432 U.S. 312 (1977), 76-674, Third National Bank in Nashville v. Impac Limited, Inc.

Docket Nº:No. 76-674
Citation:432 U.S. 312, 97 S.Ct. 2307, 53 L.Ed.2d 368
Party Name:Third National Bank in Nashville v. Impac Limited, Inc.
Case Date:June 17, 1977
Court:United States Supreme Court
 
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Page 312

432 U.S. 312 (1977)

97 S.Ct. 2307, 53 L.Ed.2d 368

Third National Bank in Nashville

v.

Impac Limited, Inc.

No. 76-674

United States Supreme Court

June 17, 1977

Argued April 26, 1977

CERTIORARI TO THE SUPREME COURT OF TENNESSEE

Syllabus

Title 12 U.S.C. § 91, which prohibits an "attachment, injunction, or execution" from being issued against a national bank or its property before final judgment in any state or local court, held, when read in context, merely to prevent prejudgment seizure of bank property by creditors, and not to apply to a mortgagor debtor's action seeking a preliminary injunction to protect its real property from wrongful foreclosure. The legislative history indicates that, when the statute was originally enacted in 1873, it was aimed at preventing preferences by creditors. In the provision itself, the word "injunction" is sandwiched in between the words "attachment" and "execution," both of which are writs used by creditors to seize bank property, strongly implying that Congress intended only to prevent state judicial action, prior to final judgment, which would have the effect of seizing the bank's property. Moreover, no reason has been given for assuming that Congress intended to give national banks engaged in making real estate mortgage loans a privilege not available to competing lenders, it being especially unlikely that Congress intended to give national banks a license to inflict irreparable injury on others, free from the normal constraints of equitable relief. Pp. 318-324.

541 S.W.2d 139, affirmed.

STEVENS, J., delivered the opinion of the Court, in which BRENNAN, STEWART, MARSHALL, POWELL, and REHNQUIST, JJ., joined. BLACKMUN, J., filed a dissenting opinion, in which BURGER, C.J., and WHITE, J., joined, post, p. 324.

STEVENS, J., lead opinion

MR. JUSTICE STEVENS delivered the opinion of the Court. A federal statute enacted in 1873 provides that certain

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prejudgment writs shall not be issued against national banks by state courts.1 The question presented by this case is whether that prohibition [97 S.Ct. 2309] applies to a preliminary injunction restraining a national bank from [97 S.Ct. 2308] holding a private foreclosure sale, pending adjudication of the mortgagor's claim that the loan is not in default. We conclude that the prohibition does not apply.

I

Only the essentials of the rather complex three-party transaction giving rise to this dispute need be stated. Respondents borrowed $700,000 from petitioner, a national bank, to finance the construction of an office building. The third party, a mortgage company, agreed to provide permanent financing to replace the bank loan upon completion of the building. The loan was secured by a deed of trust, which granted a first lien on respondents' property to the bank while the construction loan was outstanding. A dispute developed between respondents and the long-term lender over whether respondents had satisfied certain preconditions of the long-term loan. Petitioner contends that respondents are in default because of their failure to close the long-term loan. Respondents deny

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that they are in default, and contend that petitioner's remedy is against the long-term lender. On September 4, 1975, petitioner notified respondents that foreclosure proceedings would be commenced unless the loan, plus accrued interest and an extension fee, was paid in full in 10 days.

On September 23, 1975, petitioner published a notice of foreclosure. Under Tennessee practice, foreclosure of a deed of trust is not a judicial proceeding, but is routinely consummated by private sale unless restrained by judicial action initiated by the mortgagor. On September 26, 1975, respondents commenced this litigation by filing a sworn complaint in the Chancery Court of Davidson County, Tenn. seeking to restrain the foreclosure on the ground that the loan was not in default. The chancellor ordered the petitioner to show cause why an injunction should not issue.

Petitioner's answer set forth the basis for its claim of default, but did not question the court's power to restrain the foreclosure. Based on the pleadings, the exhibits, and extensive arguments of counsel, the chancellor found

the existence of issues which should be determined upon a full hearing of this cause and that [respondents] would suffer irreparable harm if the foreclosure occurred prior to such full hearing.

App. 56. He therefore temporarily enjoined the foreclosure.

