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f *-6817 SE1 254 February 10, 1931. Mr. M . Gr. Wallace, Counsel, Federal Reserve Bank, Richmond, V i r g i n i a . Ity dear Mr. Wallace: Although I have a l r e a d y communicated with you by wire, I d e s i r e f o r m a l l y to acknowledge r e c e i p t of your l e t t e r s of January 29, February 2, February 5 and February 6, with r e f e r e n c e to t h e Attmore case and the Lucas case and to thank you f o r your c o u r t e s y i n keeping me so f u l l y informed of a l l important developments i n these c a s e s , I a l s o wish to c o n g r a t u l a t e you upon your success i n having the a f f i r m a t i v e defenses s t r i c k e n from the answer i n the Attmore c a s e . In view of the c o u r t ' s a c t i o n i n s t r i k i n g the a f f i r m a t i v e defenses i n t h e Attmore case, I assume t h a t i t w i l l a l s o s t r i k e t h e a f f i r m a t i v e defenses s e t up I n the answers i n s e v e r a l s i m i l a r s t i l t s now pasding. While the g r a n t i n g of your motion t o s t r i k e i n the Attmore case deprives t h a t case of all System Ii^pQrtaafie, u n l e s s the defendant a p p e a l s , i t i s c l e a r tiiai the fiiirt'g of the Lucas suit., n&ich r a i s e s most of the questions r a i s e d the a f f i r m a t i v e defenses i n the Attmore case and a l s o r a i s e s -additional <jjfuti!avians of importance to the Federal Reserve System, j u s t i f i e s our for&s^ghi I h deciding to handle the Att** more case and r e l a t e d l i t i g a t i o n a s a Syiiejh matter &,nd i n r e t a i n i n g Mr# Baker to r e p r e s e n t -all F e d e r a l reserve b a h k s / j p i n t i y i n such l i t i g a t i o n , I p e r s o n a l l y b e l i e v e t h a t t h i s i s going t o d ^ v i i A i n t o some of the most important l i t i g a t i o n He have ever had and $ h a i .f$ &iH : s e t t l e s e v e r a l i m p o r t a n t q u e s t i o n s about which the^e,ha6;b#eW .. of dpiflion f o r many y e a r s , the p r i n c i p a l qtteitidn oilthW r i ^ h i W r e s e r v e bank to take marginal c o l l a t e r a l . Ifed&reJt * ' ' " ' . . T&e f i r s t q u e s t i o n t o be d t i i d e d , of,dou^|#i j.6 #hbth4r t h e Lucas case should be removed to the Federal Court4.. 6ft t h a t question, a s I wired you on February 7, 1 f e e l that* notwithstanding the views of the O f f i c e of the Comptroller of the Currency with r e f e r e n c e t o . l o c a l condit i o n s , the arguments i n f a v o r of removal contained i n your l e t t e r to Mr. Baker a r e p r a c t i c a l l y c o n c l u s i v e , f e c e r t a i n l y cannot a f f o r d t o t r y t h i s case b e f o r e a j u r y i f we can avoid ^ t ; and I b e l i e v e we can avoid i t by removing i t to the Federal c o u r t , because I think i t c l e a r l y i s remova b l e t o the Federal bourt and w i l l be t r e a t e d t h e r e a s a s u i t of e q u i t y . Had i t not been f o r t h e views of the C o m p t r o l l e r ' s O f f i c e about l o c a l c o n d i t i o n s , I would not have h e s i t a t e d f o f a moment to recommend t h a t you remove the case to t h e Federal c o u r t . In view of the f e e l i x g of Messrs. Await and Barse about the general s i t u a t i o n in t h a t d i s t r i c t , i 355 - 2 - X-6817 and in view of t h e f a c t t h a t t h e r e c e i v e r w i l l u l t i m a t e l y have to be made a p a r t y in t h e cfilae and probably w i l l have the bhief p e c u n i a r y i n t e r e s t i n t h e outcome of t h e c a s e , however, t h e e i t a t s d ; t o tiake such ar . . recommendation without f i r s t c o n s u l t i n g t h e r e p r e s e n t a t i v e s of t h e Compt r o l l e r of t h e Currency. Tlhen I t a l k e d to them, Messrs. Await and Barse u n h e s i t a t i n g l y agreed t h a t t h i s p a r t i c u l a r case undoubtedly should b e removed to t h e Federal c o u r t , in order to avoid the n e c e s s i t y of t r y i n g i t b e f o r e a J u r y . Mr. Jackson having a l r e a d y i n d i c a t e d h i s concurrence in your views on t h i s q u e s t i o n , I accordingly wired you on February 7 suggesting t h a t you a c t i n accordance with your own judgment and i n s t i t u t e removal proceedings without delay. Tfhile i t i s u n f o r t u n a t e t h a t we cannot have Mr. B a k e r ' s views on t h e question whether t h i s case should be removed, I have no doubt*' t h a t h e w i l l f e e l t h a t we have reached the r i g h t conclusion on t h a t p o i n t . I t seems to. me t h a t the noxt question to be considered in conn e c t i o n with the Lucas case i s whether to demur, answer o r move to d i s miss a f t e r the case h a s been removed to t h e Federal c o u r t . While I have no mature judgment on t h i s question, I am i n c l i n e d to agree with you t h a t we should move to dismiss f o r f a i l u r e to j o i n the r e c e i v e r and l i q u i d a t i n g a g e n t . I have n o t completed my a n a l y s i s of t h e complaint; b u t I f e e l p r e t t y c o n f i d e n t t h a t i t i s h o t demurrable, and t h e r e would seem to be no u s e in f i l i n g an answer and going to t r i a l on t h e m e r i t s u n t i l a l l n e c e s s a r y p a r t i e s have been j o i n e d i n the s u i t . I b e l i e v e however, t h a t , a f t e r the r e c e i v e r and l i q u i d a t i n g agent have been madb p a r t i e s to t h e s u i t , i t w i l l be n e c e s s a r y to f i l e an answer and go to t r i a l on t h e m e r i t s ; and t h a t , t h e r e f o r e , we should be t h i n k i n g about the kind of answer t o be f i l e d . I f the case i s removed to the Federal c o u r t , Mr. Baker w i l l r e t u r n in time to be consulted about the f u r t h e r proceedings in t h e case; and 1 b e l i e v e we ought to have a conference a s soon as p o s s i b l e a f t e r his return. If t h i s meets with your approval, I suggest t h a t you r e quest Mr. Jackson to t a k e the m a t t e r up with Mr. Baker a s soon a s he r e t u r n s and endeavor to a r r a n g e an e a r l y conference. In your l e t t e r of February 5 you s t a t e d t h a t you had not r e t a i n e d an a s s o c i a t e in New Bern to a s s i s t i n t h e Lucas l i t i g a t i o n and i n q u i r e d whether I thought t h a t Mr. Baker would p r e f e r to have you r e t a i n an a s s o c i a t e of h i s who I had t o l d you was somewhere i n F o r t h Carolina. As I wired you on February 7, I am sure t h a t Mr. Baker has no p r e f e r e n c e a s to the s e l e c t i o n of l o c a l counsel and would p r e f e r t h a t you use your own judgment on t h a t q u e s t i o n . The a s s o c i a t e I spoke to you about was Mr* Jackson, who was i n North Carolina on a v a c a t i o n . Mr. Baker was anxious f o r you t o get acquainted with him; but t h e next time he heard from Mr. Jackson he had gone to F l o r i d a . I t was very t h o u g h t f u l of you to forward t o me copies of t h e newspaper c l i p p i n g s with r e f e r e n c e to the Lucas case, and I apprec i a t e your k i n d n e s s . I n o t e with i n t e r e s t t h a t both papers recognized t h e f a c t t h a t t h i s case i s one of n a t i o n a l importance and probably w i l l - 3 - X-6817 go to the Supreme Court of the United S t a t e s . The newspaper accounts have a l l the earmarks