CITIZENS & SOUTHERN NAT. BANK v. BOUGAS
Legal provision: 12 U.S.C. 94
Argument of William C. Humphreys
Chief Justice Warren E. Burger: We will hear arguments next in 76-398, Citizens & Southern National Bank against Bougas.
Mr. Humphreys you may proceed whenever you are ready.
Mr. William C. Humphreys: Mr. Chief Justiceand may it please the Court.
My name is William Humphreys and I represent the petitioner in this case, the Citizens & Southern National Bank.
The case arises out of Title 12, Section 94 of the United States code which is known as the National Bank Venue Act and the case involves the application and interpretation of that bank venue provision.
The interpretation of that statute requires this court to decide whether the statute requires that a National bank only be sued in its home county, that is, the county which is specified in its certificate of organization.
A second issue that must be decided by the court in order for any decision on the merits as to the interpretation of the statute to be rendered meaningful is whether a National Bank may waive the provisions of Section 94 by the establishment of a branch bank in a county other than a county where it is chartered.
Those are the two issues presented by this petition to the court.
Unknown Speaker: As a matter of fact, in how many Georgia counties does the CNS still have banks?
Mr. William C. Humphreys: Your Honor, that fact is not in the record but I will frankly concede that CNS has branches in many counties --
Unknown Speaker: In many counties?
Mr. William C. Humphreys: Yes sir and that is not disputed and in fact, in the instant case the record shows that we did have a branch in the DeKalb county where this suit was brought, that is not our home office.
Our home office specified in the certificate of organization is in Chatham county, Georgia.
Unknown Speaker: So you are taking the position that even though you have a branch in the DeKalb County that suit may be not be brought there if it is not on a transaction arising out of, well may not be brought there.
It has to go to Savannah.
Mr. William C. Humphreys: That is correct Your Honor.
Unknown Speaker: And even though the volumes -- so suppose if someone brought suit against you in Fulton county at Atlanta, and the volume of business done by CNS in Fulton county was 20 times what it was in Savannah, you would still say they had to go to Savannah to sue you.
Mr. William C. Humphreys: That is correct Your Honor.
If the venue was waived by the bank in that particular case raised, then it would be required to be sued in Savannah, its home county.
Unknown Speaker: You say a home office, is that --
Mr. William C. Humphreys: Yes, it is the county specified in its charter, is the word we --
Unknown Speaker: Is that synonymous with registered office.
In my state, a corporation has to reside in its certificate of incorporation, if its registered there.
Mr. William C. Humphreys: Yes it is a little bit different with regard to National Banks, they are obviously federally chartered and there is not the registration that goes over state corporations rather there is a certificate of organization and in that certificate of organization there is a place specified and it is that place that we contend is the home county, that is, the place specified in the certificate of organization.
Justice William H. Rehnquist: Is that wholly within the discretion of the bank to select any county within the state that it has a bank at to be that certified place?
Mr. William C. Humphreys: Well, at the time the bank is initially chartered then the answer to your question is yes, when they are chartered they will select a place that is to be their home office and then there are really strict provisions that that home office, for example, cannot be moved during the lifetime of the bank over fifty miles.
So that even if, as I understand it, if you select county A, then you cannot move that county, your principal office over fifty miles.
You can move it fifty miles with the permission of the controller of the currency but as I read, I believe it is 12 of United States code section 30, you may not move it over fifty miles.
Justice William H. Rehnquist: Are there any substantive requirements in connection with the principal office, do you have to hold your Director's meetings there or is it just purely a venue?
Mr. William C. Humphreys: No Your Honor, there are approximately, when I went through and counted, at least seven or eight statutes that talk about activities and duties that must be conducted where you are located.
Chief Justice Warren E. Burger: But what about maintenance of records, is there not any requirements, that certain records be maintained at the principal or chartered place of business?
Mr. William C. Humphreys: Your Honor, I am not aware that there is any specific statute in existence now that requires that the records be maintained only at that one office.
Chief Justice Warren E. Burger: How about regulations over the control in general?
Mr. William C. Humphreys: Your Honor there may be I am -- there may be a regulation such as that, I am sorry I do not know of any, I do not find any specific statutory authority, there may be certain records but generally the bank can of course, now conduct business not only in its main office but --
Unknown Speaker: Do you say that there are some statues that require at the home office the conduct of some kinds of business, is that right?
Mr. William C. Humphreys: Yes, Your Honor.
Unknown Speaker: Of what kinds?