Two days later, petitioner filed a supplemental answer alleging that the state court lacked jurisdiction to enter a temporary injunction against a national bank. In due course, the chancellor concluded that 12 U.S.C. § 91 removed his jurisdiction to grant an injunction "prohibiting the foreclosure of property in which the bank has a security interest." App. 69. He therefore dissolved the preliminary injunction, granted an interlocutory appeal, and "stayed" the bank from foreclosure until the appeal to the Tennessee Supreme Court could be perfected.

The Tennessee Supreme Court reversed. 541 S.W.2d 139 (1976). It concluded that the federal statute was intended

to

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secure the assets of a bank, whether solvent or insolvent, for ratable distribution among its general creditors and to protect national banks in general.

Id. at 141. It did not believe this purpose justified an application of the statute when

a debtor of a national bank is seeking, by interlocutory injunction, to protect his property from wrongful seizure [97 S.Ct. 2310] and foreclosure sale by the bank.

Ibid. The court acknowledged that the bank had a security interest in respondents' property, but did not believe that the statute was intended to give additional protection to an interest of that kind which was already amply protected.2 One member of the court read the statute as absolutely forbidding the issuance of any temporary injunction against the national bank before judgment, and therefore reluctantly dissented from what he described as the majority's "just result." Id. at 143. We granted certiorari to decide whether the Tennessee Supreme Court's construction of the statute is consistent with the congressional mandate. 429 U.S. 1037. We affirm.

The critical statutory language reads as follows:

[N]o attachment, injunction, or execution, shall be issued against such association or its property before final judgment in any suit, action, or proceeding, in any State, county, or municipal court.

12 U.S.C. § 91.

At least three different interpretations might be placed on that language. Most narrowly, because the rest of § 91 relates

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to insolvency, this language might be limited to cases in which a national bank is insolvent, or at least on the verge of insolvency. Secondly, regardless of the bank's financial circumstances, it might be construed to prohibit any prejudgment seizure of bank assets. Most broadly, it might be given a completely literal reading and applied not merely as a shield for the bank's assets, but also as a prohibition against prejudgment orders protecting the assets of third parties, including debtors of the bank.

Although there is support for the narrowest reading in the history of the statute, both that reading and the broadest literal reading have been rejected by this Court's prior cases. Before discussing those cases, we shall review the available information about the origin and revisions of the statute.

II

The National Currency Act of 1864 authorized the formation of national banks.3 Section 52 of that Act contained the first part of what is now 12 U.S.C. § 91. It prohibited any transfer of bank assets in contemplation of insolvency or with a view to preferring one creditor of the bank over another. The 1864 statute did not, however, include the prohibition against the issuance of prejudgment writs now found in 12 U.S.C. § 91.

That prohibition was enacted in 1873 as § 2 of "An Act to require national Banks to restore their Capital when impaired, and to amend the National-currency Act." 17 Stat. 603. If the prohibition had been added to § 52 of the 1864 Act,4 the

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amended section would have been virtually identical with the present 12 U.S.C. § 91. It was, however, added to § 57 of the 1864 Act, which authorized suits against national [97 S.Ct. 2311] banks in the state courts. Petitioner therefore infers that the amendment was intended to qualify the jurisdiction of state courts over national banks, and that the amendment should be given its full, literal meaning.

There is no direct evidence of the reason for the amendment. It was passed without debate, Cong.Globe, 42d Cong., 3d Sess., 870, 2117-2118 (1873), and does not seem to have been recommended by the administration.5 However, the historical context in which the bill was passed may offer some clue as to its purpose. We may take judicial notice of the historical fact that 1873 was the year of a financial panic. Moreover, a number of reported cases involved attachments against national banks and attempts by creditors to obtain a preference by attaching assets of an insolvent bank.6

When the first edition of the Revised Statutes of the United States was prepared in 1873, the prohibition against prejudgment writs was combined with the provision concerning preferential transfers and acts in contemplation of insolvency to

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form § 5242, which is now 12 U.S.C. § 91.7 Respondents argue that this revision placed the provision in the context which was originally intended.

For the past century, the prohibition against prejudgment writs has remained in the preferential transfer section.

III

This Court has construed this prohibition only three times.8 In two cases...

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