Reaves v. Bank of America

• Decision Date: 08 January 1973
• Docket Number: Civ. No. 72-421-N.
• Citation: 352 F. Supp. 745
• Court: U.S. District Court — Southern District of California
• Parties: Frank A. REAVES and Beverly A. Reaves, Plaintiffs, v. BANK OF AMERICA, a National Trust and Savings Association, et al., Defendants.

352 F. Supp. 745

Frank A. REAVES and Beverly A. Reaves, Plaintiffs, v. BANK OF AMERICA, a National Trust and Savings Association, et al., Defendants.

Civ. No. 72-421-N.

United States District Court, S. D. California.

January 8, 1973.

John A. Crawford, Jr., Thompson & Crawford, San Diego, Cal., for plaintiffs.

Richard C. Herr, San Diego, Cal., for Bank of America.

NIELSEN, District Judge.

The question raised by defendants' motion to dismiss or to transfer this case for improper venue involves an issue of first impression for this District Court and for this Circuit: what activities by a nationally chartered bank are sufficient to constitute a waiver of venue under 12 U.S.C. § 94, so that the bank may be sued in a district other than where it is established.

The case arises out of the following facts. Plaintiffs purchased a 1971 Mazda automobile in El Cajon, a suburb of San Diego, making a down payment and financing the rest of the purchase price through a loan from the El Cajon branch of defendant Bank of America, a national banking association. Plaintiffs executed a security agreement and a promissory note in favor of the Bank of America. When a disagreement arose as to the payments, defendant bank repossessed and seized the automobile. Plaintiffs seek damages on the grounds that California Commercial Code §§ 9503 and 9504, the authority under which the bank repossessed, are unconstitutional for lack of due process, a claim which this District Court upheld in Adams v. Egley, 338 F.Supp. 614 (S. D.Cal.1972), appeal docketed, no. 72-1484, 9th Cir. 1972.

On November 13, 1972, a hearing was held on defendant's motion to dismiss or to transfer the case to the Northern District of California for lack of proper venue. After the hearing the motion was taken under submission.

Title 12, U.S.C. § 94 states the venue rule:

"Actions and proceedings against any association under this chapter may be had in any district . . . 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."¹

The primary rationale for this rule that a bank may only be sued in the federal district where it is chartered and established was discussed in First Nat. Bank v. Morgan, 132 U.S. 141, 10 S.Ct. 37, 33 L.Ed. 282 (1889):

"This exemption of national banking associations from suits in state courts, established elsewhere than in the county or city in which such associations were located, was, we do not doubt, prescribed for the convenience of those institutions, 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." 132 U. S. at 144, 145, 10 S.Ct. 38.

Although Morgan dealt with the state venue limitation in § 94 that a bank may be sued only where "located", the courts have interchangeably defined the terms "established" and "located", and thus the purpose of preventing inconvenience and interruption to a bank's activities applies whether a national bank is sued in federal court or state court.² See, United States National Bank v. Hill, 434 F. 2d 1019, 1020 (9th Cir. 1970).

The defendant bank relies heavily on United States National Bank v. Hill, in which the Court of Appeals, following a long line of cases, interpreted the meaning of the word "established" in § 94, holding that a San Diego chartered national bank did not become established in the Central District of California because it had branches in Los Angeles.

"The overwhelming weight of authority, in line with American Surety Co. American Surety Co. v. Bank of California, 133 F.2d 160 (9th Cir.) and Cope Cope v. Anderson, 331 U.S. 461, 67 S.Ct. 1340, 91 L.Ed. 1602, supports the proposition that a national bank does not become `established' or `located' in any district wherein it may open and operate a branch office." 434 F.2d at 1020.

This proposition was most recently reaffirmed in First National Bank of Boston v. United States District Court, etc., et al., 468 F.2d 180 (9th Cir. 1972), the facts of which are inapplicable to the present case.

