Summary
In Zimmerman v. Central Union Bank, 194 S.C. 518, 8 S.E.2d 359 (1940), the dispositive issue was whether the Circuit Court or the state's banking board had jurisdiction over liquidation of the bank.
Summary of this case from Cothran v. BrownOpinion
15046
March 26, 1940.
Before DENNIS, J., Richland, October, 1939. Affirmed.
Action in the nature of a general creditors' bill by Simpson J. Zimmerman, as conservator of the Central Union Bank of South Carolina, against the Central Union Bank of South Carolina and others, wherein S.J. Zimmerman and J. Roy Barron, as conservators, acting as receivers of the Central Union Bank of South Carolina, prayed the Court to issue its rule directed to the State Board of Bank Control and E.P. Miller, Robert Gage, C.G. Padgett, W.B. Cassels, and E.O. Black, composing the board, to show cause why the Court of common pleas should not exercise jurisdiction over liquidation of trust estate of Central Union Bank of South Carolina. From an adverse judgment, S.J. Zimmerman and J. Roy Barron appeal.
The order of Judge Dennis follows:
This matter came on to be heard before me in open Court upon a demurrer interposed by the State Board of Bank Control to the petition herein, together with the return of the said board to the rule to show cause heretofore issued herein by Honorable M.M. Mann, dated August 21, 1939. The demurrer raises the question whether the petition states facts sufficient to entitle the petitioners to the relief sought, the grounds or reasons therefor being stated somewhat in detail. The Court is of the opinion that the demurrer is well founded and must be sustained and hence there is no necessity of considering the return also filed by the State Board of Bank Control.
The petitioner, S.J. Zimmerman, was appointed conservator of the defunct Central Union Bank of South Carolina on March 20, 1933, by the Governor, acting with the advice of the State Board of Bank Control, pursuant to the emergency banking laws of this State. Thereafter, on or about June 20, 1933, the said bank was declared insolvent and ordered into liquidation by the Governor of the State, acting with the advice of the State Board of Bank Control. Thereafter the petitioner, J. Roy Barron, was appointed as co-conservator by the Governor, acting with the advice of the said board.
Prior to the appointment of Mr. Barron, that is, about June 26, 1933, the petitioner, Zimmerman, as sole conservator, instituted an action, as permitted by the emergency banking laws, in the Court of Common Pleas for Richland County to obtain the instruction of the Court on certain matters. This action was in the nature of a general creditors' bill and did not seek or purport to ask for the appointment of a Receiver, the pleadings in the action setting forth that the said Zimmerman had already been appointed by the Governor pursuant to the provisions of the emergency banking laws above mentioned. The Court issued its decree requiring all creditors to come in and establish their claims or else be barred; and restricted the creditors and claimants from bringing any separate action or actions or proceedings against the bank or affecting its assets save by proceeding in the pending action, which was left open. The petition here involved is brought in that proceeding.
The petition, after alleging the appointment of Zimmerman as conservator, the ordering of the bank into liquidation by the Governor, with the advice of the State Board of Bank Control, and the bringing of the above-mentioned suit by Zimmerman, then alleges that the petitioners, acting under the supervision and direction of this Court, have proceeded with the liquidation of said bank and that no interference with the administration of said receivership, nor any change in the petitioners' status or in the allowance on account of their compensation, was undertaken by the Governor of the State so long as his plenary power and control of the bank continued, nor by the State Board of Bank Control alone, until on or about March 10, 1939, the said board issued instructions to the petitioners to make disposition of certain trust assets and to reduce the compensation which they were then receiving, and also directed the said petitioners to make a report to it as to their plans with reference to compliance with its said orders.
Petitioners further allege that both the Act of May 10, 1934, 38 St. at Large, p. 2275, which transferred the control and liquidation of State banks to the State Board of Bank Control alone, and the Act of May 9, 1936, 39 St. at Large, p. 1484, under which the present board was appointed, only conferred jurisdiction on the said board over banks then doing or thereafter authorized to do business, and, therefore, did not extend the jurisdiction of said board to petitioners and their trust, but thereby petitioners and their trust were excluded from the jurisdiction of said board. Petitioners further allege that notwithstanding such alleged limitation of the board's jurisdiction and the exclusion of petitioners and their trust from its jurisdiction, the said present State Board of Bank Control has attempted to reduce the compensation to be paid to petitioners, and to direct petitioners to dispose of certain trust assets, all of which was and is in violation of this Court's jurisdiction and in excess of the said board's authority and without legal force and effect. Petitioners then pray that the Court issue its rule directed to the State Board of Bank Control to show cause why this Court should not exercise jurisdiction over the liquidation of said trust estate and the petitioners in the exercise of their duties therein, and why the petitioners should not be authorized and permitted to continue the liquidation of said bank and receive compensation therefor under the direction of this Court and why the petitioners should not be instructed from time to time by the Court as to their powers and duties in the normal and proper administration of their trust.
