Woolsey v. Security Trust Co.

• Decision Date: 11 January 1935
• Docket Number: No. 7327.,7327.
• Citation: 74 F.2d 334
• Parties: WOOLSEY et al. v. SECURITY TRUST CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

74 F.2d 334 (1934)

WOOLSEY et al. v. SECURITY TRUST CO. et al.

No. 7327.

Circuit Court of Appeals, Fifth Circuit.

December 12, 1934.

Rehearing Denied January 11, 1935.

Robert E. Cofer and John D. Cofer, both of Austin, Tex., for appellants.

James H. Hart and James V. Allred, both of Austin, Tex., and Sidney Benbow, of Houston, Tex., for appellees.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

Appellants, creditors of Security Trust Company, petitioned to have it adjudicated a bankrupt on the ground that, while insolvent, a receiver had been appointed for it in the state court, at the suit of the state of Texas. Motions to dismiss for want of jurisdiction to adjudicate it a bankrupt were filed by the Security Company, by Gibson, its receiver, and by the state of Texas.

The trust company's motion was directed at the petition itself as wanting in jurisdictional allegations. Gibson and the state, appearing by interventions, made the same point, and in addition alleged the company's incorporation as a banking and trust company under the laws of Texas, and that by these laws it was under the supervision and control of the banking department and the commissioner of banking. They further alleged that, in the exercise of this supervision and under authority of law, the commissioner had, on May 29, 1933, requested the Attorney General to institute proceedings and place the bank's affairs in the hands of a receiver, and that this had been done; that all that the corporation had done and all that had been done with it had been done under and in accordance with the laws of Texas regulating banking corporations.

Petitioners joining issue, there was a full hearing, resulting in a decree of dismissal. Petitioners have appealed. Not as their main ground, but in a tentative way, they complain that the District Judge heard evidence instead of disposing of the motion to dismiss on the pleadings.

There is no merit at all in this complaint. Petitioners, answering the interventions, definitely joined issue on the matter tendered. All questions of procedure aside, however, it was the duty of the court to determine for itself before proceeding further whether it had jurisdiction, for neither consent nor waiver nor estoppel could give it jurisdiction or permit it to proceed, if in fact the Security Company was a banking corporation exempt from bankruptcy. Vallely v. Northern Fire & Marine Ins. Co., 254 U. S. 348, 41 S. Ct. 116, 65 L. Ed. 297. Petitioners' real complaint is of the finding of the District Judge that the Security Trust Company was a banking corporation. They argue that, though chartered with banking powers, it was formed to be and for a while it was operated as a banking corporation, it was not such a corporation at the time the petition in bankruptcy was filed, but was a moneyed corporation, to wit, a trust company. They urge that not the things it was chartered to do, but those it was actually doing when the receiver was appointed, determine, for the purposes of bankruptcy jurisdiction, whether or not it is exempt from adjudication. They insist that, measured by this rule, the undisputed evidence shows that the Security Company was not a banking corporation. Appellees argue that the purposes for which a company is incorporated, as shown by its charter, determine its nature, and that particularly is this so of a banking corporation, subject, as such corporation is, to complete state supervision and control. They argue further that, if what a corporation does, rather than what it was chartered to do, determines in a proceeding of this kind whether it was a banking corporation, the undisputed evidence on that point establishes that it was such a corporation.

A consideration of the Texas corporation and banking laws, of the charter of the company, and of the undisputed facts disclosed by the record leaves us in no doubt that the District Judge was right in finding the company exempt and declining to take jurisdiction. The general corporation statutes of Texas, title 32, Revised Civil Statutes of Texas 1925 (article 1302 et seq., as amended Vernon's Ann. Civ. St. art. 1302 et seq.), will be searched in vain to find the authority for organizing a corporation with the powers the Security Company enjoys. That authority is found only in "title 16, Banks and Banking" (article 342 et seq., Vernon's Ann. Civ. St.), the title under which this corporation was formed. This title, in nine chapters, provides comprehensively for chartering and conducting, under strict supervision, the business of banking corporations.

Chapter 1 (article 342 et seq.) creates the office of banking commissioner, gives him general supervision and control over all banking corporations authorized under the act, makes him "superintendent and Instructor of the State Banking System of Texas and of all corporations incorporated under the provisions of this title" (article 347), and directs how that supervision and control shall be exercised. Article 369, that chapter, authorizes him to close any banking corporation, if in his judgment that should be done. Article 370, as amended in 1929, directs him, after taking charge of the bank, to ascertain by a thorough examination its actual financial condition, and, if he is satisfied that it is not in a condition to resume business, to in his discretion either liquidate it himself or notify the Attorney General to proceed to do so as directed in article 371. Article 371 provides that immediately upon receipt of notice the Attorney General shall institute proceedings for the appointment of, and the court shall immediately appoint, a receiver. This article further provides that, "If a State bank or bank and trust company comes voluntarily into the hands of the Commissioner, no receiver shall be appointed, and the Commissioner shall appoint a competent person in lieu thereof."

It is settled law in Texas that the purpose of these statutes is to vest the supervision, administration, and liquidation of banks and trust companies in the commissioner as a matter of general public policy in the interest of depositors and the public who deal with such institutions, and that the property of a banking corporation, when being liquidated under the direction of the commissioner of banking either through or without court proceedings, is in custodia legis. Kidder v. Hall, 113 Tex. 49, 251 S. W. 497; Arlitt v. Seaboard Bank & Trust Co. (Tex. Civ. App.) 31 S.W. (2d) 488; Driscoll v. Shaw (Tex. Civ. App.) 24 S.W. (2d) 1106. Cf. National Surety Co. v. Cobb (C. C. A.) 66 F.(2d) 323.

Chapter 2 (article 376 et seq.) "Incorporation," provides the purposes for which a banking corporation may be formed. These are, the establishment of (a) a bank of deposit or discount, or both of deposit and discount; (b) a banking and trust company; (c) a savings bank. Article 379, that chapter, requires the incorporators of any proposed state bank, savings bank, or bank and trust company to make application to the state banking board for a charter. Articles 380 and 381 require the board to examine the articles of association and the character and worth of the incorporators, to inform itself as to the public necessity for the establishment of such corporation, to determine whether it has sufficient capital and that the applicants are acting in good faith, and to grant or refuse the charter in accordance with their findings. Articles 382 and 383 require all state banks transacting business in Texas to hold a certificate of authority from the commissioner to do a banking business, and to keep some conspicuously posted in the banking house where the business is transacted. Each director of any corporation so organized must take an oath to diligently administer the corporation's affairs and that he will not knowingly violate any of the provisions of the...