Although the Bank of America has 66 branches in the Southern District of California, it is chartered as a national association in San Francisco and is headquartered there. Accordingly, this Court finds that the defendant bank is established only in San Francisco for venue purposes, irrespective of the number of branches it may have elsewhere. And therefore it appears at first glance that the defendant may be sued there and only there.

The plaintiffs do not quarrel with this interpretation of 12 U.S.C. § 94, rather they contend that the defendant has waived venue by its conduct and activities.

The right to be sued in a certain place may be waived or lost. Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U. S. 165, 60 S.Ct. 153, 84 L.Ed. 167 (1939). Buffum v. Chase Nat. Bank of City of New York, 192 F.2d 58 (7th Cir. 1951), involved a situation where defendant had no branches in Illinois but where it was sued in an Illinois federal court. Plaintiff contended that because defendant had consented to be sued in Illinois solely on transactions involving the acceptance and execution of trusts, it had waived venue objections with respect to claims in no way arising out of a trust matter. Although the court stated that this limited consent did not constitute a broad and general waiver of § 94, the court did discuss what constituted a waiver.

"Waiver is a voluntary and intentional relinquishment or abandonment of a known existing right or privilege, which, except for such waiver, would have been enjoyed. 67 C.J. 289. It may be expressed formally or it may be implied as a necessary consequence of the waiver's conduct inconsistent with an assertion of retention of the right. It must be proved by the party relying upon it. And if the only proof of intention to waive rests on what a party does or forbears to do, his act or omissions to act should be so manifestly consistent with and indicative of an intent to relinquish voluntarily a particular right that no other reasonable explanation of his conduct is possible." 192 F.2d at 60, 61.

The defendant bank contends that United States National Bank v. Hill, supra, is conclusive Ninth Circuit authority as to waiver since the San Diego bank therein involved had a significant number of branches in the Central District of California; this Court disagrees. While a bank does not become "established" in a locality because it may have set up one branch or many branches, this does not mean that a bank could never waive its venue rights under § 94 by setting up many branches in a locality, by providing complete banking service in that locality, by bringing lawsuits as a plaintiff and by not objecting to venue as a defendant—all in that same locality, and by carrying on activities in that locality which may be the basis of those lawsuits.

The Court of Appeals in the United States National Bank v. Hill decision (a mandamus action brought against the trial judge arising from his denial of a transfer of venue in the original action of Sam Greitzer v. United States National Bank) did not discuss the issue of whether defendant bank had waived venue, properly so, since the trial judge in the original case based his decision completely on the erroneous conclusion that

"a national bank is established for venue purposes under § 94 . . . in each district in which it has a branch conducting a general banking business and the defendant United States National Bank, having at least one branch conducting a general banking business in the Central District of California, is established for venue purposes and may be sued in the Central District . . ." Sam Greitzer v. United States National Bank, Order Denying Motion to Dismiss or Change of Venue, Civ.No. 70-944-IH 2, Aug. 8, 1970.³

Accordingly, since the court in United States National Bank v. Hill did not discuss whether defendant bank had waived venue, and lacking a court of Appeals decision from any Circuit discussing whether (1) extensive banking activities and (2) suing in a forum's court in furtherance of those activities constitute a waiver, this Court must look to the few decisions interpreting § 94 and waiver in the context of the facts of the instant case.

A state case, Michigan Natl. Bank v. Superior Court, 23 Cal.App.3d 1, 99 Cal. Rptr. 823 (1972), involved a bank which had no offices or branches outside of Michigan, but which refinanced purchases of airplanes sold and harbored in California by soliciting in California. The bank's security interest in the planes arose in California, and repossession would have occurred in California.

The court utilized a "minimum contacts" jurisdictional approach and found that a combination of these bank actions constituted a waiver by the bank of its privilege under § 94 of being sued in Michigan. The court correctly pointed out that there was no controlling precedent to the contrary given the particular facts of that case.

Essential to the court's decision was the statement:

"The foregoing precedents indicate that if the national bank seeks to use a state court, other than in the county or city in which it is located, to enforce obligations which are due it, it may be subject to countersuit for matters arising out of that

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