d£ being based %;on p r e s s Statements i s s u e d by counsel f o r t h e complainants. I am glad to note t h a t they a r e d i g n i f i e d , f a i r statements and do not i n d i c a t e any i n c l i n a t i o n to t r y t h i s case in t h e newspapers. When I have completed my study of t h e complaint, I s h a l l Write you f u r t h e r about the Budas case; and 1 hope t h a t you w i l l not h e s i t a t e to c a l l upon me f o r any a s s i s t a n c e which f or my a s s o c i a t e s in t h i s o f f i c e can r e n d e r . am With k i n d e s t p e r s o n a l r e g a r d s , and a l l b e s t wishes, I C o r d i a l l y yours, Walter Wyatt, General Counsel WW-sad (Note; Mr. Jackson i s one of Mr. B a k e r ' s p a r t n e r s in Cleveland.) FEDERAL RESERVE BAHK OF RICHMOND January 29, 1931 Federal Reserve Board, Washington, D. G* A t t e n t i o n : J f r r "falter Wyatt, General Counsel* Sear Mr, f y a t t i I enclose & copy of my l e t t e r to Mr. Newton Baker and a copy of the complaint i n the a c t i o n of Lucas' Administrators v. Federal Reserve Bank of Richmond, I could not send you a copy of the order s t r i k i n g out the answer i n the Attmore case as our Stenographic Department i s somewhat rushed and the order i s r a t h e r l o n g . The c o u r t , however, s t r u c k out a l l a l l e g a t i o n s except those which amounted merely to a d e n i a l of our a l l e g a t i o n s and those which s e t up the existence of a deposit balance due by the f a i l e d bank t o the defendant. I f the t r i a l judge i s c o n s i s t e n t i n h i s subsequent r u l i n g s , h i s a c t i o n i n s t r i k - , i n g out the answer would mean t h a t he intended to admit no evidence except evidence of the making of the note and whether or not i t was t r a n s f e r r e d to us for value and b e f o r e m a t u r i t y , and, of course, whether or not the defendant had a d e p o s i t b a l a n c e . I heard with much r e g r e t t h a t you had been confined t o your house with g r i p p e . I hope t h a t you a r e now improving. Very t r u l y y o u r s , (Signed) M. G. Wallace M. G. Wallace, Counsel* MOW R • 258 COPY X-6817-b ISDSBAL B3SSHV3 BAH OF RICHMOND January 29, 1931 Honorable ITewton D. Baker, c/o Baker, H o s t e t l e r and. S i d l o , Union Trust Building, Cleveland, 0. My dear Mr. Baker$ I am very pleased, t o advise you t h a t judge Small s t r u c k out p r a c t i c a l l y the e n t i r e a f f i r m a t i v e defense i n the case of Federal Reserve Bank of Richmond vi G. S. Attmore, t r a d i n g as Neuse Motor Company* I enclose a copy of the c o u r t ' s o r d e r . You w i l l n o t i c e t h a t the court has s t r i c k e n out p r a c t i c a l l y a l l of the answer except so much of i t as amounts only t o a d e n i a l of our t i t l e to the note and an a l l e g a t i o n of the d e p o s i t "balance which the defendant had i n the f a i l e d hank. The court a l s o denied the motion to make the Receiver a p a r t y . Apparently by inadvertence the court f a i l e d t o s t r i k e out a sentence in Paragraph 14 which contained a prayer t h a t the note "be c a n c e l l e d and d e l i v e r e d io the Receiver. I t was obviously i n c o n s i s t e n t t o leave t h i s p a r t i c u l a r sentence i n the answer a f t e r denying t h e motion to make the Receiver a party* Attorneys f o r t h e defendant noted an exception to the a c t i o n of the court and s t a t e d t h a t they would take ah appeal * a s s o c i a t e informs me t h a t the appeal i f taken promptly would "be On the do dee t for the February term of the Supreme Court of North Carolina, but he s t a t e s t h a t he dbes not t h i n k t h a t the a t t o r n e y s f o r the defendant w i l l take ail appeal* 1 am somewhat a t a. l o s s to i n t e r p r e t the a c t i o n of the court i n the l i g h t of i t s former order allowing leave to the defendants to f i l e an amended answef and p e r m i t t i n g the Receiver, to be made & p a r t y tb such an answer. However, the a c t i o n of $he court as f a r as i t goes i n d i c a t e s a d i s p o s i t i o n to s u s t a i n our contentions fully. I r e g r e t to say t h a t judge Small, Who e n t e t e d thiri o M e r j goes t o another j u d i c i a l d i s t r i c t and i s succeeded i n order of r o t a t i o n by a Judge i)evin# I havd heard t h a t Judge Devin i s a competent judge, but I have never had any cases b e f o r e him. Immediately a f t e r r e c e i v i n g n o t i c e of Judge Small's d e c i s i o n we were served with process and a b i l l of complaint, a copy of which i s enclosed, i n the case of W. J . Lucas' Administrators v . Federal Reserve Bank of Richmond. This i s the s u i t which we were informed t h a t the a t t o r n e y s who r e p r e s e n t e d Mr. Attmore and many o t h e r defendants were contemplating bringing." You w i l l n o t i c e t h a t the b i l l i s i n the n a t u r e of a c r e d i t o r s ' b i l l brought by the p l a i n t i f f as X-6817-b FSDEHAL RESERVE gANK OF RICHMOND Honorable Newton £. Baker, c/o Baker, H o s t e t l e r and S i d l o , Union Trust Building, Cleveland, 0. -2- January 29, 1931 r e p r e s e n t a t i v e of himself and other c r e d i t o r s , and the a l l e g a t i o n s a r e sweeping i n t h e i r n a t u r e . The Receiver of the F i r s t National Bank of New Bern and the liqui#- • dating Agent of the suspended National Bank of New Bern a r e not made p a r t i e s defendant t o t h i s s u i t , and i n my opinion, the omission of these p a r t i e s i s a f a t a l d e f e c t , as the p l a i n t i f f seeks t o e n f o r c e an e q u i t a b l e r i g h t i n a case i n which the l e g a l r i g h t of a c t i o n , i f any, i s in the Receivers of the f a i l e d banks. I have not had an opportunity to study the b i l l of complaint with care as I was anxious to have i t copied i n order to p l a c e copies i n your hands and i n - those of Mr. Wyatt. The f i r s t question to be determined i s whether or not we s h a l l remove t h i s case t o a f e d e r a l c o u r t . I t seems t o me t h a t the case i s c l e a r l y r e movable because the e n t i r e cause of a c t i o n depends upon the r i g h t of a Federal r e serve bank to accept as marginal or s u r p l u s c o l l a t e r a l paper which i s not e l i g i b l e f o r rediscount and upon the a l l e g a t i o n t h a t the Federal Reserve Bank of Richmond v i o l a t e d the s e c t i o n s of t h e National Bank Act r e l a t i n g to p r e f e r e n t i a l t r a n s f e r s . I r e a l i z e t h a t the a c t i o n taken by the s t a t e c o u r t i n the Attmore case tends toward the conclusion t h a t i t would be i l l - a d v i s e d to remove the Lucas case from the s t a t e c o u r t , e s p e c i a l l y i n view of what we have been t o l d concerning the l o c a l conditions i n the f e d e r a l d i s t r i c t c o u r t . I , p e r s o n a l l y , however, do not consider those conditions as s e r i o u s as they appear to be to our f r i e n d s i n the Comptroller's O f f i c e . One of the o b j e c t i o n s which the Comptroller's O f f i c e has to the d i s t r i c t judge depends upon h i s tendency to s u s t a i n the r i g h t of pledgees to c o l l a t e r a l which the Comptroller thinks was t r a n s f e r r e d i n a p r e f e r e n t i a l