City of Fort Worth v. McCamey

• Decision Date: 20 January 1938
• Docket Number: No. 8566.,8566.
• Citation: 93 F.2d 964
• Parties: CITY OF FORT WORTH v. McCAMEY et al. McCAMEY et al. v. CITY OF FORT WORTH.
• Court: U.S. Court of Appeals — Fifth Circuit

93 F.2d 964 (1937)

CITY OF FORT WORTH v. McCAMEY et al.

McCAMEY et al. v. CITY OF FORT WORTH.

No. 8566.

Circuit Court of Appeals, Fifth Circuit.

December 16, 1937.

Rehearing Denied January 20, 1938.

COPYRIGHT MATERIAL OMITTED

R. E. Rouer and Geo. C. Kemble, both of Fort Worth, Tex., for appellant and cross-appellee City of Fort Worth.

Preston Shirley, W. L. Dean, Stanley Boykin, A. B. Culbertson, Clay Cooke, Wm. E. Allen, Clarence E. Farmer, W. B. Pinney, and H. C. Ray, all of Fort Worth, Tex., for appellees and cross-appellants.

Before SIBLEY, HUTCHESON, and HOLMES, Circuit Judges.

SIBLEY, Circuit Judge.

Texas National Bank was closed on January 31, 1930, and a receiver appointed. The receiver, under instructions from the Comptroller of the Currency, refused to sue the City of Fort Worth to recover the value of certain securities which the bank had pledged to the city to secure the deposits made by the city and which the city in February, 1930, sold for $195,540. In October, 1930, and January, 1931, two groups of depositors, separately but in behalf of all depositors, sued the city in equity, making the bank and the receiver parties. The suits as arising under the laws of the United States were removed to the federal court. They were consolidated March 18, 1932. The motion to dismiss made by the City of Fort Worth was overruled June 2, 1937. A decree against the city, but with interest from its date only, was rendered June 2, 1937. The appeal of the city asserts that the decision of the Comptroller not to sue was final, and bound the bank and its depositors, and that the depositors cannot in any case sue; that any right to recover was barred by laches and limitation; that the pledge of the securities with knowledge of the Comptroller was valid under the statutes and banking customs of Texas; and that if not valid the agreement between the bank and the city was illegal, the parties were in pari delicto, and should not be aided by the court. By cross-appeal error is assigned because interest was not allowed from the date of the conversion of the securities instead of from the date of the decree.

On July 19, 1930, the Comptroller of the Currency, in a carefully reasoned letter, instructed the receiver that the pledge of the securities was valid and to be respected, notwithstanding decisions to the contrary effect by the Texas Commission of Appeals in Foster v. City of Longview, 26 S.W.2d 1059, and Austin, Banking Commissioner, v. Lamar County, Tex.Com.App., 26 S.W. 2d 1062. That his conclusion was erroneous is established by City of Marion v. Sneeden, 291 U.S. 262, 54 S.Ct. 421, 78 L.Ed. 787, and Lewis v. Fidelity & Deposit Co., 292 U.S. 559, 54 S.Ct. 848, 78 L.Ed. 1425, 92 A.L.R. 794, decided in 1934. But it is put forward as binding on the bank, its shareholders, and depositors on the authority of such cases as Liberty National Bank v. McIntosh, Comptroller, 4 Cir., 16 F.2d 906; Kennedy v. Gibson, 8 Wall. 498, 19 L.Ed. 476; Bushnell v. Leland, 164 U.S. 684, 17 S.Ct. 209, 41 L. Ed. 598. These cases establish that there is no court review of the Comptroller's administrative finding that stockholders ought to be assessed, or touching the amount of the assessment. The statute gives him the right to determine these things. The determination does not, at least in theory, affect the ultimate results to either creditors or stockholders, since thereby neither the assets nor liabilities of the bank are changed. If the assessment proves too small, another can be made till the limit of liability is reached; and if it proves too large, the surplus will be returned to the stockholders. The case is quite different if the Comptroller decides to abandon assets of the bank or to allow a false claim against it. The National Bank Act, 12 U.S.C.A. § 194, speaks of making dividends "on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction"; and an argument is made that the Comptroller here in effect allowed as proved a secured claim of the City of Fort Worth and that his allowance is equal under the statute to an adjudication; citing National Bank v. Mechanics' National Bank, 94 U.S. 437, 24 L.Ed. 176. The cited case holds no more than that an allowed claim draws interest equally with one adjudged. It does not hold that the allowance may not be contested. In First Nat. Bank of Bethel v. Pahquioque Bank, 14 Wall. 383, 20 L.Ed. 840, the disallowance of a claim was held contestible even by suit in a state court. And see, also, Green v. Walkill Nat. Bank, 7 Hun, N.Y., 63. If the Comptroller makes a gross error either in ordering the receiver to abandon an asset or in allowing a secured or unsecured claim, we think that those interested in the assets are not to be held without remedy.

