The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
X-4768
IDHTED STATES CII-\CUIT CotJRT OF APPEALS
FOURTH
CIRCUIT
No. <:J558.
THJ;; LIEERTY HATION.AL lWT.K OF SOUT.d
C.AROLH~A
at Columbia, et al.,
Appellants,
versus
J. W. Mcintosh, as Comptroller of the Currency of the
United States, and 1':alcolm S. McConihe, as
F.eceiver of the Liberty national Bank
of South Carolina, at Columbia,
Appellees.
No. 2569.
J. W. Mcintosh, as Comptroller of the Currency of the
United States, and 1-f..alcolm S. McConihe, as
Receiver of the Liberty National R~nk
of South Carolina, at Columbia,
Appellants,
versus
T.riE LIBERTY NATIONAL :SA.('i!K OF SOJT'".d CAROLINA
at Columbia, et al.,
Appellees.
Appeals from the District Court of the United States for
tho Eastern District of South Carolina
at Charleston.
X-4768
-' 2 -
Decided January 11, 1927)
(Argued October lS, 1926.
Before Waddill, Rose and Parker, Circuit Judges.
D. W. Robinson and William M. Shand. (Benet, Shand &
McGowan and George Bell Timmerman on brief) for
Appellants in No. 2558 and Appellees in No. 2569.
and R. Beverley Herbert and John K. Shields for
Appellees in lJo. 2558 and Appellants in No. 2569.
Waddill, Circuit Judge:
These two causes grow out of proceedings to liquidata the affairs of the Liberty National Bank of South
Carolina, at Columbia, and were argued together in this
court, and will be disposed of in one ouinion.
The Liberty National Bank of South Carolina, at
Columbia, hereinafter referred to as the Liberty Bank,
filed its bill and amended bill in equity in the first
named cause in the court below, praying that tho action of
the Comptroller of the Currency, named as a defendant
therein, in appointing tho co-defendant, Malcolm S. ticConine Receiver of said bank, he dGclarod void; and that
tho attempted levy
~nd
collection of an assessment on
the shareholders of said
b~nk
by the defendants, in their
official capacity, be enjoined and restrained.
The bill
briefly alleged that the Liberty Bank had entered into
voluntary liquidation under contract with the National
Loan and Exchange Barik of Columbia,
(h~reinafter
re-
X-4768
- 3 -
ferred to as the Exchange Bank). which latter baclc wns to act as liquidator
of the fonner, assuming to pay certain liabilities, and to be reimbursed
oy the Liberty Bank for any deficit.
The original contract between the two banks was regularly entered into on the 23rd
of October, 1923, and pursunnt to a
sub~equent
resolution
of the :Board of Directors, and by agreement between the banks, clause 6
was added thereto.
:By the agreement thus
entered into, the Liberty :Bank
transferred all of the assets of every kind of the bank to the Exchange bank,
the Exchange bnnk guaranteeing 9ayment to the deyositors of tho Liberty Balik
of the amount of their deposits therein; and also other obligations of the
Liberty :Ba.nk for bills p.<J.j>ablc and rediscounts at the close of business on
the 22nd day of October, 1923, as shown by Exhibit A attached to the
contr~ct;
with a proviso that tho Exchange Bank did not guarantee any liability of
said Liberty Bank to its
stoc~holdcrs
or any other liabilities of said
Liberty Bank except those thereinbefore set forth.
Under this contract
the Exchange Bank at once possessed itself of all the assets and effects
of the Liberty Ba11k, including its bru1king house, and proceeded to administer
and liquidate the assets of the bank as rapidly as in its judgment was
deemed advisable and adva.'1tageous; a..J.d it was provided that cfter reimbursing itself for all expenses, not however to include commissions to the Exchange Bruik (the latter barik making no charge for its services in the administration and liquidation of the affeirs of the Liberty Bank and collecting
and converting its assets
i~to
cash) together with all the advancements made
on account of said Li bcrty :?ro1k, and of all indebtedness of the Liberty Bank
to the Exchange 'Parle of every charnctcr; and that the residue of the assets
of said Liberty Bank should ho turned oTor to it for distribution among
its stockhelders.