Mr. William C. Humphreys: Well, for example, one very important statute, I believe governs the amount of reserves that must be maintained with Federal Reserve Bank and this statute requires that if you are located in a federal reserve city that you will maintain so many percentage of reserves, if you are not located in a reserve city, the reserve requirements are less, this we found in 12 United States, code 142.
Unknown Speaker: Is that why you are in Savannah and not Atlanta?
Mr. William C. Humphreys: No Your Honor, the reason we are in Savannah is because years ago, we in fact were started in Savannah.
Unknown Speaker: Has this bank, has the CNS everywhere itself used by courts of DeKalb county?
Mr. William C. Humphreys: Again that is not in the record but I am certain that we have.
Unknown Speaker: I am sure it must be.
Mr. Humphreys may I ask you two questions in this reserve calculation, I take it reserves throughout the bank, all of the bank branches are counted in calculating reserves.
Mr. William C. Humphreys: I would presume so as long as they were part of the same bank.
Unknown Speaker: Is there anything in statute and my second question is that would preclude you from closing your banking activities in Savannah but retaining your office for Director's meeting and the like there.
Say you decide all your banking in Atlanta but keep your home office in Savannah, could you do that?
Mr. William C. Humphreys: I am reluctant, I do not know the answer to that question, I will add that with regard to the requirement that it be moved fifty mile that it only be moved fifty miles.
And even then only with the controller's permission, I am told as an anecdote that at one point in time there was thought of trying to move the office from Chatham county to Atlanta and someone suggested they could only do it at about 50 miles a week, so that they would move fifty miles one week and fifty miles the next, but clearly I --
Unknown Speaker: Because that only relates to moving the home office, that isn't relevant to the question whether you could discontinue banking?
Mr. William C. Humphreys: No sir, I do not know whether if they could discontinue banking activities, I believe this will probably depend to some extent on the answer to Mr. Chief Justice's argument which I am not able to answer and that is must there be some records, must there be a physical place that continues to be maintained in the home county and that there may be some regulations regarding that.
Unknown Speaker: What limitations -- who was doing branching under Georgia law?
Mr. William C. Humphreys: Your Honor, we have opened up branching somewhat and I believe it is now a grandfather situation, we can pretty much go, we can merge with and I believe this court considered the effects of that, what used to be 5% banks and I believe now we have state wide branch banking in Georgia, it is not grandfather situation.
Unknown Speaker: Did Georgia ever have a situation that I understand prevails in some states in which no branch as well had whatever, perhaps no branch at the Atlantic county in which the home office is located.
Mr. William C. Humphreys: Oh! Yes Your Honor.
We did have that large such at one time and it has got the Georgia banking law has gone through several phases and I am confident that that law did exist at one pint because that is why the we used to have grandfather or 5% banks where the bank would go and could only own 5% of banks in other county.
So we did have that at one point in time.
Unknown Speaker: But now as so far as a law is concerned, your bank could have a branch in every county of Georgia?
Mr. William C. Humphreys: That is correct.
Unknown Speaker: And it is a hundred and some -- how many counties in Georgia --
Mr. William C. Humphreys: I do not know how many counties, I am sorry, that Georgia has but it is a large number of counties and the bank will undoubtedly have branches in those counties where it is profitable to open up an office or have a branch.
Unknown Speaker: You are going to tell us what your justification for opposing this venue is?
Mr. William C. Humphreys: Yes, Your Honor, it involves basically the meaning of two words in 12 U.S.C Section 94.
Unknown Speaker: Is that all just the statute if there isn't any policy justification?
Mr. William C. Humphreys: No Your Honor , this statute was being presented to be written by Congress today.
There was probably no policy argument for not writing a statute that will allow a branch of bank to be sued at any place, it had a branch, for calls of action arising out of the business activities conducted in that branch.
I do not believe there would probably be a very good policy argument for not giving the bank the same wide venue that a corporation has.
12 U.S.C. 94 contains two basic provisions, one is a federal provision and a one is a state provision.
The federal provision says simply that a bank may be sued in any county or in any federal court, in any district in which the bank is established; and the state court provision provides that a bank in for state court purposes may be sued in any state municipal county court in the county in which it is located and these two provisions were enacted, one in 1863, the federal court provision, and one in 1864, the state court provision.
Now, the Georgia Court of Appeals decided that since Congress had used a different word 'located' in describing the venue for national banks then it did when it described the venue for national banks which was connected to the word established and that therefore a Congress must have intended for located to have different meaning, a broader meaning than the word 'established' and therefore Congress must have intended for banks to be sued in every county in which they were located.
Unknown Speaker: But were there any branch banks in 1864?
Mr. William C. Humphreys: No Your Honor, there were not any branch banks in 1864.
