Gamble v. Daniel

Citation39 F.2d 447
Decision Date14 March 1930
Docket Number8800.,No. 8798,8798
PartiesGAMBLE v. DANIEL GREENFIELD v. PETERS TRUST CO.
CourtUnited States Courts of Appeals. United States Court of Appeals (8th Circuit)

F. A. Brogan, Edgar M. Morsman, Jr., and D. W. Swarr, all of Omaha, Neb., and C. A. Sorensen, Atty. Gen., of Nebraska, for appellant Gamble.

William Ritchie, Jr., of Omaha, Neb. (E. R. Burke, of Omaha, Neb., on the brief), for appellant Greenfield.

Arthur F. Mullen and Paul L. Martin, both of Omaha, Neb., for appellees Daniel and Peters Trust Co.

Before STONE, VAN VALKENBURGH and GARDNER, Circuit Judges.

STONE, Circuit Judge.

The Peters Trust Company is incorporated under the statute of Nebraska and engaged in business in that state. On November 23, 1929, a resolution of its board of directors and a statement of its financial condition were filed with the department of trade and commerce of the state — these alleged and purported to show insolvency. Thereupon, the above department filed a petition in a state trial court praying that the company be enjoined from further transacting business, that it be adjudged insolvent, and that the department "be appointed and directed to wind up the business of said defendant." On November 25, 1929, that court entered a decree, as follows:

"That the said Peters Trust Company, defendant, is hereby declared to be insolvent and its business shall be forthwith wound up by the Department of Trade and Commerce of the State of Nebraska as the liquidating agent subject to the orders of this Court as provided for in House Roll No. 249, being chapter 38 of the Session Laws of Nebraska for 1929 and that said Department of Trade and Commerce shall be vested with title to all of the assets and property of said defendant corporation wheresoever the same may be situated and of whatsoever kind and character, the said assets and property may be as of the date of the filing of said petition of plaintiff in this Court and any attachment liens against the property of said defendant corporation acquired within thirty days next preceding and filing of this action shall be and hereby are released and dissolved."

Under this order, the books, accounts, and all property owned or held by the company were turned over to the department. The above procedure was under statutes of the state which will be hereinafter discussed.

November 27, 1929, three creditors of the company filed their petition to have the company adjudicated a bankrupt. December 6, 1929, appellant Gamble was appointed "liquidating agent" of the Department and the property turned over to him for administration under the state statutes. On December 10, 1929, occurred the following: The company filed its petition to be adjudicated a bankrupt; it was adjudicated a bankrupt thereon; there was a reference; appellee Daniel was appointed receiver; and the receiver presented a form of order to the judge of the state court requiring delivery to him by the department of all of the property taken over by it from the company, which order the judge refused to make. Subsequent proceedings in the state court resulted in an order denying such transfer to the receiver. Thereafter, the receiver filed, in the bankruptcy court, a petition to require Gamble and other officers, employees, and agents of the department to deliver to him all of such property (including that held by the bankrupt "as trustee, custodian or otherwise"), and for related relief. Gamble filed a return thereto. Therein he sets out that the company had, for some years, been receiving deposits, some subject to order of the depositors and others for which it issued interest-bearing certificates of deposit, had been discounting commercial paper, and, in other specified respects, acting as a bank; that it acted as trustee (both revokable and not revokable by the creator of the trust), administrator, executor, and guardian, and as agent or custodian of property belonging to others; that the property held by it as trustee, administrator, executor, or guardian was physically segregated in a separate department of the business of the company with complete set of records and books of account relating thereto; that the just mentioned properties were not in possession of the company at the commencement of this bankruptcy proceeding, but "were, and are now, under the control of State authorities representing the owners of the property, and not subject to the control of the bankruptcy courts"; that property owned by the company or that held, as agent or custodian, was, at the commencement of the bankruptcy proceeding, in possession and control of the department of trade and commerce under state laws "providing for the liquidation of a banking corporation * * * and is not subject to the jurisdiction of the courts of bankruptcy"; that he had been appointed receiver of the "trust assets" by the state court, but had not taken possession; that he held possession as "liquidating agent" for the department of trade and commerce; that "as to property sufficient to cover all expenses incurred in the administration" under the laws of the state he "is an adverse claimant and objects to the jurisdiction of this court to summarily order the delivery of said assets to a receiver in bankruptcy as against this adverse claim."

