Peoples Bank v. Federal Reserve Bank of San Francisco, 23243-R.

• Decision Date: 17 November 1944
• Docket Number: No. 23243-R.,23243-R.
• Citation: 58 F. Supp. 25
• Court: U.S. District Court — Northern District of California
• Parties: PEOPLES BANK v. FEDERAL RESERVE BANK OF SAN FRANCISCO et al.

58 F. Supp. 25

PEOPLES BANK v. FEDERAL RESERVE BANK OF SAN FRANCISCO et al.

No. 23243-R.

District Court, N. D. California, S. D.

November 17, 1944.

Willkie, Owen, Otis, Farr & Gallagher, of New York City, and Sanner, Fleming & Irwin, of Los Angeles, Cal., for plaintiff Peoples Bank.

Albert C. Agnew and John A. O'Kane, both of San Francisco, Cal., for defendant Federal Reserve Bank of San Francisco.

Frank J. Hennessy, U. S. Atty., and W. E. Licking, Asst. U. S. Atty., both of San Francisco, Cal., J. P. Dreibelbis and George B. Vest, both of Washington, D. C., and Robertson, Leachman, Payne, Gardere & Lancaster, of Dallas, Tex., for defendants Board of Governors of the Federal Reserve System and Henry F. Grady, Federal Reserve Agent.

ROCHE, District Judge.

This is a suit by the Peoples Bank, a State banking corporation organized under the laws of the State of California, to annul and enjoin the enforcement of a condition of membership required by the Board of Governors of the Federal Reserve System as a prerequisite to granting plaintiff the right to become a member bank of the Federal Reserve System.

Following the jurisdictional allegations, and those identifying the parties, the complaint alleges (Par. IV) that on or about November 28, 1941, plaintiff, desiring to become a member of the Federal Reserve System, made application to the Board of Governors of the Federal Reserve System (hereinafter referred to as "the Board"), under the rules and regulations prescribed by the Board, for the right to subscribe to the stock of the Federal Reserve Bank of San Francisco (hereinafter referred to as "Reserve Bank"). On or about May 6, 1942, it is stated, the Board approved plaintiff's application for membership, subject to certain conditions, among which was the one complained of, numbered 4. This condition, it is stated, was as follows:

"4. If, without prior written approval of the Board of Governors of the Federal Reserve System, Transamerica Corporation or any unit of the Transamerica group, including Bank of America National Trust and Savings Association, or any holding company affiliate or any subsidiary thereof, acquires, directly or indirectly, through the mechanism of extension of loans for the purpose of acquiring bank stock, or in any other manner, any interest in such bank, other than such as may arise out of usual correspondent bank relationships, such bank, within 60 days after written notice from the Board of Governors of the Federal Reserve System, shall withdraw from membership in the Federal Reserve System."

Plaintiff claims that this condition is "arbitrary, unreasonable, capricious, discriminatory, ultra vires and null and void in all respects" in that no power has been conferred upon the Board to exact such condition as a prerequisite to membership in the Federal Reserve System. It is then alleged (Par. V) that on or about May 7, 1942, the defendant Reserve Bank informed plaintiff that, as a condition to its subscription to stock in the Reserve Bank, it would be required by said bank to accept condition No. 4 and agreed to comply therewith by resolution of its board of directors. On or about May 12, 1942, plaintiff, it is stated, "being desirous of acquiring the said stock" in the Reserve Bank and becoming a member thereof "and under the compulsion of the said requirement of said defendant," accepted the condition and, by resolution of plaintiff's board, agreed to comply therewith. Although the fourth paragraph of the complaint states that the condition of membership complained of emanated from the Board, it is alleged that it was "exacted" of plaintiff by the Reserve Bank and that, in so doing, the Reserve Bank violated the obligation imposed upon it by statute to administer its affairs fairly and impartially and without discrimination against plaintiff.

It is alleged (Par. VI) that on or about February 17, 1944, without the assistance or prior knowledge of plaintiff, Transamerica Corporation became the owner of five hundred out of five thousand shares of the capital stock of plaintiff. It is stated, upon information and belief, that this acquisition of plaintiff's stock by Transamerica Corporation was without the written approval of the Board and falls within the purview of condition No. 4 "imposed upon plaintiff by defendant, the Federal Reserve Bank of San Francisco." Notice of this purchase of plaintiff's stock by Transamerica Corporation was given the Board by plaintiff on or about April 4, 1944 (Par. VII). After stating that the defendants assert that the condition is valid and enforceable, it is alleged (Par. VIII), also upon information and belief, that the defendants intend to and will, unless restrained, take proceedings, predicated on condition No. 4, to deprive plaintiff of its stock in the Reserve Bank and its membership in the Federal Reserve System, to the irreparable damage of plaintiff and that such proceedings are imminent. The validity and enforceability of the condition is denied, and it is alleged that the condition, being void, constitutes a cloud upon plaintiff's title to its shares in the Reserve Bank. Alleging the existence of a justiciable controversy and the lack of other adequate remedy, plaintiff asks this Court for declaratory relief, for a decree invalidating the condition and for temporary and permanent injunctive relief against the enforcement of the condition or the termination of plaintiff's membership in the Federal Reserve System. However, no application for an injunction pendente lite was made.

