Midlantic v. Hansen ( 1995 )

Opinions of the United
1995 Decisions States Court of Appeals
for the Third Circuit
2-13-1995
Midlantic v Hansen
Precedential or Non-Precedential:
Docket 93-5120
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Recommended Citation
"Midlantic v Hansen" (1995). 1995 Decisions. Paper 46.
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
___________
Nos. 93-5120 and 93-5160
___________
MIDLANTIC NATIONAL BANK
Appellee,
vs.
E. F. HANSEN, JR.; G. EILEEN HANSEN; HANSEN
BANCORP, INC.
Appellants.
___________
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
(D.C. Civil No. 92-02670)
___________
ARGUED MARCH 8, 1994
BEFORE: MANSMANN, LEWIS and SEITZ, Circuit Judges.
(Filed February 13, 1995)
___________
David L. Braverman (ARGUED)
Fellheimer, Eichen & Braverman
One Liberty Place, 21st Floor
1650 Market Street
Philadelphia, PA 19103-7334
Attorneys for Appellants
Richard W. Hill (ARGUED)
Gary A. Kruse
McCarter & English
100 Mulberry Street
Four Gateway Center
Newark, NJ 07101-0652
Attorneys for Appellee
___________
OPINION OF THE COURT
___________
LEWIS, Circuit Judge.
This case presents the jurisdictional question of the
citizenship of an inactive corporation under the federal
diversity statute. We conclude that an inactive corporation is a
citizen of the state of its incorporation only. Having so
concluded, and thus having determined that the district court
had, and we have, jurisdiction, we are also called upon to
address the meaning of the term "joint applicant" under the Equal
Credit Opportunity Act. Because we agree with the district
court's conclusion that one of the defendants, Mrs. Eileen
Hansen, was a joint applicant for a loan for purposes of the Act,
we will affirm.
I.
Midlantic National Bank ("Midlantic") is a national
banking association with its principal place of business in
Edison, New Jersey. Appellants Elmer and Eileen Hansen are
citizens of Pennsylvania and are the joint owners of all the
issued and outstanding stock of Hansen Bancorp, Inc. ("HBI").
HBI, now inactive, is a corporation organized under the laws of
the state of Delaware. HBI owned the stock of two thrift
institutions, the Hansen Savings Bank of Florida and the Hansen
Savings Bank, SLA, in New Jersey.1
Beginning in 1985, the Hansens obtained several loans
from Midlantic. The Hansens used the first Midlantic loan to
finance the purchase of a New Jersey thrift institution, the
Raritan Valley Savings and Loan Association located in East
Brunswick, New Jersey. As collateral for this loan, the Hansens
pledged the Raritan stock to Midlantic. As part of their loan
application, the Hansens submitted a Consolidated Statement of
Net Worth and a Consolidated Income Statement. The Notes to the
Consolidated Statement of Net Worth, which explain the basis of
consolidation, report that "E.F., Jr. and G.E. Hansen, his wife,
operate their business, Hansen Properties ("Hansen"), as a sole
proprietorship." The Notes then list limited partnerships of
which the Hansens were the only partners or the only principals.
(Plaintiffs/Appellees' Appendix ("Pa.") at 487) In addition, on
the Acquisition Agreement between Raritan Valley Financial
Corporation and the Hansens, the Hansens are listed as joint
purchasers of the Raritan stock.
During 1987 and 1988 the Hansens used an additional
Midlantic loan to purchase a controlling interest in a Florida
1
. The Hansens refer to these thrift entities by different
names, calling the Florida thrift the Hansen Savings Midlantic of
Florida, and the New Jersey thrift the Hansen Savings Midlantic,
SLA.
thrift later renamed the Hansen Savings Bank of Florida (HSB of
FL). This loan was secured by a pledge of HSB of FL stock. At
this time the Hansens consolidated their indebtedness to
Midlantic into a single loan in the amount of $13 million.
In February, 1989, the Hansens and Midlantic executed a
Second Amended and Restated Loan Agreement, by which terms the
Hansens and HBI were jointly and severally liable on a
$13,166,666.69 term note payable to Midlantic. At the same time,
the Hansens signed a separate One Million Dollar Term Note
payable to Midlantic, under which they were also jointly and
severally liable. One month later the Hansens signed an
additional note for two million dollars. For all these loans the
Hansens pledged as security the stock in HBI and its
subsidiaries, HSB of FL and the Hansen Savings Bank, SLA.
