# Petition — First Bank of Oak Park v. United California Bank > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_2020%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition - **Published:** January 1, 1980 - **Citation:** 447 U.S. 907 ## Text Gupreme Court, U. ED Ra APR 22 1980 Supreme Court of the Anited OCTOBER TERM, 1979 No 629-1669 FIRST BANK OF OAK PARK, an Illinois banking corporation, Petitioner, vs. UNITED CALIFORNIA BANK, a California banking corporation, Respondent. PETITION FOR A WRIT OF CERTIORARI TO THE COURT OF APPEAL OF THE STATE OF CALIFORNIA, FIRST APPELLATE DISTRICT, DIVISION TWO RICHARD ORLIKOFF 208 South LaSalle Street Chicago, Illinois 60604 Attorney for Petitioner Of Counsel Davip P. BANCROFT SIDEMAN, BANCROFT & SUTTON Suite 1960 3 Embarcadero Center San Francisco, California 94111 ROBERT J. PETERS FRANKEL, McKay, ORLIKOFF & DENTEN 208 South LaSalle Street Chicago, Illinois 60604 Gunthorp-Warren Printing Company, Chicago e Financial 6-6565 a Pare earn A en agme e TABLE OF CONTENTS aa lt aba gaaatek s onks oc eae’ OSU ESE PCN El ge ae ee a ae i awe ic cue dc clec cece Reasons for Granting the Writ ..................008. THE DECISION BELOW HOLDING THAT THE COURTS OF CALIFORNIA HAVE IN PER- SONAM JURISDICTION OVER PETITIONER VIOLATES THE DUE PROCESS CLAUSE OF THE FOURTEENTH AMENDMENT AND IS CONTRARY TO THE DECISIONS OF THIS GEE 2 6S Gh EMRE EEN Sete ee Eee A. The Court of Appeal’s Opinion Is Based Upon A Decision Which Was Reversed By This Court B. The Decision Below Is Contrary To The Sub- sequent Decisions Of This Court In World-Wide Volkswagen Corporation Vv: Woodson And Rush EN By Sand a g's hbk oy’ a 6 C. Petitioner Is A Non-Residen#Of California And Has Virtually No Business Contacts With That NE iia acpi PO bie Wake Piao e4Sd Ss He ops D. Under The Facts And Circumstances Apparent In This Record, Requiring Petitioner To Defend This Action In California Offends Traditional Notions Of Fair Play And Substantial Justice. . . I rn Cr es Ok a aku odes Appendices: A. Opinion in United California Bank v. First Bank of Oak Park, 98 Cal. App. 3d 439, 159 Cal. Rptr. 607 (1st Dist. 1979) and Order denying Petition For Rehearing: . ow. ik. icine ee 12 13 15 er ws Le Re ET EEL NTR ee mE ee ee ee eee maT ee En ern ee te Tee ii B. Order of the Supreme Court of California Deny- ing Pettion. Fae EICMNS oe se de el A8 C. Order of Superior Court of Alameda County, California, Quashing Service of Summons and CINE oss ak > eiieiy sb 58s beh eee elbeey Lk A9 TABLE OF AUTHORITIES Cases Arnold v. San Ramon Valley Bank, 184 Cal. 632, 194 PR Pe CREEP ives sk cv ieee a Re es ake 9 Chicago Title & Trust Co. v. Central Trust Co.,.312 II. Se ee Pas ee eS LEY Wh Kh bees cage 8c 9 Continental Grain Co. v. Barge FBL-585, 364 U.S. 20 Ci cere ee eer es eae ae Tis case hee bes 15 Hanson v. Denckla, 357 U.S. 235 (1958) ...... 06380. 7 Harris v. Balk, 198 U.S. 215 (1905) ............... 12 The Haytian Republic, 154 U.S. 118 (1894) ......... 15 International Shoe Co. v. Washington; 326 U.S. 310 CR ae iach CONS eae e 7, 13,14 Kamfner v. Auburn Park Trust & Savings Bank,-344 III. EF a i: ee CRED 4 Gs 6.60 66 5 tsa od 0s 4 aves BAe 9 Kerner v. Kinsey, 384 Ill. 180, 51 N. E. 2d 126 (1943)... 9 Kulko v. Superior Court of California, 436 U.S. 84 CR ae A Ae A964 Of Counsel i inti Filed November 6, ee Plaintiff and Appellant, 1979 SIDEMAN, BANCROFT & SUTTON ivi Suite 1960 = % bi en a 3 Embarcadero Center First Bank of Oak Park, 491277-2) San Francisco, California 94111 Defendant and Respondent. | ROBERT J. PETERS | FRANKEL, McKay, ORLIKOFF & DENTEN This is an appeal from an order of the trial court quashing the 208 South LaSalle Street | service of summons on the defendant and respondent First Bank Chicago, Illinois 60604 of Oak Park (Oak Park). There is some confusion by the attorneys about what facts are in the record.’ However, the relevant facts for this appeal are summarized as follows: John Gleason was an Illinois resident. He was the sole share- holder of Gleaco Corporation, a Delaware corporation. Oak Park was a bank incorporated in Illinois. Gledéson and Gleaco e had previously borrowed money from Oak Park..Gleason, on _ behalf of Gleaco, applied for a new loan from Oak Park in the yey amount of $350,000. Oak Park denied the loan because of the manner in which Gleason and Gleaco had repaid prior loans. However, Oak Park agreed to make the loan on the following ‘ ¢ basis: Gleason, on behalf of Gleaco, on February 14, 1975, 1. United California Bank (appellant) moved this court to take new evidence on appeal. It argued facts taken from its motion in its opening brief. The motion to take new evidence was then denied. On the court’s own motion, the new evidence was subsequently taken into the record for appeal. | ) A2 executed a note to Oak Park for $350,000; Oak Park in turn transferred by intra-bank transfer the borrowed funds and issued to Gleaco a certificate of deposit for $350,000. Oak Park’s officers knew that Gleason intended to use the certificate of deposit to obtain