Ghingher v. Pearson

• Decision Date: 07 July 1933
• Docket Number: 14-16.
• Citation: 168 A. 105,165 Md. 273
• Parties: GHINGHER v. PEARSON ET AL. MAYOR AND CITY COUNCIL OF BALTIMORE v. PEARSON ET AL. PEARSON ET AL. v. GHINGHER, BANK COM'R, ET AL.
• Court: Maryland Court of Appeals

168 A. 105

165 Md. 273

GHINGHER v. PEARSON ET AL.

MAYOR AND CITY COUNCIL OF BALTIMORE v. PEARSON ET AL.

PEARSON ET AL. v. GHINGHER, BANK COM'R, ET AL.

Nos. 14-16.

Court of Appeals of Maryland

July 7, 1933

On Reargument, July 31, 1933.

Appeals from Circuit Court No. 2 of Baltimore City; Eugene O'Dunne, Charles F. Stein, and Eli Frank, Judges.

Suit by Craven P. Pearson and another against John J. Ghingher, Bank Commissioner, and the Baltimore Trust Company, in which John J. Ghingher in capacity as receiver of various banking institutions and the Mayor and City Council of Baltimore were joined. From the decree, defendant John J. Ghingher, receiver of the Chesapeake Bank of Baltimore, the defendants Mayor and City Council of Baltimore, and petitioners, separately appeal.

Affirmed in part and reversed in part, and cause remanded.

BOND C.J., and URNER, J., dissenting.

Argued before BOND, C.J., and PATTISON, URNER, ADKINS, OFFUTT DIGGES, PARKE, and SLOAN, JJ.

R. E Lee Marshall, City Sol., of Baltimore (Allan A. Davis, Asst City Sol., of Baltimore,

on the brief), for appellant Mayor and City Council.

Herbert Levy, of Baltimore (A. Cecil Snyder, of Baltimore, on the brief), for appellant Ghingher, receiver.

Charles G. Page, Eldridge Hood Young, and L. Wethered Barroll, all of Baltimore (John Holt Richardson and Paul M. Higinbotham, both of Baltimore, on the brief), for appellees and appellants Pearson and another.

Willis R. Jones, Deputy Atty. Gen. (Wm. Preston Lane, Jr., Atty. Gen., on the brief), for appellee Bank Com'r.

G. Ridgely Sappington, of Baltimore, for Baltimore Trust Co.

BOND Chief Judge.

To meet the exigencies of the banking crisis early in the year 1933, the Governor of Maryland declared successive banking holidays, extending together from February 25 to March 4, and on March 4 the General Assembly of the state passed an emergency statute, generally referred to as the Emergency Banking Act, to place the business of banking institutions under control, providing for restrictions upon withdrawals from deposits where made necessary by conditions of the respective depositaries, and providing a plan for rehabilitation of any institutions which could not be expected to meet their obligations otherwise. Specified deposits of public money were exempted by the statute from the restrictions imposed on withdrawals, and the present litigation has arisen upon complaints of existing general depositors whose rights were thus to be deferred.

The statute, chapter 46 of the Acts of 1933, has added seventeen new sections to article 11 of the Code concerning "Banks and Trust Companies," to follow after section 71. "Whereas," reads its preamble, "An emergency has arisen which has been accompanied by widespread unemployment, decreased values, untimely withdrawals of deposits and other conditions beyond the control of the State, and Whereas, The welfare of the State as a whole and of the depositors and creditors of banking institutions, requires the immediate enactment of additional legislation to promote justice, prevent distress and discriminations, and establish an orderly method of reconstruction," therefore the statute is enacted. And concluding sections declare that it is enacted to meet an emergency through the police power of the state, and is immediately necessary for the preservation of the public peace, health, and safety. The existence of the crisis so to be met, and its character, the culmination of prolonged economic depression, widespread unemployment and want, prostration of private charity and reduction in supplies of public funds, and the menace to the finances of the people of the state, and of the whole country, from loss of values in banking assets, difficulty in converting them into money, and runs of depositors that had begun, are well known, and in need of no further statements here. The statutory plan has been to place control of the institutions in the bank commissioner so far as conditions may require; those institutions which could not meet all demands at once either to be returned to full freedom after a period of restriction to installment or percentage withdrawals, or to be reorganized if reorganization should be required to meet the conditions--all as the commissioner might determine after ascertainment of the facts. The control of the commissioner for these purposes is to endure for one year, with possible continuation during another year.