The contention of the petitioners broadly stated is that the present State Board of Bank Control has no jurisdiction whatsoever over the liquidation of the Central Union Bank of South Carolina, and more specifically that the said board has no power or authority to fix or limit the compensation to be paid to the petitioners as conservators nor any right to supervise and control the liquidation of said bank, and particularly that the said board has no power or authority to direct the conservators to dispose of the remaining principal assets of said bank and to complete the liquidation thereof within a reasonable time.
The Court is of opinion that the legal questions attempted to be raised by the petition are no longer open to serious question and that the petition must be dismissed.
First. As to the compensation of the conservators. The Supreme Court at the instance of petitioners in the case of Dunlap Dunlap v. Zimmerman et al., 188 S.C. 322, 199 S.E., 296, 300, held that the "liquidating expenses" of the very bank here involved were within the exclusive jurisdiction of the State Board of Bank Control and that the Court may not interfere therewith, except under certain circumstances, which are not present here. The Court, after carefully considering all the emergency banking laws, including the Act of 1936 under which the present State Board of Bank Control was created, said:
"Is exclusive jurisdiction vested in the State Board of Bank Control under the Emergency Banking Laws, to fix or limit the fees of attorneys for an insolvent bank, in process of liquidation? * * *
"We are of the opinion that the intent and purpose of the law was to give to the State Board of Bank Control exclusive jurisdiction in the first instance in fixing and limiting attorneys' fees, and may not be defeated or subverted by any party in interest by resort to the courts, unless such Board has refused to act, or has acted in such a way as results in an abuse of discretion. In such case the Courts of Common Pleas in this state would in a proper case have the power in the exercise of their equitable jurisdiction to review the action of the Board."
It cannot be questioned that the compensation of the conservator is a part of the "liquidating expenses." The Court has examined the record in the Dunlap case and that record, as well as the opinion of the Court, shows that Walter M. Dunlap was appointed associate counsel in 1933 by the Governor with the advice and consent of the then State Board of Bank Control. The record also shows that Mr. Dunlap died on January 15, 1934, and that his compensation was fixed and approved by the present State Board of Bank Control on August 14, 1936. The contention made by the attorneys for the conservators in the argument before this Court that the Supreme Court "apparently assumed that the Dunlap firm had been employed by the present bank board," is a mere assumption which has no foundation in fact.
A casual inspection of the record in the Dunlap case should convince the most skeptical or belated investigator that the very arguments now advanced were there urged upon the Court and held to be untenable.
Second. As to the broad contention of petitioners that the present State Board of Bank Control has no control or supervision over the liquidation of the bank of which they are conservators.
The Court is of the opinion that this contention is unsound in view of the conclusions reached by the Court in the Dunlap case. As already pointed out the jurisdiction of the present State Board of Bank Control over the liquidation of this bank was under consideration in the Dunlap case. The Court said:
"An examination of these Acts (referring to the emergency banking laws, including the Act of 1936) clearly shows that the legislature undoubtedly intended that the procedure looking toward the closing of insolvent banks and their liquidation was to be under the control and supervision of the Governor, acting with the State Board of Bank Control, and now vested in the State Board of Bank Control alone." (Italics mine.)
In my opinion it necessarily follows that the Supreme Court has definitely concluded that under the banking laws as they existed at the time of the Dunlap decision (1938) (and there has been no change since that time), the procedure looking towards the closing of insolvent banks and their liquidation is now vested in the State Board of Bank Control in those cases where the conservator had been appointed and the bank ordered in liquidation by the Governor, acting with the advice of the State Board of Bank Control under the Acts of 1933, as well as in those cases where the conservator has been appointed and the bank ordered into liquidation by either the board created by the Act of 1934, or the present successor board created by the Act of 1936.
The State Board of Bank Control is clearly a governmental agency, created by the Legislature, and by the Acts hereinbefore referred to, empowered to supervise and control the liquidation of the financial institutions of this State. This legislation (the emergency banking laws) is modeled on the present national banking laws, and upon substantially similar Acts of other states.
In Knott v. Morris (1931), 101 Fla., 1299, 134 So., 615, 616, the Florida Court says: "Statutes providing for the administration, regulation, and liquidation of state banks have generally been upheld, and, in the absence of fraud, corruption, maladministration, or other illegality, to be exclusive of all other methods for that purpose. This court is committed to that rule." (Citing cases.)
A conservative appointed under the emergency banking laws, as were the petitioners here, while he has such powers as are conferred upon him by the statute, is nevertheless an agent of the board appointing him for the purpose of liquidating the bank under the supervision and control of the board. The Court has clearly indicated in the Dunlap case that the present board of bank Control has succeeded to the powers and duties vested first in the Governor acting with the State Board of Bank Control under the Acts of 1933 as well as the authority and duties conferred on the board created by the Act of 1934. It therefore follows that as far as petitioners are concerned the present State Board of Bank Control must be regarded as the appointing power.
