First National Bank of Selma v. Colby

| Ala. | Jun 15, 1871

PETERS, J.

On the 17th day of April, in the year 1867, the appellee, Oolby, commenced an action at law by attachment against the First National Bank of Selma, for the sum of forty-eight hundred dollars. This attachment was regularly issued from the circuit court of Dallas county, in this State, and regularly executed by a levy on lands belonging to said bank, on the day of its issuance. The bill of exceptions taken at the trial shows, that said bank ceased to do business on the 16th day of April, 1867, and had, 6n the 15th day of the same month, refused and failed to pay a draft of the United States for seventy-five thousand dollars.- It further appears, that the president of said bank had absconded on the 17th day of April, 1867, and on that day said corporation’s house of business and its assets were taken possession of by General Swayne, then commanding the Federal forces in this State, under instructions of the secretary of the treasury of the United States, and upon examination the cash account of said bank was found deficient in the sum of about two hundred thousand dollars. It was also shown that said bank was chartered on the 24th day of August, 1865, under authority of an act of the congress of the United States, entitled “ An act to provide a national currency, secured by a pledge of United States bonds, and to provide for the circulation and redemption thereof.” This; act was approved June 3, 1864. After the levy of said attachment, viz: on the 1st day of June, in the year 1867, by decree of the district court of the United States for the middle district of Alabama, “ all the rights, privileges and franchises of said association derived from the act of congress” were “forfeited,” and said association, called the First National bank at Selma, was adjudged to be “ dissolved.” The record of the proceedings in said district court declaring the forfeiture and dissolution of said charter thereof were given in evidence to the jury on said trial. It was likewise shown that Cornelius Cadle, jr., had been regularly appointed receiver for said association as required by law, on the 3d day of June, 1867. The plaintiff also proved by his certificate of deposit the amount of his deposit in said bank to be the sum for which the attachment had been sued out; that is, forty-eight hundred dollars. This was the substance of all the evidence offered on the trial.

On this evidence, said Cadle, as said receiver, moved the court to dissolve said attachment, and also to quash and discharge the levy of the same on the property of said bank. These motions the court refused; and said Cadle, as such receiver as aforesaid, excepted to the ruling of the court thereon. And thereupon the court charged the jury, that if they believed the evidence, they must find for the plaintiff “ the amount of the certificate and interest.” This charge was excepted to by said receiver. Cadle, as receiver as aforesaid, then asked the court to charge the converse of this proposition; that is, “if the jury believed all the evidence offered in this cause, they must find for the defendant. This charge the court refused, and the receiver, Oadle, excepted as before. There was a verdict and judgment for the plaintiff for $5,632 33 and costs, and a venditioni exponas was ordered to issue to the sheriff to sell the property levied on.

I have looked into the act of congress under which the “ First National Bank at Selma ” was incorporated, and I have not been able to find any express authority there given which would justify a court of law, in which there was a litigation regularly instituted and pending, to dissolve or dismiss an attachment regularly and properly issued and levied on the property of that association, or to discharge the levy so made. Under the laws of this State, such motions do not affect the merits of the suit. They are, then, not matters of right, but only of discretion in the court. Such discretion is not a matter of error on appeal to this-court.— Gill v. Downs, 26 Ala. 670" court="Ala." date_filed="1855-01-15" href="https://app.midpage.ai/document/gill-v-downs-6505540?utm_source=webapp" opinion_id="6505540">26 Ala. Rep. 670; Ex parte Putnam, 20 Ala. 592" court="Ala." date_filed="1852-01-15" href="https://app.midpage.ai/document/ex-parte-putnam-6504794?utm_source=webapp" opinion_id="6504794">20 Ala. 592. Under the provisions of the act of congress, the bank has power to “ make contracts, sue and be sued, complain and defend in any court of law and equity, as fully as natural persons.” — U. S. Stat. at Large 1863-64, p. 99 ; 101, § 8. Then it occupies, so far as these rights are concerned, simply the condition of a citizen. And it is entitled to the same indulgences and rights that a citizen may claim, and no more. If the suit is instituted in a State court, as it clearly may be, (8 Wall. 498" court="SCOTUS" date_filed="1869-12-13" href="https://app.midpage.ai/document/kennedy-v-gibson-88113?utm_source=webapp" opinion_id="88113">8 Wall. 498,) then the law applicable to the conduct of such suits is applicable to the bank, subject, however, to such modifications as the law of congress may impose.

