Merrill v. National Bank of Jacksonville

• Decision Date: 20 February 1899
• Docket Number: Nos. 54 and 55,s. 54 and 55
• Parties: MERRILL v. NATIONAL BANK OF JACKSONVILLE (two cases)
• Court: U.S. Supreme Court

173 U.S. 131

19 S.Ct. 360

43 L.Ed. 640

MERRILL

v NATIONAL BANK OF JACKSONVILLE (two cases).

Nos. 54 and 55.

February 20, 1899.

On the 17th day of July, A. D. 1891, the First National Bank of Palatka, Fla., a banking association incorporated under the laws of the United States, having its place of business at Palatka, Fla., failed, and closed its doors. Subsequently, T. B. Merrill was duly appointed receiver of the bank by the comptroller of the currency, and entered upon the discharge of his duties. At the time of the failure of the bank, it was indebted to the National Bank of Jacksonville in the sum of $6,010.47, on sundry drafts, which indebtedness was unsecured, and also in the sum of $10,093.34, being $10,000, and interest, for money borrowed June 5, 1891, evidenced by a certificate of deposit, which was secured by sundry notes belonging to the First Nationa Bank of Palatka, attached to the certificate as collateral. These notes aggregated $10,896.22, the largest being a note of A. L. Hart for $5,350.22. The National Bank of Jacksonville proved its claim upon the unsecured drafts for $6,010.47, and as to this there was no controversy. It also offered to prove its claim for $10,093.34, but the receiver would not permit it to do this; and, under the ruling of the comptroller of the currency, it was ordered first to exhaust the collaterals given to secure the certificate of deposit, and then to prove for the balance due, after applying the proceeds of the collaterals in part payment.

The Jacksonville Bank collected all the notes, excepting that of A. L. Hart, obtained a judgment on the latter, which it assigned and transferred to the receiver, applied the proceeds of the collaterals which it had collected to its claim on the certificate, and proved for the balance due thereon, being the sum of $4,496.44. On December 1, 1892, a dividend of $1,573.75 was paid on the claim as thus proven; and on May 17, 1893, a second dividend of $449.64 was paid.

On the 11th of September, 1894, the Jacksonville Bank filed its bill of complaint in the circuit court of the United States for the Southern district of Florida against Merrill, as receiver, which set forth the foregoing facts, complained of the action of the receiver in not permitting proof for the full amount of the certificate of deposit, and alleged that it 'gave due notice that it would demand a pro rata dividend upon the whole amount due your orator, without deducting the amount collected on collateral security, to wit, that it would demand a pro rata dividend upon $16,103.81, and interest thereon from the 17th day of July, A. D. 1891.'

The prayer of the bill was, among other things, for a pro rata distribution on the entire amount of the indebtedness.

The defendant demurred to the bill, and, the demurrer having been overruled, answered, denying 'that the complainant gave due notice that it would demand a pro rata dividend upon the whole amount due to it without deducting the amount collected on collateral security,' and averring, to the contrary, that 'the complainant accepted the said ruling of the said comptroller without demur, and accepted from the said comptroller, through this defendant, without protesting notice of any kind, the checks of the said Comptroller in payment of the dividends mentioned in the bill, and that it was not until the 15th of March, 1894, that the complainant gave notice of any kind that it dissented from the said ruling of the comptroller, and would demand payment upon a different basis.'

Sundry exceptions were taken to the answer, which were overruled, and the cause was set down for final hearing on bill and answer.

The circuit court entered its decree January 29, 1896, that complainant was entitled to receive dividends on the whole face of the indebtedness due July 17, 1891, less the dividends actually paid to it; that the receiver declare the dividend on the basis of the whole claim, and pay it out of any assets which were in his hands March 15, 1894; and that he render an account.