Unknown Speaker: Then how do you derive that intention of Congress?
Mr. William C. Humphreys: I do not -- I am not arguing for that.
I believe the Georgia Court of Appeals as in other courts, state courts are trying to find ways to expand their venue.
That has always been the case and they looked at the dictionary not the Georgia Court of Appeals but the Security Mills vs. Wachovia case in North Carolina took a run through the dictionary to look at the various words and definitions of 'locate' and 'establish'.
This is not a very fruitful task because one of the synonymous meanings or synonyms for locate is to establish.
So having done that to still give them opposite meanings does not make a lot of sense and that's particularly true in light of the conditions that existed in 1863, as we have said there were not branch banks in 1863, a bank could only do business in one place, the county in which its Certificate of Organization was issued.
But more importantly the jurisdiction of the state in federal courts in 1863 and 1864 was concurrent with regard to national banks and this to me is very important in deciding whether located and established mean the same thing, because until 1882, any suit against the national bank could be brought in the first instance in federal court without regard to diversity and without regard to amount involved.
Similarly, any suit brought in state court could also be removed to a federal court since the federal courts had concurrent and original jurisdiction and therefore it seems to me that the argument becomes even more untenable that a federal court, that Congress intended for state courts to have a broader venue and to permit suits in more state courts than in federal courts with this concurrent jurisdiction and the same really holds true today, because if a diversity suit were brought in Georgia in a branch, in a place other than where the bank was established, the bank could remove that case to federal court, and the federal courts are clearly unanimous in holding that the word established refers only to the place specified in the bank's certificate of organization.
Unknown Speaker: Why can not the bank remove in a situation like that?
Mr. William C. Humphreys: Well, it would have to be a diversity case, Your Honor, it would have to be a New York citizens suing a bank in Georgia and, for example, bringing suit in Atlanta. That would not work with two Georgia citizens such as we have here.
Unknown Speaker: Since 1882
Mr. William C. Humphreys: Since 1882, now prior to 1882, you have the same result, you would remove and then you could end up back in the county where you started or rather have the case dismissed, if you are moving from state court to federal court.
So I submit that the first argument or consideration that should not control in this case is any consideration that the word located and established had different meanings as used by Congress in 1863 and 1864.
Whatever, interpretation is given to the word located in this case and this is clearly a state court case.
It is not, does not arise in the federal court, but whatever interpretation this court gives to the word 'located' it also must give to the word 'established' and it is clear, as we have, I think mentioned briefly before that located and established when used in 1863 and 1864 referred only to one place.
There was only one place in existence at 1863 and 1864 and that was the place that the bank was chartered.
Now further more, if you read the language of section 94 carefully it is very apparent that although Congress might have mingled the words located and established, it was very particular as to when it intended to note a potential plurality and when it intended to mean the singular and thus the statute provides that the suit may be brought in any district or territorial court of the United States, and it further provides that the suit may be maintained in any state, county or municipal court.
There is a potential plurality of courts that I believe could be found from that language.
On the other hand, Congress was quite explicit that it should only be maintained in the district, the one district, I would suggest in which the bank was established and in the one city or county in which the bank was located.
Unknown Speaker: How does the Langdeau case helped you much or it hurts?
Mr. William C. Humphreys: Both the Langdeau case helps more than it hurts but is not determinant of the issue.
In Langdeau, the court was concerned with whether 12 USC 94 was permissive or mandatory that was the only issue --
Unknown Speaker: Whether it prevailed over the state.
Mr. William C. Humphreys: That is right, whether it could be in that way or whether it had to be applied or whether it just was something that could be applied.
Unknown Speaker: It held that it had to be.
Mr. William C. Humphreys: And it held that it had to be applied.
Unknown Speaker: But there was no question there about where the bank was --
Mr. William C. Humphreys: There was no question there about where the bank was although the court did say that to hold that the statute was merely permissive rather mandatory, would render meaningless a Congressional enactment permitting suits in the bank's home county.
Now that is an exact quote from Mercantile, they coined the phrase home county, the court in Mercantile.
This court really for a hundred and three years beginning back in 1871 with Bank of Bethel in going really down through 1976 in Reds and Harvard case has never intimated and it has many opportunities that located and established are not referred to any place other the one place that is the place in the Certificate of Organization.
For 40 years the federal court, ever since the Leonardi case which was decided by the Second Circuit in 1936, for 40 years the federal courts have been unanimous in holding that established is determined by the place specified in the bank's Certificate of Organization and that once that decision is made, there is no need to go further to determine where venue properly lies in a suit against the bank.