Provision also wr:s made for tho liquidation and winding
up of the affairs of the Liberty Earik by and under the supervision and
direction of
the
Exch~~ge
Bank, but the Liberty Barik reserved tho right
X-4758
- 4 -
thro11£Ch its a.:9::,>ro-priate comr:1i ttees and re:prese;.1tati ves to consult and advise
daily with the Exchange 3ank as to the
a~~i~istration
and liquidation of
the assets of the Li oerty Eailk, and also reserved the right to direct in
writing the -yro-per disposition of certain of its 'bills receivable and
choses in action as it might be advised to; and the books of the Exchange
?.ank
were to be open to the ins';)ection of a representative of the Li l:erty
It was further provio.ed that the :Exchanb'e :tank should not be liable
Bank.
to the Liberty Bank for any losses in connection with the liquidation and
collection of the assets of the latter
exc~.;pt
"bank
conveyed and transferred to it,
such as arose from gross negligence on its part or its ager1ts.
The
Liberty Ea1ik stipulated that it would save harmless the :xchange Bank from
and against any and all losses, should there be any, which the Exchange Ba1ik
might sustain on account of the failure to realize from the assets and
property of the Liberty Bank sufficient to reimburse the Exchange :Eank for
all amounts which it might expend in carrying out tho provisions of the
contract, and upon final com?letion of the liquidation to pay any such deficiency to said Exchange Bank.
The bill further charged that the Comptroller was cog-:1izant of and approved the contract of liouidation, and that thereafter the Exchange :Bank
not having lived up to its contract, sought to have the Comptroller assume
jurisdiction of the affairs of the Liberty Bank, and to appoint a receiver
to take charge; which the comptroller at first refused to do, but subsequently did, and ordered an assessment of $250,000.00 against the shareholders of
the Liberty Batik for the purpose of meeting its obligations, when tho amount
so due, in addition to the indebtedness ascertained by the comptroller in
favor of the :ii:xchange Bank, towit: $453,008.10 was not in excess of $6,000.00.
The Liberty Bank also denied its liability to the Exchange Bank for the sum
so adjudged against it, as it did the power of the comptroller to make such
X-4768
- 5 -
. ··,, :;
adjuclico.tion and n.ssossment ·"gainst sho.rcholdcrs, and insisted that such
adjudication and assosmaont could only be rnado by a court of co:mpctcnt jurisdiction having authority to wind up tho affairs and assess
in insolvent national
ba1u~s
shaxchold~rs
in liquidation.
On the filing of tbe bill, the court awarded a rule against the defendants
to l:'how cause of July 27th why the interlocutory in,junction should not be
issued as ·:yrayed for;
specially
court.
~?~eared
whereu;?on the defendant CoJ1I!)troller of the Currency
for the
~~ose
of coLtesting the jtU'isdiction of the
T'ne said dafendant Com1troller and his co-defendant t:i:J.e receiver,
-:1pon the cou:-t 1 s over1--uling the plea to the jurisdiction, each moved ·.
the court to dismiss the bill for lack of equity; and the receiver duly
made return to the said rule showin;;:; his
a:p~ooint11ient
and what he had done
thereunder, with affidavits and records in support thereof.
From said re-
port it a;)pears that assets came i:J.to his hands as follows:
Good
Doubtful
Wort:1less
1·otal
$138,453.93
63,980.69
844!719.48
1,047,154.10
From the first two items, the received hoped to realize $164,865.68.
T'ne receiver denied that his appointment was because of solicitation or L::port1Uiity of the Exchange Bank, but was solely the result of a long and careful investigation and examination by the CoJII?troller of the affairs of the
Liberty Bank, and having become satisfied of its insolvency, the rocei ver
\"aS ai?"'Jointed, and the conr)troller thereafter directed the assessment of
the shareholders to cover the indebtedness of the Liberty Bank.
On the 28th of July, the court having overruled the objection to the
jurisdiction of the court, entered an order declininG to e;njoin the com,?troller from exercising the ?O"'ors conferred u:)on him by law, and denied the
injunction·as:.-::ed
...
for to restrain the receiver from proceeding with the col-
- s -.
lcction of tho
~~ha:;.·choldor;:; ;l,;.;::;osmaentu
X-4768
tho:;c-,tofore ordered by t1"'1e Com)trollor.
From this action tl1.o a:p"?ca.l in the first ni.JL<ed cause, #?558 was taken.
On the 4th of Au.gust,
1~26,
tho Liberty Bcmk a'T')licd to the dL; trict
court of the United States for an order enjoining and reutraining the defenda.YJ. ts from further prococdiag to cnfo:cce and collect tho assessment
previously made against the s:1.ar-eholdors of
t~1.o
Liberty Ban_"K:, '1onding the
a:):9eal in the first cause, which was grante<l; and from t:·lis last naJnod order
an ap'l}eal '.vas ta}:en b.y tho coml}troller of tl1e currency
theretofore appointed by him for the Liberty Bank,
w.~d
whic~1
the receiver
conGti tutes the
last nruned cause #2569, and tho two will be considered in the order nllined.
