Meason v. Bank of Miami
| Decision Date | 06 August 1981 |
| Docket Number | No. 79-3607,79-3607 |
| Citation | 652 F.2d 542 |
| Parties | Fed. Sec. L. Rep. P 98,251 Ana Laing MEASON, Plaintiff-Appellant, v. BANK OF MIAMI, a State Bank and Florida Corp., et al., Defendants-Appellees. Edith DAVIS, Plaintiff-Appellant, v. BANK OF MIAMI, et al., Defendants-Appellees. Errol S. SCHUTTE and Gloria Schutte, Plaintiffs-Appellants, v. BANK OF MIAMI, et al., Defendants-Appellees. . Unit B |
| Court | U.S. Court of Appeals — Fifth Circuit |
Blackwell, Walker, Gray, Powers, Flick & Hoel, James C. Blecke, Raymond A. Reiser, William L. Gray, III, Miami, Fla., for Meason & Davis.
Fromberg, Fromberg & Roth, Malcolm H. Fromberg, Todd S. Rogel, Miami, Fla., for Schutte & Schutte.
Jacob H. Stillman, Ralph C. Ferrara, David A. Sirignano, Gen. Counsel, Paul Gonson, Linda W. Otto, Elisse B. Walter, David A. Sirignano, S.E.C., Washington, D.C., amicus curiae, S.E.C.
Greenberg, Traurig, Askew, Hoffman, Lipoff, Quentel & Wolfe, Marlene K. Silverman, Miami, Fla., for Bank of Miami & Popular, etc.
Weintraub & Rosen, Michael A. Rosen, Bradford, Williams, McKay, Kimbrell, Hamann & Jennings, Bruce C. King, Miami, Fla. for Northside Bank of Miami.
Arthur L. Beamon, Senior Atty., Washington, D.C., for Federal Deposit Ins. Corp.
Victor Hugo Rams, Miami, Fla., for Popular Bank, A. & H. Rodriguez.
Appeals from the United States District Court for the Southern District of Florida.
Before VANCE, HATCHETT and ANDERSON, Circuit Judges.
Plaintiffs appeal from a district court order dismissing their complaints for lack of subject matter jurisdiction. In three separate actions, later consolidated by the lower court, plaintiffs asserted violations of the antifraud and registration provisions of the Securities Act of 1933 and the Securities Exchange Act of 1934 in the sale of certificates of deposit issued by an offshore bank of the Grand Cayman Islands. The district court dismissed their suits, ruling that the certificates of deposit are not securities within the meaning of the federal securities laws. Because we conclude that the plaintiffs' claims could not properly be dismissed for lack of subject matter jurisdiction, we reverse and remand.
Errol S. Schutte and Gloria Schutte filed the first of the three consolidated cases involved in this appeal on January 16, 1979. As amended the thirteen count complaint asserted violations of sections 12(1) and (2) of the Securities Act of 1933, 15 U.S.C. § 77l (1) and (2); section 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b) and rule 10b-5 promulgated thereunder, 17 C.F.R. § 240.10b-5; and state law and common law claims. Federal jurisdiction was predicated on section 22(b) of the Securities Act of 1933, 15 U.S.C. § 77v; 1 and section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa; 2 and diversity jurisdiction. 3 Named as defendants in the Schuttes' complaint were Bank of Miami, Popular Bancshares Corporation (Bancshares), Northside Bank of Miami, Popular Bank and Trust Co., Ltd. (Popular), Francisco A. Navarro, and Andres F. Rodriguez. Defendants Bank of Miami and Bancshares moved to dismiss the complaint for lack of federal jurisdiction and for failure to state a claim upon which relief could be granted.
The complaints in both the Davis and Meason cases were premised upon facts and claims very similar to those contained in the Schuttes' complaint. The court sua sponte consolidated the three cases. After oral argument the district court dismissed the Schuttes' amended complaints and the original complaints of Meason and Davis on September 26, 1979. On October 19, 1979 the court denied the plaintiffs' motions for reconsideration but granted the motion for clarification by stating that the order of dismissal was with prejudice and that no leave to file an amended complaint was granted. 4
In granting the motions to dismiss, the district court had before it only plaintiffs' complaints. For purposes of a motion to dismiss the allegations of the complaint must be accepted as true. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 1848, 23 L.Ed.2d 404 (1969). Because the complaints are lengthy and complex a review of the allegations in some detail is appropriate.