Most courts, most even state courts in this day have recognized that located and established do in fact, mean not only the same thing but that they refer only to the county specified in the Certificate of Incorporation or rather the Certificate of Organization.
Unknown Speaker: Do you have any idea when this statute was passed, how many states had more than one federal district?
Mr. William C. Humphreys: Your Honor, I have made diligent search to try to find out this potential plurality question on district and territorial as the statute was initially enacted that it provided that it could be brought in any circuit district or territorial courts, clearly, I believe in 1863 there still were circuit courts that had primary or trial court jurisdiction.
I have not been able to -- the court system was very complicated in 1863, I am unable to say that there was a state that had a district or a territory.
I do know that back in 1863 when you stick, when you write in the alternative of circuit district or territorial court, I feel that there must have been some overlapping and even if we can't, I can't --
Unknown Speaker: Now, was there a state that had one on one circuit courts, for example.
Mr. William C. Humphreys: Your Honor, I have --
Unknown Speaker: Or having more than one district court.
Unknown Speaker: There were states with one on one district courts.
Mr. William C. Humphreys: I know that there was a district court, I know there were district courts that would encompass two states, I know that and over the district might cover two states --
Unknown Speaker: How about more than one on one state?
Mr. William C. Humphreys: I do not know I have -- the treatise on the court system at 1863, I have tried to go through and it is a very tedious task, the system was very complicated back then and I am extremely sorry, Your Honor, I simply cannot respond to that.
Unknown Speaker: I suspect, you could find it in the front pages of 35 federal.
Mr. William C. Humphreys: Your Honor, I think not.
It is very complicated, I will go back and undertake that but we have tried diligently so that I could definitely say that state Acts had a district and the circuit court in it and therefore there was a reason for that potential plurality but i would suggest that that my ignorance is not damming to my argument because my point is that even if there was a potential plurality, just the chance of more than one Congress used the word 'any', really whether there were more than one or not I do not know but if there was a chance that there was more than one court in which this case could be brought, then they used the word any.
In other words, any circuit district or territorial court on the chance that there was a plurality.
Justice Thurgood Marshall: I just remembered, there must have been plenty of states with just one district court, because I remember correctly, Maryland has still got one.
Mr. William C. Humphreys: That there are still states today that have only one district court.
Unknown Speaker: Mr. Humphreys, what significance if any do you attach to the McFadden Act of 1927 authorizing national banks to branch and using the word establish with respect to branches.
Mr. William C. Humphreys: The Act probably could be used to make a distinction between the location and establishment of a bank versus the location and establishment of the various branches of that bank but that statute has no effect on 12 USC 94, it has only not been amended by Congress, the federal case of it considered that the McFadden Act had placed no importance on it to the extent that it somehow changes or effects 12 USC 94, but that statute was written at the time still in terms of the basis, and we believe of the county specified in the charter, and if for some reason located and established are now supposed to mean every place where the bank has a branch then we have numerous other statutes, for example, the publication of controller's report shall be in the city or county where you are located.
These reserve requirements, all of these topple like house of cards and instead of having one central county where all of these reports are published the reserve requirements suits against the controller of the currency, all of a sudden these also take on a plurality rather than what we contend would be the single place, where Congress originally intended for these activities to take place.
Chief Justice Warren E. Burger: Well, is a branch or a bank in and of itself, does it have all of the attributes of the bank?
Mr. William C. Humphreys: It many have all of the attributes of the bank or it may not, it may have the instant tailor and it may not be able to make loans but it is permitted to have all of the attributes of a bank.
I mean, the general business of the bank may --
Chief Justice Warren E. Burger: Does it have its own President and Board of Directors?
Mr. William C. Humphreys: A branch would not, no sir.
Chief Justice Warren E. Burger: Well that is one of the important attributes of the bank as well.
Mr. William C. Humphreys: Yeah, sir I was directing myself to what the business that they could conduct.
Unknown Speaker: Well, the main office would not have its own President and Board of Directors, the President and Board of Directors would be over the main office in all the branches?
Mr. William C. Humphreys: That's correct, yeah sir.
The bank itself has the President and a Board of Directors, each branch will have a branch manager, just like a division of a corporation, it is not a separate entity.
Unknown Speaker: Mr. Humphreys, would you help?
You mentioned the fact that there are requirements that such as publishing the amount of reserves or something like that, what is the purpose of requirement like that, to inform people who do business with the bank, what it sizes in the like?
What are the requirements you are talking about apply all over?
May be they should apply every place at the bank.
I did not quite get the argument.