conveyance. This, of course, would not operate a g a i n s t u s . Regarding the case without r e s p e c t to the l o c a l s i t u a t i o n , I am disposed to favor a removal t o the f e d e r a l court f o r two reasons: F i r s t , the questions iinvolved a r e e s s e n t i a l l y f e d e r a l questions of f a r - r e a c h i n g importance, and a decision by an i n f e r i o r f e d e r a l court would be of more value than a d e c i s i o n by a s t a t e c o u r t . In the event of a d e c i s i o n unfavorable to u s , we could probably obtain a , review by the Supreme Court of the United S t a t e s i n any event. My second reason i s t h a t i t appears to me c l e a r t h a t the a c t i o n would of n e c e s s i t y be regarded by a f e d e r a l c o u r t as a proceeding i n chancery, and as such, would be heard e i t h e r by the t r i a l judge on evidence taken ore tonus, or e l s e be r e f e r r e d t o a s p e c i a l master. E i t h e r one of t h e s e proceedings would be p r e f e r a b l e I think to a t r i a l before a j u r y . In the s t a t e courts a l l i s s u e s of f a c t a r e t r i e d b e f o r e a j u r y , except t h a t i n c e r t a i n cases involving lengthy accounts a r e f e r e n c e to a master may be made. I have found, however, t h a t the s t a t e c o u r t s i n North Carolina do not o f t e n use a r e f e r e n c e , and I t h i n k , t h e r e f o r e , t h a t i f we went t o t r i a l i n a s t a t e court we should probably be compelled to t r y t h i s case b e f o r e a j u r y with the a t t e n d a n t inconvenience of taking witnesses and many documents to New Born and being prepared to rebut many a l l e g a t i o n s which the p l a i n t i f f s would f a i l to prove. X-6817-b FSEERAL BES3HV1 BAM OF RICHMOND Honorable Hewton D. Baker, c / o Baker, H o s t e t l e r and Sidlo, Union Trust Building, Cleveland, Ohio. -3- January 29, 1931 The above o b s e r v a t i o n upon t h e d e s i r a b i l i t y of a removal to the f e d e r a l court i s , of course, submitted to you f o r such c o n s i d e r a t i o n a s you t h i n k t h a t i t should have. I have d i s c u s s e d the matter with the o f f i c e r s of the bank, and they are e n t i r e l y w i l l i n g to be guided by you i n determining whether or not i t i s well to remove t h i s c a s e . I am sending a copy of t h i s l e t t e r to Mr. Wyatt. If you consider t h a t a conference i s d e s i r a b l e , I can arrange to meet you at any p l a c e most convenient. I remain, Very t r u l y yours, M. G-. Wallace, Counsel. MOW E - Copy to Mr. " a l t e r Wyatt, Federal Reserve Board, Washington, D. C. (C X-6817-o COPY IN SUPERIOR COURT NORTH (SAHOLIM GRAVEN COUNTY W. J . Lucas, J r . and J . W. Lucas, Administrators of the E s t a t e of W. J . Lucas, Deceased, and Kate S. -Lucas, on behalf of themselves and a l l other stockholders of the National Bank of New Berne who care to make themselves p a r t i e s h e r e t o , and on "behalf of themselves and a l l other c r e d i t o r s of the National Bank of New Berne or the F i r s t National Bank of New Bern who care t o make them~ selves p a r t i e s h e r e t o . COMPLAINT VS The Federal Reserve Bank of Richmond, Va. a Corporation e x i s t i n g under the a c t of Congress known as the Federal Reserve Act. The p l a i n t i f f s , complaining of the d e f e n d a n t , a l l e g e ; 1. That the p l a i n t i f f s , W. J . Lucas, J r . and J . W. Lucas, a r e the a d m i n i s t r a t o r s of the e s t a t e of W. J . Lucas, deceased "by v i r t u e of t h e i r appointment as such under a u t h o r i t y of the Superior Court of Craven County, North Carolina, and the p l a i n t i f f , Kate S. Lucas, i s a r e s i d e n t of New Bern, Craven County, North Carolina* That the National Bank of New Berne was a t a l l times h e r e i n 2. mentioned, a tanking c o r p o r a t i o n organized and e x i s t i n g under a u t h o r i t y of an a c t of Congress providing f o r the establishment of National Banks and l i k e w i s e the F i r s t n a t i o n a l Bank of New Bern was, from and a f t e r March 19, 1929, a banking corporation organized and e x i s t i n g under an a c t of Congress providing f o r the establishment of National Banks. 3. That t h e Federal Reserve Bank of Richmond, Va. i s a corporation organized and e x i s t i n g under the p r o v i s i o n s of an a c t of Congress known as the Federal Reserve Act and has such powers gnd only such powers as a r e provided by the terms of s a i d # c t . 4. That f h e Peoples Bank was a banking c o r p o r a t i o n organized under the laws of North Carolina providing f o r the establishment of bonks and was under the p r o v i s i o n of the Federal Reserve Act a member bank of the Federal Reserve Bgnk of Richmond, Va. u n t i l i t s merger or c o n s o l i d a t i o n with the National Bank of New Berne as h e r e i n a f t e r more f u l l y s o t o u t . X-6817rC ' 262 5. That W. J . Lucas i n h i s l i f e time and a t a l l times h e r e i n a l l e g e d , was a stockholder i n the National Bank of Hew Berne, having s t a n d i n g i n h i s name f i f t e e n s h a r e s of s t o c k which he acquired by purchase on or about the 27th day of March, 1917 and January 8 t h , 1924 and J u l y 24th, 1923, and t h a t s a i d stock, upon the death of W. J . Lucas, came i n t o the p o s s e s s i o n of h i s administra* t o r s , p l a i n t i f f s h e r e i n , as a p o r t i o n of M s e s t a t e . 6. That on February 26, 1929 and p r i o r t h e r e t o , the s a i d 17. J . Lucas was a d e p o s i t o r i n the F i r s t National Bank of New Bern and p r i o r t o March 19, 1929 f o r more than t e n y e a r s , was l i k e w i s e a d e p o s i t o r i n the National Bank of New Berne and j o i n t l y w i t h the p l a i n t i f f Kate S. Lucas, was a d e p o s i t o r i n the F i r s t National Bank of New Bern and t h a t t h e s a i d Kate S. Lucas was a d e p o s i t o r i n the F i r s t National Bank of New Bern. 7. That a s p l a i n t i f f s a r e informed and b e l i e v e arid thereupon a l l e g e , The Peoples Bank, p r i o r to the day of 1923, being then a member bank of the Federal Reserve Bank of Richmond, Va. was, on or about s a i d d a t e , examined by examiners of s a i d Federal Reserve Bank of Richmond, Va> which s a i d examiners were under the d i r e c t supervision of the Federal Reserve Bank of Richmqpd, and/or the Chairman of i t s Board of D i r e c t o r s , who by v i r t u e of s a i d p o s i t i o n was a l s o a member of the Federal Reserve Board and t h a t a t s a i d time and a l l times subsequent t h e r e t o , the Comptroller of the Currency was, by v i r t u e of h i s o f f i c e as c o m p t r o l l e r , a member of the Federal Reserve Board. 