Bradford v. Chase Nat. Bank of City of New York

• Decision Date: 18 July 1938
• Citation: 24 F. Supp. 28
• Parties: BRADFORD v. CHASE NAT. BANK OF CITY OF NEW YORK, and five other cases.
• Court: U.S. District Court — Southern District of New York

24 F. Supp. 28

BRADFORD v. CHASE NAT. BANK OF CITY OF NEW YORK, and five other cases.

District Court, S. D. New York.

June 28, 1938.

On Settlement, etc., July 18, 1938.

COPYRIGHT MATERIAL OMITTED

Conboy, Hewitt, O'Brien & Boardman, of New York City (Martin Conboy and John Vance Hewitt, both of New York City, Brice Clagett and George B. Springston, both of Washington, D. C., G. Ridgely Sappington, of Baltimore, Md., and Hugh H. Obear and George P. Barse, both of Washington, D. C., Gen. Counsel to the Comptroller of the Currency, of counsel), for plaintiffs.

Mudge, Stern, Williams & Tucker, of New York City (Henry Root Stern, George L. Trumbull, and Donald Kehl, all of New York City, of counsel), for defendant.

Eugene M. Caffey, of Washington, D. C., of the Judge Advocate General's Office, United States Army, of counsel to the Secretary of War, appearing specially as amicus curiae.

WOOLSEY, District Judge.

My judgment in this consolidated cause is that the several complaints here involved be dismissed with costs, with will include taxable disbursements divided equally as against the several plaintiffs.

I. My substantive jurisdiction in so far as the national banks are concerned is based on the fact that the suits which are here involved are suits for winding up the affairs of national banking associations —Title 28 United States Code, Section 41, subdivision (16), 28 U.S.C.A. § 41(16). Cf. Pufahl v. Parks' Estate, 299 U.S. 217, 225, 57 S.Ct. 151, 156, 81 L.Ed. 133—and as a consequence thereof would not fall within the ambit of the decision of the Supreme Court in Erie Railroad Company v. Tompkins, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487, rendered on April 25, 1938; Cf. Downey, Receiver, v. City of Yonkers, D.C.S.D.N.Y., 23 F.Supp. 1018, an opinion by Judge Knight, dated June 8, 1938, and made in a case which he heard whilst sitting by assignment in this District.

The basis of my substantive jurisdiction of the cause of the Baltimore Trust Corporation is diversity of citizenship, because it is a suit involving more than $3,000 exclusive of interest and costs between a Maryland corporation and the Chase National Bank of the City of New York, hereinafter called the Chase Bank, which has its principal banking office in New York City, in the State of New York, and which is, consequently, to be regarded as domiciled therein and a citizen thereof. Title 28 United States Code, Section 41, subdivision (16), 28 U.S.C.A. § 41 (16); United States v. Campbell, D.C., 5 F.Supp. 156, 165, 166, affirmed Campbell v. Chase Nat. Bank, 2 Cir., 71 F.2d 669, 94 A.L.R. 708.

There is not any challenge as to the locus standi of the several plaintiffs in the several constituent suits or to the venue in which the suits were brought.

II. In view of the decisions of the United States Supreme Court on April 25, 1938, in Interstate Circuit, Inc., et al. v. United States, and Paramount Pictures Distributing Co., Inc., v. United States, 58 S.Ct. 768, 82 L.Ed. 1146, it is now a work of supererogation to write a considered opinion in an equity cause, for its place will be taken by formal findings of fact and conclusions of law, separately stated, under Equity Rule 70½. Title 28 United States Code, Section 723, 28 U.S.C.A. § 723.

I am contenting myself in this interesting case, therefore, with merely summarizing the facts and stating my conclusions of law.

III. The facts are not seriously in dispute and the argument thereon is largely a question of inference and emphasis.

A. As many of the uncontroverted facts are stated in the amended complaints, it will tend to brevity if I make a summary of those complaints and supplement it by making a few findings of facts which the plaintiffs did not include therein.

Briefly stated the complaints allege:

That the banks and trust company of which the plaintiffs are receivers or liquidators were the owners of certain bonds which were pledged to secure deposits of public moneys of what was at the time of such deposits known as the Government of the Philippine Islands;

That the officers of said banks and trust company, without authority in law, delivered possession of bonds severally owned by them and pledged as aforesaid to the persons who were at the times of such pledges the Secretary of War or the Chief of the Bureau of Insular Affairs in the War Department, or to their nominees;

That the bonds were pledged and delivered for the purpose of securing certain deposits of the public funds of the Government of the Philippine Islands— hereinafter called the Philippine Government, and now superseded by the Commonwealth of the Philippine Islands—made in the particular bank in question to the credit of the Treasurer of the Philippine Islands;

