Court: Supreme Court of the United States; January 21, 1963; Federal Supreme Court; Federal Appellate Court
Mr. Justice White delivered the Court's opinion in a case involving a Texas insurance company’s receiver, who filed a lawsuit against two national banks and 143 other parties for alleged conspiracy to defraud, seeking $15 million in damages. The banks asserted a plea of privilege to move the case to Dallas County, citing Rev. Stat. 5198 (1878), 12 U.S.C. 94, which allows suits against national banks to be filed in their county of location. Conversely, the receiver argued that Texas Insurance Code, Art. 21.28, Section 4 granted jurisdiction to the court in Travis County where the liquidation proceedings were ongoing. The banks' pleas were initially overruled, leading to an appeal.
The Texas Court of Civil Appeals sided with the banks, stating that 12 U.S.C. 94 necessitated the transfer to Dallas County. However, the Texas Supreme Court rejected this interpretation, viewing 12 U.S.C. 94 as permissive and asserting that it did not prevent a lawsuit in Travis County due to the state venue statute allowing it. The Court further noted that the federal statute may have been repealed by a later omnibus statute.
The appellants appealed under 28 U.S.C. 1257(2), prompting a jurisdictional inquiry regarding which state court could hear the case against the national banks. The Court emphasized the importance of resolving the venue question prior to the merits to avoid prolonged litigation, thus establishing its jurisdiction under 28 U.S.C. 1257(2). The case's underlying issues are rooted in the National Banking Act of 1863, which established national banks as federal entities with significant Congressional oversight.
National banks are characterized as quasi-public institutions under the control of Congress, which can regulate their legal standing and the circumstances under which they may sue or be sued. The 1863 Act granted national banks the ability to "sue and be sued" in courts as corporations, but did not originally specify state courts for such actions. Subsequent legislation in the 1864 Act explicitly allowed national banks to be sued in specific state, county, or municipal courts where they are located, thereby limiting their exposure to lawsuits only within their home jurisdiction. This intention was reinforced in later revisions of the law, emphasizing that Congress's permission for suit in designated courts was deliberate and should not be disregarded. Relevant case law supports the conclusion that national banks can only be sued in state courts within the county of their location, establishing a personal privilege that protects them from being sued in other jurisdictions.
The court ruled that the bank waived its Section 57 privilege by failing to object to the suit's location during trial and raising the issue only on appeal. The statute must be interpreted mandatorily, contrary to the appellee's claims, which suggested that joining two national banks in one action is unfeasible if they are in different counties or districts. Such concerns should be addressed by Congress, not the court. The Texas Supreme Court's ruling in Langdeau v. Burke Investment Co. indicates that certain Texas statutes are permissive, allowing for case transfers. Texas procedural rules may permit dismissals without prejudice for improper venue, enabling new suits in the appropriate jurisdiction. The appellee's argument for the repeal of Section 5198, claiming it was invalidated by the 1882 Act, relies on an implied repeal, which the court found unsupported. Section 5198 governs venue for suits against national banks, while the 1882 and 1887 Acts focus on federal jurisdiction limits for national banks, not overriding Section 5198.
The legislation discussed establishes that national banks are considered citizens of the states where they are located, thereby limiting their ability to invoke federal jurisdiction solely based on their creation under federal law. This interpretation stems from the case Continental National Bank v. Buford and is supported by the Leather Manufacturers’ Bank v. Cooper decision. The statute, now codified as 28 U.S.C. § 1348, does not imply any relaxation of venue restrictions outlined in Section 5198, which must be acknowledged when properly raised. Consequently, the Texas Supreme Court's judgments are reversed, and the cases are remanded for further proceedings consistent with this ruling. Dissenting opinions are noted from Justices Black and Douglas regarding the merits of the case, while Justice Clark did not participate in the decision. The document also includes a historical reference to the relevant Acts of 1863 and 1864, which grant banks the ability to contract and engage in legal actions similar to natural persons, and outlines the jurisdictional framework for legal proceedings involving these associations. Section 5198, as amended, specifies penalties for usury and the procedures for recovering illegally paid interest within a two-year window.