But the “ national currency act,” under which the bank at Selma was brought into existence, does not interfere, so far as I am able to see, in any way with the suit in the State court. Of course, an act of congress made in pursuance of the constitution of the United States, is a part of the supreme law of the land, and a State law must yield to it. — Con. U. S. Art. VI, § 2 ; Ableman v. Booth, 21 How. 517, 520. But as the bank may sue and be sued as a natural person, in this State, it may be- sued by attachment; because it stands in no better condition than a natural person, and a natural person, in this State, may be sued by attachment. — Rev. Code, §§ 2928-30, 2942. The insolvency of the bank does not dissolve the liability to be sued by attachment. The act does not say so. And it is not to be presumed that congress would interfere with a right so important to the citizen of the State without an express declaration to that effect. It is Dot a right to be postponed or defeated by a questionable deduction. If it may be interfered with to any extent, in the end it might be paralyzed and destroyed. — Field v. Close, 15 Mich. Then the conduct of the suit against the bank is to be judged and determined by our own law in reference to attachments. This does not interfere with or settle the effect or right of the lien under the levy of the attachment. That is not a question that can be raised in this •suit in its present shape. No doubt that question is under the control of a jurisdiction where it will be properly determined. Under the law of this State, when an attachment is once properly issued against a corporation, it will not be abated or dismissed because the corporation had, before the issuance of the process, committed an act of insolvency, or because its assets had been placed in the custody of a receiver. The statute of this State governing such suits is as follows : “ If the defendant appear and plead, the cause proceeds as in suits commenced in the ordinary mode. If he make no defense, the plaintiff may at the trial term take judgment final by nil dioit, or default, or execute a writ of inquiry of damages, as may be necessary. — Rev. Code, §§ 3000, 2942. The act of insolvency does not dissolve the liability to be sued, nor the liability to be sued by attachment. The act of congress does not so declare, nor is it necessary for the purposes of that statute so to infer it. By the practice of our courts, attachments are only abatable when they have been issued without affidavit or without bond, as required by law. Rev. Code, § 2989; 19 Ala. 32" court="Ala." date_filed="1851-01-15" href="https://app.midpage.ai/document/kirkman-v-patton-6504478?utm_source=webapp" opinion_id="6504478">19 Ala. 32. These being the only causes enumerated, others are excluded by their omission. And the plea in abatement, as all others, must be made by “ the defendant,” and not by a stranger. This is the language of the statute above quoted. — Rev. Code, § 3000 ; Kirkman & Rosser vs. Patton, 19 Ala. 32" court="Ala." date_filed="1851-01-15" href="https://app.midpage.ai/document/kirkman-v-patton-6504478?utm_source=webapp" opinion_id="6504478">19 Ala. 32. And matter of abatement can not be given in evidence on an issue upon the merits, a default, or a failure to plead.

