Smiley v. Citibank

• Decision Date: 01 September 1995
• Docket Number: No. S041711,S041711
• Court: California Supreme Court
• Parties: , 900 P.2d 690, 64 USLW 2149, 95 Cal. Daily Op. Serv. 7006, 95 Daily Journal D.A.R. 11,931 Barbara SMILEY, Plaintiff and Appellant, v. CITIBANK (SOUTH DAKOTA) N.A., Defendant and Respondent.

Page 441

44 Cal.Rptr.2d 441

11 Cal.4th 138, 900 P.2d 690, 64 USLW 2149,

95 Cal. Daily Op. Serv. 7006,

95 Daily Journal D.A.R. 11,931

Barbara SMILEY, Plaintiff and Appellant, v. CITIBANK (SOUTH DAKOTA) N.A., Defendant and Respondent.

No. S041711.

Supreme Court of California,

In Bank.

Sept. 1, 1995.

Chimicles, Burt & Jacobsen, Chimicles, Jacobsen & Tikellis, Nicholas E. Chimicles, Michael D. Donovan, Pamela P. Bond, Eugene Mikolajczyk and Patrick J. Grannan, Los Angeles, for plaintiff and appellant.

Kennedy P. Richardson, Oakland, Albert Lee, Los Angeles, Kathleen Keest, Boston, MA, Adele P. Kimmel, Washington, DC, Chavez & Gertler, Mark A. Chavez, San Francisco, Malakoff, Doyle & Finberg, Michael P. Malakoff, Pittsburgh, PA, Sturdevant & Sturdevant, James C. Sturdevant and Kim E. Card, San Francisco, as amici curiae on behalf of plaintiff and appellant.

Shearman & Sterling, William M. Burke, Richard B. Kendall and Michael H. Strub, Jr., Los Angeles, for defendant and respondent.

Charles J. Stevens, U.S. Atty. Gen., Joseph E. Maloney, New York City, Julie L. Williams, L. Robert Griffin, Horace G. Sneed, Washington, DC, Christopher Chenoweth, San Francisco, John J. Gill, Robert McKew, Washington, DC, Steven I. Zeisel, Bethesda, MD, Sheppard, Mullin, Richter & Hampton, John D. Berchild, Jr., Charles H. MacNab, Jr., Los Angeles, Landels, Ripley & Diamond, Frederick M. Pownall, Sanford Svetcov, Sacramento, Morrison & Foerster, Robert S. Stern, Lauren T. Nguyen, William Alsup, Robert Stern, James Huizinga, Los Angeles, McCutchen, Doyle, Brown & Enersen, Palmer Brown Madden, Grant Guerra, Walnut Creek, Wolf, Block, Schorr & Solis-Cohen, Ballard, Spahr, Andrews & Ingersoll, Alan S. Kaplinsky, Jeffrey S. Saltz and Burt M. Rublin, Philadelphia, PA, as amici curiae on behalf of defendant and respondent.

MOSK, Acting Chief Justice.

We granted review in this cause--which is one of numerous similar matters brought in federal and state courts throughout the nation--in order to consider the meaning and effect of section 30 of the National Bank Act of 1864. In pertinent part and without substantive change, the provision has been incorporated in section 5197 of the Revised Statutes of 1878, and has been codified in section 85 of title 12 of the United States Code (hereafter section 85), which is its common designation. As relevant here, it provides that a national banking association, or more simply a national bank, "may take, receive, reserve, and charge on any loan ... interest at the rate allowed by the laws of the State ... where the bank is located...." (Italics added.) Our question is, "May the term 'interest' be construed to cover late payment fees?" Our answer is, "Yes, if such fees are allowed by a national bank's home state."

I

Plaintiff Barbara Smiley (hereafter Smiley) filed a complaint in the Superior Court of Los Angeles County against defendant Citibank (South Dakota) N.A. (hereafter Citibank). Smiley purported to proceed on behalf of herself and all others similarly situated--specifically, the class of persons "who held or currently hold a Citibank credit card ... while they were residents of California and while they maintained a California billing address, and who have contracted for or been charged a late charge on such credit card account." She alleged facts to the following effect: she was a resident of Los Angeles County; Citibank was a national bank chartered by the Comptroller of the Currency with its only address in Sioux Falls, South Dakota, and consequently located solely in that state; it issued credit cards under the "Visa" and "MasterCard" service marks; she held a Citibank "Preferred" Visa credit card and had held a Citibank MasterCard credit card; as a condition of the extension of credit, Citibank "charges a late charge of up to $15.00 upon California consumers who use its credit cards, irrespective of the outstanding balance or amount owing on the credit card in question," when they do not timely make a minimum payment; she had been charged late payment fees by Citibank on both her Preferred Visa and her MasterCard credit card accounts. On the basis of such allegations, she attempted to state various causes of actions arising under California law, including statutes and common law, going ultimately to the amount of the late payment fees in question, and sought various forms of relief.