Case #~558 involves a s''l~v::Tal consideration of the National :Sa.11k Act,
:?articularly as res::oects tho })O\¥er and authority of the Comptroller of
the Currency to <r..Jpoi:at r;;::ceivers for insolvent national banks, a.'l.d assess
si1areholders in such institutions after liqu:idation proceedings
been il'laug,uratod by the
the
Com~ptroller
ba'1~c.
~1ave
The Liberty Bank insists that the right of
to appoint a receiver only exists prior to the liquidation
proceedings, and thereafter receivers are appointed a'l.d shareholders assessed
not by the comptroller, but by a court of equity of competent jurisdiction.
Whatever may have been the law prior to the amendment of the National
:Sank Act of 30th June, 1876, 19 St. L., 63, it would seem since that date
there sbould be but little trouble to meet and disnose of the questions
pre sen ted in this record.
the Comptroller
s~1all
Section 1 of thee
G.C
t J)rovides
11
* * *
become satisfied of t::1e insolve:1cy of a national
ba.'1king association, he raay, nfter due exa;aination of its affairs
a~point
whenever
***
a receiver, who shall proceed to close up such &_ssociation, and
e::1force the personal liabi1i t;:.r of its shareholders, as 'Drovided in Section
(R.S.,5234) (C.S.,982l) of said statutes."
- 7 -
X-'±753
:..;;; __ ,
{
Section 2 of the o.ct of 1276 ])rovides
t~at
w:1en any national banking
association shall have g:me into (volunta17) liouidation under the provisions
of Section 5220 R,·;, (C. S.,9806) the individo.:-;.1 liability of shareholders
provided for by R. S. 5151 (C. S. 9689)
ma:~r
be enforced by any
creditol~,
by
a bill in the nature of a creditor's bill in the district court of the district in which the association may have been located.
Section 3 of the act of 1876 (C. S. 9827) provides that when the
Comptroller has a:ppo in ted a receiver and shall have paid the creditors in
full and redeemed the circulating notes then a meeting of the shareholders
shall be called who shall decide whether the liquidation shall be co;:J.pleted
by the receiver or an agent appointed by the shareholde~s.
It will be observed that by·the first section of the amended act
(which it may be said in passing is one of far reaching importance to
the national government and the public. and in which the Comptroller of
the Currency is granted almost imperialistic powers) there is placed apparently no limitation to what he may do when the rioper conditions arise
for the exercise of the authority and discretion reposed in him.
word, whenever he becomes after due
exa~ination
In a
of its affairs, satisfied
of the insolvency of a national banking association he may appoint a receiver, who shall proceed to close up tho business of such association,
and enforce the personal liability against shareholders as prescribed by
law.
This act
c,~~
have but one meaning, and having regard to the
import~
ancc of its subject matter, and the delicate duties to be performed, positive and quick action, when found necessary,
the winding up
&~d
i~
contemplated looking to
closing of insolvent national banks.
The convenience
'
of large numbers of the public perhaps affected by what is to be done,
and the serious disturbance of business conditions liable to be involved,
would seem to justify and warrant this grant of power to an official of
the dignity
and importance of the Comptroller of the Currency.
- c -
Ths Ulird scctio:.1 of the r1mendcd act si vos further color to this
view, in that it :provides that when. creditors, through tho Comptroller's
receiver, have boon
~paid.ir1
f-'-;_ll, and the bo.;.1k's circulating 11otes redeemed,
the institution shall bo returned to the CO<ltrol of its stockholders.
Conceding that the second section of tho runendatory act of 1876, on
which tho relief sought by the Liberty Bac''1k is largely based, may give
color to tho claim made,in that it provides that Ylhen a national ba:1king
association shall have gone into voluntary liquidation, the individual
liability of shareholders (Rev.Stat. sec.5151; Comp.St. sec.9689) may be
enforced by
~1y
creditor by a bill in the nature of a creditor's bill in
the district court of the district in which the association is located.
But we :have no such case here, and no proceedings have been instituted,
or a::lY receiver asked for, and we believe we are c.1ot called upon to pass
on the relative powers a:'ld authority of the Comptroller and the courts,
in an insolvency proceeding against a brmk in liquidation u.J.der section 2
of the amended act.
