Wichita Royalty Co. v. City Nat. Bank of Wichita Falls, 8541.

• Decision Date: 19 April 1938
• Docket Number: No. 8541.,8541.
• Citation: 95 F.2d 671
• Parties: WICHITA ROYALTY CO. et al. v. CITY NAT. BANK OF WICHITA FALLS et al. CITY NAT. BANK OF WICHITA FALLS et al. v. WICHITA ROYALTY CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

95 F.2d 671 (1938)

WICHITA ROYALTY CO. et al. v. CITY NAT. BANK OF WICHITA FALLS et al.

CITY NAT. BANK OF WICHITA FALLS et al. v. WICHITA ROYALTY CO. et al.

No. 8541.

Circuit Court of Appeals, Fifth Circuit.

March 23, 1938.

Rehearing Denied April 19, 1938.

COPYRIGHT MATERIAL OMITTED

Guy Rogers and Ray Bland, both of Wichita Falls, Tex., and Charles L. Black, of Austin, Tex., for appellants.

Leslie Humphrey, T. R. Boone, and Arch Dawson, all of Wichita Falls, Tex., and Tarlton Morrow, of Houston, Tex., for appellees.

Before SIBLEY and HOLMES, Circuit Judges, and MIZE, District Judge.

SIBLEY, Circuit Judge.

On October 11, 1930, in a state court, City National Bank of Wichita Falls (herein called the old bank) sued Wichita Royalty Company and E. E. Scannell, its trustee, to recover on a note and on an indorsement made by them of another note, joining others from whom collateral equitable relief was sought. The above-named defendants filed a cross-bill asserting a large liability against the bank for a balance of a deposit account misappropriated by or with the assistance of the bank. The bank on a trial prevailed, but on appeal the Supreme Court of Texas sweepingly sustained the contentions of Wichita Royalty Company and Scannell, trustee, and remanded the case for a new trial, expressly leaving questions of fact open. Wichita Royalty Co. v. City National Bank, 127 Tex. 158, 89 S.W.2d 394, 93 S.W.2d 143. Meanwhile the bank, closed by the bank holiday of March, 1933, did not reopen, but a new corporation called City National Bank in Wichita Falls (herein called the new bank) was created which purchased from the old bank its best assets, assuming stated liabilities not including the claim of Wichita Royalty Company. The remaining affairs of the old bank went into the hands of a liquidating agent pursuant to 12 U.S.C.A. § 181. No receiver was appointed. Thereafter in May, 1936, the old bank filed an amended petition in the state court, and the Wichita Royalty Company and its trustee Scannell on June 18, 1936, filed what they termed a "third amended original answer, cross-action and intervention in lieu and in amendment of" their former pleadings. This pleading answered the amended petition, restated the cross-demand previously asserted, carrying it back several more years, and then set up the failure and insolvency of the old bank and the establishment of the new bank with practically the same officers, attacked the sale of assets from the old to the new bank, and charged that it was designed to defeat the claims of Wichita Royalty Company and to prefer others contrary to the National Banking Act as found in 12 U.S.C.A. § 91, and was void. It asserted that these and all other assets of the old bank constituted a trust fund for the ratable payment of all creditors. Malfeasance of the directors was charged. Several additional parties were made including the new bank, the liquidating agent of the old bank and its directors, and the administrator of G. W. Peckham, the former trustee of the Wichita Royalty Company. Besides judgment for its demand in a sum of $200,000 and a general accounting between all parties, and general legal and equitable relief, Wichita Royalty Company prayed: "That the old bank be declared to have been insolvent * * * and that its assets be decreed to be a trust fund for the benefit of all creditors, * * * that all creditors of the old bank be given notice of the pendency of this suit and permitted to intervene herein * * * and that such fund be ratably distributed between the creditors of the old bank existing at its insolvency." Petitions were at once filed to remove the cause to the federal court on the grounds that the cross-petition was a case for winding up the affairs of a national bank, and a suit arising under the laws of the United States and involving more than $3,000. Removal being allowed, motions to remand were made asking the remand of the whole cause, and of each separate cause of action involved. These were denied. Repleading was ordered, however. The case was tried and a decree rendered which denied the old bank recovery against Wichita Royalty Company and denied the latter recovery against the old bank; and ordered sale of the remaining assets of the old bank, and retained jurisdiction to wind up its affairs. Appeals taken by each side are before us contesting these judgments.