Mr. William C. Humphreys: Alright.
There are numerous other statutes.
In some of them, it might in fact be desirable to apply every place, the bank has a branch.
Publications of, as I say directors meetings and that sort of thing and it might be that it is desirable for the bank to publish them not only in the place where it is located as specified in the statute but also all over the state, every place it has a branch.
I would suggest though that it is that sort of argument that ought to be directed to the Congress and not directed to this court and whether it is desirable policy for a bank to be sued everywhere or whether it is desirable policy to have controller's reports published everywhere.
It's something we cannot answer
Unknown Speaker: May be Congress has already answered that.
Mr. William C. Humphreys: Well, I do not think so particularly with regard to the reserve requirement Your Honor because there it would seem like Congress certainly would not intend to create a confusion by using the word 'located' to define the specific reserve requirements for a bank depending on the county whether that it was located in, that is, whether it be a central reserve county or whether it be another county.
By the saying that the bank is located everywhere then that provision becomes almost unmanageable that would seem to me.
Unknown Speaker: I thought that the requirement only related to the place where publication had to be made rather than the content of the publication.
Mr. William C. Humphreys: No, Your Honor.
As I say I tried to summarize too quickly and they are not cited in the brief but there are about 8 more statutes that were enacted in 1864.
One of the statutes concerns the requirements for maintaining reserves, I mean this is not a publication statute and I do not want to suggest that that statute was necessarily passed in 1864 but the statute provides that if you are located in a reserve city, you will have a reserve requirement of 'x', if you are not located in a reserve city, you have another reserve that is not a publication that actually directs you as to how much reserve you may have.
Justice Thurgood Marshall: And in the state of Texas, the bank that is chartered in Galveston and a branch in El Paso had to turn out that since it were taking about three days to get there, would it not?
Mr. William C. Humphreys: At least.
Justice Thurgood Marshall: And it would apply, your statute would apply.
Mr. William C. Humphreys: That is correct Your Honor.
Justice Thurgood Marshall: And as of today that bank had published whatever they want in the Galveston daily paper is noticed in El Paso.
Mr. William C. Humphreys: Under all of the statutes that would be correct, yes sir.
In the few minutes that I have remaining, I would like to ask the courts in diligence to consider the waiver argument because many state courts having concluded that located and established refer to only one county then turned right around and say however this venue requirement is waved by the erection and maintenance of a branch in another county.
That argument is not found on judicial precedent and if the court would think about it as I know it will, it occurs to me that never before in American Jurisprudence have we decided that venue can be waved presumptively by pre-litigation conduct, the only case that even suggests that, if that sort of rule was adopted every case that comes before a trial court, the judge is now going to be faced with an argument of he presumptively waved venue by some conduct inconsistent with it, in advance of trial.
Unknown Speaker: What do you do about the Neirbo case?
Mr. William C. Humphreys: Neirbo trade very lightly on this matter and was a very narrow holding and it involved the corporation who specifically appointed a registered agent for service of process.
Unknown Speaker: Which is pre-litigation conduct --
Mr. William C. Humphreys: But that was very narrow, they found to express consent to be sued by the appointment of agent for service of process and I would suggest that Neirbo can never be cited or used without considering Olberding which was decided in 1953, by Justice Frankfurt because Neirbo be read too expansively or can be used too expansively without reading Olberding because in Olberding the argument was made that a non resident motorist passing through the state, and this was not a jurisdiction question this was on venue, they had decided constitutionality of the non resident motorist statute.
But this non resident motorist was passing through a state and for some reason venue requirements were not met because neither the plaintiff nor defendant were residents of that state and the defendant assorted his venue right and the court said, now you waived venue because we have got our non resident statute that says when you are passing through the state you waive a venue, if you have an automobile wreck and you appoint the Secretary of State to receive process although there no specific appointment was made.
And justice Frankfurt has said that but to conclude that a motorist who never consented to be sued has agreed to be sued and therefore waived federal court venue as to move in the world of Alice in Wonderland.
In other words, that non resident motorist had not consented expressly to be sued.
There is no case that this court has considered other than Neirbo in which a pre-litigation waiver has been allowed and in Neirbo the court was very specific to say that it was because they had expressly appointed an agent for service of process and therefore had expressly consented to be sued.
Now what the proponents of the waiver argument would seek now is to say that any Act inconsistent with assorting venue that you do prior to trial will result in waiver of venue such as erecting a branch bank.
Well I submit that individuals do things all the time in consistent with the normal state venue right of to be sued in your home county.
