Impac Ltd., Inc. v. Third Nat. Bank

• Decision Date: 16 August 1976
• Parties: IMPAC LIMITED, INC., et al., Appellants, v. THIRD NATIONAL BANK and First and Mid-South Mortgage Company, Appellees. 541 S.W.2d 139
• Court: Tennessee Supreme Court

Page 139

541 S.W.2d 139

IMPAC LIMITED, INC., et al., Appellants, v. THIRD NATIONAL BANK and First and Mid-South Mortgage Company, Appellees.

541 S.W.2d 139

Supreme Court of Tennessee.

Aug. 16, 1976.

Gail P. Pigg, Nashville, for appellant.

Thomas P. Kanaday, Jr., Stephen W. Ramp, Farris, Evans & Warfield, Nashville, for appellees.

OPINION

FONES, Justice.

The question presented by this interlocutory appeal is whether a section of the National Bank Act prohibits a state court from issuing an injunction against a national bank, as mortgagee, temporarily restraining it from foreclosing upon appellant's property.

Appellant brought this action against appellee in the Chancery Court of Davidson County when appellee declared appellant in default on a note secured by a deed of trust on real property and advertised the property for sale, pursuant to terms contained in the deed of trust. Appellant sought to enjoin appellee from proceeding with the foreclosure sale and set forth the grounds upon which it sought the injunction. The Chancellor found, upon the pleadings, exhibits, and arguments of counsel at the show cause hearing, that there existed issues which shoudl be determined upon a full hearing; and that appellants would suffer irreparable harm if the foreclosure sale occurred prior to the hearing. Upon these findings, the Chancellor issued a temporary injunction prohibiting appellee from foreclosing on appellant's property prior to a full hearing on the merits of the cause.

Appellee then moved the Trial Court to dissolve the temporary injunction on the basis that 12 U.S.C.A. § 91, denied the Court jurisdiction to issue the injunction. The motion was granted, and the Chancellor allowed appellant a discretionary appeal to this Court.

The statute upon which appellee relies, reads as follows:

§ 91. Transfers by bank and other acts in contemplation of insolvency

All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void; and no 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.

Appellee maintains that this statute, and the case law construing it, prohibits the courts of this State from issuing an interlocutory injunction against a national bank under any circumstances. This view necessarily encompasses the position that regardless of the degree of wrongdoing on the part of a national bank against one of its debtors, resulting in irreparable damage, our courts, both state and federal, are prohibited from exercising jurisdiction and allowing an equitable remedy until a full trial on the merits of the cause has been completed. We cannot accept appellee's position as a correct exposition of the law.

The leading case construing the statute is Pacific National Bank of Boston v. Mixter, 124 U.S. 721, 8 S.Ct. 718, 31 L.Ed. 567 (1888). There plaintiffs began a suit against the bank in the United States Circuit Court (now District Court) of Massachusetts by writ of attachment for the amounts owed them. At the time the lawsuit was instituted, the bank was solvent; but it later closed, and a receiver was appointed to wind up its affairs. The question before the Court was whether an attachment could issue against a solvent national bank before final judgment in a suit begun in federal court.

The Court noted that although the prohibition against interlocutory injunctions did not expressly apply to federal courts, those courts were only authorized to issue attachments in common law causes as provided by the applicable state law. The Court held that the power of state courts to issue attachments (and injunctions) prior to final judgments had been eliminated by the federal statute and that the statute was not limited to protecting insolvent banks:

Although the provision was evidently made to secure equality among the general creditors in the division of the proceeds of the property of an insolvent bank, its operation is by no means confined to cases of actual or contemplated insolvency. The remedy is taken away altogether and cannot be used under any circumstances. 124 U.S. at 727, 8 S.Ct. at 721.

We are of the opinion that the precedential value of the broad language of the last quoted sentence is limited to the facts of the case in which it was spoken, and that the Ratio decidendi of Mixter does not extend to the facts of the case at lar. We reach this conclusion only after a careful search for subsequent decisions of the United States Supreme Court interpreting 12 U.S.C.A. § 91. We are unable to find that the Mixter rationale has been applied to the converse situation; that is, a situation in which a debtor of a national bank is seeking, by interlocutory injunction, to protect His property from wrongful seizure and foreclosure sale by the bank. See, Van Reed v. People's National Bank of Lebanon, 198 U.S. 554, 25 S.Ct. 775, 49 L.Ed. 1161 (1905); Mechanics Universal Joint Company v. Culhane, 299 U.S. 51, 57 S.Ct. 81, 81 L.Ed. 33 (1936). Nor have we found any federal court of appeals or district court decisions which make the Mixter decision so applicable.

Although we have read with interest the opinions in other states which hold contra to our decision today, Freeman Mfg. Co. v. National Bank of Boston, 160 Mass. 398, 35 N.E. 865 (1894); Metropolitan Lumber Co. v. Fordham Nat. Bank, 102 N.J.Eq. 514, 141 A. 742 (1928); First National Bank of Oakland v. Superior Court, 240 Cal.App.2d 109, 49 Cal.Rptr. 358, Cert. denied 385 U.S. 829, 87 S.Ct. 65, 17 L.Ed.2d 65 (1966), we are not persuaded by what appears to be blind reliance on Dicta in the federal cases. Rather, we look to the purpose of the statute which was to secure the assets of a bank, whether solvent or insolvent, for ratable distribution among its general creditors and to protect national banks in general. See, e.g., First National Bank v. Colby, 21 Wall. 609, 22 L.Ed. 687 (1874); Loew's Inc. v. Superior Court, 301 P.2d 64 (Cal.App.1956).

In our opinion, the decision in Earle v. Pennsylvania, et al., 178 U.S. 449, 20 S.Ct. 915, 44 L.Ed. 1146 (1900), undermines the literalism accorded by courts of our sister states to the Mixter Court's statement that the remedies of attachment, injunction and execution are taken away altogether and cannot be used under any circumstances. A writ of attachment by garnishment was issued and served upon the Chestnut Street National Bank, as garnishee, to reach the assets of one James Long; and upon the answer and interrogatories filed by the bank, judgment was entered against the bank. Shortly thereafter the bank closed, and Earle was appointed receiver. He intervened and moved to vacate the judgment and dismiss the attachment upon the authority of the statute under...