The relation of the conservator to the board is analogous to the relationship between the comptroller of the currency and a receiver appointed by him.
The receiver of a national bank appointed by the comptroller under the national banking laws is his officer, and not an officer of the Court, nor are its assets, while in his hands in custodia legis. The receiver is the mere instrument of the comptroller and subject in all respects to his instructions. In re Chetwood, 165 U.S. 443, 17 S.Ct., 385, 41 L.Ed., 782; Port Newark Bank v. Waldron, 3 Cir., 46 F.2d 296.
The fundamental error in petitioners' position is the repeated contention that they are equity receivers and that hence the Court of Common Pleas must supervise and control the liquidation of their trust. The effect of the suit in the nature of a creditors' bill which petitioner Zimmerman instituted in the Court of Common Pleas in 1933 was considered by the Court in the Dunlap case. The contention was there made that by reason of this suit Zimmerman had been appointed as Receiver by the Court and that thereby the Court had assumed jurisdiction of the liquidation of the bank. This contention was rejected by the Supreme Court.
Since the passage of the emergency banking laws, a conservator appointed pursuant to the provisions thereof and directed to liquidate a bank is in effect a statutory receiver. He is not appointed by the Court but under the Act of 1933 by the Governor acting with the State Board of Bank Control and under the existing law by the board alone. These statutes contemplate that the liquidation of an insolvent State bank shall be by a conservator appointed by the board and acting under its supervision and control. The fact that the law authorizes the conservator to apply to the Court in certain cases for instruction does not make him an equity receiver or in any wise divests the power of the board to supervise and control the liquidation.
In Pennsylvania the Legislature has provided for the liquidation of state banks under statutes somewhat similar to ours. Those statutes provide that the secretary of banking shall take over the liquidation of insolvent banks and gives the Court of Common Pleas jurisdiction to make certain orders and decrees relating to the conduct of the liquidation.
In holding that the secretary of banking in liquidating a bank under this statute was not an equity receiver the United States District Court for the Eastern District of Pennsylvania in General Baking Company v. Gordon, 9 F. Supp. 210, 213, said: "The secretary of banking is an administrative officer. His office exists by statute. He is appointed by the Governor and not by the court. He is not an equity receiver, and the mere fact that the statute provides that he shall have the rights, powers, and duties of an equity receiver does not make him one, nor does the fact that the common pleas courts of the state are given jurisdiction to make certain orders and decrees relating to the conduct of the liquidation and rights in the fund mean that the fund is in the custody of the court. That depends entirely upon the nature of the office of the liquidating officer and the power from which he derives his authority."
The petitioners contend that the effort of the board to fix and limit the liquidating expenses and to direct them as to the disposition of certain trust assets is an attempt to oust the jurisdiction of the Court of Common Pleas. The considerations of jurisdictional rivalry have no bearing on the questions here involved. There can be no question of the right of a Court of equity to review the action of the board in a proper case. This right was adverted to by Mr. Justice Fishburne in the opinion in the Dunlap case. But here the real question does not arise out of any conflict between the jurisdiction of the board on the one hand and that of the Court on the other. The real contention of the petitioners is that the board has no jurisdiction or control whatsoever over them, and that they are authorized to liquidate the bank under such procedure and at such time or times as they themselves decide. Such contention is directly opposed to the manifest purpose of the Legislature in enacting the present banking laws. It presents the novel situation of an agent or administrative officer contending that the appointing power has no control or authority over his acts in spite of the fact that the law gives the board supervision and control over the liquidation. Such contention is contrary to reason and common sense. Petitioners evidently overlook the established rule of law that the power of appointment carries with it the right of removal and the further fact that the Act of 1936 specifically provides that the conservator shall serve "at the pleasure of and under the direction of the Board." To sustain the contention of petitioners would be tantamount to encouraging an unseemly controversy between an officer or agent and the power which appointed him.
The contention of petitioners that the Acts of 1934 and 1936 apply only to banks doing business at the time of the passage of the respective Acts and that therefore the Legislature intended that neither the board created by the Act of 1934 nor the successor board created by the Act of 1936 should have any control or supervision over banks ordered into liquidation under the Acts of 1933, is untenable.
The Court does not think that the Legislature had any such consequences in mind when it enacted either the Act of 1934 or the Act of 1936. Section 9 of the Act of 1936 provides in Subsection (b) thereof: "The terms hereof shall not be applicable to banks at present in liquidation under a receivership appointed by the order of Court."