In March of 1989, the Hansens borrowed an additional
two million dollars from Midlantic, and in mid-1990, the Hansens
and Midlantic executed two Demand Notes for $100,000 each.
By September of 1990, the Hansens were in default on
several of their Midlantic loans. The parties then entered into
a Loan Coordination, Security and Intercreditor Agreement, in
which Midlantic agreed to postpone acceleration of sums due under
the already executed notes until the earlier of either June 30,
1991, or a default under the Intercreditor Agreement. By 1992
the Hansens were in default on the Intercreditor Agreement.
In January, 1992, the Office of Thrift Supervision and
the Resolution Trust Corporation seized control of the Hansens'
Florida and New Jersey thrifts. HBI was rendered inactive by
this seizure.2 Midlantic initiated this collection action six
months later, on June 25, 1992, for the recovery of the amounts
loaned by Midlantic to the Hansens. Midlantic's complaint bases
the existence of subject matter jurisdiction upon 28 U.S.C.
§ 1332.
The district court denied a motion to dismiss for lack
of subject matter jurisdiction filed by the Hansens and, on
January 6, 1993, granted Midlantic's motion for summary judgment.
On January 26, 1993, the district court entered final judgment in
favor of Midlantic. The Hansens filed their notice of appeal on
February 25, 1993. In their appeal of the district court's entry
of summary judgment, the Hansens challenge the existence of
federal diversity jurisdiction as well as the propriety of
Midlantic's requiring Mrs. Hansen to sign the loan applications.
In turn, Midlantic claims that the Hansens failed to file a
timely notice of appeal. Because we find that the Hansens'
notice of appeal was timely filed, we will consider the issues
raised therein. Because we agree with the district court on all
of the issues raised, we will affirm.
2
. The Hansens explain that "[a]s HBI is a holding company,
and all of its holdings were seized, HBI was forced to cease
actively engaging in business at this time[,]" and that "[s]ince
the seizure, HBI has been an inactive corporation except for
activities relating to the institution of litigation against the
O[ffice of Thrift Supervision and other federal agencies."
(Appellants' brief at 16).
II.
First, we must address whether the district court had
jurisdiction over the subject matter in this case. We exercise
plenary review over issues of jurisdiction. Mellon Bank v.
Farino, 960 F.2d 1217, 1220 (3d Cir. 1992).
To satisfy the jurisdictional requirements of 28 U.S.C.
§ 1332(a)(1), the federal diversity statute, diversity must be
complete; that is, no plaintiff can be a citizen of the same
state as any of the defendants. Carden v. Arkoma Assocs., 494
U.S. 185, 187 (1992); Quaker State Dyeing & Finishing Co. v. ITT
Terryphone Corp., 461 F.2d 1140, 1142 (3d Cir. 1972). Whether
diversity jurisdiction exists is determined by examining the
citizenship of the parties at the time the complaint was filed.
See Smith v. Sperling, 354 U.S. 91, 93 n.1 (1957) (stating that
jurisdiction is tested by the facts as they exist when the action
is brought). Thus, the question before us is whether HBI was a
citizen of New Jersey in June of 1992, when Midlantic filed its
complaint. If so, diversity of citizenship would not be complete
since Midlantic is also a citizen of New Jersey.
For purposes of diversity jurisdiction, "a corporation
shall be deemed to be a citizen of any State by which it has been
incorporated and of the State where it has its principal place of
business . . . ." 28 U.S.C. § 1332(c). The Hansens contend that
HBI's principal place of business was New Jersey at the time
Midlantic filed its complaint.3 The five month period between
3
. According to the Hansens, at the beginning of 1991, HBI
moved its headquarters from Pennsylvania to New Jersey. In an
affidavit submitted to the district court in connection with the
Hansens' motion to dismiss, Jere A. Young, the Chairperson of the
Board and Chief Executive Officer of HBI, alleged the following
facts: in early 1991, HBI transferred all of its books and
records, including all accounting and financial records, to New
Jersey; also in early 1991, all employees of HBI were either
terminated or transferred to executive positions with HBI's New
Jersey subsidiary, Hansen Savings Bank, SLA, or to Hansen Savings
Bank's Pennsylvania subsidiary; from the beginning of 1991, the
office of HBI's Chief Executive Officer was located in New
Jersey; and, finally, from early 1991, "substantially all of the
accounting, financial, corporate and legal activities of HBI were
conducted from HBI's headquarters in Hammonton, New Jersey."