8. That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t s h o r t l y a f t e r the s a i d examination r e f e r r e d to i n the p r o c e d i n g paragraph, the National Bank of New Berne was approached with a view of having s a i d National Bank of New Berne absorb or take over the s a i d Peoples Bank and t h a t during the n e g o t i a t i o n s following such proposal, c e r t a i n o f f i c e r s of t h e Federal Reserve Bank promised, agreed and r e p r e s e n t e d to the National Bank of New Berne t h a t i f the National Bank of New Berne would take over s a i d Peoples Bank t h a t the Federal Reserve Bank of Richmond would extend such a d d i t i o n a l accommodations i n the way of discounts a s would be n e c e s s a r y t o meet the a d d i t i o n a l burden thus assumed by the National Bank of New Beme and t h a t s a i d r e p r e s e n t a t i o n s , agreements and promises on the p a r t of the Federal Reserve Bank were a m a t e r i a l p a r t of the consideration upon which the s a i d National Bank of New Berne then took over, absorbed and d i s charged tne o b l i g a t i o n s of the Peoples Bank of New Bern, a l a r g o p o r t i o n of s a i d o b l i g a t i o n s being due the Federal Reserve Bank of Richmond and which, as these p l a i n t i f f s a r e informed and b e l i e v e , s a i d Peoples Bank was then unable to pay the said Federal Reserve Bank of Richmond. 9. That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t the r e p r e s e n t a t i v e s of the Federal Reserve Bank of Richmond remained i n New Bern f o r s e v e r a l days and during s a i d time entered a c t i v e l y i n t o the n e g o t i a t i o n s between the then Peoples Bank and the National Bank of New Berne and p r e s s e d and urged the s a i d National Bank of New Berne to accept the proposal to take over the Peoples Bank and l a r g e l y due to the u r g i n g , r e p r e s e n t a t i o n s and demands of s a i d r e p r e s e n t a t i v e s of t h e Federal Reserve Bank of Richmond, s a i d National Bank of New Berne did take over s a i d Peoples Bank, i t , the s a i d National Bank of New Berne, X-6817-6 being a t the time, indebted to the FediJfial Reserve Batik of Richmond and by reason t h e r e o f , more e a s i l y induced, coerced and p r a c t i c a l l y r e q u i r e d t o take over and assume the debts and l i a b i l i t i e s of t h e Peoples Bank and to take over as a s s e t s , many f r o z e n loans which were then i n the Peoples Bank and which were known to the r e p r e s e n t a t i v e s of the Federal Reserve Baiik of Richmond to be u n c o l l e c t a b l e within any reasonable time or by any reasonable d i l i g e n c e and to bo p a r t i a l l y , ' i f not wholely, worthless as batiking p a p e r . 10. That s h o r t l y a f t e r the Peoples Bank was merged with the Hation- a l Bank of Hew Berne, s a i d Federal Reserve Bank of Richmond, c o n t r a r y t o i t s promise and agreement, demanded and p r e s s e d f o r the l i q u i d a t i o n of the paper of the n a t i o n a l Bank of Hew Berne which i t then h e l d , e i t h e r d i r e c t from s a i d bank or by reason of discount of customers' n o t e s ; r e s t r i c t e d i t s c r e d i t to t h e n a t i o n a l Bank of Hew Berne and i n a d d i t i o n t h e r e t o , u n l a w f u l l y , wrongfully and i n v i o l a t i o n of i t s powers and d u t i e s , demanded t h a t s a i d Hational Bank of Hew Berne should dep o s i t with i t a d d i t i o n a l n o t e s and b i l l s of i t s customers i n an amount equal to ' f i f t y per cent of the r e - d i s c o u n t s or advancements to be held by i t as s e c u r i t y f o r any sums due by reason of r e - d i s c o u n t s of the Hational Bank of Hew Berne and t h a t s a i d requirement was unreasonable, unlawful and deprived the s a i d Hational Bank of Hew Berne of the use of s a i d b i l l s and n o t e s , 11, That on or about the year 1925, so p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e , the Federal Reserve Bank of Richmond, found and determined among i t s o f f i c e r s , t h a t the Hational Bank of Hew Berne was i n s o l v e n t and i t s a s s e t s f r o z e n and u n c o l l e c t a b l e , s a i d f i n d i n g being based l a r g e l y , i f not wholely, upon the presence i n the Hational Bank of Hew Berne of the notes and debts i t had taken over when i t acquired the Peoples Bank and t h a t thereupon, without any order of i t s Board of D i r e c t o r s or without any order of the Board of D i r e c t o r s of the Hational Bank of Hew Berne and without any a u t h o r i t y v e s t e d i n i t , u n l a w f u l l y and wrongfully r e q u i r e d t h a t the Hational Bank of Hew Berne d e p o s i t with i t , a d d i t i o n a l marginal c o l l a t e r a l as h e r e i n b e f o r e described i n the sum of f i f t y per cent of the amount of r e - d i s c o u n t s and advancements, making the t o t a l deposit of s a i d marginal c o l l a t e r a l equal t o one hundred per cent of the s a i d r e discounts and advancements, 12, That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t i n 1925 the r e - d i s c o u n t s of the Hational Bank of Hew Berne with the Federal Reserve Bank of Richmond were as g r e a t or g r e a t e r than they were a t any subsequent p e r i o d of the l i f e of the s a i d Hational Bank of Hew Berne or i t s successor, the F i r s t Hational Bank of Hew Bern and t h a t while s a i d r e - d i s c o u n t s changed from time to time by the s u b s t i t u t i o n of d i f f e r e n t customers' notes to the nationa l Bank of Hew Berne, y e t the t o t a l amount advanced thereon remained p r a c t i c a l l y the same, 13. That on or about March 19, 1929, the F i r s t Hational Bank of Hew Bern was organized and took over and assumed the o b l i g a t i o n s of the Hational Bank of ITew Berne arid a c q u i r e d the p r o p e r t y and p r o p e r t y r i g h t s , of which f a c t s defendant vras f u l l y advised and informed, and t h a t i t thereupon e n t e r e d on i t s X-6817-c I 264 ledger s h e e t s a n o t a t i o n t h a t the aetadunt of the National Bank of New Berne had been t r a n s f e r r e d to the F i r s t National Bank of New Bern and t h a t otherwise s a i d account remained the same as i t had "been with the n a t i o n a l Bank of New Berne and t h a t a t s a i d time, t o - w i t , March 19th or 20th, 1929, the s a i d Federal Reserve Bank of Hichmond h e l d n o t e s , "bills of exchange, d r a f t s , bonds, evidences of indebtedn e s s , warehouse r e c e i p t s and other items of s e c u r i t y i n an amount of a t l e a s t $208,103. as p l a i n t i f f s a r e informed and "believe, to which i t had no r i g h t i n law or e q u i t y or i n f a c t and which i t h e l d c o n t r a r y and i n v i o l a t i o n of the r i g h t s of the d e p o s i t o r s , stockholders and c r e d i t o r s of t h e National Bank of New• Berne and the F i r s t National Bank of New Bern and p a r t i c u l a r l y i n v i o l a t i o n of the r i g h t s of these p l a i n t i f f s * and t h a t a t a l l times h e r e i n mentioned the s a i d Federal Reserve Bank demanded, received and held wrongfully and u n l a w f u l l y and without a u t h o r i t y i n law Or i n f a c t , n o t e s , "bills of exchange, d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s and other evidences of s e c u r i t y belonging e i t h e r to the F i r s t National Bank of New Bern or the National Bank of New Berne i n v i o l a t i o n of the r i g h t s of s a i d c r e d i t o r s and these p l a i n t i f f s as a f o r e s a i d . That as a l l e g e d i n Paragraph 11 h e r e t o f o r e , said o f f i c e r s of the Federal Reserve Bank, having found and determined among themselves t h a t the National Bank of New Berne was i n s o l v e n t and i t s a s s e t s f r o z e n and u n c o l l e c t a b l e , and