A section 71B provides that all remedies of depositors, creditors, stockholders, or others arising out of agreements or transactions made prior to the passage of the statute, against any institution in the custody of the commissioner, shall be suspended during the period of control, saving, however, rights in or against collateral security. By the same section it is provided that during that period the assets and business of controlled institutions shall be deemed to be in the possession of the commissioner in custodia legis, and the property of the institutions shall not be subject to attachment, execution, or seizure under judicial process of any kind. Section 71E provides that any institution in the commissioner's custody may receive new deposits which shall be subject to withdrawal in accordance with their terms, and shall be preferred, in right of payment and satisfaction, to deposits, debts, or liabilities made or incurred prior to the assumption of management by the commissioner; and percentages of old deposits made available from time to time shall have the status of new deposits within the meaning of the section, and shall not be subject to restrictions imposed on other deposits.

In section 71G, the deposits to be excepted from the imposition of restrictions, and so to be preferred, are specified; and this section is therefore the immediate ground of controversy in most of the suits before the court. It provides that: "All deposits of public money not secured by the deposit of collateral or by a surety bond, guaranteeing the payment of such deposits when demanded, now in any banking institution, made by the State of Maryland, any county, municipality or town, taxing district, or any political sub-division of the State or of any officer, board, commission, institution or other agency thereof or the receiver of any banking institution, shall be entitled to priority and immediately transferred to a new deposit and thereafter subject to all rights as to new deposits set out in Section 71E of this Act. No restriction or limitation on withdrawals of deposits made by or under the provisions of this Act shall apply to withdrawals from any banking institution by check payable to and in the possession of the City Collector of Baltimore City before five P. M. on February 28th, 1933, and presented by the said Collector for deposit to any banking institution in Baltimore City on March 1st, 1933, the aggregate amount of said checks not to exceed $2,101,347.90. Any banking institution is authorized to accept the certification of the City Collector to the facts above stated, and upon such identification the banking institution upon which said checks are drawn is required to pay the same. The purpose of this is to provide the City with necessary funds to meet certain bonded indebtedness and interest which matured on March 1st, 1933, and to enable said City to meet emergency relief for which funds are otherwise unavailable."

The first case was instituted by Craven P. Pearson and Horace E Wennagle, two depositors in the Baltimore Trust Company, which was one of the banking institutions not permitted to open for the full resumption of its business, and one whose depositors generally were by the terms of the statute deferred to those specified as excepted from restrictions. The original defendants were the bank commissioner and the Baltimore Trust Company, but, upon petitions of several others interested in the question of validity of the priorities, these were admitted as parties defendant; that is, John J. Ghingher, the bank commissioner, in his capacities as receiver of the Title Guarantee & Trust Company, receiver of the Commercial Savings Bank of Baltimore, receiver of the Park Bank, and receiver of the Chesapeake Bank of Baltimore, and the mayor and city council of Baltimore. The bank commissioner filed answers and demurrers in his several capacities, and on behalf of the city a demurrer only was filed. The questions at issue were by agreement of all counsel argued on the demurrers. From the decree so far as it affects priorities in which those parties are interested, appeals have been entered by the bank commissioner as receiver of the Chesapeake Bank and by the mayor and city council of Baltimore, and by the complainants themselves from the upholding by the decree of the statutory exemption or priority of state deposits. In the bill it was averred that the complainants were depositors in the Baltimore Trust Company as stated; that the assets of that company had become insufficient for the payment of its obligations in full, and that up to the time of the institution of the suit the complainants had been, as a consequence of the custody and control of the bank commissioner, barred from withdrawal of any of their deposits, while under the provisions of the statute the depositors specified as exempted, but who in fact were entitled only to equal rights with the complainants, were to be allowed to withdraw the whole amounts of their deposits out of the funds available; that this would result in a deprivation of constitutional rights of the complainants, and should therefore be enjoined. The answer of the bank commissioner denied that the Baltimore Trust Company was insolvent, and stated that subsequently depositors generally had been permitted to...