(Defendants/Appellants' Appendix ("Da.") at 25).
the time when HBI ceased to conduct business activities and the
time Midlantic filed its complaint did not, the Hansens argue,
dissipate HBI's local character for diversity purposes. HBI's
principal place of business for diversity purposes, according to
the Hansens, was HBI's last principal place of business, that is,
New Jersey.
In addressing the jurisdictional question in this case,
we must resolve the issue of HBI's citizenship under 28 U.S.C.
§ 1332(c), bearing in mind that HBI was an inactive corporation
at the time the complaint was filed.4 The issue of the
citizenship under Section 1332(c) of an inactive corporation is
one of first impression in this circuit. Essentially, the
question before us is whether an inactive corporation can be
deemed to have a "principal place of business" at all.
We gave meaning to the phrase "principal place of
business" in Kelly v. United States Steel Corp., 284 F.2d 850 (3d
Cir. 1960), concluding that "corporate activities" determine the
corporation's principal place of business. Kelly, 284 F.2d at
854. Inasmuch as we consider the actual business activities of
the corporation to be determinative of the corporation's
principal place of business, we conclude that as a general
matter, an "inactive" corporation (that is, a corporation
conducting no business activities) has no principal place of
4
. By "inactive" corporation, we mean a corporation that has
ceased any and all business activities. In the Young Affidavit,
it is admitted that "[s]ince January 10, 1992, . . . HBI has had
no active subsidiary company and no business activities." (Da.
at 26-27).
business, and is instead a citizen of its state of incorporation
only.
We thus further conclude that HBI, which was inactive
at the time Midlantic filed its complaint, had no principal place
of business under Section 1332 when this suit was commenced.
When this lawsuit was commenced, HBI was a citizen of its state
of incorporation only, namely, Delaware. We therefore find that
complete diversity is present in this case.
We acknowledge that the conclusion we reach today with
regard to the citizenship of an inactive corporation conflicts
with that reached by the Courts of Appeals for the Second and
Fifth Circuits, the only two of our sister courts of appeals to
have addressed the matter.
The Second Circuit opined that when a corporation
ceases business activity, it is to be deemed a citizen both of
its state of incorporation and of the state in which "it last
transacted business . . . ." Wm. Passalacqua Builders v. Resnick
Developers, 933 F.2d 131, 141 (2d Cir. 1991). In so holding the
Second Circuit placed principal reliance upon notions of
congressional intent:
To allow inactive corporations to avoid
inquiry into where they were last active
would give them a benefit Congress never
planned for them, since under such a rule a
defunct corporation, no matter how local in
character, could remove the case to federal
court based on its state of incorporation.
Wm. Passalacqua Builders, 933 F.2d at 141.5
5
. The Second Circuit also relied upon the fact that it had
previously rejected the argument of a bankrupt that the district
The Fifth Circuit adopted a more flexible approach,
holding that while the place of an inactive corporation's last
business activity is relevant to the inquiry into the inactive
corporation's principal place of business, it is not dispositive
of the inquiry. Harris v. Black Clawson Co., 961 F.2d 547, 551
(5th Cir. 1992). Instead, the court suggested, the amount of
time elapsed between the date when the corporation ceased
business activities and the date of the suit should assist in
determining the relevance of the situs of the corporation's
now-ceased business activities to the determination of the
(..continued)
court lacked jurisdiction because New York was not a place of
business at least six months preceding the filing of the
bankruptcy petition. Id. (citing Fada of New York, Inc. v.
Organization Serv. Co., 125 F.2d 120 (2d Cir. 1942) (per curiam).