No doubt the government could send one of its military officers to seize upon its own funds deposited in a bank or elsewhere, when they can be legally reached. But the officer thus sent could not go farther and seize the property of the bank also. His possession as such officer in the latter case is not the custody of the law which courts of merely legal jurisdiction will respect, but the custody of the sword, which courts are not constituted to resist. This latter custody does not forbid the levy of a proper attachment legally issued. The funds of the United States deposited in the bank were not entitled to any lien on the assets of the bank, until, at least, the assets had passed into the custody of a receiver, if even then. The government had power to secure itself against such loss of its deposits by the security required to be taken in another way. The lien on the assets seems to be intended for the security of the note-holders of the bank, and not for the deposits. — Act of Congress, supra, § 45. It is possible that the lien of the attachment must give way to the equities arising under certain sections of the above recited act of congress, and to the necessities of an administration and distribution of the assets of the association by the receiver; but this question does not arise in this case, and it is not necessary to be decided. — Act Cong, supra, §§ 47, 50, 52. Claims against the bank may be such as the receiver may be unwilling to allow. In such case, they may be proven to the satisfaction of the receiver, or adjudicarted in a court of competent jurisdiction. This could not be, unless the suit could be instituted against the corporation. And for this purpose a State court is competent to adjudicate such claims. — Act of Cong, supra, §§ 47,50, 52, 57 ; Kennedy v. Gibson et al., 8 Wall. 498" court="SCOTUS" date_filed="1869-12-13" href="https://app.midpage.ai/document/kennedy-v-gibson-88113?utm_source=webapp" opinion_id="88113">8 Wall. 498. For this reason, the doctrine of the case of Paschall v. Whitsett does not apply. — 11 Ala. 472" court="Ala." date_filed="1847-01-15" href="https://app.midpage.ai/document/paschall-v-whitsett-6503229?utm_source=webapp" opinion_id="6503229">11 Ala. 472. In this latter case, the corporation •was extinct before the suit was brought. — See Rev. Code, § 1775.

[Note by Reporter. — The foregoing opinion was delivered at the January term, 1870, when Mr. Compton applied for a re-hearing, and filed in support thereof an elaborate argument, the substance of which was as follows :]

The record does not show that the defendant, said bank, pleaded any plea in defense of said action; and it appears that the claim of the plaintiff was fully proven. The plaintiff was therefore entitled to his judgment. — Rev. Code, § 3000. There was, then, no error in the action of the court below.

The judgment is affirmed.

1. There is no statute providing for the continuance of actions against corporations created by an act of the congress of the United States after dissolution; the dissolution of such corporations therefore abates all suits pending at the time of its dissolution. — Mumma v. Potomac Co., 8 Pet., 281" court="SCOTUS" date_filed="1834-03-12" href="https://app.midpage.ai/document/mumma-v-potomac-co-85878?utm_source=webapp" opinion_id="85878">8 Peters, 281 ; Greely v. Smith, 3 Story’s R. 657.

Since the decision in the case of Paschall v. Whitsett, (11 Ala. 472" court="Ala." date_filed="1847-01-15" href="https://app.midpage.ai/document/paschall-v-whitsett-6503229?utm_source=webapp" opinion_id="6503229">11 Ala. 472,) the laws of Alabama (Rev. Code, § 1775,) have- provided for the continuance of domestic corporations for the purpose of winding up the business of such corporations. National banking associations can not be kept alive by State laws for any purpose ’whatever; if so, State laws would control federal legislation, and could continue federal laws after they had ceased to exist. An act of congress made in pursuance of the constitution of the United States, is a part of the supreme law of the land, and State laws wbieb conflict with its provisions must yield. — Const. U. S. Art. VI, § 2 ; Ableman v. Booth, 21 How. 517.

These national banking associations exist alone by virtue of a law of congress; they are a part of the financial system of the nation; they are not dependent upon the comity of any State for the privilege of transacting business within its borders. The general government has a right to establish them in any State. — McCullough v. State of Maryland, 4 Wheat. 316.

The laws of Alabama in reference to such associations are precisely the same now as they were when the decision in Paschall v. Whitsett, supra, was made. The judgment of the dissolution of the association by the United States district court was rendered before the judgment in the attachment suit. The attachment was therefore dissolved by the extinction of the defendant’s corporate existence; if the attachment was at an end, its hold or lien on the property was gone, and the judgment in the attachment suit, and the order directing the issuance of the venditioni exponas was erroneous. The fact of the dissolution of the association was established by proof to the court, before the judgment in the attachment suit was rendered.