financing for a grape-growing venture in California, and that the certificate of deposit would be worthless security for the loan issued in California because Oak Park could cancel the certificate against its own loan to Gleaco. John Gleason came to California and pledged the certificate of deposit as security for a personal loan in the amount of $350,000, borrowed from the First State Bank of Northern California (Northern). The certificate of deposit was assigned to Northern by Gleason for Gleaco Corporation. United California Bank (appellant) purchased a 90 percent participation in Northern’s personal loan to Gleason. Gleaco defaulted on its loan with Oak Park, and Oak Park canceled the certificate of deposit. Thus, Northern’s loan (with appellant’s 90 percent participation) was unsecured. John Gleason filed for bankruptcy in February 1976. He defaulted on his personal loan from Northern on March 4, 1976. Northern was closed and placed in receivership by the Super- intendent of Banks for the State of California on May 21, 1976. The Federal Deposit Insurance Corporation (FDIC) was appointed received for Northern, and by a sale of assets to itself, FDIC acquired the note from Gleason to Northern. FDIC then filed an action in Alameda County against appellant and sought to recover Northern’s deposits that appellant used to “offset” the amount of appellant’s participation in Northern’s loan to Gleason.? Appellant then instituted this action for a declaratory judg- ment against Oak Park. Appellant seeks a declaration that Oak Park wrongfully offset its loan to Gleaco against the certificate 2. The FDIC also filed an action against Oak Park in the United States District Court for the Northern District of Illinois. The FDIC sought a declaration that the certificate of deposit was valid. A3 of deposit, and that it is entitled to be indemnified by Oak Park to the extent that an award is made against it in the FDIC action. Oak Park moved the trial court to quash the service of summons on it of the ground of lack of jurisdiction or, in the alternative, to stay or dismiss the action on the ground of inconvenient forum. The motion to quash was granted by the trial court and led to the instant appeal.® Appellant asks this court to hold that the exercise of juris- diction over Oak Park is proper under California’s long-arm statute, section 410.10 of the Code of Civil Procedure. Section 410.10 states that California may exercise jurisdiction “on any basis not inconsistent with the Constitution of this state or of the United States.” Appellant contends that the court should exercise jurisdiction over the defendant on the theory that if a defendant has caused effects in this state by his out-of-state act or omission, the state may exercise jurisdiction over the defendant (Kulko v. Superior Court (1977) 19 Cal. 3d 514; Sibley v. Superior Court (1976) 16 Cal. 3d 442).* The effects theory is discussed in the Judicial Council Comment to the Code of Civil Procedure for section 410.10: “A state has power to exercise judicial jurisdiction over an individual who causes effects in the state by an omission or act done elsewhere, with respect to causes of action arising from those effects, unless the nature of the effects and of the individ- ual’s relationship to the state make the exercise of such juris- diction unreasonable.” Appellant argues that consistent with 3. The facts before the trial court were different than as recounted above. New evidence, taken in the record for appeal, has changed the nature of the case. Our decision need not involve any disapproval of the trial court’s action in view of the evidence before it. 4. The “effects” test of jurisdiction is an outgrowth of the seminal case of Internat. Shoe Co. v. Washington (1945) 326 U.S. 310, 316, which stated that the test for personal jurisdiction over out-of-state defendants was “minimum contacts” sufficient to satisfy “ ‘traditional notions of fair play and substantial justice.’” (See Hanson v. Denckla (1958) 357 U.S. 235; McGee v. International Life Ins. Co. (1957) 355 U.S. 220.) A4 the effects test of jurisdiction, the exercise of jurisdiction is reasonable in the instant case because: 1) Oak Park did an in- tentional act knowing that it would cause effects in California, the nature of which California deems to be exceptional and subject to special regulation, and 2) Oak Park anticipated an economic benefit from its act which caused the effect in this state. We agree with both of appellant’s contentions, and, therefore, the ruling of the trial judge must be reversed. In Quattrone v. Superior Court (1975) 44 Cal. App. 3d 296, 306, the court said, “we conclude that it is reasonable to exercise jurisdiction on the basis of the defendant intentionally causing ‘effects in the state by an omission or act done else- where’ whenever (a) the effects are of a nature ‘that the State treats as exceptional and subjects to special regulation, ... .” Quattrone is controlling in this case. An examination of the record makes it abundantly ciear that