"Because New York had been a principal place of business, we
ruled[,]" the Wm. Passalacqua court observed, "that the
bankruptcy petition had been properly filed in New York." Id.
Fada is particularly instructive because the
bankruptcy laws in effect at that time provided for
jurisdiction either in the place of the corporation's
domicile or in its principal place of business, and
Congress amended § 1332(c) to follow these provisions
in the bankruptcy laws.
Wm. Passalacqua Builders, 933 F.2d at 141 (citations omitted);
but see Moore's Federal Practice ¶ 0.77[3.-1], 104 ("In the
legislative history to the 1958 statute which injected the
"principal place of business" criterion into the diversity
statute, Congress specifically instructed courts to look to
bankruptcy precedent for guidance in interpreting the phrase.
Ample bankruptcy precedent existed, but consistent bankruptcy
precedent did not. Although the courts originally followed
bankruptcy precedent -- conflicts and all -- the ensuing three
decades have witnessed a significant emergence of general
principles and criteria for making the jurisdictional
determination.").
corporation's principal place of business. But where the
corporation has been inactive in a state for "a substantial
period of time, in this case five years,"6 the Harris court
continued, that state, as a matter of law, is not the
corporation's principal place of business. Harris, 961 F.2d at
551.
Our conclusion is also in conflict with that of several
of the district courts to have considered the citizenship of an
inactive corporation. Most of the district courts to address the
issue have found an inactive corporation to be the citizen both
of its state of incorporation and of its last principal place of
business. See Comtec, Inc. v. National Technical Schools, 711 F.
Supp. 522, 525 (D. Ariz. 1989); China Basin Properties v.
Allendale Mut. Ins., 818 F. Supp. 1301, 1305 (N.D. Cal. 1992);
China Basin Properties v. One Pass, Inc., 812 F. Supp. 1038, 1040
(N.D. Cal. 1993.) As principal support for their position, these
district courts proffer a plain meaning argument.
[W]hen Congress amended section 1332 to
include a corporation's principal place of
business as its state of incorporation
through the use of the conjunctive "and,"
Congress could not have meant that a
corporation's citizenship would be its
principal place of business or its state of
incorporation. If Congress intended such a
result, it clearly could have expressly
stated as such. Since there is nothing in
section 1332 to suggest that a corporation's
principal place of business should be ignored
once that corporation becomes inactive, a
6
. The question of the substantiality of the duration of
inactivity, the court explained, must be determined on a case by
case basis. Id. at 551 n.10.
strict reading of the statute requires this
Court to utilize [the] last principal place
of business in determining . . . [corporate]
citizenship.
China Basin Properties, 818 F. Supp. at 1304-05; see also Comtec,
711 F. Supp. at 524 ("Section 1332(c) states that corporate
diversity is based on both the place of incorporation and
principal place of business. By using the conjunction `and,'
Congress intended for all of the requirements of the statute to
be fulfilled.").
We believe the interpretation of Section 1332(c) that
we adopt today most closely comports with the plain meaning of
the statute. We do not find persuasive the argument that
Congress' use in 1332(c) of the conjunction "and" signifies that
Congress intended that the courts strain to locate a principal
place of business when no such place in reality exists. We
reject the notion that implicit in the statute's terms is the
requirement that all corporations be deemed to have a principal
place of business. Far more significant to a plain meaning
analysis, and thus far more indicative of congressional intent,
is the fact that in Section 1332 Congress provided that a
corporation is to be deemed a citizen of the state in which it
has its principal place of business. Congress could easily have
provided that a corporation shall be deemed a citizen of the
state in which it "has or has had" its principal place of
business. Clearly, however, Congress has provided no such thing.
We are mindful of the concern expressed in Wm.
Passalacqua Builders and in several district court opinions, that
the conclusion we reach today may, in certain cases, result in
the subversion of the intent of Congress in amending
Section 1332.7 We believe, however, that the benefits of
certainty and clarity which obtain from the "bright line"
approach we adopt outweigh the potential for the harm identified
by the Second Circuit.
III.