If, then, there is any authority in law for the prosecution of suits against dissolved national bank associations, it must be found in the act creating them. Section 50 of the Currency Act provides, that claims against such associations in the hands of receivers and in process of settlement, such asthe controller of the currency may not consider proved to his satisfaction, may be “adjudicated in a court of competent jurisdiction.” If this section is invoked as giving such authority, the party must be bound by all its terms, provisions and purposes.

2. If the plaintiff had the right to proceed with his suit ■ after it was shown to the court that the association had been dissolved by the decree of the United States district court, it is admitted that he had the right to have his claim against the association ascertained or determined by the “adjudication of a court of competent jurisdiction” by any process available for that purpose in such a court, if he had not proved it to the satisfaction of the controller of the currency. He had the right to have the validity of his claim and the amount of it determined; when this was done, the claim was in the condition of those which had been proved to the satisfaction of the controller, and was entitled to receive a ratable dividend with other claims proved or adjudicated, from the assets of the association, after they had been converted into money and paid over to the treasurer of the United States. “ The claims of creditors may be proved before the controller, or established by suit against the association. Creditors must seek their remedy through the controller in the mode prescribed by the statute; they can not proceed directly in their own names against the stockholders or debtors of the bank.” — Kennedy v. Gibson et al., 8 Wall. 506. Can they proceed against the property of such associations ? Beyond the ascertainment of the validity of his claim, and the amount of it, he is not permitted to go, except in violation of section 50 of the currency act.

It is clear that under the general law, aside from the provisions of the currency act, the assets of this insolvent corporation constitute a trust fund or pledge in the hands of its receiver for the equal benefit and security of all note holders, and other creditors of such corporation, and no diligence on the part of a creditor of such corporation could defeat the right of other creditors to a ratable dividend 'of the funds arising from the assets of such corporation. — Marr v. Bank of West Tenn., 4 Caldwell, p.471, and cases therein cited; 2 Story’s Eq. Jur. § 1252; Wood v. Dummer, 3 Mason’s R. 308; Gue v. Tide Water Canal Company, 24 How. p. 257 ; Hightower v. Thornton, 8 Geo. R. 493.

But section 50 of the currency act has provided a tribunal for the express purpose of giving to creditors of such associations when they become insolvent, a speedy adjustment of its affairs, and a ratable dividend of its assets among all its creditors, excepting the government, which section 47 provides shall have a lien upon all the assets to re-imburse the government the amount expended by it in redeeming the notes of such associations. After this lien is satisfied, all creditors who have proven their claims as required in the act, or have had them proved by adjudication, are to be paid ratably. The effect of the exercise of the authority given to the controller was, to give him exclusive jurisdiction of the affairs of this association. The terms of section 50 preclude any other hypothesis ; any interference with this authority, except in the manner provided in this act, would be illegal; there would be no end to the embarrassment and conflict which would ensue from such interference. This tribunal has exclusive jurisdiction, and to it all parties must resort. As soon as it was made manifest that the United States, by the controller of its currency, had assumed the administration of the assets of this association, the State court should have discharged the levy of the attachment and given judgment on the proof of the plaintiff’s claim in the manner indicated in the act, and analogous to the law respecting judgments against insolvent estates in this State. — Rev. Code, § 2209.

This attempted transfer of the property of the association by its sale under venditioni exponas for the purpose of the payment of the claim of plaintiff, to the exclusion of other creditors, is void. “The 50th and 52d sections of the act of Congress of June 3d, 1864, (‘banking act,’) apply to legal as well as tó voluntary transfers by the bank.” “ The law will not compel a payment or transfer which it prohibits a debtor from making.”