The receiver is the usual and natural representative of the bank in litigation touching its assets and liabilities. Kennedy v. Gibson, 8 Wall. 498, 19 L.Ed. 476. But the bank is not dissolved and may still sue or be sued. First Nat. Bank of Bethel v. Pahquioque Bank, supra. If it does not act to defend itself, in proper cases its creditors or stockholders may, making the bank a party as was done here. A national bank receivership is not a court receivership, but the Comptroller or his receiver may be impleaded in any court having jurisdiction. Stockholders and creditors ought not ordinarily to be allowed to prosecute litigation in the right of the bank without having sought relief at the hands of the receiver and Comptroller, and a court of equity ought to be careful not to impede the administration by entertaining frivolous cases of this sort. But the right of creditors to sue about the very matter here in contest was sustained in O'Connor v. Rhodes, 65 App.D.C. 21, 79 F.2d 146, and even without a precedent demand for relief made on the Comptroller and receiver. A certiorari was granted on the sole point whether the suit could be maintained without such prior demand and refusal. The judgment was affirmed without decision of the point. 297 U. S. 383, 56 S.Ct. 517, 80 L.Ed. 733. In the case before us, request to sue was made both to the receiver, the Comptroller, and the bank, and each refused. See In re Chetwood, 165 U.S. 443, 17 S.Ct. 385, 41 L.Ed. 782.

The suit is not barred by limitation. No federal limitation exists, so that the state statutes apply. Article 5526 of Texas Revised Civil Statutes lays down a two-year limitation for "actions for detaining the personal property of another, and for converting such property to one's own use." This suit is not an action at law in the name of the bank or its receiver, but is a suit wherein because of a want of a legal remedy the complainants, though not having the legal right, seek in equity to be allowed to assert a right of the bank in which they are interested. It is not precisely a case of concurrent jurisdiction with courts of law, where the rule is that equity will usually adopt and apply legal limitations. Hurdle v. American Security & Trust Co., 59 App.D. C. 58, 32 F.2d 954; McNair v. Burt, 5 Cir., 68 F.2d 814. But the right to be enforced is the legal right of the bank to recover the value of the securities alleged to have been converted, and equity will adopt and apply the appropriate legal limitation, there not having been any collusion between the bank or its receiver and the city, or any concealment of the cause of action. If the right of action here asserted is the conversion by sale of the securities, the suits were both brought in time. If, as the city contends, the right of action is the possession or detention of them as a pledge which was unlawful, it arose more than two years before the suits were filed. We are of opinion that whether the pledge was valid or not, there was no conversion of the securities by merely holding them with the consent of the bank. The city could not have been sued for the value of the securities unless it refused to return them on demand or did something with them beyond keeping them safe. Mere adverse possession of property belonging to another may sometimes be treated as a conversion of it, but not possession bestowed by the owner, even though the bestowal be revocable at will. The suits here do not complain of the possession, nor of any act except the sale of the securities. The sale and the amount realized are set forth, and that amount is alleged to be the value of the securities which is sought to be recovered. The sale is the conversion sued for and it happened less than a year before the suits were filed.

It is argued that a court of equity should refuse relief because of laches, especially in not prosecuting the suit more diligently. We do not find that a defense of laches was pleaded, or that any evidence was taken or fact-finding made upon it. It does not appear precisely why the cause was delayed. The District Court denied interest because of the delay, but we agree with him that no such laches has been shown as ought to defeat all relief.

On the merits the court found that the pledge by the bank of its securities to obtain this deposit of public money was, according to the practice of banks in Texas, known to the Comptroller and acquiesced in by him. The Comptroller said as much in his decision not to sue the city, and in his testimony. There is...