We next address the timeliness of the Hansens' notice
of appeal. We find United States v. Schaefer Brewing Co., 356
U.S. 227 (1958), to be dispositive. Indeed, this case mirrors
Schaefer Brewing Co. in two significant respects: first, as was
the case in Schaefer Brewing Co., the case before us is one for
the recovery of money only; second, as was the case in Schaefer
Brewing Co., the district court's opinion and accompanying order
granting summary judgment did not expressly or by reference
specify the exact amounts Midlantic was entitled to recover
thereon.
While . . . there is no statute or rule that
specifies the essential elements of a final
judgment, and this Court has held that "[n]o
form of words and no peculiar formal act is
necessary to evince [the] rendition [of a
judgment]," yet it is obvious that a final
judgment for money must, at least, determine,
or specify the means for determining, the
amount; and an opinion, in such a case, which
does not either expressly or by reference
determine the amount of money awarded reveals
7
. It has been observed that through the principal place of
business provision, "Congress purported to preclude what was in
fact a local entity from suing (or being sued by) a local citizen
in federal court simply because it was chartered in another
state." Moore's Federal Practice ¶ 0.77[3.-4].
doubt, at the very least, whether the opinion
was a "complete act of adjudication" . . . or
was intended by the judge to be his [or her]
final act in the case.
Schaefer Brewing Co., 356 U.S. at 233-34 (citations omitted)
(emphasis in original).
Because the district court's January 7 opinion and
order did not determine the exact amount of money Midlantic was
entitled to receive pursuant to the issuance of summary judgment
in its favor, we have little difficulty concluding that it
neither embodies the essential elements of a judgment for money
nor demonstrates the district court's intention that it
constitute its final acts in this case. See Mauriello v. Univ.
of Med. & Dentistry of N.J., 781 F.2d 46, 49 (3d Cir. 1986)
(quoting Schaefer Brewing Co. for the proposition that to be
final, a judgment for money must, at least, determine, or specify
the means of determining, the amount of money awarded). We
conclude that the district court's January 7 order does not
constitute a "judgment" or "order" within the terms of Fed. R.
App. P. 4(a), and that it is instead the district court's
January 27 "Final Judgment" which constituted its final act in
this case. We therefore hold that the Hansens' February 25
notice of appeal was timely filed because it was filed within 30
days after the date of entry of the judgment or order appealed
from.
IV.
Having determined that the district court had, and we
have, jurisdiction over this case, we move to the remaining issue
on appeal: whether the district court erred in granting summary
judgment in favor of Midlantic.
The Hansens appeal the grant of summary judgment
against them in light of their affirmative defense that Midlantic
violated the Equal Credit Opportunity Act, 15 U.S.C. § 1691 (the
"ECOA") and Regulation B, 12 C.F.R. §§ 202.1 et seq. The Hansens
claim that the existence of this affirmative defense raises a
genuine issue of material fact which precluded the granting of
summary judgment against them.
The district court rejected the Hansens' ECOA defense,
finding that Mrs. Hansen was a bona fide joint applicant for the
Midlantic loans.8 We agree with the district court's assessment
of Mrs. Hansen's status and will affirm the district court's
rejection of the Hansens' ECOA defense.9
8
. The district court, as an initial matter, noted that a
substantial argument can be made that a violation of the ECOA
cannot be interposed as an affirmative defense, but must instead
be pleaded as a counterclaim. In fact, the courts are split on
the question whether the ECOA may be used as an affirmative
defense or may be asserted as a counterclaim only. Compare
American Security Midlantic v. York, 1992 WL 237375 (D. D.C.
Sept. 1, 1992); FDIC v. Notis, 602 A.2d 1164 (Me. 1992) and In re
Remington, 19 B.R. 718 (Bankr. D.Co. 1982), with Riggs Nat. Bank
of Washington, D.C. v. Linch, 829 F. Supp 163 (E.D. Va. 1993);
CMF Virginia Land, L.P. v. Brinson, 806 F. Supp. 90 (E.D. Va.
1992) and United States v. Joseph Hirsch Sportswear Co. Inc.,
1989 WL 20604 (E.D. N.Y. Feb. 28, 1989). We do not address this
issue because of our disposition of the Hansens' ECOA claim on
other grounds.
9
. The Hansens also claim that the district court erred in not
allowing them to continue discovery in connection with their ECOA
affirmative defense. However, this claim is of no moment
because, as we discuss infra, we agree with the district court
that Mrs. Hansen was a joint applicant.
