Blades v. Hood
| Decision Date | 15 June 1932 |
| Docket Number | 18. |
| Citation | 164 S.E. 828,203 N.C. 56 |
| Parties | BLADES v. HOOD, Commissioner of Banks, ex rel. SAVINGS BANK & TRUST CO. OF ELIZABETH CITY et al. |
| Court | North Carolina Supreme Court |
Appeal from Superior Court, Pasquotank County; Small, Judge.
Action by L. S. Blades, Jr., against Gurney P. Hood, Commissioner of Banks, on the relation of the Savings Bank & Trust Company of Elizabeth City and another. From an adverse judgment defendants appeal.
Reversed and remanded.
Receiver being officer of court, is amenable to its instruction in performance of his duties.
Equity courts have original power to appoint receivers and make orders respecting discharge of their trust as equity may require.
This is an action to enjoin the defendants from borrowing money from the Reconstruction Finance Corporation and pledging assets for the purpose of hastening the payment of dividends to the creditors and depositors of the Savings Bank & Trust Company of Elizabeth City.
The plaintiff alleges that prior to December 19, 1930, the Savings Bank & Trust Company was an active banking institution organized and existing under the laws of North Carolina; that he owns fifteen shares of the capital stock each of the the value of $1,500; that on the date above given the bank was closed and taken over by the Corporation Commission for the purpose of liquidation; that it has since been in process of liquidation, and is now in the possession and under the control of the commissioner of banks, successor of the Corporation Commission, who intends and threatens to borrow $350,000 from the Recon struction Finance Corporation and to pledge all or a large part of the assets of the bank as security for the loan; that there is no authority in law to procure the loan or to pledge the assets; and that, if the defendants accomplish their purpose, the plaintiff and other stockholders will be irreparably damaged.
The defendants filed an answer admitting their purpose to borrow the money and to pledge the assets of the bank and asserting that this course is an appropriate and needful part of their duties in the administration of their trust. They allege that they have complied with the requirements of the act of Congress, and that the loan of the proposed amount or of such amount as the corporation will lend, instead of injuring the plaintiff and other stockholders, will afford relief to those whose money and investments are now in assets which cannot immediately be liquidated.
The trial court enjoined the defendants from borrowing the money and from pledging the assets of the bank, and the defendants excepted and appealed.
Thompson & Wilson, of Elizabeth City, and Connor & Hill, of Wilson, for appellants.
Worth & Horner, of Elizabeth City, for appellee.
On January 22, 1932, the Congress of the United States approved "An act to provide emergency financing facilities for financial institutions, to aid in financing agriculture, commerce, and industry, and for other purposes." Act Jan. 22, 1932, c. 8 (15 USCA §§ 601-617). The act created a body corporate under the name of "Reconstruction Finance Corporation," upon which it conferred power to make loans to banks, including loans secured by the assets of any bank that is closed or in process of liquidation, and to aid in such liquidation upon application of the receiver or liquidating agent. All loans must be adequately secured, and the corporation may take over or provide for the administration and liquidation of any collateral accepted by it as security for loans.
The right of the corporation to lend money to those who are in charge of a closed bank is not in controversy; the contested point is whether the defendants have the legal right to borrow money from the corporation and to secure payment by pledging the assets of the bank.
Persons, companies, and corporations transacting the business of banking within this state pursuant to its laws were formerly under the supervision of the Corporation Commission. It was the duty of this commission through the chief state bank examiner and other agents to enforce and execute all state laws relating to banks; and to this end it was empowered to promulgate appropriate rules, regulations, and instructions. It was authorized to take possession of the business and property of any bank that disregarded prescribed statutory requirements, and in such case, or in the event of insolvency, to apply to the courts for the appointment of a receiver whenever the interests of creditors, depositors, or stockholders called for such appointment. Under the direction and orders of the court, the receiver took over the assets, made collections, disposed of or compounded doubtful debts, sold real and personal property, paid dividends, and, when necessary, enforced the personal liability of stockholders. The bank remained under the supervision of the Corporation Commission, but the receiver was subject to the orders of the court. Pub. Laws 1921, c. 4, §§ 16, 17.
There are numerous cases in which courts of competent jurisdiction apply equitable remedies which have for their object the prevention, rather than the redress, of injuries. One of the familiar cases is that of an insolvent corporation, the title to whose property rests in the receiver, when appointed, for the purpose of executing the trust. Southern Pants Co. v. Ins. Co., 159 N.C. 78, 74 S.E. 812. The receiver is an officer of the court, and is amenable to its instruction in the performance of his duties; and the custody of the receiver is the custody of the law. Simmons v. Allison, 118 N.C. 761, 24 S.E. 740; Pelletier v. Lumber Co., 123 N.C. 596, 31 S.E. 855, 68 Am. St. Rep. 837; Greenleaf v. Land Co., 146 N.C. 505, 60 S.E. 424. Courts of equity have original power to appoint receivers and to make such orders and decrees with respect to the discharge of their trust as justice and equity may require. Skinner v. Maxwell, 66 N.C. 45; Lasley v. Scales, 179 N.C. 578, 103 S.E. 214.
It was presumably upon this theory that the Legislature provided in the Public Laws of 1921, c. 4, § 19: "That article ten [chapter twenty-two] of the Consolidated Statutes, relating to receivers, [C. S. § 1208] when not inconsistent with the provisions of this act, shall apply to receivers appointed hereunder," i. e., the receivers referred to in chapter 4, section 17, of the act of 1921.
At the session of 1927, the General Assembly amended section 17 of the act of 1921 by providing that, whenever a bank became insolvent, the Corporation Commission should take charge of the business and assets for the purpose of liquidation. The provision for the appointment of a receiver was repealed. Pub. Laws 1927, c. 113. But section 19, supra, which retains article 10, chapter 22, was neither repealed nor materially modified.
In 1931 all the powers vested in the Corporation Commission with respect to banks were transferred to the commissioner of banks, and...
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