Marine Bank v. Weaver

LOCATION: Turner Turnpike

DOCKET NO.: 80-1562
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 455 US 551 (1982)
ARGUED: Jan 11, 1982
DECIDED: Mar 08, 1982

Andrew J. Conner - on behalf of the Respondent
Daniel L. R. Miller - on behalf of the Petitioner

Facts of the case


Media for Marine Bank v. Weaver

Audio Transcription for Oral Argument - January 11, 1982 in Marine Bank v. Weaver

Warren E. Burger:

We will hear arguments now in Marine Bank against Samuel Weaver et ux.

Mr. Miller, you may proceed whenever you are ready.

Daniel L. R. Miller:

Mr. Chief Justice, and may it please the Court:

This case involves two separate and distinct instruments: one, an FDIC-insured certificate of deposit in the amount of $50,000 bearing interest at 7 1/2 percent and maturing in six years; secondly, an agreement between a loan customer of the bank and a guarantor of the customer's loan to the bank about which the bank had no knowledge at the time the loan was made.

Petitioner Marine Bank requests that the Court reverse the judgment of the Circuit Court which found that both instruments were securities within the meaning of the definitions of the '33 and '34 Acts.

The FDIC-insured certificate of deposit is not specifically mentioned as an enumerated item in the '33 and '34 Act definitions.

However, the Circuit Court of Appeals applied several tests: one, the "any note" test: and secondly, whether it was an investment contract.

In the investment contract issue, the Howey case decided by this Court clearly establishes what the test is and has been since 1946, and that test was further elaborated upon by this Court in the Tcherepnin case cited a few years later; and that test being a document is a security if it's a contract, transaction or scheme whereby a person invests money in a common enterprise with the profits to come solely from the efforts of others.

We believe that that test has been misapplied by the Circuit Court, and there are three Circuit Court decisions, in the Fourth, Fifth and Seven Circuits: the Burrus case in the Fourth, the Bellah case in the Fifth, and the Fingland case in the Seventh, which hold that certificates of deposit are not securities within the meaning of those cases of this Court.

Is it any note?

The statutes say unless the context otherwise requires any note and so forth.

Is the CD any note?

In this event we'd like you to address the matter the way you did in the Daniel case which looked at the substance of the transaction and not what it is called.

If you look at the substance in Daniel, as you did, you found that a pension plan document did not establish a security.

Now, the Third Circuit here said that this was functionally the equivalent of a corporate note.

We don't believe that that's correct.

A corporate note contains an earnings risk and a risk of repayment.

This FDIC-secured certificate of deposit does not have a payment or repayment risk being an insured deposit, and it has a fixed rate of interest.

Mr. Miller, you haven't mentioned the facts.

You don't have to because we know what they are.

But you represent the bank here.

Daniel L. R. Miller:

Yes, I do.

These old people are out their $50,000, aren't they?

Daniel L. R. Miller:

Well, there was recovery, Your Honor, Mr. Justice, against other collateral, but there would be a substantial portion of that lost, yes, sir.

Is the officer of the bank who handled this transaction still employed by the bank?

Daniel L. R. Miller:

Yes, he is.

Without reprimand?

Daniel L. R. Miller:

He has not been reprimanded, to my knowledge.

I believe the Third Circuit erred in its analogy calling this an investment contract.

The Tcherepnin case held there was no voting... the fact of whether there is or is not a voting right connected with the instrument is important.