Section 5198 of the Revised Statutes of 1878, which relates to jurisdiction in lawsuits involving national banking associations, is derived from earlier legislation, specifically Section 57 of the 1864 Act, and is codified as 12 U.S.C. § 94. This section allows legal actions against national banking associations to be filed in various courts, including federal district courts and state or local courts where the association operates. Title 12 has not been officially enacted into law.
The Revised Statutes of 1873 outline jurisdiction for district and circuit courts over cases involving national banking associations. Specifically, district courts have jurisdiction over all suits by or against these associations within their districts, while circuit courts have similar authority.
The Act of July 12, 1882, established that the jurisdiction for lawsuits involving national banking associations aligns with that of state-chartered banks, repealing any inconsistent federal laws. The Act of March 3, 1887, later amended in 1888, classified national banking associations as citizens of their respective states for legal actions, limiting federal court jurisdiction in actions between these associations to that of cases among citizens of the same state, with exceptions for cases involving the United States.
Current jurisdictional provisions are encapsulated in 28 U.S.C. § 1348, which maintains the character of national banking associations as state citizens for most legal actions while allowing federal jurisdiction for cases initiated by the United States or its officers. The historical context of national banking in the U.S. is briefly noted, beginning with the First Bank of the United States established in 1791.
The Second Bank, established in 1816 and dissolved in 1836, is referenced in relation to Section 57 of the 1864 Act, which allows state courts to hear disputes involving national banks closely tied to state laws, despite such disputes generally having federal jurisdiction. In Bank of Bethel v. Pahquioque Bank, a national bank argued it should not be sued in state court due to its federal instrumentality status; however, the court upheld the state court's jurisdiction based on Section 57. The subsequent case, Casey v. Adams, confirmed that while Section 57 applies to ordinary transitory actions, it does not extend to local in rem actions. Later, in Cope v. Anderson, the court clarified that a national bank is considered a 'citizen' of the state where it is located for jurisdictional purposes and can only be sued there. This limitation on suits aims to protect banks from operational disruptions. The national bank's exemption from being sued in other state courts is deemed a personal privilege that can be waived, which occurred when the bank defended itself without claiming immunity. The decision is supported by consistent rulings in lower federal courts affirming the statute's effectiveness.
State courts are divided on whether a national bank must be sued in the county where it is located. Some courts assert that such a requirement exists, referencing cases like *Monarch Wine Co. v. Butte* and *Crocker v. Marine Nat. Bank*. Others contend that the requirement has been impliedly repealed by Section 57 of the 1864 Banking Act or is subject to permissive interpretation, citing cases such as *Fresno Nat. Bank v. Superior Court* and *First Nat. Bank v. Alston*. Additionally, if a plea of privilege is upheld, the case will not be dismissed but will be transferred to the appropriate court according to Texas procedural rules. A plaintiff may take a non-suit at any time before the jury's deliberation without affecting the rights of the opposing party to seek affirmative relief. Furthermore, if multiple defendants reside in different counties, the suit may be brought in any county where one defendant resides, as per Texas statutes.
Texas law prohibits the frivolous joinder of defendants solely to manipulate venue; however, the appellee is not expected to struggle in demonstrating that the defendant national banks are residents of Dallas County and that there is a substantial basis for the claims against them. Historical context is provided regarding the 1882 Act, specifically an amendment by Representative Hammond, which established that national banks would be subject to the same jurisdictional regulations as state banks operating within the same state. This amendment was reiterated in discussions among representatives, confirming that national banks must adhere to the same jurisdictional rules as state banks. Subsequent legal revisions and codifications, including the repeal of the 1882 proviso in 1948 and the 1911 codification of judicial provisions, are also noted, indicating the historical changes in the legal framework governing national banks and their jurisdictional limits.