having f u r t h e r found among i t s o f f i c e r s i n A p r i l , 1929, t h a t the same condit i o n was t r u e of the F i r s t National Bank of New Bern, based on the f a c t t h a t the F i r s t National Bank of New Bern had taken over the a s s e t s of the National Bank of New Bern, u n l a w f u l l y , wrongfully and i n v i o l a t i o n of the laws of the United S t a t e s , p a r t i c u l a r l y Section 5242 of the Revised S t a t u t e s of the United S t a t e s , and i n f r a u d of the c r e d i t o r s , d e p o s i t o r s and stockholders of the National Bank of New Berne and the F i r s t National Bank of New Bern and p a r t i c u l a r l y i n f r a u d and i n v i o l a t i o n of the r i g h t s of the p l a i n t i f f s , demanded and r e c e i v e d s a i d n o t e s , b i l l s , d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s and o t h e r evidences of s e c u r i t y , i n the amount h e r e i n b e f o r e s e t out and a t a l l times one hundred per cent g r e a t e r than the r e - d i s c o u n t s accepted from the National Bank of Ifew Berne or the F i r s t National Bank of New Bern. That on or about October 23, 1929, a r e p r e s e n t a t i v e of the F i r s t National Bank of New Bern, a t the i n s t a n c e and d i r e c t i o n of s a i d bank, went to Richmond and demanded of the o f f i c e r s of the Federal Reserve Bank, a r e t u r n and surrender of the n o t e s , b i l l s of exchange, d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s and other evidences of s e c u r i t y amounting to $208,103. which the s a i d Federal Reserve Bank then held u n l a w f u l l y , wrongfully and i n v i o l a t i o n of the r i g h t s of s a i d F i r s t National Bank of New Bern and i t s p r e d e c e s s o r and the c r e d i t o r s , stockholders and d e p o s i t o r s of s a i d banks and p a r t i c u l a r l y these p l a i n t i f f s ; t h a t thereupon the defendant, Federal Reserve Bank of Richmond, through i t s o f f i c e r s , r e f u s e d to t u r n over and surrender s a i d items so wrongfully held by i t , although i t was then advised and informed by said r e p r e s e n t a t i v e of the F i r s t National Bank of New Bern that a surrender of s a i d items would enable s a i d F i r s t National Bank of New Bern to continue t o operate and enable i t to provide funds to meet the demands then being made upon i t atid t h a t the f a i l u r e of the defendant, Federal Reserve Bank of Richmond, to surrender and turn over s a i d items so wrongfully h e l d by i t , would r e s u l t i n the i n a b i l i t y t o s t a y open and meet i t s current o b l i g a t i o n s and these p l a i n t i f f s are f u r t h e r informed and b e l i e v e t h a t s a i d f a i l u r e of the defendant Federal Reserve Bank of Richmond to surrender and turn over s a i d c o l l a t e r a l did cause the F i r s t National Bank of New Bern to be unable to meet i t s X-6817-0 -*5>- : 265 current demands and Obligations and was the d i r e c t cause of s a i d "bank having to cloSe i t s dtiors and suspend "business on the 26th day of October 1989, j u s t a t the peek of the c o l l e c t i n g season of the community i n which the s a i d F i r s t n a t i o n a l Bank of New Bern vras s i t u a t e d and r e s u l t e d i n g r e a t and i r r e p a r a b l e damage to the s t o c k h o l d e r s , d e p o s i t o r s and c r e d i t o r s of the F i r s t n a t i o n a l Bank of Heir Bern and p a r t i c u l a r l y these p l a i n t i f f s . 14. That by reason of the matters and things h e r e i n b e f o r e s e t out, these p l a i n t i f f s and those s i m i l a r l y s i t u a t e d , have been damaged i n the g r e a t sum of One Million ($1,000,000.) D o l l a r s , and t h a t the s a i d Federal Reserve Bank of Richmond i s now attempting to c o l l e c t t h e commercial paper u n l a w f u l l y h e l d by i t and i s d i v e r t i n g the same to i t s own use and i s b r i n g i n g s u i t s a g a i n s t v a r i o u s and sundry people i n i t s o m name and making demands f o r payment through the Receiver of t h e F i r s t National Bank of Hew Bern and t h a t i t has h e r e t o f o r e c o l l e c t e d a l a r g e sum which i t has a p p l i e d to i t s ovn purpose, u n l a w f u l l y , wrongf u l l y and i n v i o l a t i o n of the r i g h t s of these p l a i n t i f f s and those s i m i l a r l y situated. And f o r a n o t h e r and f u r t h e r cause of a c t i o n , p l a i n t i f f s a l l e g e : 1. That they r e - a l l e g e a l l e g a t i o n s 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of t h e f i r s t cause of a c t i o n . 2 . That p l a i n t i f f s a r e informed and b e l i e v e and t h e r e f o r e a l l e g e t h a t the Federal Reserve Bank of Richmond i s vested r;ith those powers and only :-r. those powers s e t f o r t h i n the Act of Congress e n t i t l e d "Federal Reserve Act" dated December 23, 1913, as amended, and t h a t s a i d powers a r e s p e c i f i c a l l y and d e f i n i t e l y l i m i t e d t o the purposes of s a i d Act and no other except such i n c i d e n t a l powers as s h a l l be necessary to c a r r y on the business of banking w i t h i n the l i m i t a t i o n s p r e s c r i b e d by the Federal Reserve Act. 3, That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t the Federal Reserve Bank of Richmond, defendant h e r e i n , c o n t r a r y and i n v i o l a t i o n of the powers g r a n t e d t o i t by Congress and i n v i o l a t i o n of the r i g h t s of the c r e d i t o r s , d e p o s i t o r s and stockholders of the n a t i o n a l Bank of Hew Berne and of the F i r s t n a t i o n a l Bank of Hew Bern, and p a r t i c u l a r l y these p l a i n t i f f s , r e q u i r e d and demanded the n a t i o n a l Bank of Hew Berne and i t s s u c c e s s o r , the F i r s t National Bank of Hew Bern, to deposit with i t , n o t e s , b i l l s of exchange, d r a f t s , bonds, evidences of i n d e b t e d n e s s , warehouse r e c e i p t s and other evidences of s e c u r i t y , i n an amount equal t o n o t e s , b i l l s of exchange, d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s and other items of s e c u r i t y which the s a i d Federal Reserve Bank accepted f o r discount and t h a t s a i d requirements was unreasona b l e , unlawful and deprived the N a t i o n a l Bank of Hew Berne and i t s s u c c e s s o r , the F i r s t National Bank of New Bern of the use and b e n e f i t of said n o t e s , b i l l s of exChange, e t c . and thereby hampered and prevented the s a i d National Bank of Hew Berne and the F i r s t National Bank of New Bern from having f u n d s , proceeds of s a i d items, to use i n carrying on i t s ordinary banking business and meeting i t s c u r r e n t o b l i g a t i o n s and l i a b i l i t i e s . X-6817-e 4» That t h e s e p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t the F e d e r a l Reserve System, of r.