Citibank filed in the United States District Court for the Central District of California a notice of removal of Smiley's action from state court to federal--its petition for removal. The sole ground on which it relied was diversity of citizenship--so-called "diversity jurisdiction"--under subdivision (a)(1) of section 1332 of title 28 of the United States Code, which requires not only that the parties are "citizens of different States" but also that the "matter in controversy exceeds the sum or value of $50,000...."

Subsequently, Citibank filed an answer in federal district court. One of the affirmative defenses was to the effect that Smiley's complaint failed to state facts sufficient to constitute a cause of action against Citibank: Smiley's pleading, which was based on California law bearing on the amount of late payment fees, was without support because that law was preempted as to Citibank through section 85 by operation of the supremacy clause.

Smiley then filed in federal district court a motion to remand the action to the superior court. Her ground was that diversity jurisdiction was lacking because, properly considered, the matter in controversy did not exceed $50,000.

Citibank in turn filed in federal district court a motion requesting leave to amend its petition for removal. It sought to add as a ground that the action, as a result of preemption, arose "under the Constitution, treaties or laws of the United States"--so-called "federal question jurisdiction"--under subdivision (b) of section 1441 of title 28 of the United States Code.

In due course, the federal district court filed an order denying Citibank's motion requesting leave to amend its petition for removal and granting Smiley's motion to remand. (Smiley v. Citibank (South Dakota), N.A. (C.D.Cal.1993) 863 F.Supp. 1156.) It denied Citibank's motion as untimely, although it noted that, "[g]iven the strength of Citibank's preemption argument and the strong public interest in developing a uniform and consistent body of federal banking law, [it] understands Citibank's desire to adjudicate this dispute in federal court." (Id. at p. 1162.) It granted Smiley's motion, accepting as meritorious her claim that diversity jurisdiction was lacking because, properly considered, the matter in controversy did not exceed $50,000.

Citibank then filed in the superior court a common law motion for judgment on the pleadings. Its ground was to the effect that Smiley's complaint failed to state facts sufficient to constitute a cause of action against it as a result of preemption through section 85. Smiley filed opposition. By leave of the court, the United States filed a statement of interest on behalf of the Controller of the Currency as amicus curiae in support of Citibank's position.

The superior court caused entry of a minute order wherein it denied Citibank's motion.

Citibank proceeded to file a petition for writ of mandate in the Court of Appeal, Second Appellate District, seeking to compel the superior court to vacate its order denying its motion and to enter a new and different order granting its request.

After soliciting and receiving opposition from Smiley, the Court of Appeal caused issuance of an alternate writ of mandate, compelling the superior court either to vacate its earlier order denying Citibank's motion and to grant its request or to show cause why, among other things, it should not be required to do so by peremptory writ.

Complying with the Court of Appeal's alternative writ of mandate, the superior court caused entry of a minute order. In that order, it vacated its earlier order denying Citibank's motion and proceeded to grant its request.

Thereupon, Smiley filed a notice of appeal in the superior court. That same day, the Court of Appeal discharged the alternative writ of mandate and dismissed Citibank's petition as moot.

Subsequently, the superior court filed an order, with reasons stated, granting Citibank's motion, and in accordance therewith filed a judgment of dismissal.

On appeal, the Court of Appeal affirmed. ¹ Agreeing with the superior court on preemption through section 85, a majority of two justices concluded that its order granting Citibank's motion should be sustained. Disagreeing, a single dissenting justice would have held to the contrary. The majority relied in large part on Greenwood Trust Co. v. Com. of Mass. (1st Cir.1992) 971 F.2d 818 (hereafter sometimes Greenwood Trust ), which construes section 85 in the course of construing a provision evidently modeled on its language, viz., section 521 of the Depository Institutions and Monetary Control Act of 1980 (hereafter DIDA), codified in subsection (a) of section 1831d of title 12 of the United States Code, which covers federally insured state banks and federally insured branches of foreign banks. They also relied on the position taken by the Comptroller of the Currency. For his part, the dissenter criticized the Greenwood Trust court's reasoning and the Comptroller of the Currency's views, the former at length and in detail and the latter less so.

On Smiley's petition, we granted review. We now affirm.

II

Smiley's sole contention is that Court of Appeal erred in its conclusion upholding the superior court's order granting Citibank's common law motion for judgment on the pleadings. ²

A

In ruling on a common law motion for judgment on the pleadings made by a defendant, a trial court determines what has been called a pure question of law (Donohue v. State of California (1986) 178 Cal.App.3d 795, 802, 224 Cal.Rptr. 57; Goodley v. Wank & Wank,...