But no court has ever said that because if you are an individual, you go to another county and commit a tort that you have waived venue, you have a waived venue if the statute says you have a right to be sued where you live, you do not waive that statute prior to litigation, and that is what we would contend this statute says that the bank has a right to be sued where it maintains its home offices.
Chief Justice Warren E. Burger: Very well,Mr. Humphreys.
Mr Kovacich you may proceed.
Argument of Michael J. Kovacich
Mr. Michael J. Kovacich: Mr. Chief Justice Burger and may it please the Court, I am Mike Kovacich.
I think Mr. Humphreys has outlined to you the crunch of the matter and it basically boils down to a statutory interpretation and there have been decisions which were cited in the briefs from various lower federal courts and state appellate courts dealing with this question in recent years.
This case is revolved basically around two theories of interpretation, as far as holding for the position which I contend is proper.
The first theory, and this was the one predominantly followed by the Georgia court is the dichotomy in language between the words established and located.
The ruling was basically and because of this dichotomy in language, once the bank set up a branch, county other than its chartered county, if you want to use that term, that it was located there, and could be sued there, and therefore in compliance with the statute.
The second theory is that of waiver.
That is that act of establishing a branch bank in and of itself constituted waiver.
This is what Mr. Humphreys discussed when he said pre-litigation waiver.
That is the basis of the decisions in some of the lower federal courts which are cited in my brief and in some of the state court decisions which are also cited.
But as I said it revolves around this question of interpreting the statute as to litigation in federal court which is not really what we have got here but it has been brought in for a consideration and looking at the entire picture, I would agree with Mr. Humphreys, that the established does mean that particular county.
I do not know whether that is quite a case for state litigation and I would not go so far as to concede that, but I think as some of these federal decisions have held the establishment or the conduct of business.
There were one or two decisions and there is also a recent Florida appellate decision which dealt with the question of doing business and this gets us in part as to what is required.
Some of these cases have contained a recitation of like the Reeves (ph) case, the 66 branches in the Southern District of California and all of that, the Wyle (ph) and this brings upon the question that Justice Rehnquist posed before in Wyle (ph).
You may not be aware that DeKalb and Fulton counties are bordered next to each other and part of the city of Atlanta is located in DeKalb.
I think that as Mr. Humphrey's response to Mr. Justice Rehnquist indicates a considerable portion of CNS's business by volume as in DeKalb and Fulton counties.
I am sure the business in DeKalb is several times what it is in Chatham county.
And as to the question raised by Mr. Justice Blackmun about their using the courts in DeKalb, as pointed out in my brief, there was earlier litigation dealing with one of the loans that led to the unlawful redemption as we have alleged in our petition.
It was litigation in regard to that, filed by the bank in the exact court that this litigation --
Chief Justice Warren E. Burger: Are you suggesting that the person goes to another state of another jurisdiction from his own and uses their courts that that in and of itself draws him into the jurisdiction of that court for all other purposes.
Mr. Michael J. Kovacich: No I would not Your Honor.
Mr. Chief Justice, but what I am raising here is the fact that besides using the court, the bank has established branches and is conducting active business and uses the courts as a part of conducting that business and has become a part and parcel of that county and this leads into somewhat the point that Mr. Humphreys raised about, does going to another county and committing a tort waive an individual's venue, and he said no it would not.
I believe, that is a correct statement of the law.
But many states Georgia included, provide a corporation can be sued in any county in which it commits a tort.
You can sue a corporation in a county where the tort is committed or in a contract matter where the contract is entered.
So I think courts have recognized different jurisdictional and venue requirements as to corporations.
Chief Justice Warren E. Burger: Nothing ambiguous about that statute, is it not?
Mr. Michael J. Kovacich: No, Your Honor, I think that statute is fairly clear and I think that that situation -- .
Chief Justice Warren E. Burger: No, but when you are talking about that situation, you are simply saying Georgia legislature has as a matter of policy declared that to be so, but we do not have that quite clear kind of expression here, do we?
Mr. Michael J. Kovacich: No, we do not Your Honor and because of this courts decision in the Mercantile case that is holding that 12 USC Section 94 was mandatory.
That therefore pre-empts the Georgia statute for the determination of where CNS can be sued and the determination has to be made under this statute.
Unknown Speaker: Mr. Kovacich, I want to be sure about your procedure.
Do you feel that you could sue this bank in any county, in state court of any county in Georgia where it has a branch, whether this particular transaction arose out of business from that branch.
Mr. Michael J. Kovacich: NO I would not go that far Your Honor.
I would say that there has to be some connection to that county.
Unknown Speaker: Why do you draw that distinction?