-hich the Federal Reserve Bank of Richmond, Va. i s a p a r t , was e s t a b l i s h e d by Congress w i t h the purpose and i n t e n t ! cn of p r o v i d i n g a means by which l i q u i d commercial paper might be converted i n t o a b a s i s f o r i s s u e s of c u r r e n c y and as a means of a i d i n g t h e c r e d i t and t r a d i n g powers of the N a t i o n and to p a r t i c u l a r l y a s s i s t member banks, and of which e v e r y National Bank was, by s t a t u t e , r e q u i r e d t o become a member, and t h a t Congress, by i t s s a i d Act, d e s i g n a t e d and r e s t r i c t e d the type and k i n d of commercial p a p e r t h a t might be so used as b a s i s f o r i s s u i n g of currency i n o r d e r t o p r o t e c t and s a f e guard, a t a l l times, the ™orth of currency so i s s u e d and t o s t a b l i z e and maintain the confidence of t h e p u b l i c i n such i s s u e s of currency and i n the banking systems which had or might become members of t h e Federal Reserve System and s a i d a c t , by i t s terms, l i m i t s p a p e r s t o be d i s c o u n t e d by the Federal Reserve Bank t o the type and k i n d s e t f o r t h i n s a i d Act which would meet t h e requirements above s p e c i f i e d and t h a t t h e p l a i n t i f f s a r e f u r t h e r informed and b e l i e v e and t h e r e upon a l l e g e t h a t t h e F e d e r a l Reserve Bank of Richmond i n i t s d e a l i n g s w i t h the National Bank of Hew Berne and the F i r s t N a t i o n a l Bank of New Bern, d i s r e g a r d e d the purpose of s a i d a c t and i t s terms and d i s r e g a r d e d t h e types and k i n d s of paper t h a t i t p r e t e n d e d to accept f o r r e - d i s c o u n t and a c c e p t e d f r o m the n a t i o n a l Batik of New Berne and the F i r s t N a t i o n a l Bank of New Bern, paper f o r d i s c o u n t t h a t d i d not meet the requirement of s a i d a c t and was known t o the o f f i c i a l s of the Federal Reserve Bank a s n o t meeting s a i d requirements and t h a t f u r t h e r i n v i o l a t i o n of s a i d a c t , s a i d F e d e r a l Reserve Bank of Richmond r e q u i r e d , demanded and compelled s a i d N a t i o n a l Bank of New Berne and F i r s t N a t i o n a l Bank of New Bern, t o send o t h e r commercial paper of a k i n d and type n o t meeting t h e r e q u i r e - . ments of s a i d a c t and s a i d Federal Reserve Bank a r b i t r a r i l y of i t s own motion w i t h out r i g h t i n law and i n f a c t , d e s i g n a t e d s a i d f u r t h e r sendings a s marginal c o l l a t e r a l and advanced no amount of money, no t h i n g of c r e d i t and no t h i n g of value to the s a i d National Bank of New Berne or F i r s t N a t i o n a l Bank of New Bern by reason of s a i d a d d i t i o n a l amounts of commercial paper h e r e i n a f t e r r e f e r r e d to as marginal c o l l a t e r a l and amounting to approximately the sum of $ 2 0 8 , 0 0 0 . , s a i d amount being approximately t h e amount w r o n g f u l l y w i t h h e l d by s a i d Federal Reserve Bank a t a l l times h e r e i n mentioned. 5. That t h e unreasonable and u n l a w f u l requirements of the Fede r a l Reserve Bank of Richmond i n demanding and holding s a i d a d d i t i o n a l commerc i a l paper d e p r i v e d the s a i d National Bank of New Bern and F i r s t ^ N a t i o n a l Bank of New Bern of i t s use and thereby i n e f f e c t , produced a c o n d i t i o n e q u i v a l e n t t o i n s o l v e n c y i n t h e a f f a i r s of s a i d two banks and p l a i n t i f f s a r e f u r t h e r informed and b e l i e f t h a t i f such u n l a w f u l r e q u i r e m e n t s had n o t been made, s a i d banks would have been a b l e to meet t h e i r c u r r e n t o b l i g a t i o n s and would not have been compelled t o l i q u i d a t e or c l o s e and the c l o s i n g of s a i d banks and the a c t s on the p a r t of t h e d e f e n d a n t , Federal Reserve Bank, has caused g r e a t and i r r e p a r a b l e damage to | h e s e p l a i n t i f f s and o t h e r s s i m i l a r l y s i t u a t e d and t h e i r l i q u i d a t i o n has r e s u l t e d i n a g r e a t and i r r e p a r a b l e damage to t h e s e p l a i n t i f f s and o t h e r s S i m i l a r l y s i t u a t e d . X-6817-c. -7- ' 267 6t That "by reason bf the matters and things h e r e i n b e f o r e s e t put, these p l a i n t i f f s and those s i m i l a r l y s i t u a t e d , have "been damaged i n the g r e a t sum of One Million ($1,000*000) D o l l a r s , and t h a t t h e s a i d Federal Reserve Bank of Richmond i s now attempting to c o l l e c t the commercial paper u n l a w f u l l y held by i t and i s d i v e r t i n g the same to i t s own use and i s bringing s u i t s a g a i n s t various and sundry people i n i t s own name and making demands f o r payment through the Receiver of the F i r s t n a t i o n a l Bank of Hew Bern and t h a t i t has h e r e t o f o r e c o l l e c t e d a l a r g e sum which i t has a p p l i e d to i t s own purpose, u n l a w f u l l y , wrongf u l l y and i n v i o l a t i o n of the r i g h t s of these p l a i n t i f f s and those s i m i l a r l y situated. And f o r a n o t h e r and f u r t h e r cause of a c t i o n these p l a i n t i f f s a l l e g e : 1. That they repeat the a l l e g a t i o n s 1 to 12 i n c l u s i v e of the f i r s t eayse of a c t i o n . 2 . That the Federal Reserve Bank of Richmond, Va. i s v e s t e d with a u t h o r i t y to examine and i n q u i r e i n t o the condition of member banks and t h a t i t , through the Chairman of i t s Board, has access to a l l examinations made of member banks and p a r t i c u l a r l y of N a t i o n a l Banks, of which the National Bank of He« Berne was one and the F i r s t National Bank of New Bern was one and such batiks were r e g u l a r l y examined i n the ordinary conduct of t h e s u p e r v i s o r y powers vested i n the comptroller and the Federal Reserve Bank. 3. That the Federal Reserve Bank of Richmond knew t h e condition of the National Bank of New Berne and the F i r s t National Bank of New Bern, the nature and condition of i t s a s s e t s , and by reason of i t s knowledge of o t h e r member banks, had a more i n t i m a t e knowledge of the sane than even the o f f i c e r s of the s a i d F i r s t National Bank of New Bern or the National Bank of New Berne had, and t h a t with such knowledge i n i t s b r e a s t , the s a i d Federal Reserve Bank of Richmond determined among i t s o f f i c e r s on or about the year 1925 t h a t the National Bank of New Berne was i n s o l v e n t and i t s a s s e t s f r o z e n and uricollectable and thereupon i t undertook and d i d cause t r a n s f e r s of n o t e s , bonds, b i l l s of exchange and other evidences of debt from the s a i d National Bank of New Berne to be u n l a w f u l l y t r a n s f e r r e d to i t and t h a t s a i d t r a n s f e r s were made i n contemplat i o n of the insolvency of the National Bank of New Berne and i t s s u c c e s s o r , the F i r s t National Bank of New Bern with a view t o prevent the a p p l i c a t i o n of a s s e t s of said National Bank of New Bern and F i r s t National Bank of New Bern i n the manner p r e s c r i b e d by law and with the view to p r e f e r the Federal Reserve Bank as a c r e d i t o r t o other c r e d i t o r s . 