McDavid v. Bank of Bay Minette

• Decision Date: 10 June 1915
• Docket Number: 860
• Parties: McDAVID v. BANK OF BAY MINETTE et al.
• Court: Alabama Supreme Court

69 So. 452

193 Ala. 341

McDAVID v. BANK OF BAY MINETTE et al.

No. 860

Supreme Court of Alabama

June 10, 1915

Appeal from Chancery Court, Mobile County; Thomas H. Smith Chancellor.

Suit by Joel A. McDavid against the Bank of Bay Minette and others for an accounting and an injunction. From denial of a temporary injunction, complainant appeals. Affirmed.

D.B Cobbs, of Mobile, and Samuel C. Jenkins, of Bay Minette, for appellant.

Ervin &amp McAleer, of Mobile, and Charles Hall, of Bay Minette, for appellees.

GARDNER J.

The bank of Bay Minette was organized in 1913. On October 26 1914, pursuant to a resolution passed by the stockholders of said bank on that day, a deed of assignment was executed in the name of the bank by the vice president thereof to Joel A. McDavid. On November 3, 1914, the board of directors ratified and confirmed said deed of assignment and authorized the vice president and cashier of the Bank of Bay Minette to execute in its name such further conveyance as they might deem proper and necessary. These deeds of assignment were in the usual form made for the benefit of creditors, and the trust was duly accepted by the assignee, McDavid, who filed his bill on November 3, 1914, in the chancery court for administration of the trust. The bill showed that on September 17, 1914, the directors of the Bank of Bay Minette attempted to effect a transfer of all the assets to the Baldwin County Bank in consideration that the latter bank pay all the debts of the Bank of Bay Minette, and that in pursuance of a resolution of the board of directors the Baldwin County Bank took possession of all assets of the Bank of Bay Minette. It was further alleged that on October 26th, at a meeting of the stockholders, they declined, by resolution, to ratify said transfer and directed that the deed of assignment be made said McDavid. The board of directors of the Bank of Bay Minette subsequently took similar action. The bill therefore sought an accounting by the Baldwin County Bank of all the assets of the Bank of Bay Minette.

On November 11, 1914, the Baldwin County Bank filed its answer, practically admitting the averments of the original bill, and that it took possession of the property under the bill of sale executed pursuant to a resolution of the board of directors of the Bank of Bay Minette. It was further alleged, however, that it only held the possession until November 4th, upon which date it was notified that the state banking board had taken possession of the property and assets of the Bank of Bay Minette, and that in compliance with notification to that effect it had surrendered to said board all of said assets. In the third paragraph of the answer it is alleged, among other things, that prior to the meeting of November 3d, at which time the last deed of assignment was executed and the bill in the case filed, the Bank of Bay Minette had been notified by the state banking board that it would on November 4th hold a meeting in Montgomery, and requiring said bank to be represented at that meeting; and it is alleged that the action taken by the directors on November 3d was done in an effort to escape action by the banking board. It is further alleged that the banking board had not been made a party to the bill, although the complainant well knew that said board was to hold a meeting on November 4th for the purpose of considering matters in regard to the Bank of Bay Minette, and suggesting that the cause should not further proceed until said banking board was made a party respondent to the bill.

The resolution of the board of directors, dated September 17, 1914, is attached as "Exhibit A" to the answer, and the deed or transfer executed in pursuance of said resolution in the name of the bank is made "Exhibit B." The resolution recites, among other things, the presence of the superintendent of banks at said meeting, and that in fact the meeting had been called by his direction; that, after stating it as his opinion that the Bank of Bay Minette was insolvent and should be liquidated, the said superintendent told the directors that they could accept the proposition of the Baldwin County Bank, or if they preferred they could turn the same over to the banking board for liquidation. The resolution further recites that "the Bank of Bay Minette is in a failing condition and cannot pay its debts." The resolution accepting the proposition of the Baldwin County Bank to pay all its debts in consideration of all its assets was unanimously adopted by the board of directors.