The case was discussed interestingly in an opinion by the District Judge, but there was no finding of the facts specially, nor a separate statement of conclusions of law as required by Equity Rule 70½, 28 U.S.C.A. following section 723. The evidence is long and complicated. A score or more of transactions are contested in the pleadings and evidence. Clear-cut findings as to what was done in each and of the knowledge and participation of the bank and its officer Harrell in each are necessary. The opinion goes into no detail, but expresses general conclusions such as that the court found no dishonest transaction on the part of Peckham, the former trustee, and that the bank had not sustained its burden as to some matters and the Wichita Royalty Company had similarly failed as to others. We held this an insufficient compliance with the rule in Southwestern Bell Telephone Co. v. City of San Antonio, 5 Cir., 75 F.2d 880, 882, saying: "The contested facts should be put in such detail as will decide each contest made concerning them, the purpose of the rule being to aid review by enabling it to be restricted to the exact points on which error is claimed." Complaint is made by the main appellants on this ground; and we find that we should be obliged to study out the whole of this complicated record without the assistance of special fact-findings specifically challenged. We shall remand the cause without allowing costs to either side that Rule 70½ may be complied with and a new decree entered. But as was done in the case just cited, we shall pass upon some of the major questions of law, as an aid in the further proceedings; and necessarily upon the question of jurisdiction.

There is federal jurisdiction, and remand was rightly refused. The new cross-bill filed by Wichita Royalty Company and Scannell, as trustee and as stockholder, prayed for a collection and restoration of all the assets of the old bank, which was alleged to be insolvent, and for a distribution of them to all creditors. That plainly would be a winding up of the affairs of the old bank. The District Court has a special jurisdiction of such a case. 28 U.S.C.A. § 41 (16); International Trust Co. v. Weeks, 203 U.S. 364, 27 S.Ct. 69, 51 L.Ed. 224. It has been held indeed that where no other relief is prayed a state court should not exercise jurisdiction. Birdsey v. Commercial National Bank, 143 Ga. 627, 85 S.E. 881. Removal of such a suit is authorized. 28 U.S.C.A. § 71; Lawrence Natl. Bank v. Rice, 10 Cir., 83 F.2d 642; Bailen v. Deitrick, 1 Cir., 84 F.2d 375; Studebaker Corporation v. First National Bank, D.C., 10 F.2d 590. It is a "suit of a civil nature * * * arising under the * * * laws of the United States * * * of which the district courts of the United States are given original jurisdiction," within the very words of the removal statute, 28 U.S.C.A. § 71, for a national bank is necessarily wound up under the provisions of the National Bank Act. Davis v. Elmira Bank, 161 U.S. 275, 16 S.Ct. 502, 40 L.Ed. 700. Moreover, the effort to set aside the transfer of the assets to the new bank as violative of 12 U.S. C.A. § 91 made it a case arising under the laws of the United States and involving more than $3,000, and hence removable. The laws of the United States are to be directly applied both in testing the validity of the transfer and in ratably distributing all the assets to creditors. Gully v. First National Bank, 299 U.S. 109, 57 S.Ct. 96, 81 L.Ed. 70, is not to the contrary.

But it is urged that one cause of action, that of the Wichita Royalty Company against the old bank, had been before the state courts for several years and it was too late to remove it, and that the same was true of the suit by the old bank on its notes; and additionally that the old bank could not remove its own suit. It is of course true that neither of these controversies could have been independently removed and neither was sought to be. They come to the federal court as a part of the case asserted by the Wichita Royalty Company in its new cross-bill. That pleading presented for the first time the elements of federal jurisdiction, and there was no delay in removing thereafter. The matters of the insolvency of the old bank and the illegal transfer of its assets and their final disposition might have been made the subject of an independent bill, but Wichita Royalty Company elected to attach them to the pending litigation. It cannot complain that the whole case is thereby rendered removable. It is true that this results in the trial in the federal court of controversies of which there would not otherwise have been federal jurisdiction. The jurisdiction over them is dependent and ancillary. Hoffman v. Lynch, D.C., 23 F. 2d 518. The situation is like that where, in an original suit in a federal court, jurisdiction is based on a federal question; but all other matters are to be decided also, even though it turns out that the federal question is not necessary to be decided at all. Green v. Louisville R. Co., 244 U.S. 499, 37 S.Ct. 673, 61 L.Ed. 1280, Ann.Cas.1917E, 88; Siler v. Louisville R. Co., 213 U.S. 175, 29 S.Ct. 451, 53 L.Ed. 753. Where removal of the whole case is for local prejudice and influence, the removal statute, 28 U.S.C.A. § 71, expressly provides for a partial remand, and it is suggested in Hoffman v. Lynch, supra, that there may be a discretionary power to make such in other removals. See discussion in Tillman v. Russo-Asiatic Bank, 2 Cir., 51 F.2d 1023, 80 A.L.R. 1368. There was no abuse of discretion here in retaining the whole controversy,...