4. That t h e s e p l a i n t i f f s a r e informed and b e l i e v e t h a t a t . . a l l the times mentioned i n the f i r s t , second and t h i r d cause of a c t i o n h e r e i n s e t out, the amount of r e - d i s c o u n t s from the National Bank of New Berne and the F i r s t National Bank of New Bern remained p r a c t i c a l l y the same and t h a t the exchange of notes from time t o time was made without an a p p r e c i a b l e i n c r e a s e i n the amount of money r e c e i v e d from the Federal Reserve Bank of Richmond and notwithstanding the determination updn the p a r t of the o f f i c i a l s of the Federal Reserve Bank. as to the insolvency of the National Bank of New Berne and the F i r s t National X-6817-c -*8~ ? 268 Bank of Hew Bern, s a i d Federal 3cserve Bank u n l a w f u l l y , wrongfully and i n v i o l a t i o n of the expressed terms of law, r e q u i r e d and demanded a d d i t i o n a l n o t e s , M i l s and other evidences of indebtedness i n an amount equal t o t h e amount pretended to "oe accepted for discount amounting, as p l a i n t i f f s are informed and b e l i e v e , to the sum of a t l e a s t $208,000. and t h a t such a c t s on the p a r t of the Federal Beserve Bank, made with the s e c r e t knowledge which i t had, c o n s t i t u t e d a p r e f e r e n c e and a f r a u d on these p l a i n t i f f s and those s i m i l a r l y s i t u a t e d . 5. That the p l a i n t i f f s , p r i o r to the i n s t i t u t i o n of t h i s a c t i o n , t o - w i t , on the 8th day of October, 1930, i s s u e d a n o t i c e and demand on R. S. Schumacher, who had t h e r e t o f o r e been appointed Receiver of the F i r s t Nationa l Bank of New Bern by the Comptroller of the Currency, r e q u i r i n g and demanding t h a t s a i d r e c e i v e r i n s t i t u t e t h i s a c t i o n and t h a t i n r e p l y t h e r e t o , under date of October 16, 1930, these p l a i n t i f f s , through t h e i r a t t o r n e y s , r e c e i v e d a l e t t e r from the s a i d E. E. Schumacher, r e f u s i n g to bring s a i d a c t i o n , copies of s a i d demand and l e t t e r of r e f u s a l being h e r e t o a t t a c h e d and marked E x h i b i t s A and B respectively. 6. That t h e s e p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t t h e Receiver of the F i r s t National Bank of New Bern w i l l not have f o r d i s t r i b u t i o n among i t s general c r e d i t o r s an amount i n excess of t e n p e r cent of the amount due s a i d c r e d i t o r s . 7. That t h e s e p l a i n t i f f s a r e informed and b e l i e v e t h a t t h e i r r i g h t s can only be p r o t e c t e d by having a r e c e i v e r appointed to take charge of s a i d c o l l a t e r a l h e r e i n b e f o r g described and t h a t s a i d r e c e i v e r be a u t h o r i z e d , d i r e c t e d and empowered to c o l l e c t and administer s a i d c o l l a t e r a l pending the f i n a l determination of t h i s cause. 8. That by reason of the matters and things h e r e i n b e f o r e s e t out, these p l a i n t i f f s and those s i m i l a r l y s i t u a t e d , have been damaged i n the g r e a t sum of One Million ($1,000,000.) D o l l a r s and t h a t the s a i d Federal Reserve Bank of Richmond i s now a t t e m p t i n g to c o l l e c t the commercial paper u n l a w f u l l y held by i t and i s d i v e r t i n g the same to i t s own use and i s bringing s u i t s a g a i n s t v a r i o u s and sundry people i n i t s own name and making demands f o r payment through the Receiver of the F i r s t National Bank of New Bern and t h a t i t has h e r e t o f o r e c o l l e c t e d a l a r g e sum which i t has a p p l i e d to i t s own purpose, u n l a w f u l l y , wrongfully and i n v i o l a t i o n of the r i g h t s of these p l a i n t i f f s and those s i m i l a r l y s i t u a t e d . And for another and f u r t h e r cause of a c t i o n , p l a i n t i f f s a l l e g e : 1. That they r e - a l l e g e Allegations 1, 2 , 3, 4, 5, 6, 7, 8, 9, 10, 11 and 12 of the f i r s t cause of a c t i o n . 2. That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t the Federal Reserve Bank of Richmond required i t s member banks and p a r t i c u l a r l y the National Bank of New Berne and the F i r s t National Bank of New Bern to deposit with i t funds as a r e s e r v e balance equal t o not l e s s than seven per'cB&t X-6817-c ^ 269 of i t s aggregate demand d e p o s i t s and -three per cent of i t s time d e p o s i t s . 3. That p l a i n t i f f s a r e informed and "believe and thereupon a l l e g e t h a t a t times the s a i d n a t i o n a l Bank of New Berne and the F i r s t N a t i o n a l Bank of Hew Bern were unable t o meet s a i d requirements due i n p a r t to the f a c t t h a t the Federal Reserve Bank of Hi tihmond was holding u n l a w f u l l y , many of i t s a s s e t s as s e t out i n the f i r s t , second and t h i r d cause of a c t i o n of t h i s complaint and there-* upon the Federal Reserve Bank of Richmond, defendant h e r e i n , u n l a w f u l l y , wrongfully and i n v i o l a t i o n of law -and i n v i o l a t i o n of these p l a i n t i f f s and others s i m i l a r l y s i t u a t e d , charged and demanded and r e c e i v e d by d e b i t i n g the account of the Nationa l Bank of New Berne a n d / o r F i r s t National Bank of New Bern with i t , p e n a l t i e s a t the r a t e of a s high as t e n p e r cent or g r e a t e r of the d e f i c i e n c y between s a i d seven or three p e r cent and the amount of balance i n said bank. 4. That p l a i n t i f f s a r e informed and b e l i e v e and thereupon a l l e g e t h a t t h e r e i s not a v a i l a b l e to them f u l l information to determine t h e amount of s a i d charges so wrongfully made but they a r e advised t h a t the same reach a g r e a t sum and they a r e f u r t h e r advised, and informed t h a t they a r e e n t i t l e d t o have an accounting of the defendant f o r a l l sums so wrongfully and u n l a w f u l l y charged and e n t i t l e d to have any amount due from the National Bank of New Berne or the F i r s t National Bank of New Bern to the Federal Reserve Bank of Richmond, c r e d i t e d w i t h the sums so wrongfully charged, c o l l e c t e d and r e c e i v e d . 5. That by reason of t h e matters and t h i n g s s e t out i n t h i s cause of a c t i o n , p l a i n t i f f s have been damaged i n a g r e a t sum, the exact amount of which can only be determined by an accounting h e r e i n b e f o r e a l l e g e d to be due to the plaintiffs. Wherefore these p l a i n t i f f s pray 1. That t h e Federal Reserve Bank be r e q u i r e d t o render an account of a l l commercial p a p e r , n o t e s , b i l l s of exchange, evidences of indebtedness, warehouse r e c e i p t s and o t h e r evidences of s e c u r i t y held by i t on the 19th day of March, 1929, as the p r o p e r t y of the National Bank of New Bern, f o r discount and otherwise, and on the 23rd day of October, 1929 as the p r o p e r t y of t h e F i r s t National Bank of New Bern, for discount and otherwise, and an accounting of a l l funds received by i t from such commercial paper since s a i d d a t e s ; 2 . That a r e c e i v e r be appointed to c o l l e c t and a d m i n i s t e r s a i d c o l l a t e r a l pending the f i n a l determination of t h i s cause and t h a t the Federal Reserve Bank of Richmond be r e q u i r e d to t u r n over to s a i d r e c e i v e r , a l l the items now held by i t , t o g e t h e r with a l l sums of money h e r e t o f o r e c o l l e c t e d from any of s a i d n o t e s , b i l l s , e t c . 