Opinion ID: 393941
Heading Depth: 2
Heading Rank: 1

Heading: The Assumption of Liability Theory

Text: 24 An indispensable premise of BBI's contention that Banco Nacional assumed Branches' obligations to Boston is that Branches and Boston were separate entities. The district court properly rejected this proposition in light of the legal framework within which Branches was created and the facts surrounding the Boston-Branches operation. 25 Boston's Branches were organized under the Federal Foreign Banking Law, 12 U.S.C. §§ 601-04, 611-32 (1976). Under this statute the Branches were not, and could not lawfully have been organized as separate corporations. 12 U.S.C. §§ 601, 603. Although foreign branches maintain separate books of account pursuant to 12 U.S.C. § 604, that section is nothing more than a 'bookkeeping' statute, designed to make examination into the financial condition of national banks, particularly the foreign operations of such banks, as simple as possible. First National City Bank v. Internal Revenue Service, 271 F.2d 616, 619 (2d Cir. 1959), cert. denied, 361 U.S. 948, 80 S.Ct. 402, 4 L.Ed.2d 381 (1960). Given the federal statutory scheme, federal agencies and officials have long viewed a national bank and its branches as a single entity. For example, in 1917, counsel to the Federal Reserve Bank gave an opinion to the Governors of the Federal Reserve Board as follows: 26 There is nothing in this language (12 U.S.C. § 601-604) to indicate that branches established in foreign countries are to have a separate existence and constitute separate corporations. On the contrary, it is clear that the parent bank is merely to engage in certain foreign transactions through its foreign branch. This view is substantiated by the fact that the profit and loss accruing to each bank is to be entered on the general ledger of the parent bank at the end of each fiscal year. 27 3 Federal Reserve Bulletin 198, 199 (1917). And a current interpretation by the Federal Reserve Board reads as follows: 28 Identity of foreign branches with parent bank. A foreign branch established by a national bank is not an independent corporation and the creditors of the branch are general creditors of the parent bank.... 29 Published Interpretations of the Board of Governors of the Federal Reserve System § 5600 (1980). Cf. also United States v. First National City Bank, 379 U.S. 378, 85 S.Ct. 528, 13 L.Ed.2d 365 (1965), holding that a suit against a national bank gave the court jurisdiction to require that actions be taken by its foreign branch, and stating that a national bank has actual, practical control over its (foreign) branches; it is organized under a federal statute, 12 U.S.C. § 24, which authorizes it 'To sue and be sued, complain and defend, in any court of law and equity, as fully as natural persons' as one entity, not branch by branch. Id. at 384, 85 S.Ct. at 531. Thus, federal law regards a national bank and its branches as a single entity. 7 30 Within this legal framework, the district court found that while Branches had some operating autonomy, they were never considered to be nor held out to be an entity separate from Boston. There is evidence to support these findings, including the facts that Branches were capitalized with $3,000,000 in bonds that remained in Boston's name, that Branches' Management Group were recommended by Boston, that Boston paid U.S. taxes on Branches' profits, and that Branches operated under the style, First National Bank of Boston, founded in 1789. We cannot say that the finding that Boston and its Branches were a single entity is clearly erroneous. 31 Since Boston and its Branches were not distinct entities, any obligations of one to the other were not matters of substance but, as the district court concluded, merely matters of internal bookkeeping. There were, therefore, no liabilities of Branches to Boston for Banco Nacional to assume.