That the deposits were not the kind of deposits which could be secured by a pledge of the bank's assets and that the attempted pledge was both ultra vires and forbidden, and so was absolutely void and of no effect;

That, accordingly, the several banks here involved continued to be the legal owner and entitled to immediate possession of the bonds on demand;

That thereafter when the banks became insolvent, and were closed, and the plaintiff was appointed receiver or liquidator as the case may be, the Secretary of War or the Bureau of Insular Affairs caused the bonds to be sold, and the said receiver or liquidator thereupon became entitled to the proceeds and that the said proceeds were, notwithstanding the fact that the receiver or liquidator was entitled to them, paid over to the defendant, the Chase Bank, by the Bureau of Insular Affairs;

Plaintiffs, alleging that they have not any plain adequate remedy at law,—in addition to the usual interlocutory prayers —pray for an accounting of the funds so deposited and as their principal relief pray—

"That a decree be entered by this Court adjudging that the aforesaid funds held by said defendant, as aforesaid, belong to and are impressed with and subject to a trust in favor of the plaintiff and that the said The Chase National Bank of the City of New York be ordered and directed to pay said funds to the plaintiff together with the dividend and interest."

B. I find that the funds deposited as above stated were credited by the Chase Bank on instructions from the Philippine Government—usually given through the Bureau of Insular Affairs—to such of the fourteen accounts of the Treasurer of the Philippine Islands in the Chase Bank as might be indicated when the deposit was sent on to it.

These accounts were captioned as follows:

1. Treasurer of the Philippine Islands —Treasury Certificate Fund Account—Demand Deposit.

2. Treasurer of the Philippine Islands —Public Improvement Bonds Account Act, 2940—Demand Deposit—Bureau of Insular Affairs, Washington D. C.

3. Treasurer of the Philippine Islands —Sundry Sinking Fund Account—Demand Deposit—Bureau of Insular Affairs, Washington, D. C.

4. Treasurer of the Philippine Islands —General Fund Account—Demand Deposit.

5. Treasurer of the Philippine Islands —Gold Standard Fund Account—Demand Deposit.

6. Treasurer of the Philippine Islands —Teachers Pensions & Disability Fund Account—Demand Deposit.

7. Treasurer of the Philippine Islands —Financial Interest Protection Bond Fund Account—Demand Deposit.

8. Treasurer of the Philippine Islands —Property Insurance Fund Account—Demand Deposit.

9. Treasurer of the Philippine Islands —Land Title Assurance Fund Account— Demand Deposit.

10. Treasurer of the Philippine Islands —Special Account Bank of the Philippine Islands Circulating Notes Redemption Fund Account No. 3330—Demand Deposit.

11. Treasurer of the Philippine Islands —Special Account National Bank Circulation Notes Reserve—Demand Deposit.

12. Treasurer of the Philippine Islands —Philippine Government Public Funds—Demand Deposit.

13. Treasurer of the Philippine Islands —Gold Standard Fund Account— Time Deposit.

14. Treasurer of the Philippine Islands —Special Account Philippine National Bank Circulating Notes Reserve Fund Account No. 3174—Time Deposit.

C. I find that these accounts are now in the possession of the Commonwealth of the Philippine Islands—hereinafter called the Philippine Commonwealth—a sovereignty which succeeded the Government of the Philippine Islands on November 15, 1935, in pursuance of the Philippine Independence Act. Title 48 United States Code, Sections 1231-1247, 48 U.S. C.A. §§ 1231-1247.

D. I find—

That the pledged bonds were sold with the consent of the receiver or liquidator of each bank, and also with the consent of the Comptroller of the Currency in the case of the national banks, and of the Banking Commissioner of Maryland in the case of the Baltimore Trust Company;

That if the sale price of the pledged bonds exceeded the deposit of the Philippine Government in any of the banks here involved, the excess was duly remitted by the Bureau of Insular Affairs to its receiver or liquidator; and

That, in the Bradford and Hardee cases, the proceeds of the bonds were not equal to the deposit balance of the Treasurer of the Philippine Islands, and that this deficiency was paid, as is alleged under mistake of law, in cash by the receiver of each of those two banks after the bonds were sold.

E. Thus there was achieved in each case what the Philippine Government considered was a final settlement with the receivers or liquidators of the plaintiff banks in respect of its several secured deposits.

These settlements are claimed by the plaintiffs to be so tinctured with the original ultra vires nature of the pledges as to be wholly void.

F. Whilst the plaintiffs' demand is for the entire traceable proceeds of the bonds, and of these alleged preferential payments in the two cases I have mentioned, to avoid circuity of action and to prevent any attempt to tie up the funds of the Philippine Commonwealth, "without prejudice" agreements have been made to limit any recovery in each case to the difference between the plaintiffs' claims and the...