To acce:pt t):le Liberty Ba..J.k 1 s contention would be
in effect to take away the Comptroller of the Currency's authority to act
in the proper winding up of all insolvent national banking insti tutim1s,
by the mere act or atteiDl)ted act of those in charge of such institution,
to inaugurate liquidation proceedings.
pur~90 se
su~ely,
could not have
bee~
the
of the act, and to give it such an b terpretn tion w:mld not only
do violence to its manifest meaning, but
s~rstom,
This
wea~wn
tho whole national banking
a.'1d bring about a co::.dition of uncertainty and chaos i:1 connection
with this most important branch of the govornme<J.t' s business.
Ample authority will be found to ma.'>co cloar the pur-;Joses of the
national b:smking act, and to fully and clearly snow the power and authority
of those charged with its administration, cs-pccL:c>lly that of the Comptroller
of the Currency.
His jurisdictbn in respect to all matters properly with-
in his discretion is exclusive, and he is in respect thereto in no manner
,~:;
X-4768
- 9 -
amenable to
11
ru1y
CJurt, nor is
~is
action subject to review
(
t~croin.
The bank is not c 1nsidered as a private cor:;Joration, whose '!rinciyal
object is individual trade ard individual profit; but as a public cor-;oration created for public
national purposes. 11
ru1d
Chief Justice Marshall,
in McCulloch vs.Mal7land, 4 '\':'heat., 316, 425.
11
0ur conclusiona upon principle and authority are that Congress havin.::;
power to create a system of national banks, is the judge as to the extent
of the powers which should be conferred upon such banks, and has sole
power to regulate and control the exercise of their operations.
That
congress has directly dealt with the subject of insolvency of such banks
by giving control to the Secretary of the Treasury and the Comptroller
of the Currency, who are authorized to sus-oend the operations of the bnnks
and a?point receivers thereof when they become insolvent, or when they
fail to make good any impairment of capital."· Mr. Justice Shiras, in
Easton v. Iowa, 188 U.S.238.
11
The receiver il:. tho instru.-nent of tho Comptroller.
He is appointed
by the Comptroller, and the powers of the appointment ca:.cry with it the
power of removal.
It is for the Comptroller to decide when it is necessary
to institute proceedings again at the s toclr..holders to enforce their perso:J.al
liability,
~~d
whether tDc
shall be collected.
~1ese
w~olc
or a part, and if only a part, how much
questions are referred to his
cretio:J., and his determination is conclusive.
controvert it.
jud~nent ~~d
dis-
The stockholders cannot
It is not to be questioned in the litigation that may ensue.
He may ma..lte it at such t il:ue as he may deem proper,
a..~d
uyon such data as
shall be satisfactory to him. 11 Mr. Justice Swayne in Kennedy v. Gibson,
75 U. S. (8 Wall.) 505.
The decisions of the Com:9troller of the Curreacy nre not subject to
-,
... , ··
X-4768
- 10 -
collateral attack, nor is h1.s assessment against shareholders, and the
&""11ount thoreof open to review; but, on the
contl~ary,
neither the bank nor
the shareholders,clearly in the absence of fraud charged and proved, are
entitled to a judicial determination of any question involved in his.decision either as to the solvency, the sum due creditors and the amount of
assessments as ordered, such matters one and all being exclusively within
the judgment and discretion of the comptroller, and as to which he acts
in a quasi judicial capacity.
Kennedy v. Gibson, supra, 75 U.S.498; Casey
v. Galli, 94 U.S. 673; United States v. Knox, 102 U.S. (12 Otto) 422;
Richmond v. Irons, 121 U.S. 27; Schrader v. Bank, 133 U.S. 67; Bushnell
v. Leland, 164 U.S.684; Hightower v. Bank, 263 U.S. 351; Deweese v. Smith,
(7th CCA) 106 Fed.438.
Moreover, upon the Comptroller appointing a receiver of a national
bank, the receiver takes possession of tho assets of the bank, and assumes
control of its operation, not as agent of the bank, but as an officer of
the United States.
He executes band to the United States for the faith-
ful performance of his duties, and pays to the Treasurer of the United
States the moneys collected, and makes to the Comptroller under whose
supervision and control he disbUl·ses the funds to the credit of the insolvent bank, a full report of his acts and doings in the premises.
In
re Chetwood, Pet 1 r. 165 U.S.443, 458; United States v.Weitzel, 246 U.S.
533, and cases cited in each opinion.
Coming to the consideration of the second case, #2569, it is confined
within a comparatively narrow compass, and really involves the question
of the right to appeal from an order refusing to grant an injunction,
What court should exercise this power, that is, the court tl1.at declined
the injunction or the one to which the appeal is propooed to be taken,
and the authority
of courts acting in such circumstances?