From this decree the receiver prosecuted an appeal to the circuit court of appeals for the Fifth circuit. That court, differing from the circuit court as to the form of its decree, reversed it, and remanded the cause, with directions to enter a decree that the Jacksonville Bank was entitled to prove its claims to the entire amount of the indebtedness, and to the payment thereon of the same dividends as had been paid on other indebtedness of the Palatka Bank, with interest on such dividends from the date of the declaration thereof, less a credit of the sums which had been paid as dividends on the part of the claim theretofore allowed, provided the dividends theretofore paid and thereafter to be paid on the sum of $10,093.34, together with the amounts theretofore and thereafter received on the collaterals securing that indebtedness, should not exceed 100 cents on the dollar of he principal and interest of said debt; that the receiver recognize the Jacksonville Bank as creditor of the Palatka Bank in said sum of $10,093.34 as of July 17, 1891, and pay dividends as aforesaid thereon, or certify the same to the comptroller of the currency, to be paid in due course of administration; and that the Jacksonville Bank receive, before further payment to other creditors, its due proportion of the dividends as thus declared, with interest. 41 U. S. App. 529, 21 C. C. A. 282, and 75 Fed. 148. From that decree after the mandate of the circuit court of appeals had been sent down to the circuit court, and proceedings had thereunder, an appeal was taken and perfected to this court, and is numbered 54 of this term.

The decree was entered by the circuit court in pursuance of the mandate of the circuit court of appeals, July 27, 1896; and the receiver prayed an appeal therefrom to the circuit court of appeals, which was by that court dismissed, on motion of the Jacksonville Bank. 41 U. S. App. 645, 24 C. C. A. 63, and 78 Fed. 208. From this decree of dismissal, an appeal was allowed and perfected to this court, and is numbered 55 of this term.

These appeals were argued together.

Edward Winslow Paige and F. F. Oldham, for appellant.

J. C. Cooper, Wm. Worthington, and Geo. H. Yeamans, for appellee.

Mr. Chief Justice FULLER, after stating the facts in the foregoing language, delivered the opinion of the court.

The circuit court of appeals reversed the decree of the circuit court with specific directions. Nothing remained for the circuit court to do except to enter a decree in accordance with the mandate; and, for the purposes of an appeal to this court, the decree of the circuit court of appeals was final. The mandate went down, and the circuit court entered its decree in strict conformity therewith before the appeal in No. 54 was prosecuted to this court. This promptness of action did not, however, cut off that appeal, and any difficulty in our dealing with the cause in the circuit court was obviated by the second appeal, which brings before us, in No. 55, the record subsequent to the first decree of the circuit court of appeals.

It is contended that the bill should have been dismissed because of adequate remedy at law, and on the ground of laches and estoppel. As the controversy involved the question on what basis dividends should have been declared, and therein the enforcement of the administration of the trust in accordance with law, we have no doubt of the jurisdiction in equity.

Nor was the lapse of time such as to raise any presumption of laches, nor could an estoppel properly be held to have arisen. Less than two years had elapsed from the payment of the first dividend to the filing of the bill, and the other creditors of the insolvent bank had not been harmed by the temporary submission of complainant to the ruling of the comptroller. The decree affected only assets on hand, or such as might be subsequently discovered; and, if the other creditors had no rights superior to that of complainant, they lost nothing by the reduction of their dividends, if any, afterwards declared to be paid out of such assets.

The inquiry on the merits is, generally speaking, whether a secured creditor of an insolvent national bank may prove and receive dividends upon the face of his claim as it stood at the time of the declaration of insolvency, without crediting either his collaterals, or collections made therefrom after such declaration, subject always to the proviso that dividends must cease when, from them and from collaterals realized, the claim has been paid in full.

Counsel agree that four different rules have been applied in the distribution of insolvent estates, and state them as follows:

'Rule 1. The creditor desiring to participate in the fund is required first to exhaust his security, and credit the proceeds on his claim, or to credit its value upon his claim, and prove for the balance, it being optional with him to surrender his security and prove for his full claim.

'Rule 2. The creditor can prove for the full amount, but shall receive dividends only on the amount due him at the time of distribution of the fund; that is, he is required to credit on his claim, as proved, all sums received from his security, and may receive dividends only on the balance due him.

'Rule 3. The creditor shall be allowed to prove for, and receive dividends upon, the amount due him at the time of proving or sending in his claim to the official liquidator, being required to credit as payments all the sums received from his security prior thereto.

'Rule 4. The creditor can prove for, and receive dividends upon, the full amount of his claim, regardless of any sums received from his collateral after the transfer of the assets from the debtor in insolvency, provided that he shall not receive more than the full amount due him.'

The circuit court and the circuit court of appeals held the fourth rule applicable, and decreed accordingly.

This was in accordance with the...