In opposition to the relief requested in the complaint, the following motions were filed: Board of Governors of the Federal Reserve System, motion to dismiss; Henry F. Grady, motion to dismiss; Federal Reserve Bank of San Francisco, motion to dismiss and, in the alternative, motion for summary judgment. In addition, plaintiff interposed a counter-motion for summary judgment against the defendant Reserve Bank. To this counter-motion, defendant Reserve Bank filed a motion to strike. This counter-motion will be stricken. It is clear that, under Rule 56(a) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c, a party seeking to recover upon a claim or to obtain declaratory relief may move for summary judgment in his favor only after a pleading responsive to the complaint has been filed. No such pleading has been filed by the Reserve Bank in this case. The counter-motion is premature. Moore's Federal Practice, Vol. 3, p. 3181; United States v. Adler's Creamery, Inc., 1939, 2 Cir., 107 F.2d 987; Fox v. Johnson & Wimsatt, 75 U.S.App.D.C. 211, 127 F.2d 729.

The motion of the Board of Governors of the Federal Reserve System for dismissal will be granted. This Board is an independent establishment of the United States, created by the Congress to perform certain important governmental functions prescribed by the Federal Reserve Act and other statutes (30 Ops.Attys.Gen. 308, 311). Neither in the enactment creating the Board nor in any subsequent act has the Congress given its consent to suits against the Board. Aside from this, however, it is undeniably true that, by law, the habitat or official residence of this Board is in the District of Columbia. U.S.C.A., Tit. 12, § 244. Service of summons and complaint in this case was made by sending a copy thereof by registered mail to the Board at its office in Washington, D.C. The appearance entered by the Board was special, for the sole purpose of testing the jurisdiction of this Court over it. Whether or not this suit be considered as one against the United States and therefore not maintainable against the government without its own consent or Congressional sanction, it is undeniably true that the Board is not an "inhabitant" of this district and therefore may not be sued herein without its consent (U.S.C.A., Tit. 28, § 112). That this is the law is amply supported by the authorities. International Molders Union v. National Labor Relations Board, D.C., 26 F.Supp. 423; Appalachian Electric Power Co. v. Smith, 4 Cir., 67 F.2d 451, certiorari denied, 291 U.S. 674, 54 S.Ct. 458, 78 L.Ed. 1063; Raichle v. Federal Reserve Bank of New York, 2 Cir., 34 F.2d 910, 67 A.L.R. 1167; Howard v. United States ex rel. Alexander, 10 Cir., 126 F.2d 667, certiorari denied, 316 U.S. 699, 62 S. Ct. 1297, 86 L.Ed. 1768; Kentucky Natural Gas Corporation v. Public Service Commission of Kentucky, D.C.Ky., 28 F.Supp. 509, affirmed in 6 Cir., 119 F.2d 417; Carr v. Desjardines, D.C.Okl., 16 F.Supp. 346; United States v. Western Fruit Growers, Inc., D.C.Cal., 34 F.Supp. 794.

Plaintiff contends that, because the Federal Reserve Act makes provision for the appointment in each Reserve district of a Federal Reserve agent who, in addition to his duties as chairman of the board of directors of the Reserve Bank, is required to maintain a local office of the Board on the premises of the Reserve Bank and to act as the official representative of the Board in the performance of the functions of the Board (U.S.C.A., Tit. 12, § 305), the situation is sui generis and the general rule is inapplicable. With this contention, I do not agree. If it were sound, it would subject the Board to the jurisdiction of any district court in any district where a Reserve Bank is maintained and a Federal Reserve agent could be found. In many of the cases in which the right of governmental agencies to be sued only in the District of Columbia has been sustained, there have been local agents with powers as broad as those accorded Federal Reserve agents, authorized to act and acting for the agency at the place where the suit was brought, but the fact that such agency existed has not been held to create an exception to the rule. Nor has the plaintiff cited any cases in support of its contention.

The motion of Henry F. Grady, Federal Reserve Agent, for dismissal as to him is likewise granted. It is not contended that Grady performed any function or had any...