Our review of a district court's entry of summary
judgment is plenary. Public Interest Research of NJ v. Powell
Duffryn Terminals, Inc., 913 F.2d 64 (3d Cir. 1990). In
reviewing the entry of summary judgment, we take the non-movant's
allegations as true and draw all inferences in favor of the non-
movant. Berner Int'l Corp. v. Mars Sales Co., 987 F.2d 975 (3d
Cir. 1993).
The ECOA was enacted to protect consumers from
discrimination by financial institutions. See United States v.
Am. Future Sys., Inc., 743 F.2d 169, 174 (3d Cir. 1984). In
particular, the ECOA provides that "[i]t shall be unlawful for
any creditor to discriminate against any applicant, with respect
to any aspect of a credit transaction . . . on the basis of . . .
marital status." 15 U.S.C. § 1691(a)(1). To further protect
consumers, Regulation B, promulgated by the Federal Reserve Board
pursuant to the ECOA, provides that "a creditor shall not require
the signature of an applicant's spouse or other person, other
than a joint applicant, on any credit instrument if the applicant
qualifies under the creditor's standards of creditworthiness for
the amount and terms of the credit requested." 12 C.F.R.
§ 202.7(d)(1) (1992) (emphasis supplied). A "joint applicant" is
"someone who applies contemporaneously with the applicant for
shared or joint credit" and not someone "whose signature is
required by the creditor as a condition for granting the credit
requested." Official Staff Interpretation to § 202.7(d)(1).
The Hansens claim that Mr. Hansen was the "only true
applicant" for the Midlantic loans and that Midlantic therefore
violated the ECOA when it required Mrs. Hansen to co-sign the
loan applications. The district court disagreed with the
Hansens' ECOA argument, finding, as a matter of fact, that:
Mrs. Hansen was a co-owner of HBI, the
holding company that acquired the Florida and
New Jersey banks and whose stock was pledged
to secure acquisition financing. The Hansens
submitted consolidated statements of income
and net worth for their loan application and
included an explanatory note which detailed
the joint ownership of their assets.
Finally, and perhaps most importantly, G.
Eileen Hansen and Elmer F. Hansen, Jr. are
both parties to the Acquisition Agreement for
Raritan Savings Bank, the first bank acquired
through Midlantic financing. While Mrs.
Hansen may not have had a major role in the
day-to-day operations of HBI or any of its
subsidiary banks, she clearly had an equal
stake with Mr. Hansen in the assets which
secured Defendants' borrowing. Under these
circumstances, Mrs. Hansen was a bona fide
joint applicant for the loans and the ECOA
does not protect her from liability upon
plaintiff's claims in this suit.
(D.Ct. op. January 6, 1993 at 10; Pa. at 538).
The district court observed that this case differed
from other cases in which violations of the ECOA or Regulation B
were found to have occurred. In those cases, the district court
noted, the spouses who were required to sign the notes were not
connected to the underlying transactions for which the loans were
sought. See, e.g., Marine American State Bank v. Lincoln, 433
N.W.2d 709, 711 (Iowa 1988) (wives of applicants neither officers
nor shareholders in business and had no material participation in
its activities); American Security Bank v. York, 1992 WL 237375
(D. D.C. Sept. 1, 1992) (applicants applied for loan for their
business; wives had no ownership interest in business and played
no role in loan negotiations).
We agree with the district court that Mrs. Hansen was a
"joint applicant." Though the Hansens claim that Mr. Hansen
sought the loans alone, several of the loans were for the
purchase and financing of Raritan, of which the Hansens were
joint purchasers. All of the assets listed on the statement of
net worth supplied to Midlantic for the loan to purchase Raritan
were jointly owned. The list of loans the Hansens applied for
and the affidavit of Barbara Parker, the Midlantic employee who
served as account officer for Raritan, indicate that the Hansens
jointly purchased Raritan and that Midlantic relied on documents
setting forth jointly owned properties in granting the loan (Da.
