Source: https://supreme.justia.com/cases/federal/us/439/299/case.html
Timestamp: 2017-11-19 12:42:36
Document Index: 443377687

Matched Legal Cases: ['§ 94', '§ 48', '§ 85', '§ 30', '§ 30', '§ 85', '§ 85', '§ 30', '§ 85', '§ 41']

Marquette Nat. Bank v. First of Omaha Svc. Corp., (full text) :: 439 U.S. 299 (1978) :: Justia US Supreme Court Center
Justia › US Law › US Case Law › US Supreme Court › Volume 439 › Marquette Nat. Bank v. First of Omaha Svc. Corp. › Case
(c) Omaha Bank cannot be deprived of its Nebraska location merely because under the BankAmericard program it extends credit to residents of another State, for it is in Nebraska that credit is extended by the Bank's honoring sales drafts of Minnesota customers, unpaid-balance
262 N.W.2d 358, affirmed. BRENNAN, J., delivered the opinion for a unanimous Court.
The First National Bank of Omaha (Omaha Bank) is a national banking association with its charter address in Omaha, Neb. [Footnote 2] Omaha Bank is a card-issuing member in the BankAmericard plan. This plan enables cardholders to purchase goods and services from participating merchants and to
obtain cash advances from participating banks throughout the United States and the world. Omaha Bank has systematically sought to enroll in its BankAmericard program the residents, merchants, and banks of the nearby State of Minnesota. The solicitation of Minnesota merchants and banks is carried on by respondent First of Omaha Service Corp. (Omaha Service Corp.), a wholly owned subsidiary of Omaha Bank. Minnesota residents are obligated to pay Omaha Bank interest on the outstanding balances of their BankAmericards. Nebraska law permits Omaha Bank to charge interest on the unpaid balances of cardholder accounts at a rate of 18% per year on the first $999.99, and 12% per year on amounts of $1,000 and over. [Footnote 3] Minnesota law, however, fixes the permissible annual interest on such accounts at 12%. [Footnote 4] To compensate
for the reduced interest, Minnesota law permits banks to charge annual fees of up to $15 for the privilege of using a bank credit card. [Footnote 5]
Marquette named as defendants Omaha Bank, Omaha Service Corp., which is organized under the laws of Nebraska but qualified to do business and doing business in Minnesota, [Footnote 9] and the Credit Bureau of St. Paul, Inc., a corporation organized under the laws of Minnesota having its principal office
The defendants sought to remove Marquette's action to Federal District Court. See 12 U.S.C. § 94. [Footnote 11] Marquette responded by dismissing without prejudice its action against Omaha Bank, see Fed.Rule Civ.Proc. 41(a)(1)(i), and the District Court, citing Gully v. First Nat. Bank, 299 U. S. 109 (1936), remanded the case to the District Court of Hennepin County. Marquette Nat. Bank v. First Nat. Bank of Omaha, 422 F.Supp. 1346 (Minn.1976). Marquette thereupon moved for partial summary judgment to have Omaha Bank's BankAmericard program declared in violation of the Minnesota usury statute, Minn.Stat. § 48.185 (1978), [Footnote 12] and permanently to enjoin the remaining defendants from engaging in
On appeal, the Minnesota Supreme Court reversed. Noting that Marquette's dismissal of Omaha Bank was a procedural device that removed the case from the jurisdiction of the federal courts of the Eighth Circuit, and noting that a recent decision of the Court of Appeals for the Eighth Circuit had made it plain that, in its judgment, the usury laws of Nebraska, rather than Minnesota, should govern the operation of Omaha Bank's BankAmericard program in Minnesota, see Fisher v.
