the Defendant, controlled the Defendant, Standard Life Corporation (and its other subsidiaries, officers and directors).' (parenthetical phrases supplied.)

Plaintiff further alleged National City and other Defendants have done business (15 U.S.C.A. § 77v(a)) in Oklahoma; all Defendants were guilty of fraud, wrongdoing and misleading acts and statements by withholding facts of the insolvency of Family Loan, Inc., National Guaranty Insurance Company and other subsidiaries, not to mention other wrongful and misleading acts of certain officers and directors of various subsidiaries; that the offer and sale of the $300,000.00 note in question was accomplished by use of the U.S. mails and interstate commerce (see 15 U.S.C.A. §§ 77e and 77q).

After process was issued to National City, it immediately tested the venue of the District Court of Ottawa County, Oklahoma, by a special motion to quash based upon 12 U.S.C.A. § 94 fixing venue and jurisdiction in the county or city in which the national bank is located. This motion was overruled and National City filed an application and petition for extraordinary relief seeking mandamus and prohibition in this Court against the trial court's allegedly excessive use of its judicial powers.

In granting Petitioner's application and considering its Petition for Writs of Mandamus and Prohibition, we are motivated by the uniqueness of the question involved and activated by the fact that it is a case of first impression in Oklahoma and perhaps in this Union of States.

We hold that the District Court of Ottawa County, Oklahoma, has both jurisdiction (which is not challenged by the parties) and Venue to hear and determine the Oklahoma Bank's complaint against National City and others.

In support of its position that 12 U.S.C.A. § 94 is controlling and fixes venue in New York in the county and city where the association is located, National City refers us to decisions of the U.S. Courts of Appeal from the 9th and 2d Districts and to the decisions of the U.S. District Courts of Ohio and Georgia. See United States National Bank v. Hill, 434 F.2d 1019 (9th C.A., 1970); Bruns, Nordeman & Co. v. American National Bank & Trust Company, 394 F.2d 300 (2d C.A., 1968), certiorari 393 U.S. 855, 89 S.Ct. 97, 21 L.Ed.2d 125; Allied Steel Tractor Prod. v. First National City Bank of N.Y., 54 F.R.D. 256 (N.D.Ohio, 1971); and Swiss Isreal Trade Bank v. Mobley, et al., 319 F.Supp. 374 (S.D.Ga., 1970).

The Respondents refer us to cases reaching an opposite conclusion from the U.S. Court of Appeals in the 3rd District and to decisions from the U.S. District Courts of Texas and New Jersey. See Ronson Corporation v. Liquifin Aktiengesellschaft, 483 F.2d 852 (3rd C.A., 1973); Carpenter v. Hall, 352 F.Supp. 806 (S.D.Texas, 1972); and, Levin v. Great Western Sugar Company, 274 F.Supp. 974 (N.J.C.D., 1967).

Examination of all the cases last mentioned indicates that they deal not with complaints under the Securities Act of 1933, but with complaints under the Securities Exchange Act of 1934, (15 U.S.C.A. § 78a et seq.). There appears to be a dearth of cases under the Securities Act of 1933. The trial court in its order overruling National City's motion to quash gave as one of its reasons for such action, the Securities Exchange Act of 1934--with this portion of its order we disagree, for exclusive jurisdiction lies in the Federal courts in the disposition of Exchange Act violations. See 15 U.S.C.A. § 78aa.

At the risk of over simplification, we note the two Acts, Securities Act of 1933 and the Securities Exchange Act of 1934, are aimed at different phases of protecting investors in security matters. For our purpose the Act of 1934 is directed to transactions in securities as commonly conducted upon exchanges and in the over-the-counter markets. It has been said to apply 'primarily to post-distribution of securities; Peoples Securities Company v. Securities and Exchange Commission, 289 F.2d 268 (5th C.A., 1961).' The Securities Act of 1933 is directed towards protecting the investor against imposition and fraud in the sale of securities through the use of the mails or facilities of interstate commerce; Oklahoma-Texas Trust v. Securities and Exchange Commission, 100 F.2d 888 (C.C.A., 1939). In Reader v. Hirsch & Co., 197 F.Supp. 111, (N.Y., 1961) that court observed the Securities Act is 'concerned primarily with the initial distribution of securities, rather than subsequent trading.'

Nonetheless, the Acts stand 'in pari materia.' See Brown v. Gilligan, Will & Co., 287 F.Supp. 766 (N.Y., 1968); Rosenberg v. Globe Aircraft Corp., 80 F.Supp. 123 (Pa., 1948). There is no doubt that the two Acts are often considered, construed and compared by the various courts in the Nation.

In RONSON CORPORATION V. LIQUIFIN AKTIENGESELLSCHAFT, SUPRA⁴, (Ronson) the 3rd Circuit Court stated:

'We are guided by the realization that the Securities Exchange Act must be liberally interpreted in order to accomplish the congressional objects of regulating the securities market and of affording proper disclosure to the investing public, as well as preventing fraud in securities trading. In recognition of the national rather than local nature of transactions involved, Congress enlarged the applicable venue and service of process requisites. An unduly narrow ruling on venue could not but inhibit and reduce the effectiveness of the remedies provided by the Act.

The Bruns court thought there had been no intent to carve out an exception to the older National Bank Act Limitation because there was nothing in the legislative history of the venue provisions of the Securities Exchange Act which indicated any consideration of the status of national banks. We interpret this lack of specific reference in a different fashion and believe that the failure to mention national banks in this setting implies a congressional intent to include them among those governed by the more liberal standards of the Securities Exchange Act. Indeed we note, as did the court in levin v. Great Western Sugar Company, supra, that when it drafted the Act, Congress was aware that certain portions might be construed as applicable to banks and proceeded to make specific provisions for them. The absence of such an exception in the venue section speaks forcefully for the proposition that the banks also were to be affected by its more expansive sweep.

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Additionally we are aware that the limited forum provided by the National Banking Act has been the subject of severe criticism. The American Law Institute, Study of the Jurisdiction Between State And Federal Courts (1969), recommends repeal saying 'There is no obvious reason why a national bank requires a unique and restrictive venue rule, and cannot be treated as is any other corporation for purpose of venue.' (pp. 412, 413). See also An Assault On the Venue Sanctuary of National Banks, 34 George Washington Law Review 765 (1966).

We conclude, therefore, that the special and wide venue provisions of the Securities Exchange Act govern in a factual situation where a national bank is a party to the action, and therefore the District Court properly refused to dismiss the Bank. Cf. Robinson v. Penn Central Company, (3d Cir. 1973) 484 F.2d 553.'

We would apply and adopt the rationale of Ronson to the instant case under the Securities Act of 1933, believing the Act has granted concurrent jurisdiction and venue to State courts by virtue of § 77v.

National City concedes there is a split of authority and attaches great significance to the fact that...