at 195). In addition, there were loans for the Florida and New
Jersey thrifts, subsidiaries of HBI, of which the Hansens were
the joint owners. Furthermore, contrary to the Hansens'
assertion that Mrs. Hansen had nothing to do with the business,
the statement of net worth stated, "E.F. Jr. and G. Eileen
Hansen, his wife, operate their business, Hansen Properties
("Hansen") as a sole proprietorship." (Pa. at 486). Finally,
even though there were no properties pledged that were solely
owned by Mrs. Hansen (indeed she had no income and no substantial
assets of her own (Hansen affidavit, Pa. at 391)), all properties
pledged were jointly owned. These facts constitute powerful
evidence that the Midlantic loans were jointly applied for and
were secured by jointly owned assets and compel the conclusion
that Mrs. Hansen, at the very least, was a de facto joint
applicant for the loans in question. See Riggs National Bank of
Washington, D.C. v. Webster, 832 F. Supp. 147, 151 (D. Md. 1993)
(wife of individual loan applicant held to be a de facto joint
applicant where loan was for refinancing and renovation of a
building owned by her and financial statement submitted by
applicant included both jointly owned properties and properties
she solely owned).
V.
Having determined that we have, and the district court
had, jurisdiction over this case, and for the above-stated
reasons, we will affirm the district court's entry of summary
judgment in favor of Midlantic and against the Hansens and HBI.
Midlantic National Bank v. E. F. Hansen, Jr.;
G. Eileen Hansen; Hansen Bancorp, Inc.
Nos. 93-5120 & 93-5160
SEITZ, Circuit Judge, dubitante.
I agree with the majority that our court has appellate
jurisdiction of these appeals. However, I have serious doubt as
to the standard that should be adopted by our court to determine
the citizenship of an inactive corporation for diversity
jurisdiction purposes.
The diversity statute, which confers jurisdiction on
federal courts in certain circumstances, is of considerable age.
Its principal purpose is to provide a federal forum where out of
state citizens, including corporations, could presumably avoid
the prejudices of local courts and juries.
Before 1958, a corporation was deemed a citizen of the
state in which it was incorporated for purposes of diversity. In
the 1950s, Congress became concerned with the ease with which
corporations removed essentially "local" cases to the federal
courts based solely on their place of incorporation.10 In 1958,
Congress amended the diversity statute to provide that "a
corporation shall be deemed to be a citizen of any State by which
it has been incorporated and of the State in which it has its
principal place of business." 28 U.S.C. § 1332(c) (amended
10
. The legislative history to the 1958 amendment of section
1332(c) centered around the perceived evil of allowing an
essentially local corporation to remove a case to the federal
court simply because the corporate charter was obtained in
another state. See S. REP. NO. 1830, 85th Cong., 2d Sess. 2
(1958), reprinted in 1958 U.S.C.C.A.N. 3099, 3102.
portion emphasized). However, neither the amendment itself nor
the legislative history to section 1332(c) refers to the
citizenship of an inactive corporation.
The general view in the federal courts that have
addressed the present issue is that an inactive corporation is a
citizen of both the state where it is incorporated and the state
where it had its last principal place of business. See, e.g.,
Harris v. Black Clawson Co., 961 F.2d 547 (5th Cir. 1992); Wm.
Passalacqua Builders, Inc. v. Resnick Developers South Inc., 933
F.2d 131 (2d Cir. 1991).11 This rule seems to embrace Congress'
intent to deny a federal forum to "local" corporations in actions
involving local citizens.
On the other hand, the majority's bright line test
certainly has simplicity to recommend it, and it may reflect the
reality that an inactive corporation has no business activities,
let alone a principal place of business. However, the rule seems
to run counter to the congressional purpose underlying the 1958
amendment to the diversity statute.
The issue here is one that Congress should address.
After weighing the conflicting considerations, I remain doubtful
as to the proper application of section 1332(c). In view of my
11
. In Harris, the Fifth Circuit adopting a more flexible
approach, stated, "[A]s a matter of law, where a corporation has
been inactive in a state for a substantial period of time, in
this case five years, that state is not the corporation's
principal place of business." Harris, 961 F.2d at 551 (footnote
omitted). The court added that the question of substantiality
must be determined case-by-case. Id. at 551 n.10.
doubt, it would serve no purpose for me to address the other
issues in the case.