Kimen v. Atlas Exchange Nat. Bank of Chicago

• Citation: 92 F.2d 615
• Decision Date: 04 November 1937
• Docket Number: No. 6179.,6179.
• Parties: KIMEN v. ATLAS EXCHANGE NAT. BANK OF CHICAGO. AWOTIN v. HEALY et al.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

92 F.2d 615 (1937)

KIMEN v. ATLAS EXCHANGE NAT. BANK OF CHICAGO.

AWOTIN v. HEALY et al.

No. 6179.

Circuit Court of Appeals, Seventh Circuit.

November 4, 1937.

Robert F. Carey, Daniel M. Healy, and Eldbridge W. Rice, all of Chicago, Ill., for appellees.

Austin L. Wyman, of Chicago, Ill., for appellant.

Before SPARKS and MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Appellant seeks to reverse a decree of the District Court entered in an equity proceeding whereby his claim for damages was denied. The original proceeding in the trial court was a bill brought by a creditor of the Atlas Exchange National Bank of Chicago, then in liquidation, against it and its stockholders, in the nature of a creditors' bill. Various judgments had been procured against the bank. Executions had been returned, "no property found"; thereupon the equity suit to establish liability of the stockholders for the unpaid judgments was instituted.

Appellant had previously instituted in the state court two suits against the bank to recover damages upon agreements to repurchase certain real estate bonds sold by the bank to him. One suit had been prosecuted to judgment, but the other, which is the basis of the present suit, had not reached trial. At the trial below it was stipulated that, subsequent to the commencement of the suit in the District Court, appellant and the liquidator of the bank had agreed that a certain other suit of appellant pending in the municipal court, alleging loss on account of an alleged forged check, and the suit upon the cause of action involved in the present appeal were pending in the municipal court; that the bank claimed to have good defenses to each of the same, fully set forth in the pleadings; that it was agreed that the suit on the forged check claim should be dismissed and that the cause involving the claim for damages for repurchase should be tried by the court; that the bank would interpose no active defense and offer no testimony but that the plaintiff might "recover whatever judgment he could convince the court he was entitled to under his pleadings and evidence"; that the last-mentioned suit was tried upon evidence introduced by the plaintiff therein and judgment entered by the court, without argument or objection by the bank. No appeal was taken, and the resulting judgment was made the basis of appellant's cause of action in the District Court. The master to whom the claim was referred filed a report finding that the judgment upon the repurchase agreement might be attacked in the equity suit; that the original agreement was void because contrary to public policy and ultra vires of a national bank. The court approved the report and entered a decree denying the claim and dismissing it for want of equity.

Appellant now insists that the court should have given full credence to the judgment of the state court; that, if the question there adjudicated is to be reconsidered, the agreement upon which same was based was not void because contrary to public policy or ultra vires of the corporation.

Appellant frankly admits that, though he has an unreversed judgment against the corporation, since he is compelled to come into a court of equity to enforce the same against the stockholders, the District Court was at liberty to go behind the judgment to determine whether the subject matter upon which it was based might justify equitable relief, but insists that this rule should not be applied against him here, because of the entry of the judgment, as he says, upon the consent of the bank and its liquidator.

Appellant, in the District Court, sought to go beyond a mere money judgment and asserted an additional remedy which a court of equity furnishes under certain facts. In this situation, the liquidator consented that the cause then pending might be heard in the state court upon the pleadings, without active presentation of defense, and that such judgment as appellant could obtain should be entered. This was not a consent judgment in the sense that any defenses or the right to appeal were waived. It was more nearly like the situation upon a default judgment. There was no stipulation that the claim should be allowed against the stockholders. Had that been the intent, the stipulation should have provided for the allowance of the claim in the equity suit in the District Court rather than agreeing that the plaintiff might proceed to judgment in the municipal court. We cannot see that this situation created in appellant any right to avoid the rule that a court of equity may inquire into a judgment entered in another cause to determine whether it is void because contrary to public policy or for other reasons, when the judgment creditor attempts to assert a remedy in equity thereon. Lawrence Manufacturing Co. v. Janesville Mills, 138 U.S. 552, 11 S.Ct. 402, 34 L.Ed. 1005; Lewers & Cooke v. Atcherly, 222 U.S. 285, 32 S.Ct. 94, 56 L.Ed. 202; Com'rs of Taxing Dist. of Brownsville v. Loague, 129 U.S. 493, 505, 9 S.Ct. 327, 32 L.Ed. 780; Perry v. United States School Furniture Co., 232 Ill. 101, 83 N.E. 444. This rule results from the unwillingness of a court of equity to permit the use of its powers, created for the furtherance of lawful ends, to aid schemes, the nature of which is condemned by public policy.

National banks may rightfully exercise only such powers as are expressly granted and such as are necessarily incidental to the effectuation of their chartered purposes. Incidental powers can avail neither to create powers which expressly or by reasonable implications are withheld nor to enlarge the powers granted. They are inferred and exist only to carry into effect such...