The court found the petition sufficient, the return as stating no justification, and entered an order requiring Gamble to give immediate possession to the receiver of all property, including that which had been held by the company "as trustee, custodian or otherwise." This appeal is from that order.

The issues here are as follows:

I. Is this company a "banking corporation" within the meaning of the Bankruptcy Act?

II. Has the bankruptcy court jurisdiction to require, by summary order, return of the property not owned by the company but held by it as trustee, administrator, executor, guardian, agent, or custodian?

I.

Section 4 of the Bankruptcy Act, as amended by the Act of June 25, 1910 (36 Stat. 838, 839 11 USCA § 22) excepts "banking corporations" from voluntary or involuntary bankruptcy. The questions here are the construction of the words "banking corporation" as used in the amended act and the application of those words, so construed, to the situation in this case. The most natural meaning of the words is: A corporation empowered to do a banking business. Whether a corporation empowered to do a banking business and also other character of business, but actually doing no banking business, is included, we need not determine, as that situation is not here present. The contentions of appellant are that there was the power to do a banking business, and, also, that the company was actually doing a banking business. The latter contention may be rather shortly dealt with. First, it would be strange if Congress would permit the classification under section 4 (and, therefore, the application of the entire Act) to be controlled by the exercise of ultra vires powers by a corporation. Second, a comparison of the Amendment of 1910 (the present section) with similar sections in previous bankruptcy legislation shows a deliberate departure from the "business carried on" criterion.1 Third, the reason for the amendment of section 4, in 1910 was stated by its author to be to escape the confusion which had arisen in decisions as to construction and application of the words "engaged principally" in the 1898 act — as instances of such decisions compare In re Niagara Contracting Co. (D. C.) 127 F. 782 with In re MacNichol Construction Co. (D. C.) 134 F. 979; In re Barton Hotel Co., 12 A. B. R. 335 with In re Baird (D. C.) 112 F. 960; In re Troy Steam Laundering Co. (D. C.) 132 F. 266 with In re White Star Laundry Co. (D. C.) 117 F. 570; In re New York & W. Water Co. (D. C.) 98 F. 711 with First Nat. Bank v. Wyoming Valley Ice Co. (D. C.) 136 F. 466; and see Cong. Rec. vol. 45 p. 2276. It was to escape this confusion and uncertainty that the amendment "adopted the scientific way of declaring a class and then stating exceptions to the class." Cong. Rec. vol. 45 p. 2275. We have no doubt that when Congress used the words "banking corporations" it meant corporations which were authorized by the laws of their creation to do a banking business.

Even if such be the proper construction of the above words in the Bankruptcy Act, appellant contends that "banking business," within the act, means the doing of any one of the essential or the usual things banks do — such as discounting commercial paper, making loans, buying and selling commercial paper — and that this company was empowered to do several of these, and therefore is within the section. When Congress spoke of "banking corporations" it spoke as of 1910. It used the words in no technical nor special sense, but as they were then ordinarily understood. As that time, the ordinary conception of a bank was of a business which was based primarily on the receipt of deposits (general or special), which deposits were used by the bank for loans, discounts, buying and selling commercial paper, and other business purposes. None but national banks could then issue bank notes as currency. The prime incentive in engaging in the business was the profit to be made, directly or indirectly, from use of deposits. Most of the then existing state legislation concerning banks had as its principal purpose the protection of such depositors. Much of the right to regulate banks was the public interest in protecting depositors. Banking has been a development, and the above was its status in 1910. Other businesses might and did, and still do, deal in commercial paper, make loans or borrow money without any one thinking of them as banks. When a business takes deposits and then does the above or related things, every one knows it is doing a banking business. As far back as Oulton v. German Sav. & L. Soc., 17 Wall. 109, 118, 21 L. Ed. 618, it was said: "Strictly speaking the term bank implies a place for the deposit of money, as that...

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