respondent, Oak Park, issued the certificate of deposit knowing that Gleason intended to take it to California and use it as security for a loan, and that the security would be worthless because of Oak Park’s right of offset. The effects caused was the extension of a loan to Gleason which in effect was unsecured and ultimately became uncollec- tible. Both effects are treated as exceptional and are subject to regulation in California. The types and amounts of loans and the types and values of security which state banks must obtain for those loans are regulated by the state (Fin. Code, §§ 1220- 1236). No further citations are needed to support the conclu- sion that California deems state chartered banks exceptional and subject to special regulation. Consequently, under the hold- ing of Quattrone, it is reasonable to require Oak Park to ap- pear and defend this lawsuit in California. Additionally, we hold that it is reasonable to exercise juris- diction over Oak Park because Oak Park anticipated that it would derive an economic benefit as a result of its out-of-state activities which caused effects in California. That Oak Park AS anticipated sucli economic benefits is apparent from the record. By making the loan to Gleaco, which was immediately rein- vested in the Oak Park certificate of deposit, Oak Park had made a risk free loan: Meanwhile, it collected interest on the loan in excess of the interest it paid on the certificate of de- posit. This difference in interest rates resulted in a substantial economic benefit to Oak Park. This realization of economic benefit from out-of-state activity which caused effects in Califor- nia makes it reasonable for California to exercise jurisdiction over Oak Park (Kulko v. Superior Court, supra, 19 Cal. 3d 514; Sibley v. Superior Court, supra, 16 Cal. 3d 442). In view of our conclusion, the additional issues raised by the parties need not be discussed. A6é . - The order of the trial court quashing service of summons is reversed. CERTIFIED FOR PUBLICATION. Calhoun, J.* WE CONCUR: Taylor, P. J. Trial Court: Superior Court, County of Alameda Trial Judge: John Sparrow Attorneys for Appellant: ‘Severson, Werson, Berke & Melchior Robert L. Loftus Jan T. Chilton Steven W. Waldo One Embarcadero Center, 25th Floor San Francisco, California 94111 Attorneys for Respondent: William H. Carder 785 Market Street, Suite 1304 San Francisco, California 94103 Robert J. Peters Frankel, McKay, Orlikoff, Denten & Kostner ° 208 South La Salle Street Chicago, Illinois 60604 1/Civil 43371 i United California Bank v. First Bank of Oak Park * Assigned by the Chairperson of the Judicial Council. A7 CouRT OF APPEAL OF THE STATE OF CALIFORNIA In and for the First Appellate District Division Two Filed Dec. 6, 1979 United California Bank, etc., 7 Plaintiff and Appellant, No. 43371 VS. r Superior Court No. “.... First Bank of Oak Park, etc., Defendant and Respondent. ) By the Court: The petition for rehearing filed in the above entitled cause is hereby denied. Dated Dec. 6, 1979 . /s/ Taylor P.J. A8 APPENDIX B. ORDER DUE February 4, 1980 ORDER DENYING HEARING After Judgment by the Court of Appeal Ist District, Division 2, Civil No. 43371 IN THE SUPREME COURT OF THE STATE OF CALIFORNIA In Bank Filed January 24, 1980 UNITED CALIFORNIA BANK vs. First BANK OF OAK PARK Respondent’s petition for hearing Denied. Clark, J., is of the opinion that the petition should be granted. Bird Chief Justice A9 APPENDIX C. Filed August 9, 1977 IN THE SUPERIOR COURT OF THE STATE OF CALIFORNIA 85 In and for the County of Alameda United California Bank, a California ) banking corporation, Plaintiff, VS. ° No. 491277-2 First Bank of Oak Park, an Illinois banking corporation, Does One through Four, inclusive, Defendants. | ORDER QUASHING SERVICE OF SUMMONS AND COMPLAINT Defendant First Bank of Oak Park appeared specially to move this Court for an order quashing service of summons and complaint upon said defendant on the ground of lack of juris- diction over said defendant or in the alternative for an order staying or dismissing this action on the ground of inconvenient forum. Said motion came on regularly for hearing on August 1, 1977, Steven W. Parnes, Esq., appearing for said defendant in support of said motion and Robert L. Lofts, Esq., appearing for plaintiff in opposition thereto. The Court, on the basis of the papers on file herein and evidence offered at said hearing, having found that there exists no basis for the exercise of jurisdiction by a court of this state over defendant First Bank of Oak Park consistent with Code of Civil Procedure Section 410.10, which defines the permissible bases for the exercise of jurisdiction by the courts of this state, A10 It Is Hereby Ordered that the service of summons and com- plaint upon defendant First Bank of Oak Park be and hereby is quashed. Dated: August 1, 1977 and Presented and Signed August 9, 1977 John P. Sparrow Judge of the Superior Court --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385006_2020%3A1. Public record. Not legal advice.