Lapinsohn v. Lewis Charles, Inc.
| Decision Date | 21 March 1968 |
| Parties | Donald T. LAPINSOHN and Carol Lapinsohn, h/w, Appellants, v. LEWIS CHARLES, INC. and First Camden national Bank & Trust Co. and Commonwealth Land Title Insurance Co. |
| Court | Pennsylvania Superior Court |
Rehearing Denied April 16, 1968.
Petition for Allowance of Appeal June 10, 1968.
Yale B. Bernstein, Brickley, Cummins, Torpey & Bernstein, Philadelphia, for appellants.
C Clark Hodgson, Jr., Stradley, Ronon, Stevens & Young Philadelphia, for appellees.
Before WATKINS, Acting P.J., and MONTGOMERY, JACOBS, HOFFMAN, and SPAULDING, JJ.
Lewis Charles, Inc (Charles) entered into an agreement in Philadelphia on October 20, 1965, wherein it agreed to construct a house in Cherry Hill, New Jersey, for Donald T Lapinsohn and Carol Lapinsohn, appellants. On April 27, 1966, appellants and Charles entered a supplemental agreement, in Philadelphia, containing certain warranties and guarantees concerning the construction of this new home. In reliance on these agreements, settlement was made in Philadelphia at that time.
Soon thereafter, appellants noted evidence of improper construction. To secure relief, appellants instituted suit by foreign attachment seeking to attach Charles' assets in the hands of the First Camden National Bank and Trust Company (Bank), appellee. This Bank is a federally-chartered bank with its principal office in Camden, New Jersey. The Bank also operates a branch bank at 223--225 Market Street, Philadelphia, Pennsylvania. The writ was served on the Bank at its Philadelphia office on November 25, 1966.
The Bank filed preliminary objections on December 5, 1966, alleging that it was immune from suit in Pennsylvania under 12 U.S.C. § 94, a federal venue statute which limits actions against national banks.
On December 16, 1966, appellants filed an Answer and New Matter to the Bank's preliminary objections, alleging Inter alia, that the Bank, by its conduct, had waived its right to object to such attachment.
On March 21, 1967, depositions were taken of a vice-president of the Bank, and an assistant vice-president who was the manager of the Philadelphia office.
The matter was then heard before the lower court on these preliminary objections and depositions. The court entered an order on May 29, 1967, sustaining the Bank's objections and dismissing appellant's complaint in assumpsit on the basis that the Bank could not be made a garnishee in Pennsylvania. This appeal followed.
The sole question raised by this appeal is whether the assets of a depositor in this Bank, which operates a branch bank and office in Philadelphia, may be garnished in Philadelphia when the Bank's principal office and place of incorporation are in Camden, New Jersey.
Section 94 of 12 U.S.C. 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.'
The fundamental purpose underlying this venue statute is to protect a federally-chartered bank from being sued in a district or county other than that in which it was originally established and chartered. Michigan National Bank v. Robertson, 372 U.S. 591, 83 S.Ct. 914, 9 L.Ed.2d 961 (1963); Mercantile National Bank at Dallas v. Langdeau, 371 U.S. 555, 83 S.Ct. 520, 9 L.Ed.2d 523 (1963); Buffum v. Chase National Bank of City of New York, 192 F.2d 58 (7th Cir.1951), cert. denied, 342 U.S. 944, 72 S.Ct. 558, 96 L.Ed. 702 (1952); Schaefer Sons, Inc. v. Watson, 26 A.D.2d 659, 272 N.Y.S.2d 790 (1966); Raiola v. Los Angeles First National Trust & Savings Bank, 133 Misc. 630, 233 N.Y.S. 301 (1929). Although the word 'established' is used with reference to venue in the federal courts and the word 'located' with regard to venue in state courts, our extensive research reveals that both words have been interpreted to mean the place specified in the organization certificate. [1] Schaefer Sons, Inc. v. Watson, supra.
'An Assault on the Venue Sanctuary of National Banks,' 34 Geo.Wash.L.R. 765, 768 (1966) (cited hereinafter as 34 Geo.Wash.L.R.)
