277 Pa. 110 | Pa. | 1923
Opinion by
These three appeals involve the same question, namely, whether a national bank has the right to act as a fiduciary under the laws of Pennsylvania; they were argued together and will be decided in a single opinion.
In settling the account of executors of the estate of Edna F. Turner, a fund was awarded to minor children, beneficiaries under the will of decedent. The court appointed the Rittenhouse Trust Company, of the City of Philadelphia, guardian of their estate and before the account was called for audit that company was converted into a national bank and consolidated with the Corn Exchange National Bank, with power granted by the Federal Reserve Board to transact a fiduciary business. The latter bank applied for and secured a certificate from the state banking department authorizing it to do a fiduciary business in Pennsylvania and presented a petition asking that funds belonging to the minors be paid to it. This the court refused to do until the bank secured the approval of the Orphans’ Court of Philadelphia County, under Rule 21 of that court relating to approval of fiduciaries. Accordingly, a petition was presented for that purpose, setting forth the fact of petitioner’s incorporation under the national banking laws and its subsequent consolidation with the Rittenhouse National Bank, formerly Rittenhouse Trust Company, stating it was authorized by the Federal Reserve Board to transact a fiduciary business and had complied with the laws of Pennsylvania governing the transaction of such business; had conformed with the Acts of May 9, 1889, P. L. 159, and May 20, 1921, P. L. 991, agreeing to be subject to supervision and examination by the banking department of Pennsylvania in the same manner as corporations of Pennsylvania; and stipulated, pursuant to requirements of the before-mentioned rule of court, that “securities and other property received by the corporation both in a fiduciary capacity and from the person or persons for whom it is surety, shall not be taken out of the jurisdiction of the court and shall be
The Act of Congress, approved December 13, 1913, 38 Statutes, 251, gave the Federal Reserve Board power, inter alia, “to grant by special permit to national banks applying therefor, when not in contravention of state or local law, the right to act as trustee, executor, administrator or registrar of stocks and bonds under such rules and regulations as the said board may prescribe.” It was thus left to the courts to ascertain whether, in any given case, the exercise of the powers granted would be in contravention of state or local law. Difficulties arose in the construction of the act, resulting in its amendment in 1918 (Act September 26, 1918, 10 Statutes 867) by permitting national banks to act as executor, administrator, trustee, guardian, etc., in all cases where state banks, trust companies, or other corporations “which come into competition with national banks, are permitted to act under the laws of the state in which the national bank is located,” and also providing that “whenever the laws of such state authorize or permit the exercise of any or all of the foregoing powers by state banks, trust! companies or other corporations which compete with national banks, the granting to and the exercise of such powers by
The contention of the Commonwealth is that, to permit a federal bank to act in a fiduciary capacity in this State, under the statutory provisions mentioned, would amount to a violation of our laws. The Act of May 21, 1919, P. L. 209, provides, inter alia, that the banking department shall have supervision of all corporations or persons receiving money on deposit for safe keeping, including banks incorporated under the laws of the United States, which shall, pursuant to federal law or regulations, be permitted to act in any fiduciary capacity and makes all such corporations subject to inspection and examination by the banking commissioner. By Act of May 20, 1921, P. L. 991, it was provided that no person should have the right to appoint, in a fiduciary capacity, any corporation other than a corporation organized and doing business under the laws of Pennsylvania and subject to the supervision and examination of the banking department of the State, or a corporation organized under the laws of the
A comparison of tbe foregoing federal and state acts shows tbe main points of difference is that tbe federal statute allows inspection of tbe books and records of only that part of tbe assets of national- banks as are received in a fiduciary capacity and requires them to segregate all assets held in a fiduciary capacity and prohibits commingling them with other assets in its business, unless it shall first set aside in tbe trust department United States bonds or other securities approved by tbe Federal Reserve Board, while, on tbe other band, tbe state acts authorize supervision by tbe banking department of all tbe assets of tbe corporation and forbids substitution of securities for tbe funds but requires tbe companies, in all cases, to keep trust funds separate from its other assets and to indicate all investments made as fiduciaries, so that tbe trust to which tbe investment belongs shall be clearly known. It is argued this difference in tbe two provisions produces a conflict, making tbe Federal Reserve Act in direct violation of tbe state law by permitting uninvested funds to be mingled with tbe general assets and removing such funds from inspection or supervision of state authorities. Tbe Corn Exchange National Bank has complied with every provision of tbe state rules, regulations and laws, by consenting to tbe examination of all its assets by tbe state bank examiners and agreeing to keep trust securities on deposit in a separate bank. This voluntary compliance with state rules would, in itself, seem to render unnecessary a further discussion of tbe question raised. Appellant contends, however, that tbe national bank cannot validly agree to be bound by state law or by local rule of court, which is contrary or inconsistent with tbe federal law and that, consequently,
The answer to this contention is that, in so far as the state law is inconsistent with the Federal Act, the former must yield to the latter, even though the result may be to place upon federal banks a benefit or burden not received or assumed by the state banks and trust companies.
The definition given in the Federal Act as to what constitutes a violation of the state law takes no cognizance of the fact that certain administrative details in the regulations of federal banks were different from those governing state institutions. The existence of these differences, however, is not sufficient to deprive a national bank of the enjoyment of its powers under the federal law. The establishment of the Federal Reserve Bank was a matter within the scope of federal power and a state cannot, in any way, interfere with the powers of such bank, except in so far as Congress has permitted it to do so. When the Federal Act was passed Congress had knowledge of the fact that various states had adopted different laws and systems governing persons or corporations acting in a fiduciary capacity. Having this knowledge, Congress gave the Federal Reserve Board power to prescribe regulations for the government of federal banks. Regulations thus established are paramount to state rules and the latter must yield whenever a conflict arises. It was with knowledge of this situation and the existing difference between rules governing state and federal banks that Congress undertook to define, by the Act of 1918, what would be considered “in contravention of state law.” It will be observed the definition refers to “powers” only and not the rules governing the exercise of such powers. It is the right itself, not the rules governing the exercise of the right, to which reference is made. Concede the existence of the right in the state banks and trust companies and we have the same right bestowed upon national banks. Had Con
The decrees of tbe Superior Court are affirmed.