Lawrence Nat. Bank v. Rice

• Decision Date: 30 April 1936
• Docket Number: No. 1254.,1254.
• Citation: 83 F.2d 642
• Parties: LAWRENCE NAT. BANK v. RICE et al.
• Court: U.S. Court of Appeals — Tenth Circuit

83 F.2d 642 (1936)

LAWRENCE NAT. BANK v. RICE et al.

No. 1254.

Circuit Court of Appeals, Tenth Circuit.

April 30, 1936.

Justin D. Bowersock, Robert B. Fizzell, and John F. Rhodes, all of Kansas City, Mo., for appellant.

Raymond F. Rice, of Lawrence, Kan., for appellees.

Before LEWIS, PHILLIPS, and McDERMOTT, Circuit Judges.

McDERMOTT, Circuit Judge.

The record upon which this appeal was heard made it appear that appellees filed an original bill of complaint in the court below. Neither in the record, the assignments of error, the briefs, nor the oral arguments was there an intimation that the cause orginally was brought in the state court, removed to the federal court, a motion to remand filed, argued and overruled. The case turned upon the construction of a contract by which a national bank had satisfied its creditors in order to accomplish its dissolution as authorized by the National Banking Act, and was bottomed upon the proposition that the dissolved bank, having complied with the federal statute authorizing a voluntary dissolution, was protected by the statute of limitations from claims of its creditors. 12 U.S.C.A. §§ 181, 182. Involving, as it did, the very contract by which the affairs of a national bank were wound up, and the appellees being a liquidating committee appointed to wind up its affairs, there was jurisdiction on the face of the case by virtue of section 24 (16) of the Judicial Code (28 U.S.C.A. § 41 (16), which expressly confers jurisdiction upon the federal courts in all cases "for winding up the affairs of any such national bank." The point not being referred to in the record, briefs, or arguments, and jurisdiction being apparent on the face of the record, no reference thereto was had in the opinion.

In their petition for rehearing, appellees now advise that the case was not originally brought in the federal court as the record disclosed, but in the state court. By certiorari we have brought up the removal papers which should have been in the original record. In their petition for rehearing, appellees state that their failure to bring up a complete record was deliberate; that, having prevailed below, they did not care to challenge the jurisdiction to render a judgment in their favor; but, having now lost, the point becomes of importance and interest. We quote their italicized explanation:

"Appellees gave the matter serious consideration but since the urging of such objections on appeal would have placed them in the anomalous position of attacking the validity of a judgment in their own favor, and since the decree of the trial court fully sustained all of their contentions, they felt justified in arguing the case upon its merits and in passing over all jurisdictional questions."

Assuming full responsibility for the situation, exonerating this court of blame, appellees correctly state that jurisdiction of the subject matter in a federal court is always open to inquiry and cannot be waived. We proceed now to the inquiry which should have been made before weeks of labor were spent on the merits of this troublesome case, Did the lower court have jurisdiction of the controversy?

Section 41, subsec. 16, 28 U.S.C.A. confers jurisdiction upon the district courts of the United States "of all cases commenced by the United States, or by direction of any officer thereof, against any national banking association, and cases for winding up the affairs of any such bank."

A liquidating committee for a national bank which has voluntarily dissolved, while a convenient and proper instrumentality for winding up the affairs of a bank, O'Connor v. Watson (C.C.A.) 81 F.(2d) 833, Holland Banking Co. v. Continental Nat. Bank (D.C.) 43 F.(2d) 640, affirmed (C.C.A.) 50 F.(2d) 19, is not an office created by congressional act as are the offices of receiver and statutory agent. Its members are therefore not officers of the United States within the meaning of section 41 (1), 28 U.S.C.A. Davis v. McFarland (C.C.A.5) 15 F.(2d) 612, certiorari denied 273 U.S. 754, 47 S. Ct. 457, 71 L.Ed. 875. The phrase "and cases for winding up the affairs of any such bank" is in the conjunctive and is a distinct grant of jurisdiction. If this is such a case, it is not necessary that plaintiffs be officers of the United States or that a substantial federal question be involved. Any other construction would render the quoted phrase meaningless. Subsection 1, § 41, confers jurisdiction of suits brought by an officer of the United States, and of those arising under the constitution and laws of the United States. If subsection 16 confers any additional jurisdiction at all, it must be over cases not brought by officers of the United States and not arising under the laws of the United States. If this is, therefore, a case for winding up the affairs of a national bank, there is jurisdiction.

