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::-<-569 ' I N r £lii UNITED STATI5S C I R C U I T COURT O F A P P E A L S , FIFTH CIRCUIT. No. 4-692. DOUGLAS C- CROVGLL, -liiT A : , . , Appellants, Versus F - D 51:v, 1 G S 3 R V E BANK OF D . . L L A S , TEXAS, ET A L . , Appellees. Appeal f r o m t h e D i s t r i c t Court of t h e United. S t a t e s f o r t h e Tie s t e r n D i s t r i c t o f T e x a s . R.xi.D. Morton (Dyer & Morton on t h e b r i e f ) , for Appellant. J . C - . lip G r a d y , A . H . C u l v r e l l , (Turney, Surges, Culwell H o l l i d a y & P o l l a r d ; Wm* H . S u r g e s ; C h a r l e s C. H u f f ; E t h a n B« S t r o u d , J r . j Lea, McGrady, Thomas on & E d w a r d s , on t h e b r i e f ) , for Appellees. B e f o r e WALKER, BRYAN a n d FOSTER, C i r c u i t J u d g e s . BRYAN, C i r c u i t J u d g e : On S a t u r d a y , J a n u a r y 2 6 , 1 9 2 4 , b a n k e x a m i n e r s completed an e x a m i n a t i o n i n t o the c o n d i t i o n of the C i t y National Bank o f El Paso, Texas, and n o t i f i e d i t s o f f i c e r s t h a t the bank w o u l d n o t b e a l l o w e d t o open i t s d o o r s on t h e f o l l o w i n g 1'onday u n l e s s b y t h a t t i m e i t s h o u l d h a v e c h a n g e d o f f § 8 0 0 , 0 0 0 i n papc-r 2 4 4 X-45 69 -2- . h e l d as a s s e t s w h i c h t h e examiners c o n s i d e r e d t o be w o r t h l e s s . On the f o l l o w i n g night a meeting of c i t i z e n s was held for the purpose of assisting i n r a i s i n g $>800,000 i n money so as t o e n a b l e t h e bank t o continue in business. aggregating $300,000, subscriptions notes bank e x a m i n e r s • These c i t i z e n s s u b s c r i b e d t o v a r i o u s amounts and signed an agreement t o accept for t h e i r i n equal amounts which had been r e j e c t e d by the I t was p r o v i d e d by the s u b s c r i p t i o n l i s t which t h e y signed t h a t their subscriptions were subject to an agreement by the Federal Reserve Bank t o take and p a y f o r at par $500,000 of the l e a s t valuable of the r e j e c t e d notes and a s s e t s h e l d b y the bank* governor The of t h e R e s e r v e bank was p r e s e n t a t t h e p l a c e w h e r e t h e m e e t - ing of t h e c i t i z e n s was h e l d , and s t a t e d t o t h o s e who a p p r o a c h e d him t h a t the Reserve bank c o u l d not make a d o n a t i o n , and t h a t under no c i r c u m s t a n c e s w o u l d he a c c e p t and p a y f o r w o r t h l e s s a s s e t s , but that h e w o u l d c o n s i d e r m a k i n g a n advance f o r t h e R e s e r v e b a n k o f $ 5 0 0 , 0 0 0 , w h i c h was t h e amount o f t h e c a p i t a l stock of t h e El Paso bank, pend- ing an assessment of 100 per cent against the shareholders. A resolu- t i o n was a d o p t e d by t h e d i r e c t o r s of t h e El P a s o bank a c c e p t i n g an advance i n t h a t a m o u n t , a g r e e i n g t o make t h e a s s e s s m e n t s u g g e s t e d , and p r o v i d i n g , i n t h e e v e n t i t s h o u l d n o t be made or t h e E l P a s o b a n k should suspend b u s i n e s s b e f o r e i t was completed and the amount n e c e s s a r y t o t a k e up t h e l o a n r a i s e d , that the Reserve bank should have a f i r s t and p r i o r l i e n on a l l the a s s e t s of the El Paso bank t o secure repayment# On M o n d a y m o r n i n g , the c i t i z e n s and the J a n u a r y 28, t h e $ 3 0 0 , 0 0 0 s u b s c r i b e d b y "$500*000 a d v a n c e d b y t h e R e s e r v e b a n k w e r e d e - p o s i t e d i n the El P a s o bank and t h e q u e s t i o n a b l e a s s e t s were taken out 245 2 a n d t u r n e d o v e r t o a c o m i t t c c f o r d i s t r Jbu-:.:.on. closed its ttiie E l P a s o b & n l c d o o r s o n M a y 6, 1924* and i n ilOTcrabcr, 1 9 2 4 , w i t h t h e a p p r o v a l of t h e C o m p t r o l l e r , its receiver, a n d the R e s e r v e b a n k e n t e r e d i n t o a c o n t r a c t of s e t t l e m e n t , i n w h i c h t h e a d v a n c e o f $ 5 0 0 , 0 0 0 b y t h e R e s e r v e banlc w a s r e c o g n i z e d a s , a l o a n . D o u g l a s C# C r o w d 1 s u b s c r i b e d