From the above quoted decision, it will be seen that the effect of the currency act is to wind up such associations in the same manner as insolvent estates. It seems to be the uniform policy of national and State laws, upon bankruptcy, or the death and insolvency of persons, or corporations, to divide the estate or assets of either, ratably among the creditors, and for this purpose to dissolve attachment liens. — U. S. Bankrupt Act, Insolvent Estates, Revised Code of Alabama. The Code of Alabama nowhere says, that the insolvency of an estate shrill dissolve attachment liens. — See §§ 2062, 2177, 2205, 2206. Yet such insolvency has been uniformly held to have that effect. Lamar v. Gunter, 39 Ala. p. 326 ; McEachim v. Reid, 40 Ala. 410" court="Ala." date_filed="1867-01-15" href="https://app.midpage.ai/document/mceachin-v-reid-6507293?utm_source=webapp" opinion_id="6507293">40 Ala. 410.

The strongest term used in the Code in reference to the distribution of such estates is, ratable payment, (§ 2206); the language of the Currency Act is, ratable dividend.

3. Section 47 of the currency act provides, that the United States shall have a first and paramount lien upon all the assets of such associations, to re-imburse the United States the amount expended in redeeming the circulating notes of such associations. The controller is required by section 50, to make full provision for the payment of the amount so expended before he makes a ratable dividend of the proceeds of the assets; this provision for such payment can only be made by him. If, then, these assets can be taken under attachments before they are converted into money, the controller will be deprived of the means to secure the government the benefit of this paramount lien, and this one tribunal created by the law for the enforcement of the provisions of this act, will have taken from it by the process of a court, one of its most essential powers, and the means to perform one of its plainest duties. This is the effect of the venditioni exponas ordered by the circuit court, and it is insisted that such interference is against the spirit and policy, if not letter, of the currency act.

If property, when attached, is subject to a lien bonafidei placed upon it by the defendant, that a lien must be respected and the attachment postponed to it. — Section 223, Drake on Attachment, and cases cited.

And this rule extends to those created by law. — Taylor v. The Royal Saxon, 1 Wallace, jr. 311. In the case of Peale v. Phipps, 14 Howard’s Rep. p. 375, Taney, C. J., says:

“ In the case of Wiswall v. Simpson’s Lessee, 14 Howard, 52, the court held that where certain lands were in the hands of a receiver, appointed by the chancery court of Alabama, in a case pending before it, they could not be sold by the marshal upon process of execution issuing out of the circuit court of the United States for that district, although the judgment upon which the process issued, was a lien upon the land, and the execution was laid before the receiver obtained actual possession of the property.”

If a receiver had been wrongfully appointed by reason of an alleged refusal of the association to pay its circulating notes, the association could have applied to the nearest United States court, within ten days after receiving notice of the appointment of such special agent, and enjoined further proceedings in the premises. — § 50, Currency Act.

A modification of the opinion rendered at this term in this cause, is asked to the extent of setting aside the judgment of the circuit court, so far as it authorizes the issuance of a venditioni exponas. In this event, the appellee will receive the whole of his debt, if there be assets, and his satisfaction by a rateable dividend, if there be a deficit.

The application was responded to as follows by—

PETERS, J.

The application for rehearing in this case is overruled, with costs. The plaintiff in the court below, who is appellee in this court, was entitled to his judgment in the circuit court. The opinion delivered in this case is not intended to go beyond this, and settle the rights of the parties under the levy of the attachment. If the judgment below was correct, then the plaintiff’s rights under the judgment to have it enforced necessarily followed, unless they were defeated by some superior right in favor of the defendant, or some third person. — Revised Code, §§ 2837, 2838, 2868, 2955 ; Autrey v. Walters, June term, 1871. In this case the defendant had no right against the plaintiff which was not settled by the verdict. And in such a suit no third person will be permitted to intervene to defeat the right of the plaintiff to his judgment. This question is sufficiently apparent from the authorities cited in the opinion in the principal case, without further discussion.