Liberty Nat. Bank v. Mcintosh

• Decision Date: 11 January 1927
• Docket Number: No. 2558,2569.,2558
• Citation: 16 F.2d 906
• Parties: LIBERTY NAT. BANK OF SOUTH CAROLINA, AT COLUMBIA, et al. v. McINTOSH, Comptroller of Currency, et al. McINTOSH, Comptroller of Currency, et al. v. LIBERTY NAT. BANK OF SOUTH CAROLINA, AT COLUMBIA, et al.
• Court: U.S. Court of Appeals — Fourth Circuit

16 F.2d 906 (1927)

LIBERTY NAT. BANK OF SOUTH CAROLINA, AT COLUMBIA, et al. v. McINTOSH, Comptroller of Currency, et al.

McINTOSH, Comptroller of Currency, et al. v. LIBERTY NAT. BANK OF SOUTH CAROLINA, AT COLUMBIA, et al.

Nos. 2558, 2569.

Circuit Court of Appeals, Fourth Circuit.

January 11, 1927.

D. W. Robinson and William M. Shand, both of Columbia, S. C. (Benet, Shand & McGowan, of Columbia, S. C., and George Bell Timmerman, of Lexington, S. C., on the brief), for plaintiffs.

R. Beverley Herbert, of Columbia, S. C., and John K. Shields, of Tate, Tenn., for defendants.

Before WADDILL, ROSE, and PARKER, Circuit Judges.

WADDILL, Circuit Judge.

These two causes grow out of proceedings to liquidate the affairs of the Liberty National Bank of South Carolina, at Columbia, and were argued together in this court, and will be disposed of in one opinion.

The Liberty National Bank of South Carolina, at Columbia, hereinafter referred to as the Liberty Bank, filed its bill and amended bill in equity in the first-named cause in the court below, praying that the action of the Comptroller of the Currency, named as a defendant therein, in appointing the codefendant, Malcolm S. McConihe receiver of said bank, be declared void, and that the attempted levy and collection of an assessment on the shareholders of said bank by the defendants, in their official capacity, be enjoined and restrained. The bill briefly alleged that the Liberty Bank had entered into voluntary liquidation under contract with the National Loan & Exchange Bank of Columbia (hereinafter referred to as the Exchange Bank), which latter bank was to act as liquidator of the former, assuming to pay certain liabilities, and to be reimbursed by the Liberty Bank for any deficit.

The original contract between the two banks was regularly entered into on the 23d of October, 1923, and pursuant to a subsequent resolution of the board of directors, and by agreement between the banks clause 6 was added thereto. By the agreement thus entered into, the Liberty Bank transferred all of the assets of every kind of the bank to the Exchange Bank, the Exchange Bank guaranteeing payment to the depositors of the Liberty Bank of the amount of their deposits therein, and also other obligations of the Liberty Bank for bills payable and rediscounts at the close of business on the 22d day of October, 1923, as shown by Exhibit A attached to the contract, with a proviso that the Exchange Bank did not guarantee any liability of said Liberty Bank to its stockholders, or any other liabilities of said Liberty Bank except those thereinbefore set forth. Under this contract the Exchange Bank at once possessed itself of all the assets and effects of the Liberty Bank, including its banking house, and proceeded to administer and liquidate the assets of the bank as rapidly as in its judgment was deemed advisable and advantageous, and it was provided that, after reimbursing itself for all expenses, not, however, to include commissions to the Exchange Bank (the latter bank making no charge for its services in the administration and liquidation of the affairs of the Liberty Bank and collecting and converting its assets into cash), together with all the advancements made on account of said Liberty Bank, and of all indebtedness of the Liberty Bank to the Exchange Bank of every character, and that the residue of the assets of said Liberty Bank should be turned over to it for distribution among its stockholders.