In the present posture of this case, Omaha Bank is no longer a party defendant. The federal question presented for decision is nevertheless the application of 12 U.S.C. § 85 to the operation of Omaha Bank's BankAmericard program. There is no allegation in petitioners' complaints that either Omaha Service Corp. or the Minnesota merchants and banks participating in the BankAmericard program are themselves
(Emphasis supplied.) Section 85 thus plainly provides that a national bank may charge interest "on any loan" at the rate allowed by the laws of the State in which the bank is "located." The question before us is therefore narrowed to whether Omaha Bank and its BankAmericard program are "located" in Nebraska, and for that reason entitled to charge its Minnesota customers the rate of interest authorized by Nebraska law. [Footnote 19]
The State of Minnesota, however, contends that this conclusion
We disagree. Section 85 was originally enacted as § 30 of the National Bank Act of 1864, [Footnote 22] 13 Stat. 108. [Footnote 23] The congressional debates surrounding the enactment of § 30 were conducted on the assumption that a national bank was "located" for purposes of the section in the State named in its organization certificate. See Cong.Globe, 38th Cong., 1st Sess., 213-2127 (1864). Omaha Bank cannot be deprived of this location merely because it is extending credit to residents of a foreign State. Minnesota residents were always free to visit Nebraska and receive loans in that State. It has
not been suggested that Minnesota usury laws would apply to such transactions. Although the convenience of modern mail permits Minnesota residents holding Omaha Bank's BankAmericards to receive loans without visiting Nebraska, credit on the use of their cards is nevertheless similarly extended by Omaha Bank in Nebraska by the bank's honoring of the sales drafts of participating Minnesota merchants and banks. [Footnote 24] Finance charges on the unpaid balances of cardholders
Stipulation of Facts, App. 91a. Minnesota residents can thus use their Omaha Bank BankAmericards to purchase services in the State of New York or mail-order goods from the State of Michigan. If the location of the bank were to depend on the whereabouts of each credit card transaction, the meaning of the term "located" would be so stretched as to throw into confusion the complex system of modern interstate banking. A national bank could never be certain whether its contacts with residents of foreign States were sufficient to alter its location for purposes of § 85. We do not choose to invite these difficulties by rendering so elastic the term "located." The mere fact that Omaha Bank has enrolled Minnesota residents, merchants, and banks in its
Since Omaha Bank and its BankAmericard program are "located" in Nebraska, the plain language of § 85 provides that the bank may charge "on any loan" the rate "allowed" by the State of Nebraska. Petitioners contend, however, that this reading of the statute violates the basic legislative intent of the National Bank Act. See Train v. Colorado Public Interest Research Group, 426 U. S. 1, 426 U. S. 9-10 (1976). At the time Congress enacted § 30 of the National Bank Act of 1864, 13 Stat. 108, so petitioners' argument runs, it intended "to insure competitive equality between state and national banks in the charging of interest." Brief for Petitioner in No. 77-1265, p. 24. This policy could best be effectuated by limiting national banks to the rate of interest allowed by the States in which the banks were located. Since Congress in 1864 was addressing a financial system in which incorporated banks were "local institutions," it did not "contemplate a national bank soliciting customers and entering loan agreements outside of the state in which it was established." Brief for Petitioner in No. 77-1258, p. 17. Therefore to interpret § 85 to apply to interstate loans such as those involved in this case would not only enlarge impermissibly the original intent of Congress, but would also undercut the basic policy
Close examination of the National Bank Act of 1864, its legislative history, and its historical context makes clear that, contrary to the suggestion of petitioners, Congress intended
13 Stat. 108, 109. [Footnote 29]
Cong.Globe, 38th Cong., 1st Sess., 2144 (1864). [Footnote 30] See also id. at 1343, 1376, 2143-2145, 2152, 2181-2182. Similarly, the debates surrounding the enactment of § 41 of the Act, which provided that the shares of a national bank could be taxed as personal property "in the assessment of taxes imposed by or under state authority at the place where such bank is located, and not elsewhere," 13 Stat. 112, demonstrated
Bank of Augusta v. Earle, 13 Pet. 519, 38 U. S. 590-591 (1839). Examples of this interstate loan market have been noted by historians of American banking. See, e.g., 1 F. Redlich, The Molding of American Banking 49 (1968); 1 F. James, The Growth of Chicago Banks 546 (1938); Breckenridge, Discount Rates in the United States, 13 Pol.Sci.Q. 119, 136-138 (1898). Evidence of this market is to be found in the numerous judicial decisions in cases arising out of interstate loan transactions. See, e.g., Woodcock v. Campbell, 2 Port. 456 (Ala. 1835); Clarke v. Bank of Mississippi, 10 Ark. 516 (1850); Planters Bank v. Bass, 2 La.Ann. 430 (1847); Knox v. Bank of United States, 27 Miss. 65 (1854); Bard v. Poole, 12 N.Y. 495 (1855); Curtis v. Leavitt, 15 N.Y. 9 (1857). After passage of the National Bank Act of 1864, cases involving interstate loans begin to appear with some frequency in federal courts. See, e.g., In re Wild, 29 F.Cas. 1211 (No. 17,645) (SDNY 1873); Cadle v. Tracy, 4 F.Cas. 967 (No. 2,279) (SDNY 1873); Farmers' Nat. Bank v. McElhinney, 42 F. 801 (SD Iowa 1890); Second Nat. Bank of Leavenworth v. Smoot, 9 D.C. 371 (1876).
Petitioners' final argument is that the "exportation" of interest rates, such as occurred in this case, will significantly impair the ability of States to enact effective usury laws. This impairment, however, has always been implicit in the structure of the National Bank Act, since citizens of one State were free to visit a neighboring State to receive credit at foreign interest rates. [Footnote 31] Cf. 38 Cong.Globe, 38th Cong., 1st Sess., 2123 (1864). This impairment may, in fact, be accentuated by the ease with which interstate credit is available by