3 . That the p l a i n t i f f s have and recover of the defendant the sum of One Million Dollars t o be discharged <- X-6817-c „_io^ : 2 7 0 ' Then these p l a i n t i f f s have received from the defendants the sum of $15,086.71 being the amount of the deposits and p a r value of the stock a l l e g e d i n Paragraph 5 of t h e f i r s t cause of a c t i o n and t h a t as t o o t h e r s s i m i l a r l y s i t u a t e d to these p l a i n t i f f s , should they come i n and make themselves p a r t i e s , t h a t t h i s p r a y e r be extended t o cover the amount shown to be due them; 4 . For an accounting of a l l p e n a l t i e s and excess i n t e r e s t charged by the defendant and p r o p e r c r e d i t as a l l e g e d i n the f o u r t h cause of a c t i o n above, given t o the F i r s t National Bank of New Bern and the National Bank of New Berne; 5. And for such o t h e r and f a r t h e r r e l i e f as p l a i n t i f f s may show themselves e n t i t l e d to r e c e i v e . (signed) (signed) W. B. B. Qui on Whitehurst & Barden Attorneys f o r p l a i n t i f f s . X-6817- W. J . Lucas, J r . , A d m i n i s t r a t o r , one of the p l a i n t i f f s above named, "being duly sworn, deposes and s a y s ; That he has r e a d the foregoing Complaint and t h a t the same i s t r u e of h i s own knowledge except as to m a t t e r s t h e r e i n s t a t e d on information and b e l i e f and as t o those matters he b e l i e v e s i t to he t r u e . (signed) Sworn to and subscribed b e f o r e me t h i s 22nd day of January, 1931 (Seal) (s igned) M. P. Jones Hotary P u b l i c My commission e x p i r e s 11/23/31 W. J . Lucas. Adm« COPY NORTH CAROLINA CRAVE! COUNTY To R. E. Schumacher, Esquire, Receiver of the F i r s t National Bank of New Bern, Hew Zern, North Carolina. Dear S i r : I n behalf of the e s t a t e of W. J . Lucas, who was a stockholder i n t h e National Bank of New Berne, predecessor of the F i r s t N a t i o n a l Bank of New Bern, and who was likewise a d e p o s i t o r i n the F i r s t National Bank of New Bern, and i n b e h a l f of s a i d e s t a t e j o i n t l y with Mrs. Kate S. Lucas, w i f e of s a i d W. J . Lucas, de* ^ ceased; and of a l l other stockholders of the National Bank of New Berne and d e p o s i t o r s and c r e d i t o r s of the F i r s t National Bank of New Bern, and any other p e r s o n s , f i r m s or corporations s i m i l a r l y s i t u a t e d , r e q u e s t and demand i s hereby made upon you t h a t you f o r t h w i t h i n s t i t u t e proceedings i n a c o u r t of competent j u r i s d i c t i o n a g a i n s t the Federal Reserve Bank of Richmond f o r the r e t u r n t o you to "be handled f o r the b e n e f i t of those persons making t h e demand and a l l other persons s i m i l a r l y s i t u a t e d , of a l l n o t e s , b i l l s of exchange, d r a f t s , bonds, evidences of indebtedness, warehouse r e c e i p t s or other items of s e c u r i t y which have been or may have been d e p o s i t e d vrith the s a i d Federal Reserve Bank of Richmond a s s e c u r i t y f o r any indebtedness due from the National Bank of New Berne to the s a i d Federal Reserve Bank of Richmond and/or from t h e F i r s t National Bank of New Bern o t h e r than notes denominated e l i g i b l e n o t e s , d r a f t s , e t c . w i t h i n the meaning and tenns of the Federal Reserve Act which were d i s counted or purchased by the Federal Reserve Bank without c o l l a t e r a l s e c u r i t y , And i n a d d i t i o n t h e r e t o , t h a t i n s a i d proceeding you w i l l demand the r e t u r n of the items of the c h a r a c t e r received from t h e F i r s t National Bank of New Born and/or the National Bank of New Berne by the Federal Reserve Bank of Richmond not h e l d i n accordance with s a i d Federal Reserve Act and when s a i d items a r e shown to have been c o l l e c t e d or i f t h e r e t u r n of same cannot be had, t h a t you demand f o r t h e b e n e f i t of the c r e d i t o r s of s a i d F i r s t National Bank of New Bern and t h e National Bank of Now Borne, the cash proceeds r e c e i v e d by the Federal Reserve Bank of Richmond from s a i d items so c o l l e c t e d or which they f a i l t o r e t u r n . This demand i s made upon you i n order t h a t you s h a l l obtain f o r c o l l e c t i o n and d i s t r i b u t i o n among the c r e d i t o r s of the i n s t i t u t i o n f o r which you a r e Receiver s a i d items u n l a w f u l l y o b t a i n ed and h e l d by the Federal Reserve Bank of Richmond f o r the b e n e f i t of t h e c r e d i t o r s of t h e s a i d F i r s t National Bank of New Bern and/ or t h e c r e d i t o r s of t h e National Bank of New Berne. You a r e f u r t h e r n o t i f i e d t h a t should you f a i l to comply with t h i s demand and immediately i n s t i t u t e s a i d proceedings 273 X-6817-d -2•jithin a reasonable time of t h i s n o t i c e , t h a t t h e persons maki n g the demand m i l , i n t h e i r own r i g h t , i n s t i t u t e s a i d p r o c e e d ings. You r / i l l k i n d l y advise w i t h i n t e n days whether i t i s your purpose to i n s t i t u t e s a i d a c t i o n f o r the recovery of the a s s e t s improperly and u n l a w f u l l y held by the Federal Reserve Bank of Richmond, otherwise your f a i l u r e so t o advise w i l l be deemed a r e f u s a l by you t o comply with t h i s n o t i c e . This 9th day of October, 1930. W . J . Lucas, J r . and J . W. Lucas, Administrators of the E s t a t e of W. J . Lucas. Kate S. Lucas By Whitehurst & Barden B. B. Quion Attorneys Received 10/8/30 Served 10/9/30 by reading and d e l i v e r i n g a copy of the w i t h i n n o t i c e to R. 3 . Schumacher, E s q u i r e , Receiver of the F i r s t National Bank of Hew Bern. James S. Bryan Cons t a b l e . X-6817-d R. i i Schumacher* Receiver I 274 The F i r s t ITational Bank of Hew Bern Hew Bern, N. C. October 16th 1930 Whitehurst & Barden, Attorneys a t Law, New Bern, 17. C. Mr. W. B. R. Guion, Attorney a t Law, New Bern, 11. C. Mr. W. J . E s t a t e of Mrs. Kate New Bern, Lucas, J r . & Mr. J . V7. Lucas, Adm. T7. J . Lucas, Deceased, S. Lucas, IT. C. Subject: Demand made "by Administrators of W. J . Lucas, Deceased, to commence a c t i o n a g a i n s t the Federal Reserve Bank of Richmond. Gentlemen: Service having been madd upon the Receiver of the F i r s t National Bank of New Bern, I n s o l v e n t , i n behalf of the e s t a t e of W. J . Lucas and Mrs. Kate S. Lucas, r e q u e s t i n g t h a t t h e Receiver i n s t i t u t e proceedings in" a Court of Competent j u r i s d i c t i o n a g a i n s t the Federal Reserve Bank of Richmond, has been r e f e r r e d to the Comptroller of the Currency. You were informed t h a t as Receiver of the F i r s t N a t i o n a l Bank of New s e r n , I r e f u s e to f i l e the a c t i o n r e q u e s t e d i n your demand of October 9 t h , 1930, as i t i s not w i t h i n my j u r i s d i c t i o n to do s o . * The Receiver a l s o Relieves t h a t any such a c t i o n , I f f i l e d , should oe f i l e d i n the United S^p-tes D i s t r i c t Court, and i t i s my i n t e n t i o n to p e t i t i o n f o r removal to t h a t Court any such a c t i o n t h a t may be f i l e d i n the S t a t e Court. Respectfully, Raymond E. Schumacher, RES-L Receiver
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