Mr. Michael J. Kovacich: Well, I think maybe because in the back of my mind, I think of the Georgia venue statute as to corporations that is if you are going to sue a corporation over a tort or a contract, you have to have some connection to the county other than just finding him there.
Unknown Speaker: Do you feel you could sue in Savannah, or Chatham counties of Georgia?
Mr. Michael J. Kovacich: Yeah.
Well of course the bank is contending that the Chatham is the only place that --
Unknown Speaker: Right, but do you think you can sue there?
So at least on your theory you have two counties which you could sue, the Chatham and DeKalb.
Regardless of where the defense actually--
Mr. Michael J. Kovacich: Well, under my theory if there were no ties, no transactions, no part of these transactions in Chatham county, then the only way that I could sue there is on the fact that the statute provides a special additional venue.
Unknown Speaker: Well, let me ask it again.
On the facts of this case, on your theory then you can sue only in Chatham county or DeKalb county not in Fulton?
Mr. Michael J. Kovacich: That is correct, Your Honor because I am not aware of any transactions or any part of this entire matter which were conducted in Fulton county.
Unknown Speaker: So you do not go all the away and say because there was a full service branch in the county whatever that means, speaking terminology, that you can sue the bank in that county?
Mr. Michael J. Kovacich: No I do not, now I think some of the decisions referred to in my brief imply that possibly that is the case.
The waiver or the establishment of the branch that knowing business decision to open the branch and all the ramifications that imposes, includes the right to be sued there.
Now, some of these decisions though do contain the qualifying language or the limitation that there must be transactions that arose out of that, otherwise I would think the original purpose of the statute that being to protect the banks, national banks and their infancy at that time from cumbersome litigation would be thwarted and I think I do not know whether or not that is a legitimate purpose today, but assuming that it is.
I think that the same purpose is accomplished by limiting the litigations to counties, which have some connection.
I will not say here we are dealing with the series of four, five different actions including two separate notes and you know the record does not show and the way this case was involved.
Unknown Speaker: You confused me a little bit, I suppose I am not tracking but I thought you were are approaching this initially on a basis of statutory interpretation and then I hence I am wondering why you include the county of the branch or the transaction but exclude a county, where there is another branch and no transaction.
Mr. Michael J. Kovacich: Well as I say, or I think some of the decisions do not --.
Unknown Speaker: I am not asking about you, and not those decisions.
Mr. Michael J. Kovacich: Well I guess from the stand point of the the fairness aspect, I do that in my mind that this could possibly be burdensome to the bank and I think really fairness is one aspect that we have to consider in this.
Unknown Speaker: Well on that approach, do you not to lose your construction argument and are you not forced go on into a waiver theory?
Mr. Michael J. Kovacich: Well, I think to a certain degree and to me, it is thinking from the fact that to resolve this question which is gone through extensive litigation and many courts recently, that this courts decision or it might be desirable that this court's decision also address itself to the federal and the only way to do that is on the waiver theory because the dichotomy of language definitely does not exist and apply to the federal situation.
Unknown Speaker: What would you say, okay if it does not mean established?
Mr. Michael J. Kovacich: Well, this I think that is one theory of application and I think that is a theory --.
Unknown Speaker: What you would say about national bank that exists in a state, that has two districts and it has branches in two districts and have one as its home office and another as a branch in another district.
Where may it be sued?
Let us assume that a suit is brought in the district, federal district court, in the district where it has a branch but that is not its own house office, can it be sued there?
Mr. Michael J. Kovacich: If you follow my contention that the establishment of the branch constitutes a waiver at least for transactions arising out of this.
Unknown Speaker: Except on the waiver you would have to say that it could brought in only one district, except for the waiver.
Mr. Michael J. Kovacich: As far as the federal is concerned yes, your Honor and this is why I think we get into the fairness question and this touches upon the matter that Mr Justice Marshall raised before in regard to the Galveston, El Paso situations.
Unknown Speaker: Your suggestion, we just rewrite the statue in a fair way?
Mr. Michael J. Kovacich: No I am not your Honor, I am not suggesting that you rewrite the statue.
I am suggesting that you interpret the statue and you decide what constitutes a waiver of the prerogatives that the bank has under the statue and I would contend to you that the establishment of the branch should be a sufficient act to a constitute waiver, at least as to transactions arising out of the conduct of business in that branch.
Justice Thurgood Marshall: Where is the notice, the bank did not get that notice.
When was the bank told that if it established a branch, they would be subject to suit in that county?
Waiver is annoying waiver.