~~e
relief
X-4768
- ll -
asked is based upon a written r.1otion ma.de by the )arties wi'lo failed to
secure an injunction to preserve t;1e status quo, and stay the proceedings
sought to be enjoined.
Vf.."latever the pro11osed action may be te1 med technically, at least
1
it is but an a.3):plicat ion to grant an appeal from an order refusing an
injunction, which in effect seeks to stay or enjoin the doing of something when nothing has been done.
The novelty of this situation would
seem to be a sufficient answer to the same, save that the statute {Jud.
Code, 1911, sec. 129, with runendments Rose's Fed. Pro. Sees. 3rd Ed. sec.
612, Hopkinls Jud. Code, sec. 129, 2nd Ed.) in terms provide for such an
appeal.
Provision for appeals from orders refusing injunctions was appar-
ently first made by tho act of 18th February, 1895, (28 St.L.,666).
By
subsequent act of 6th June, 1900 (31 St.L.,660) and a still later act of
14th of April, 1906 (34 St.L.,ll6) the provision for
~)peals
from orders
refusing injunctions was omitted, and next
~~:peared
in the Judicial Code
of 1911, sec. 129 (36 St.L.,ll34), and has
rorr~ined
substantially as at
prasent, thou·Gh this section has several times been amended,
Just the proper procedure for
taki~g ~ppcals
from orders refusing to
grant injunctions, and whether the same should be granted by the trial or the
appellate courts, has brought about some divergence of views on the subject.
In the Railroad Tax cases from North Carolina, the district court sought to
afford tho relief gran ted by :postpm1ing the day on which the order dec linin,-,
the
inj~~ction
should have effect, leaving a reasonable time to apply to
the supreme court for an anpeal, if such action should Qe thought ?roper.
Southern Railway Co. and other railroads, against Watts, et al., 259 U.S.
576.
~'1e
supreme court concluded tnat as it was a matter of which the dis-
trict court was advised, and that tribunal was not, the district court
should act
u~on
the npplication.
T~e
case was proceeded with on that
X-4768
- 12 theory, the district court allowin;; t:w
~:r:xpod,
v.r::1icl1 o:poratod in off oct to
grant the hjunction originn.lly r\s:ced for, b;r ::n:..s·;cDdbg the collection of
the taxes involved :pending decision on t:1 ..; murits; and the action of the
lower court was
subseq·~entl~r
affh•mod.
Tho :precise condi tiona were
recently before tho su:oromo court in tho case of theVirginian Ra.ilwa3r Co.
vs. The United States, a."ld tho United States vs. the Virginian Railway Co.,
decided December 13th, 192&; and in the latter case, the district court
took the same action that it did in the North Carolina tax
granted tho
a~~peal
from an order declining an injunction.
ca~es,
that is,
The su:preme court
quite fully reviewed the whole subject of procedure, and held that that court
and the district court alike had the right to gr[illt or refuse the n.pyeal,
a."ld that in the particular case it should have been refused, and not
~a."lted;
especially as the effect of granting tho same operated not only to secure
the relief that had been denied on the a?plication for bjunction, but because it stayed the enforcement of the order of the Interstate Commerce
Commission, wilich had received the sa.1ction of the district court by
declining the
inj~!ction.
This decision in the Virginia Railway cases seems conclusive of this
case, as there is nothing peculiar in the circumstances here that call for
•
the grru1ting of tho relief sought in the
the
Curre~1cy
hac issued
a.'1
circumst~1ces.
Tho Comptroller of
order to proceed with the winding up of the
affairs of the insolvent bank, by appointing a receiver
~1d
ordering the
necessary assessment against the shareholders of the bank; and tho district
court having declined to enjoin this action because of the authority
vested in tho Comptroller, there was no reason w:1y the court 1 s action
and that of the Comptroller in such circwnstances should be stayed.
We are not prepared to say that there ma=r not be cases in which the
stay should be had, and the appeal gr[lltod,, ,but we aGsume the decision L1
- 13 -
the Virginian Railway Co. cases to r:1ean that at least there should be
S?ecial or U.'1usual conditions
ma~:ing
such course proper and necessary
at the stage the same was as 1::::ed for here.
granting of an
a~peal
Hence, we hold that the
from the order refusing the injunction in the
circumstances, was an unwise exercise of the discretion reposed in
the court.
Case No. 2558 - Decree affirmed as to matter appealed from.
Case No. 2569 - Decree reversed as to matter auuealed
from .
.. ...
@FedFRASER