The history of this enactment may aid in determining its scope. By the constitution, the judicial power of the federal courts was extended to cases arising under the constitution and laws of the United States. Congress did not, however, authorize the inferior courts to exercise that power by the Judiciary Act of 1789 (1 Stat. 73). It was held, therefore, in Bank of United States v. Deveaux, 5 Cranch, 61, 3 L.Ed. 38, that the first National Bank could not sue in the United States courts because of the authority contained in its charter to sue in courts of record. The act creating the second National Bank specifically authorized the bank to sue in the federal courts. In Osborn v. Bank of U. S., 9 Wheat. 738, 816, 6 L.Ed. 204, it was held that such grant of jurisdiction was warranted by the constitution, since every suit brought by a corporation incorporated by Act of Congress arose under the laws of the United States. By the Act of March 3, 1875 (18 Stat. 470) Congress extended the jurisdiction of the circuit courts to cases arising under the laws of the United States.¹ It was thereupon held, following Osborn v. Bank of U. S., supra, that the federal courts had jurisdiction over all suits by or against national banks. Petri v. Commercial Bank, 142 U.S. 644, 648, 12 S.Ct. 325, 35 L.Ed. 1144; Bankers' Trust Co. v. Texas & Pac. R. Co., 241 U. S. 295, 36 S.Ct. 569, 60 L.Ed. 1010. Congress then, by section 4, Act of July 12, 1882, enacted that, except as to suits between national banks and the United States, the federal courts should have the same jurisdiction over national banks as they had over state banks and no more. This jurisdiction was broadened by the Act of March 3, 1887 (24 Stat. 552), as corrected by the Act of August 13, 1888 (25 Stat. 433), to include "cases for winding up the affairs of any such bank." The Judicial Code, Act of March 3, 1911, § 24 (16), supra, grants jurisdiction over such cases affirmatively.

It thus appears that from 1875 to 1882 the federal courts had jurisdiction under the general act over all litigation involving national banks; that from 1882 until 1887 it had; with one exception, no more jurisdiction over the litigation of national banks than of state banks; and that from 1887 to the present jurisdiction also exists over cases for winding up the affairs of national banks, separately and distinctly granted by an amendatory act.

What did Congress have in mind in using the phrase "winding up the affairs" of a national bank? Specifically, did Congress intend to exclude those cases growing out of a voluntary liquidation and confine jurisdiction to those cases where the liquidation is carried out by an officer of the United States — a receiver or statutory agent?

Two short answers suggest themselves: If Congress intended to confine the scope of the phrase to one type of winding up, it failed to say so; again, if it is so confined, no jurisdiction is granted by the 1887 amendment, for jurisdiction is granted in suits brought by officers of the United States by the first subsection of the same section.

An examination of the National Banking Act demonstrates, we believe, that no such forced and narrow construction should be put upon the broad language employed by Congress. The National Banking Act comprises a complete code for the organization, operation, and dissolution of national banks. As was said by Mr. Justice Field in Cook County Nat. Bank v. United States, 107 U.S. 445, 448, 2 S.Ct. 561, 564, 27 L.Ed. 537,

"Everything essential to the formation of the banks, the issue, security, and redemption of their notes, the winding up of the institutions, and the distribution of their effects, are fully provided for, as in a separate code by itself, neither limited nor enlarged by other statutory provisions with respect to the settlement of demands against insolvents or their estates."

After providing for the organization and operation of such banks, Congress turned to the question of their dissolution. The Act of June 3, 1864 (Rev.St. §§ 5220, 5221 12 U.S.C.A. §§ 181, 182), provided for voluntary dissolution by a vote of two-thirds of its outstanding stock together with a published notice that it was "closing up its affairs." The Act of July 14, 1870 (12 U.S.C.A. § 184), provided an exemption not pertinent here, but in the act referred to a bank in course of voluntary liquidation as one "winding up its business." In Rev.St. § 5225, as amended by the Act of February 27, 1877, § 1 (12 U. S.C.A. § 186) reference is again made to a bank which, in voluntary liquidation, has "commenced to close its affairs." By the Act of June 30, 1876, § 1 (12 U.S.C.A. § 191) provision was made for the appointment of a receiver who should "close up such association." Section 2 of that act (12 U.S.C.A. § 65) authorized a creditor of any bank which had voluntarily dissolved to bring a suit to enforce the liability of the shareholders. Thus when the Act of March 3, 1887, was passed, there were two methods of dissolution, voluntary and involuntary, for national banks. In each, provision was made for enforcing shareholders' liability. In...