In view of this answer of the Baldwin County Bank, the complainant amended the bill by making the superintendent of banks a party thereto. The amended bill shows the presence of the superintendent at the meeting of the board of directors on September 17th, and that he advised the course pursued by the directors in the transfer. The amended bill further alleges that the superintendent and the agent appointed by him to assist in the matter of the liquidation of the bank were hostile towards all parties opposing the transfer authorized by the board of directors, and that the directors and stockholders do not desire the said superintendent or his agent to have anything to do with the liquidation of the Bank of Bay Minette. The amended bill further shows that the said superintendent gave notice dated October 27, 1914, to both the vice president and cashier of said bank to appear before the banking board on November 4th and show cause why the said Bank of Bay Minette should not be taken charge of by the banking board as provided by law (Acts 1911, p. 50), which notice was duly served on October 30, 1914.

It is further alleged that the banking board could not lawfully take charge of the assets of said bank because of the insufficient notice, and for the further reason that the act above referred to, under which the said board was proceeding, was unconstitutional and void upon several grounds, and particularly section 49 thereof, in so far as it might tend to show an exclusive authority in the superintendent of banks, or the banking board, in the matter of the liquidation of an insolvent bank.

It is alleged further that the remedy there provided is merely cumulative and does not prevent a bank from making a general assignment for the benefit of its creditors; that as such general assignment had been made previous to the passage of the resolution by the banking board on November 4th, and as this bill had been filed on the day previous, therefore the chancery court had acquired jurisdiction.

The prayer of the original bill was amended by adding the superintendent of banks and his agent as parties thereto, and by asking the court to order the said superintendent to surrender and deliver to complainant, as administrator, all the assets of the Bank of Bay Minette received by him, and that he and his agent be enjoined by the court from interfering in any manner with or handling said assets.

Upon temporary injunction being sought the chancellor set the same down for hearing, and on the hearing the superintendent of banks offered several affidavits, the tendency of which was to show that for a long time prior to September 17, 1914, the Bank of Bay Minette had not been operating successfully, that its capital had been diminished, and that in fact it showed signs of being in a failing condition. Embraced in some of the affidavits, or accompanying them, are the reports of some of the examiners of the bank. The superintendent himself filed in the cause an affidavit showing fully the history of the bank from its organization, its condition from time to time, the correspondence had with the cashier of the bank, which as far back as March 11, 1914, showed the capital of the bank impaired and demanding that the deficit be made good. The affidavit of the superintendent shows that he was present in person at Bay Minette, discussing the failing condition of the said bank with all of its officers and members of the board of directors at the time of the transfer to the Baldwin County Bank on September 17, 1914, and that all those who in any manner had charge of the business affairs of the bank had full notice that it had to discontinue business, either by a transfer to the Baldwin County Bank, as proposed by it, or by liquidation through the banking board. These affidavits were offered for the purpose of showing that the superintendent of banks and the banking board were sufficiently justified in the action taken by them in reference to said bank.

Objection is made on the part of complainant to these affidavits, but we do not think the objection is well taken. Upon the hearing complainant sought an injunction against the superintendent of banks from interfering with the assets of the Bank of Bay Minette, and the bill charged hostility on the part of the superintendent towards the stockholders and, in effect, charged an unnecessary interference on his part with the affairs of said bank. Clearly therefore, under the circumstances, the superintendent was within his rights in offering these affidavits in proof of his good faith, and in justification of his action. The affidavits were not controverted upon the hearing, and it certainly cannot be denied, with any show of reason, that they show full cause for the action taken. It is further shown that the superintendent of banks was acting upon a resolution of the banking board so directing him to take charge of the Bank of Bay Minette, and there was in all respects as to notice, etc., a substantial compliance with the provision of the above-noted act of 1911.

Upon the hearing of the application for a temporary writ of injunction, the chancellor denied the same, and from this order the appeal is prosecuted. Section 4531, Code 1907.

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