Since national banks could not establish branches, and since they conducted very little business outside of the general area of their office, it was not unreasonable to restrict suits to the site where that business was conducted. Moreover, the venue statute here involved was passed shortly after the Second National Bank Act, at a time when national banks were in great need of protection from suit. Thus, the purpose of the Act was to protect and afford convenience to the national banks, 'and to prevent interruption in their business that might result from their books being sent to distant counties in obedience to process from state courts.' First National Bank of Charlotte v. Morgan, 132 U.S. 141, 145, 10 S.Ct. 37, 38, 33 L.Ed. 282 (1889); see Chaffee v. Glens Falls National Bank & Trust Co., 204 Misc. 181, 123 N.Y.S.2d 635, affirmed 223 A.D. 694, 128 N.Y.S.2d 539, appeal denied 283 A.D.2d 793, 129 N.Y.S.2d 237 (1953).
In 1927, Congress amended the National Bank Act to permit a national bank, under certain conditions, to effectively compete with state banks by setting up branch banks. [2] Section 81 of the Act was also amended in 1927 to read: 'The general business of each national banking association shall be transacted in the place specified in its organization certificate And in the branch or branches, if any, established or maintained by it in accordance with the provisions of section 36 of this title.' (Emphasis indicates amended portion of the statute.) Thus, for the first time, Congress foresaw that national banks might conduct business outside of the county or district of the principal office. [3] Yet, the venue provision, enacted in 1864, remained unchanged.
We note that some courts have disregarded this historical background and rigidly fulfilled the literal language of § 94 by permitting suit only at the bank's principal office or location. For example, in 1936, the U.S. Court of Appeals for the Second Circuit affirmed the old concept of 'location' as limited to the place specified in the organization certificate. Leonardi v. Chase National Bank of City of New York, 81 F.2d 19 (2d Cir.1936), cert. denied, 298 U.S. 677, 56 S.Ct. 941, 80 L.Ed. 1398 (1936); [4] see 34 Geo.Wash.L.R., supra at 769--770. In most of the suits arising under this provision, however, the bank did not have a branch in a second district or county, but was merely conducting business through an agent or was involved in isolated transactions. e.g. Michigan National Bank v. Robertson, supra. [5]
In an effort to ameliorate the harsh results of a strict interpretation of § 94, several courts found national banks subject to suit on a theory of waiver. 'It is well settled that the exemption granted to national banks under § 94 is a personal privilege and may be waived by the bank either by failure to assert it or by conduct inconsistent with its retention.' 34 Geo.Wash.L.R. supra at 774; see First National Bank v. Morgan, supra.
In several cases involving conduct by banks outside of the district in which they were established some courts, as previousy noted, have held that suit could not be brought in such foreign districts. Branch banks, however, were not involved in most of those cases. For example, in Buffum v. Chase National Bank, supra, a New York bank conducted business in Illinois with regard to trust accounts. It had registered as a foreign corporation to specifically transact this business. A contract suit, arising out of business wholly unrelated to its trust transactions, was filed against the bank in Illinois. The U.S. Court of Appeals for the Seventh Circuit held that the bank had only consented to be sued on transactions arising out of the limited trust business and had '* * * evinced no intention to waive in its entirety the privilege it had under the laws of being sued only in New York.' 192 F.2d at 61. Nevertheless, the Court cautioned that the privilege accorded national banks could impliedly be waived by conduct 'inconsistent with an assertion of retention of the right.' See also Sulil Realty Corp. v. Rye Motors, Inc., 45 Misc.2d 458, 257 N.Y.S.2d 111, affirmed 47 Misc.2d 715, 262 N.Y.S.2d 989 (1965).
On the other hand, several state courts have specifically found a waiver of the right to assert the protective venue statute where a national bank has transacted business in a foreign jurisdiction, even though no branch bank was set up. In Okeechobee County v. Florida National Bank of Jacksonville 112 Fla. 309, 150 So. 124 (1933), the defendant bank was liable under a tripartite agreement for any breach of a trust agreement in a foreign jurisdiction. The Court held that when a national bank had specifically entered into such an agreement in a district or county other than its charter location, it had thereby waived its right to assert the venue statute by a preliminary objection. Recently, in Lichtenfels v. North Carolina National Bank, 260 N.C. 146, 132 S.E.2d 360, 1 A.L.R.3d 897 (1963), the Supreme Court of North Carolina was faced with a similar problem. There, the bank acted...
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