Schuttes' amended complaint avers that on April 1, 1977, both Popular and Bank of Miami were wholly owned subsidiaries of defendant Bancshares, a Florida chartered bank holding company. Defendant Bank of Miami is a Florida state bank. Popular, however, is a bank organized pursuant to the law of the Grand Cayman Islands, British West Indies. Popular had no offices of its own and was not licensed to do business in the United States. Instead, it conducted its business through the officers and employees of the Bank of Miami.
On or about April 1, 1977, Errol S. Schutte went to Bank of Miami to transfer certain funds from a checking account into an interest bearing account. There, Schutte met Navarro who was introduced as being in charge of the International Banking Division for Bank of Miami and for Bancshares. Navarro advised Schutte to place his money in a certificate of deposit issued by the defendant Popular since "according to Navarro, Popular was the best investment 'they' had to offer." Navarro also represented to Schutte that "there was no risk and that his money would be perfectly safe since Popular was owned by the same company which owned Bank of Miami, to-wit: Bancshares." Schutte bought a $250,000 Popular certificate in his and his wife's names. On August 18, 1977 an additional transfer of $50,000 was authorized by the Schuttes to buy a second certificate. 5
The Schuttes allege that on February 16, 1978 Bancshares sold Popular to defendant Rodriguez and others. 6 The Schuttes were advised of this transaction by letter dated March 7, 1978. According to their complaint, on May 31, 1978 Schutte attempted to contact defendant Navarro for the purpose of redeeming his certificates of deposit. He was told at the Bank of Miami that Navarro could be contacted at the Northside Bank, which had also been purchased by defendant Rodriguez. When Schutte finally reached Navarro at Northside, Navarro informed him that Popular was now owned by Northside and that although Popular was no longer owned by Bancshares, it was still owned by a United States bank and was continuing business as usual. On the basis of these representations Schutte agreed to roll over his certificates of deposit. He tendered his old certificates and received new certificates for all the sums he had previously placed with Popular through Bank of Miami and Bancshares. Subsequently, on June 5, 1978 Schutte presented a cashier's check for $132,415.06 to Navarro at Northside requesting that Navarro deposit $130,000 in an interest bearing account in his behalf and pay over to him the remaining balance. Schutte never received a certificate of deposit for this transaction.
On June 30, 1978 Errol Schutte went to Northside to redeem his certificates. He was informed by Navarro that Popular did not have sufficient funds within the United States but that there were more than sufficient funds in the Grand Cayman Islands and that he would contact Schutte when the funds had been transferred. Schutte did not wait for the transfer. He flew to the Grand Cayman Islands but was unable to locate any office or establishment known as the Popular Bank and Trust Co., Ltd. He discovered that Popular was conducting business through a subsidiary of a Canadian company. The Canadian agent informed Schutte that Popular did not have sufficient funds to redeem any of his certificates of deposit, not even one for $2,576.59.
The factual allegations upon which plaintiffs Davis and Meason base federal jurisdiction are similar to those pled by the Schuttes. The Meason complaint alleges that Angela Bernal, the mother of Ana Laing Meason, purchased certificates of deposit issued by the Bank of Miami prior to 1974. In October 1976 Bernal was introduced to Navarro who advised her to purchase from Bank of Miami a certificate of deposit issued by Popular. She was advised, according to allegations in her complaint, "that her money was just as safe in Popular as if deposited in Bank of Miami ... that the purchase of said certificate of deposit was a safe investment in that Popular was solvent and able to meet its obligations ... that the plaintiff's money would be handled by Bank of Miami, Bancshares and Popular in good faith and in a reasonably prudent manner in order to protect her investment." 7
The Meason complaint further alleges that on October 11, 1976 Angela Bernal purchased two certificates of deposit from the Bank of Miami and Bancshares issued by Popular in the amounts of $127,000 and $144,700 with a maturity date of October 6, 1977. Meason did not receive the original certificates of deposit but was "induced" to leave the original certificates with Navarro at the Bank of Miami, which gave her a receipt for them. Without the permission of Angela Bernal or Meason the proceeds of these certificates of deposit were used on December 5, 1977 to purchase two more certificates of deposit in the same amount which had a new maturity date of December 5, 1978.
Edith Davis avers that in September of 1977 she purchased a $500,000 Popular certificate of deposit from Navarro who advised her that it was a safe investment, that the Bank of Miami and Bancshares would vouch for the security of the investment and that their assets stood behind Popular. Davis further alleges that she was induced to leave the original certificate in safekeeping at Bank of Miami by Navarro who receipted the same for Popular.
The plaintiffs' certificates were not paid by defendants notwithstanding presentment and demand.
In dismissing the complaints the district court stated that "the dispositive issue in this case is clearly whether the ...
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