United States Sav. Bank v. Morgenthau

• Decision Date: 20 July 1936
• Docket Number: No. 6605.,6605.
• Citation: 85 F.2d 811
• Parties: UNITED STATES SAV. BANK et al. v. MORGENTHAU, Secretary of the Treasury, et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

85 F.2d 811 (1936)

UNITED STATES SAV. BANK et al. v. MORGENTHAU, Secretary of the Treasury, et al.^*

No. 6605.

United States Court of Appeals for the District of Columbia.

Decided July 20, 1936.

Philip H. Marcum and Thomas E. Rhodes, both of Washington, D. C., for appellants.

George P. Barse, J. Bruce Kremer, George B. Springston, and Herbert M. Bingham, all of Washington, D. C., for appellees.

Before MARTIN, Chief Justice, and VAN ORSDEL, GRONER, and STEPHENS, Associate Justices.

MARTIN, Chief Justice.

On June 28, 1934 the appellants, as plaintiffs, filed suit in the Supreme Court of the District of Columbia against the appellees as defendants, praying for a decree to terminate a receivership of the appellant bank and for the return of its assets to the original officers and stockholders of the bank.

The plaintiffs in their bill of complaint alleged in substance the following facts:

That the appellant, the United States Savings Bank, hereinafter called the Bank, was a banking corporation of the state of West Virginia which for many years prior to the date of the "bank moratorium" maintained a banking house and conducted a banking business in the city of Washington, D. C.; and that the appellant Wade H. Cooper was the owner of 56 per cent. of the capital stock of the Bank, and for many years was its president and chief executive.

That the appellee Henry Morgenthau, Jr., is Secretary of the Treasury of the United States; that the appellee J. F. T. O'Connor is Comptroller of the Currency of the United States; and that the appellee Carter B. Keene since the month of February, 1934, has been the receiver of the bank, appointed thereto by the appellee O'Connor, and is now in possession and control of all of the assets of the Bank and occupies the Bank's premises as his place of business.

That prior to the middle of the year 1932 the Bank was prosperous, having a capital stock of $100,000 and surplus approximating $250,000 and paying dividends on the capital stock at the rate of 30 to 40 per cent. per annum; that the shares of stock were selling on the public market at a considerable premium; that at the date of the so-called moratorium proclamation, to wit, March 6, 1933, the affairs of the Bank were less prosperous, and for a short time the salability of its assets was so depressed that subsequent to the 1st day of February, 1933, and for several months thereafter, they might not have realized sufficient cash to pay all of the indebtedness of the Bank and the amount of the capital stock, yet at no time was the real value thereof so low that it did not equal the indebtedness of the Bank and the amount of the capital stock, and that after March 1, 1934, the assets of the Bank had increased in value and the Bank had become wholly solvent, fully able to meet all of its creditors' demands, including depositors, and had to its credit over and above its liabilities assets in excess of its capital stock.

That following the bank moratorium the Comptroller of the Currency refused a license to the Bank to reopen for business, and shortly thereafter undertook and attempted to constrain the Bank to join with other banks in the organization of a new bank to be called the Hamilton National Bank which the plaintiffs refused to join, and that plaintiffs thereupon instituted proceedings in the Supreme Court of the District of Columbia against William H. Woodin, then Secretary of the Treasury of the United States, and the defendant O'Connor to prevent them from consolidating this Bank with the Hamilton National Bank, this proceeding being equity cause No. 56143 upon the court's docket; that the court sustained the plaintiff's claim; and that its order to that effect was affirmed by this court, of all of which the court was requested to take judicial notice. (Cooper v. Woodin, 63 App.D.C. 311, 72 F.(2d) 179). It is disclosed by the record in that case that Cooper had offered a plan for the reopening of the Bank, purporting to make available to the depositors immediately 65 per cent. of the total amount of their deposits, with a certain prospect of a future entire payment thereof which the Comptroller refused.

That the plaintiff Cooper, as president of the Bank on or about May 28, 1934, applied to the Comptroller for a statement of the condition of the Bank, but was refused any information with respect thereto, and was denied access to the books of the Bank, and the plaintiffs alleged that while the suit in equity, No. 56143, was pending, and prior to the appointment of the defendant Keene as receiver of the Bank, the assets of the Bank had so far increased in value and their liquidity had so increased that from the date of the appointment of Keene as receiver and up to the present time the Bank has been and is wholly solvent, and able to meet any normal demands of creditors or depositors, and that, if there is any impairment of the capital stock, the plaintiff Cooper and other stockholders of the Bank are able and willing to supply any impairment which may be shown to exist in the capital stock of the Bank; that the appointment of the receiver in the month of February, 1934, during the pendency of the equity case (56143) in the lower court as aforesaid, by the Comptroller of the Currency, was without warrant of law, in contravention of the purport and intent of the Bank Conservation Act, and was made by the defendant O'Connor arbitrarily, wantonly, and maliciously in an attempt to utterly ruin and destroy the Bank and the plaintiff Cooper; that the action of the defendants O'Connor and Keene was made without notice to the Bank at a time when the Bank was "perfectly solvent," and the appointment was made "arbitrarily, wantonly and maliciously, not in good faith and for the purpose of carrying out the laws of the United States, but for the sole purpose of damaging these plaintiffs and was without warrant of law."

The plaintiffs therefore prayed that a temporary injunction issue against the defendants, enjoining and restraining them during the pendency of this cause from maintaining the defendant Keene as receiver of the Bank, and from withholding from the officers, directors, and stockholders of the Bank possession of its banking house and assets; that on a final hearing hereof a decree be entered restoring to the officers, directors, and stockholders of the plaintiff Bank its banking house and all of its assets, discharging the defendant Keene as receiver of any of the assets or property of the Bank, and enjoining and restraining all of the defendants from interfering in any way with the operation of the Bank by its officers, directors, and stockholders; that, if on final hearing it should develop that for any reason the capital stock of the Bank is impaired, then and in that event the stockholders of the Bank be afforded an opportunity of supplying said impairment; that the temporary injunction heretofore prayed be, on a final hearing, made permanent; and for other and further relief.

On June 18, 1935, the plaintiffs below applied for leave to file a supplemental bill in the case. This application was denied under exceptions. The defendants below first filed an answer to the bill, but subsequently filed a motion to dismiss it upon a claim that it was bad in substance. The lower court...