a n d p a i d $ 2 , 0 0 0 a t t h e c i t i z e n s 1 meeting in January, was a d e p o s i t o r . He w a s n o t a s h a r e h o l d e r i n t h e E l P a s o b a n k , b u t At the time of that bank's failure deposit with it 019,473.68, failure #23,500. He h a d b o r r o w e d o n h i e It is admitted that a l l e x c e p t one f o r § 8 7 5 0 , w h i c h i t notes before the of t h e s e n o t e s were negotiable i s c l a i m e d was n o n - n e g o t i a b l e b e c a u s e , t h o u g h i t w a s m a d e p a y a b l e t o o r d e r six as c o l l a t e r a l i n H a y ho h a d o n months a f t e r date, it pledged c e r t a i n stock with the right of the payee to c a l l for additional security should the stock decline, p a y a b l e on demand* All these notes, i*i w h i c h e v e n t i t b e c a m e i n c l u d i n g the one l a s t mentioned, were pledged as c o l l a t e r a l s e c u r i t y by the El Paso bank before I t s f a i l u r e to the Reserve bank* f i e d Crowe 11 t h a t After the failure, t h e R e s e r v e banlc noti** i t was t h e h o l d e r of t h e n o t e s , a n d he p a i d t h e $8750 n o t e b e f o r e i t was due# The r e p r e s e n t a t i v e o f t h e R e s e r v e b a n k s t a t e d t o him that i t could grant a dhort e x t e n s i o n of time> and did not t h r e a t e n t o s u e o r t o e x e r c i s e t h e r i g h t t o s e l l t h e s t o c k p l e d g e d -as collateral# C r o w c l l s t a t e d t h a t he w a s p a y i n g h i s notes under p r o t e s t , and demanded t h a t when t h e Reserve bank s h o u l d be p a i d i n f u l l on paper discounted w i t h i t by the El Paso bank his p r o p o r t i o n of any • s u r p l u s i n c o l l a t e r a l n o t e s or c a s h s h o u l d be d e l i v e r e d t o him and not Z-4569- turned over to the r e c e i v e r . r e c e i v e r was s t i l l At the date of the f i n a l h e a r i n g the i n d e b t e d t o t h e Reserve b a n k t o t h e e x t e n t o f a b o u t 575,000, for which the Reserve bank h e l d c o l l a t e r a l notes amounting t o % 7 , b 0 0 and r e d i s c o u n t e d notes amounting t o approximately $178,000. Crowe 1 1 f i l e d a b i l l t o s e t a s i d e t h e c o n t r a c t o f s e t t l e m e n t between the r e c e i v e r and t h e Reserve bank on t h e ground t h a t t h e Reserve bank was e s t o p p e d t o claim, t h a t the %00,000 a d v a n c e d b y i t i n J a n u a r y was a l o a n , b e c a u s e the c i t i z e n s who d o n a t e d $ 5 0 0 , 0 0 0 d i d s o o n c o n d i t i o n t h a t t h e R e s e r v e b a n k w o u l d m a k e a d o n a t i o n o f .$500,000, The b i l l a l s o p r a y s t h a t Crowe 1 1 b e d e c r e e d t o h a v e t h e r i g h t t o s e t o f f h i s d e p o s i t a g a i n s t a l l h i s notes> or a t l e a s t a g a i n s t t h e note f o r $8750, w h i c h he c l a i m s t o be n o n - n e g o t i a b l e • hearing the evidence dismissed the b i l l , The d i s t r i c t c o u r t a f t e r but w i t h o u t p r e j u d i c e , The e v i d e n c e s h o w s w i t h o u t c o n f l i c t t h a t t h e R e s e r v e b a n k d i d n o t a g r e e t o make a d o n a t i o n , and i t becomes u n n e c e s s a r y t o d e c i d e w h e t h e r i t had t h e r i g h t or p o w e r t o do s o . The m o s t t h a t c a n b e c l a i m e d b y a p p e l l a n t i s t h a t some of t h e c i t i z e n s who made d o n a t i o n s w e r e l e d t o b e l i e v e b y o t h e r s o f t h e i r number or b y o f f i c i a l s of t h e El P a s o b a n k t h a t t h e R e s e r v e b a n k w o u l d a l s o make a d o n a t i o n o f h a l f a m i l l i o n d o l l a r s . It is very clear, in fact it is a l l e g e d in the b i l l , that the governor o f t h e R e s e r v e bank w o u l d d e p o s i t t h e amount r e q u e s t e d o f him o n l y upon c o n d i t i o n t h a t he r e c e i v e as s e c u r i t y an a s s e s s m e n t in f u l l of the s h a r e holders* liability* Nor i s t h e r e a n y d i s p u t e t h a t t h e R e s e r v e b a n k r e f u s e d t o make a d e p o s i t u n t i l a f t e r t h e p a s s a g e o f a r e s o l u t i o n b y t h e d i r e c t o r s