Provision also was made for the liquidation and winding up of the affairs of the Liberty Bank by and under the supervision and direction of the Exchange Bank, but the Liberty Bank reserved the right, through its appropriate committees and representatives, to consult and advise daily with the Exchange Bank as to the administration and liquidation of the assets of the Liberty Bank, and also reserved the right to direct in writing the proper disposition of certain of its bills receivable and choses in action as it might be advised to, and the books of the Exchange Bank were to be open to the inspection of a representative of the Liberty Bank. It was further provided that the Exchange Bank should not be liable to the Liberty Bank for any losses in connection with the liquidation and collection of the assets of the latter bank conveyed and transferred to it, except such as arose from gross negligence on its part or its agents. The Liberty Bank stipulated that it would save harmless the Exchange Bank from and against any and all losses, should there be any, which the Exchange Bank might sustain on account of the failure to realize from the assets and property of the Liberty Bank sufficient to reimburse the Exchange Bank for all amounts which it might expend in carrying out the provisions of the contract, and upon final completion of the liquidation to pay any such deficiency to said Exchange Bank.

The bill further charged that the Comptroller was cognizant of and approved the contract of liquidation, and that thereafter the Exchange Bank, not having lived up to its contract, sought to have the Comptroller assume jurisdiction of the affairs of the Liberty Bank, and to appoint a receiver to take charge, which the Comptroller at first refused to do, but subsequently did, and ordered an assessment of $250,000 against the shareholders of the Liberty Bank for the purpose of meeting its obligations, when the amount so due, in addition to the indebtedness ascertained by the Comptroller in favor of the Exchange Bank, to wit, $453,008.10, was not in excess of $6,000. The Liberty Bank also denied its liability to the Exchange Bank for the sum so adjudged against it, as it did the power of the Comptroller to make such adjudication and assessment against shareholders, and insisted that such adjudication and assessment could only be made by a court of competent jurisdiction having authority to wind up the affairs and assess shareholders in insolvent national banks in liquidation.

On the filing of the bill, the court awarded a rule against the defendants to show cause of July 27th why the interlocutory injunction should not be issued as prayed for, whereupon the defendant Comptroller of the Currency specially appeared for the purpose of contesting the jurisdiction of the court. The said defendant Comptroller and his codefendant, the receiver, upon the court's overruling the plea to the jurisdiction, each moved the court to dismiss the bill for lack of equity, and the receiver duly made return to the said rule, showing his appointment and what he had done thereunder, with affidavits and records in support thereof. From said report it appears that assets came into his hands as follows:

                  Good ........................ $  138,453.93
                  Doubtful ....................     63,980.69
                  Worthless ...................    844,719.48
                                                _____________
                    Total ..................... $1,047,154.10
                

From the first two items, the receiver hoped to realize $164,865.68. The receiver denied that his appointment was because of solicitation or importunity of the Exchange Bank, but was solely the result of a long and careful investigation and examination by the Comptroller of the affairs of the Liberty Bank, and, having become satisfied of its insolvency, the receiver was appointed, and the Comptroller thereafter directed the assessment of the shareholders to cover the indebtedness of the Liberty Bank.

On the 28th of July, the court, having overruled the objection to the jurisdiction of the court, entered an order declining to enjoin the Comptroller from exercising the powers conferred upon him by law, and denied the injunction asked for to restrain the receiver from proceeding with the collection of the shareholders' assessments theretofore ordered by the Comptroller. From this action the appeal in the first-named cause, No. 2558, was taken.

On the 4th of August, 1926, the Liberty Bank applied to the District Court of the United States for an order enjoining and restraining the defendants from further proceeding to enforce and collect the assessment previously made against the shareholders of the Liberty Bank, pending the appeal in the first cause, which was granted, and from this last-named order an appeal was taken by the Comptroller of the Currency and the receiver theretofore appointed by him for the Liberty Bank, which constitutes the last named cause No. 2569, and the two will be considered in the order named.

Case No. 2558 involves a general consideration of the National Bank Act, particularly as respects the power and authority of the Comptroller of the Currency to appoint receivers for insolvent national banks, and assess shareholders in such institutions after liqidation proceedings have been inaugurated by the bank. The Liberty Bank insists that the right of the Comptroller to appoint a receiver only exists prior to the liquidation proceedings, and thereafter receivers are appointed and shareholders assessed not by the Comptroller, but by a court of equity of competent jurisdiction.

Whatever may have been the law prior to the amendment of the National Bank Act of June 30, 1876, 19 Stat. 63, it would seem since that date there should be but little trouble to meet and dispose of the questions presented in this record. Section 1 of the act (Comp. St. § 9826) provides "* * * Whenever the Comptroller shall become satisfied of the insolvency of a national banking association, he may, after due examination of its affairs, * * * appoint a receiver, who shall proceed to close up...