Korbly v. Springfield Inst For Savings Springfield Inst For Savings v. Korbly

• Decision Date: 10 December 1917
• Docket Number: 27,Nos. 26,s. 26
• Citation: 38 S.Ct. 88,245 U.S. 330,62 L.Ed. 326
• Parties: KORBLY v. SPRINGFIELD INST. FOR SAVINGS et al. SPRINGFIELD INST. FOR SAVINGS et al. v. KORBLY
• Court: U.S. Supreme Court

245 U.S. 330

38 S.Ct. 88

62 L.Ed. 326

KORBLY

v SPRINGFIELD INST. FOR SAVINGS et al.

SPRINGFIELD INST. FOR SAVINGS et al.

v. KORBLY.

Nos. 26, 27.

Argued Nov. 8, 1917.

Decided Dec. 10, 1917.

Mr. Charles G. Gardner, of Springfield, Mass., for Korbly, receiver.

Messrs. Boyd B. Jones, of Boston, Mass., and William H. Brooks, of Holyoke, Mass., for Springfield Inst. for Savings.

Mr. Justice CLARKE delivered the opinion of the Court.

These two cases are appeals from the Circuit Court of Appeals for the First Circuit, which were heard and will be decided together.

The Pynchon National Bank of Springfield, Mass., with a capital stock of $200,000, divided into 2,000 shares of $100 each, became insolvent and in June, 1901, the Comptroller of the Currency appointed a receiver to liquidate its affairs.

Upon examination there were found among its assets bonds of the American Writing Paper Company, of the par value of $577,000, which the bank had purchased at a discount, but which, at the time of the transaction we are about to consider, had so depreciated that they were worth on the market only 65 cents on the dollar.

A consideration of the condition of the bank resulted on March 18, 1902, in an assessment by the Comptroller on the shareholders of their full statutory liability of 100 per cent., payable on the 15th day of the following May.

Thereupon a plan was devised under which it was proposed that all of the shareholders, except the three defendant savings banks, should purchase from the receiver the paper company bonds at 95 cents on the dollar, each shareholder to purchase one bond of $1,000 for every three shares of stock owned by him. This purchase price was an advance over the market price of 30 cents on the dollar and the excess payment by each shareholder would equal 82 per cent. of the assessment which had been made by the Comptroller. Because they lacked corporate power to invest in such bonds the savings banks with the approval of the Comptroller and shareholders were to pay to the receiver the required advance over the market price without purchasing their quota of the bonds.

The Comptroller cordially approved of this proposed purchase, and in a letter to the board of directors of the insolvent bank, the contents of which were intended to be and were communicated to its shareholders while the plan was under consideration, he stated that it would result in a settlement of the affairs of the bank highly satisfactory for all interests concerned, and that he was satisfied that if such sale of the bonds were made the receiver would be able to promptly pay all of the creditors in full, but that if the plan failed and it became necessary to sell the bonds on the market there would be no escape from an assessment of 100 per cent. against the shareholders.

This proposed settlement was approved by all of the shareholders, and the defendant banks made payment to the receiver as follows: The Springfield Institution for Savings, $30,360.17; the Springfield Five Cents Savings Bank, $9,820; and the Hampden Savings Bank, $5,319.16. For these payments the banks did not receive any consideration other than the joining of the other shareholders in the plan, together with the anticipated saving of 18 per cent. of the assessment which the Comptroller had made against them. The bonds allotted the banks were sold at the market price.

After the completion of this bond transaction, the receiver, under instructions from the Comptroller, on July 22, 1902, wrote to the shareholders as follows:

'Large amounts of securities sold make it probable that the payment of the assessment will not be required. The Comptroller has accordingly decided to withdraw this assessment and I have been instructed to suspend any action to enforce its payment. This withdrawal is made, however, without prejudice to the right of the Comptroller to levy and collect any assessment or assessments that may hereafter be necessary.'

The results anticipated from this action on the part of the shareholders were not realized, and in order to satisfy the still unpaid debts of the bank and interest and costs of administration, the Comptroller on December 28, 1906 made a second assessment of $49 on each share of stock. The banks refusing to pay this second assessment, this suit was instituted against them in the District Court, and resulted in a holding in favor of the defendants, which was affirmed by the Circuit Court of Appeals in the decision which is now under review.

It will be necessary to consider but two questions, viz.: (1) Was the second assessment invalid because the Comptroller did not withdraw and had no legal authority to withdraw the first assessment? and (2) was it the understanding that the payments made by the savings banks should be applied on the assessment for their statutory liability, so that they remained liable for only 18 per cent. additional?

From the earliest days of the administration of the National Banking Act to this case attempts have been made in many forms to give to it a technical construction which would so...