Dinan v. First Nat. Bank of Detroit

• Decision Date: 10 February 1941
• Docket Number: No. 8472.,8472.
• Citation: 117 F.2d 459
• Parties: DINAN et al. v. FIRST NAT. BANK OF DETROIT.
• Court: U.S. Court of Appeals — Sixth Circuit

117 F.2d 459 (1941)

DINAN et al. v. FIRST NAT. BANK OF DETROIT.

No. 8472.

Circuit Court of Appeals, Sixth Circuit.

February 10, 1941.

J. Owen Guiney, of Detroit, Mich. (Guiney & Guiney, Neill E. Graham, and John D. Sullivan, all of Detroit Mich., on the brief), for appellants.

Robert S. Marx and William C. Kelly, both of Cincinnati, Ohio, and Lawrence I. Levi and Frank M. Wiseman, both of Detroit, Mich., and Nichols, Wood, Marx & Ginter, of Cincinnati, Ohio, for appellee.

Before SIMONS, HAMILTON and MARTIN, Circuit Judges.

SIMONS, Circuit Judge.

The appeal is from a judgment dismissing the suit of the appellants for damages on account of the breach of an executory contract, and is against an insolvent national bank. It has so often been said that the National Banking Act 12 U.S.C.A. § 1 et seq., constitutes "by itself a complete system for the establishment and government of national banks," Cook County Nat'l Bank v. United States, 107 U.S. 445, 448, 2 S.Ct. 561, 564, 27 L.Ed. 537; Davis v. Elmira Savings Bank, 161 U.S. 275, 16 S.Ct. 502, 40 L.Ed. 700; Deitrick v. Greaney, 309 U.S. 190, 60 S.Ct. 480, 84 L.Ed. 694; Grindley v. First National Bank-Detroit, 6 Cir., 87 F.2d 110, and the Congress having conferred upon the District Courts of the United States original jurisdiction of suits for winding up the affairs of such banks, T. 28 U.S.C.A. § 41, Subd. (16), the question usually arises, in a suit against an insolvent bank, whether it is of that character. This becomes of importance, not only in determining the jurisdiction of the District Court, but also in determining the law to be applied.

In July, 1923, the appellants made a written lease with the predecessor of the appellee for the rental of a branch bank building, for a twenty-five year term at a monthly rental of $800, payable in advance. Up to and including the installment due February 1, 1933, the rent was paid as agreed. On February 11, 1933, the bank was closed and its affairs placed in the hands of a conservator, later succeeded by a receiver. On April 26, the conservator disavowed all obligations under the terms, conditions, and covenants of the lease. The sole provision therein governing the rights of the lessors in the event of default gave them or their representatives the right to re-enter into and to repossess the premises, and to remove therefrom the tenants and other occupants. There was no stipulation in the lease for acceleration of rentals, indemnity or liquidated damages in the case of default by the lessee.

Though denying the right of the conservator to repudiate the lease, the appellants re-entered the premises and re-let them at a reduced rental with the asserted purpose of mitigating damages. Following the appointment of the receiver, proof of claim was filed with him in the sum of $148,000 for alleged anticipatory breach of the lease, the asserted damages being based upon the then present value of the difference between the total agreed rent for the unexpired term, and the fair rental value of the premises at the time of the breach. Upon rejection of the claim the present action was begun in the state court. The receiver, though not a party thereto, instituted removal proceedings and subsequently obtained a certified copy of the transcript of the record which he filed with the clerk of the District Court in Detroit. Later, being apprehensive that the appellants would proceed with their action, regardless of the steps taken to remove it, the receiver filed an ancillary equitable proceeding in the Federal Court for an injunction restraining them from proceeding with their state court suit. A permanent injunction followed. While some preliminary steps were taken to appeal from the decree, the appeal was abandoned. A motion to remand having been denied, the law case proceeded to hearing in the District Court with the result that a judgment of no cause of action was entered in favor of the defendant bank, and a motion for new trial was denied.

The error assigned to the denial by the court of the motion to remand is before us for consideration, notwithstanding the finality of the injunction decree resulting from the abandonment of the appeal. While the decree might have been urged by the defendant as a bar to the consideration of the issue in the present case, even though it involved a jurisdictional question, Ostrander-Seymour Co. v. G. R. Trust Co., 6 Cir., 50 F.2d 567; Baldwin v. Traveling Men's Ass'n, 283 U.S. 522, 51 S.Ct. 517, 75 L.Ed. 1244, res judicata was not pleaded as an affirmative defense, and such definitive pleading is required by Rule 8(c) of the Federal Rules of Civil Procedure, 28 U.S.C.A. following section 723c. We hold, nevertheless, that there was no error in denying the motion to remand. As hereinbefore indicated, the District Courts have jurisdiction of cases for winding up the affairs of any national bank. This is such a case. International Trust Co. v. Weeks, 203 U.S. 364, 367, 27 S.Ct. 69, 51 L.Ed. 224; In re Chetwood, 165 U.S. 443, 17 S.Ct. 385, 41 L.Ed. 782; Guarantee Co. of North Dakota v. Hanway, 8 Cir., 104 F. 369. Our decision in Connolly v. First Nat'l Bank-Detroit, 6 Cir., 86 F.2d 683, does not require a contrary result. It was based upon allegations of a declaration seeking but a money judgment against the defendant, which bore no analogy to a case for winding up the affairs of a bank. The action was against the bank and it was clear, from the averments of the declaration therein, that the transactions constituting the foundation for the suit occurred prior to its insolvency and the appointment of a receiver. While the present suit is likewise against the bank and the receiver is not joined, yet the declaration is replete with allegations that the default and repudiation, for which damages are claimed, were breaches of contract by the receiver and not by the bank. Notice of default was sent to the receiver, the claim for damages was filed with him, and was by him denied. While it is true that there is no express averment in the declaration that the default took place after insolvency, yet the dates so indicate, since the numerous adjudications, both in the court below and here, involving the affairs of the bank, leave nothing to implication in that respect.

We come, then, to the important question in the case, which is whether damages for breach of an executory contract may be recovered against the receiver of an insolvent national bank when the contract sued upon contains no provision for acceleration, indemnity or liquidated damages, and there has been no breach prior to the declaration of insolvency. The answer depends upon whether local law or the terms and implications of a federal statute are to govern decision. The importance of the question is made apparent by the statement, though admittedly dehors the record, that at the time of the banking collapse in 1933 the defendant bank had acquired, through innumerable mergers and consolidations, over 200 branches, most of which it held under lease; that the gross stipulated rentals under such leases exceeded $90,000,000, and that damage claims in excess of $16,000,000 had been filed against the receivership because of their disaffirmance. What were the total gross rentals, under leases disaffirmed by receivers for all closed banks, can only be guessed at.

The law of Michigan, as announced by its court of last resort in McGraw v. Union Trust Co., 135 Mich. 609, 98 N.W. 390, recognizes that a lessor has a right to recover his damages for loss of future rents in accordance with the terms of the lease where the premises are vacated because of the insolvency of the lessee and the appointment of a receiver, and this notwithstanding the absence of a provision in the lease for acceleration, indemnity or liquidated damages in case of default. That this is not true in states which follow the English tradition, and where in the absence of statute or express contract a...