In re Commercial Nat. Bank
| Decision Date | 06 June 1942 |
| Docket Number | Civil Action No. 2435. |
| Citation | 45 F. Supp. 482 |
| Parties | In re COMMERCIAL NAT. BANK (REED). |
| Court | U.S. District Court — Western District of Pennsylvania |
W. Albert Sanders, of Philadelphia, Pa., for Frank Gorman, escheator.
George G. Chandler and Robert T. McCracken, both of Philadelphia, Pa., for L. M. Reed, receiver for Commercial National Bank.
The Commercial National Bank suspended business on February 28, 1933. Its affairs have since been in course of liquidation, first under a conservator, and later under receivers appointed by the Comptroller of the Currency. L. M. Reed at present occupies the office of receiver for Commercial National Bank. At the time this proceeding was instituted in the Court of Common Pleas No. 3 of the County of Philadelphia, the receiver had in his hands unclaimed funds in the amount of $265,900. The petition for escheat filed in the state court alleges that these funds represent amounts due but unpaid to depositors and other creditors, which are escheatable under the statutes of Pennsylvania governing escheats.
The petition for escheat was filed by Frank Gorman, appointed as Escheator for that particular purpose by William J. Hamilton, Jr., Secretary of Revenue of the Commonwealth of Pennsylvania. The petition contained a prayer for a hearing and for a finding of escheat of all moneys in the hands of the receiver except moneys due to living persons; or moneys due to persons for whom personal representatives have been appointed, or corporations still in existence or their successors; or moneys which have been claimed by or paid to lawful claimants between the date of the bank's closing and the date of the hearing, or which might be lawfully claimed at the hearing; and a further prayer for the service of a copy of the petition on L. M. Reed, receiver of the Commercial National Bank, and on the United States District Attorney for the Eastern District of Pennsylvania.
The receiver notified the escheator of his intention to file a petition and bond for removal to the United States District Court, which petition and bond were then seasonably filed; but instead of entering an order of removal, the Court of Common Pleas No. 3 permitted an answer to the petition to be filed by the escheator, and, after hearing argument, entered an order dismissing the petition for removal "without prejudice to the right to file such petition when the question of escheat has been determined."
The receiver then filed his petition in this court to enjoin the escheator from proceeding further in the state court, and also filed in this court a transcript (originally uncertified, but later replaced with a certified transcript) of the record of proceedings in the state court. A temporary restraining order was entered on this petition, returnable on March 26, 1942, which date was later changed by agreement to March 24, 1942. The escheator filed a motion to remand the case to the state court and the receiver filed a motion to dismiss the case. A consolidated hearing was had on the petition for injunction, motion to remand and motion to dismiss, all of which matters were fully argued both orally and in the briefs submitted to the court.
The following questions are presented for determination:
(1) Was the receiver a necessary party to the escheat proceeding?
(2) Is the proceeding one which is removable to a United States Court; and, if so
(3) Is it necessary that the state court in which the cause is pending enter an order of removal, or on the contrary, is the case removed by the filing of the requisite petition and bond?
(4) Is a state escheat statute valid which provides for the escheat of unclaimed deposits in the hands of the receiver of a closed national bank?
Prior to the year 1935, there was no statutory authority in Pennsylvania for escheating moneys in the hands of national banks or their receivers, and it had been held in the case of Columbia National Bank v. Powell, 1919, 265 Pa. 85, 108 A. 445, that moneys in national banks were not escheatable under the statutes then in force. By an amendment in 1935, 27 P.S. 282, escheat of moneys in a national bank or in the hands of its receiver was expressly authorized and it was provided that the escheat shall be "determined and enforced by an action in the nature of a bill in equity, filed by and in the name of the Attorney General, against the depositary, fiduciary, or debtor, and all of his or its depositors, beneficiaries, or creditors for whom he or it holds unclaimed moneys escheatable under the provisions of this act." The amendment further provides that "proceedings for the escheat of moneys in the possession or custody of any officer of any court shall be by a bill as provided for by this section in other cases, in which bill such officer and the persons entitled to such moneys shall be made codefendants."
No objection has been offered to the form of the proceeding as having been brought by a person appointed as escheator by the Secretary of Revenue under Section 614 of the Acts of 1929, P.L. p. 343, 72 P.S.Pa. § 614, instead of by a bill in equity filed in the name of the Attorney General. However, it is obvious that under the Pennsylvania statutes the proceeding must be against the receiver, since he it is who now stands in the place of the depositary and its depositors and creditors, for whom he is holding the unclaimed moneys alleged to be escheatable. The receiver is therefore, by the terms of the state statute, not only a necessary, but an indispensable party.
Even in the case of a suit against a state bank to escheat unclaimed funds, it has been held that the depositors are necessary defendants and must have reasonable notice and opportunity to be heard. Security Savings Bank v. People of State of California, 1923, 263 U.S. 282, 44 S.Ct. 108, 68 L.Ed. 301, 31 A.L.R. 391.
I am therefore of opinion that the receiver is a necessary party to this proceeding.
Section 28 of the Judicial Code, 28 U.S. C.A. § 71, provides in part: "Any suit of a civil nature, at law or in equity, arising under the Constitution or laws of the United States * * * of which the district courts of the United States are given original jurisdiction, in any State court, may be removed by the defendant or defendants therein to the district court of the United States for the proper district."
By the Judicial Code federal courts are given original jurisdiction "of all suits * * * for winding up the affairs of any such (national) bank." 28 U.S.C.A. § 41 (16). Since the principle is well settled that "the potentiality of originality" is a condition precedent to removability (Solanics v. Republic Steel Corporation et al., D.C., 34 F.Supp. 951, 954), it becomes necessary to inquire whether or not this proceeding for the escheat of funds in the hands of a national bank's receiver is one of which the United States Courts are given original jurisdiction. I am confronted at the outset with a dictum of...
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