Mr. Michael J. Kovacich: I do not think, in that sense may be that there was notice Your Honor, but I think also on the same bank if an individual say in a Fulton county Georgia, goes into see and ask to transact business with them, do they tell him look if this does not go the way you want it and you decide you have to sue us that you have go to Savannah, I am sure they do not and so --.
Justice Thurgood Marshall: So if he goes into an ordinary corporations, it still is the same thing there, is it not?
It has extended the law but you termed that a waiver.
Well, I say waiver has been knowingly made.
When bank had to know that, when they established a branch bank that they will waive then, the statue.
Mr. Michael J. Kovacich: Well, I would think that it could be, I mean you could argue and I am sure that would be the bank's position that they must make a annoying waiver and they must be put on some kind of a notice but I really do not know any way to put bank on any type of notice as to what are the ramifications of establishing a branch bank.
Justice Thurgood Marshall: How otherwise can you waive a statue?
Mr. Michael J. Kovacich: Well, I think that going into that county assumes some ramifications of it.
It is a knowing business decision and I am sure when they go in there they do not know what the tax, they may not know what the tax structure or the tax rate is going to be, but they presume and know that they have to pay, they are going to have to pay some type of taxes and as far as this you know this point it is --
Justice Thurgood Marshall: How did the bank know that it is the statue tells them, that they can only sued in Savannah, that they know and the statute says that.
Mr. Michael J. Kovacich: Well, that is the interpretation that the bank has been operating under.
Justice Thurgood Marshall: But now this is what the statue says.
Mr. Michael J. Kovacich: Well this is a question of statutory interpretation.
Your Honor, some courts including state appellate courts and federal courts had held.
That this is not what the statue means because by the establishment of the branch, the bank waives venue.
There are decisions on both sides of that and in the fairness question, I think probably the most classic is the Halco case, where a New York bank had established a branch in the Virgin Islands and the transaction and everything arose out of the activities of the branch in the Virgin Islands.
Now, there the Third Circuit's holding was that the individual had to go to New York, to sue the bank.
But there are other federal decisions including one that crosses state lines that hold that the establishment of the branch is a waiver.
One were, the bank was established in Camden, New Jersey and the branch in Philadelphia, and the District Court in Philadelphia held that the establishment there was sufficient action to constitute a waiver.
Now some of the decisions have looked at other business, are the extensive business of the branches but I think that it would be hard to write any definitive standards there.
Justice Thurgood Marshall: What do you do, where the banks has its office in Fulton County and a branch in DeKalb county, that all in couple of feats, how would your fairness work there?
You are suing either one, I guess?
Mr. Michael J. Kovacich: I think probably is, if that had been the situation as a matter of convenience, since our office had been handling the litigation in prior action, we might have gone down to Fulton.
Justice Thurgood Marshall: But as a matter of fact your office has a branch in Fulton County?
Mr. Michael J. Kovacich: No.
No mine, mine is a small suburban firm.
But I think one other point that this deals with is, each of the branches has a branch manager who is generally also a Vice President, who can be an agent for service, and the fact and that is how service was perfected in this case and how it has been in other cases, but besides the fairness is as an argument is difficult to make, but I think the statue is subject to interpretation on either, the basis of a waiver theory and for this court to defensively say what actions constitute a waiver.
I would contend that the establishment of a branch in and of itself is sufficient.
The other as I said and this was the basis on which the George Court Of Appeals rendered its decision, is that by establishing a branch bank, the bank located itself in that respective county, for suit under that court's interpretation of this act without getting in to any waiver but I think that on either application that the motion of the bank, the original motion of the bank to be dismissed was properly denied and I would respectfully request that this court affirm, the decision of the Georgia Court of Appeal.
Mr. Michael J. Kovacich: Mr. Kovacich, may I ask you question?
I think throughout the argument both parties seem to assume that when a federal venue is sought to be established, the bank can be established only in one place and that the branch would not be established within the meaning of the statue.
Has this court ever so held?
I do not think so your Honor, I think the reason that both parties have taken that position is one we have not gone into that aspect of it and as great of depth as we are dealing with the state court issue and secondly the statue uses the word 'established' in regard to the federal district and as I understand that the federal laws which set up the procedure for a bank a national bank being chartered also used that exact term 'established' and so from that you draw possibly, an intention to mean the same thing and therefore you do get this home county aspect but to my knowledge as far as --
Unknown Speaker: There is no holding by this court that a federal, that the branch of a national bank is not established in the county and in which the branch is located.
There is no holding by this court.
Mr. Michael J. Kovacich: Not that I am aware of.
Chief Justice Warren E. Burger: Thank you, gentleman.
The case is submitted.