of the El Paso bank p l e d g i n g other a s s e t s in the event of a X-4569 -5- S 4 S f a i l u r e to sccurc by stock assessment the f u l l amount a d v a n c e d . It was o n l y upon the p a s s a g e of that r e s o l u t i o n t h a t t h e Reserve bank u n d e r t o o k t o b i n d i t s e l f t o do a n y t h i n g . A l l p r e v i o u s s u g g e s t i o n s and c o n v e r s a t i o n s were a c r e p r e l i m i n a r y n e g o t i a t i o n s , and i t was thoroughly u n d e r s t o o d a l l t h e w h i l e b y t h o s e who d e a l t w i t h t h e g o v e r n o r o f t h e F e d e r a l R e s e r v e Bank t h a t he w o u l d under no c i r c u m s t a n c e s make a d o n a t i o n , a n d t h a t i f he made a l o a n i t w o u l d h a v e t o be s e c u r e d . The q u e s t i o n i s not whether the l i a b i l i t y of the s h a r e h o l d e r s could be p l e d g e d as s e c u r i t y b u t w h e t h e r a l o a n was m a d e . c o n f l i c t answers that question in the affirmative. The e v i d e n c e w i t h o u t It is contended that the t r i a l court should have granted a p p e l l a n t ' s request t o c a l l a j u r y t o p a s s upon the q u e s t i o n whether t h e amount advanced was a l o a n or a d o n a t i o n . B u t c l e a r l y t h e r e w a s n o e r r o r i n r e f u s i n g t o summon a j u r y , as the c o u r t w o u l d have b e e n o b l i g e d t o d i r e c t them t o f i n d a g a i n s t a p p e l l a n t on t h e u n d i s p u t e d f a c t s , It follows that appellant must f a i l on h i s p r i n c i p a l c l a i m of e s t o p p e l . premature. The E l P a s o bank was s t i l l His c l a i m of s e t o f f i s indebted t o t h e Reserve bank a t the date of the f i n a l hearing, and i t t h e r e f o r e had not been determined what amount, i f any, would be r e a l i z e d from c o l l a t e r a l n o t e s and a v a i l - able to the receiver. I t i s contended, however, t h a t the Reserve bank s h o u l d be c o m p e l l e d t o p a y over e i t h e r t o a p p e l l a n t or t o t h e r e c e i v e r p r o c e e d s of the §8750 note on the ground t h a t i t was n o n - n e g o t i a b l e . W h e t h e r t h a t i s t r u e o r n o t d o e s n o t scorn t o h a v e b e e n s e t t l e d i n t h e S t a t e of T e x a s , and we f i n d i t u n n e c e s s a r y t o d e c i d e , b e c a u s e a p p e l l a n t made p a y m e n t o f t h a t n o t e v o l u n t a r i l y ; ho e v e n p a i d i t b e f o r e i t was d u o , X—4569 2 4 9 -6- a n d was not i n d u c e d t o do so b y a n y a c t i o n t h r e a t e n e d b y the R e s e r v e bank t o s e l l or r e s o r t t o t h e c o l l a t e r a l p l e d g e d t o s e c u r e payment of the note. this The d o c t r i n e o f m a r s h a l i n g a s s e t s h a s n o a p p l i c a t i o n , i s n o t a c a s e of a j u n i o r a n d s e n i o r l i e n h o l d e r . for Appellant has no l i e n , and t h e R e s e r v e bank has t h e r i g h t t o s u b j e c t a n y s e c u r i t y i t holds to the s a t i s f a c t i o n of its debt• The s u g g e s t i o n i s f i n a l l y made t h a t i t w a s e r r o r t o d i s m i s s t h e b i l l ^ b e c a u s e h a v i n g t a k e n j u r i s d i c t i o n the court should have proceeded t o e s t a b l i s h a p p e l l a n t ' s claim to his deposit. It is not averred in the b i l l that appellant had ever p r e s e n t e d h i s c l a i m or t h a t i t had b e e n d i s a l l o w e d b y t h e r e c e i v e r # It is t o be assumed t h a t the c l a i m would be allowed upon p r e s e n t a t i o n . I t w o u l d be i n t o l e r a b l e t o a l l o w e v e r y d e p o s i t o r t o come i n t o c o u r t t o e s t a b l i s h h i s c l a i m w i t h o u t f i r s t h a v i n g made demand or s h o w i n g t h a t i t had been disallowed. As t h e d i s m i s s a l o f t h e b i l l w a s w i t h o u t p r e j u d i c e , a p p e l l a n t is l e f t f r e e t o a s s o r t i n a p p r o p r i a t e p r o c e e d i n g s a n y r i g h t s he may have a g a i n s t t h e r e c e i v e r . The d e c r e e i s AFFIRMED. ( O R I G I N A L F I L E D MARCH 1 6 , 1 9 2 6 ) .
@FedFRASER