Had the Legislature intended to restrict the application of the act solely to banks then or thereafter actively engaged in business as contended by petitioners, there would have been no occasion or reason why the above-quoted provision should have been contained in the Act. This provision in itself plainly indicated the legislative intent to restrict the application of the Act only to such banks for which a Receiver had been appointed by the Court prior to the enactment of the emergency banking laws in 1933.
Furthermore, Section 13 of the Act of 1936 provides that the board thereby created should succeed to the board created under the Act of 1934. This provision would be meaningless unless the Legislature intended that the authority of the succeeding board should continue over the banks then in process of liquidation. To adopt the construction contended for by petitioners would leave a hiatus in the existing law regulating the liquidation of State banks, and would create a chaotic condition in the case of a bank of which the liquidation had been practically completed, such as is the case here.
The Court is of the opinion that it was the legislative purpose and intent by the emergency banking laws to vest the Governor, acting with the State Board of Bank Control, and subsequently the State Board of Bank Control alone, with plenary power and control over the banks of the State and their liquidation, including the determination of their liquidating expenses, and that such power cannot be defeated or subverted by any party in interest by resorting to the Courts, except under certain circumstances, which are not present here.
It is therefore ordered that the rule to show cause be and the same is hereby discharged and the petition be and the same is hereby dismissed.
Messrs. Melton Belser, Brown Watts, for appellants, S.J. Zimmerman and J. Roy Barron, Conservators, and C.T. Graydon, for intervening depositors, cite: Jurisdiction of bank board: 23 R.C.L., 64; 76 F.2d 313; 134 S.C. 373; 145 S.C. 1; 125 S.C. 332; 262 U.S. 77; 67 L.Ed., 871; 112 F., 453; 212 U.S. 118; 53 L.Ed., 435; 208 U.S. 38; 52 L.Ed., 379; 111 U.S. 176; 28 L.Ed., 390; 177 U.S. 51; 44 L.Ed., 667; 15 C.J., 1134; 290 U.S. 326; 78 L.Ed., 342; 178 S.C. 346; 188 S.C. 133; 191 S.C. 260; 175 S.C. 122; 175 S.C. 21; 188 S.C. 322. Constitutionality of Act creating board: 87 S.C. 270; 69 S.E., 391; 240 U.S. 305; 182 S.C. 369; 189 S.E., 475; 112 S.C. 67; 98 S.E., 853; 88 S.C. 438; 70 S.E., 1055; 81 S.C. 244; 62 S.E., 249; 166 S.C. 523; 165 S.E., 190; 171 S.C. 209; 188 S.C. 133; 191 S.C. 260; 290 U.S. 326; 78 L.Ed., 342. Administration of assets of insolvent bank a judicial function: 88 S.C. 438; 70 S.E., 1055; 81 S.C. 244; 62 S.E., 249; 166 S.C. 523; 165 S.E., 190; 182 S.C. 369; 189 S.E., 475; 112 S.C. 67; 98 S.E., 853; 143 S.C. 516; 136 S.C. 514; 77 S.C. 305; 80 S.C. 255; 136 S.C. 514; 3 S.C. 124; 170 S.C. 31; 168 S.C. 285; 182 S.C. 135; 189 S.C. 320.
Messrs. John M. Daniel, Attorney General, J. Ivey Humphrey and M.J. Hough, Assistants Attorneys General, and Nelson, Mullins Grier, for respondents, cite: Estoppel: 156 U.S. 680; 39 L.Ed., 578; 68 F., 524; 76 Ne. 1001. Jurisdiction: 294 U.S. 176; 79 L.Ed., 481; 23 R. C.L., 66; 271 U.S. 176; 70 L.Ed., 889. As to statutory liquidation of banks: 166 S.C. 1; 12 S.W.2d 1; 173 S.E., 53; 147 S.E., 667; 26 S.W.2d 1045; 132 S.E., 372; 273 S.W. 305; 78 A.L.R., 774; 57 P.2d 932; 48 P.2d 147; 192 N.E., 349.
March 26, 1940. The opinion of the Court was delivered by
By this proceeding, petitioners-appellants seek a judicial determination that the Court of Common Pleas, and not the State Board of Bank Control, has jurisdiction over the liquidation of the Central Union Bank of South Carolina, which was, on June 20, 1933, by the Governor, acting with the advice of the State Board of Bank Control, declared to be insolvent and ordered into liquidation.
At their instance, the identical issue was presented to this Court in the cause of Dunlap Dunlap v. Zimmerman, 188 S.C. 322, 199 S.E., 296, 301, by the appellants in the instant cause, and such issue was there decided agreeably to the contentions therein made by Messrs. Zimmerman and Barron, who, by this appeal, now seek a contrary adjudication.
In Dunlap's case, supra, in a well-considered opinion delivered by Mr. Justice Fishburne, it was held: "We are of the opinion that the intent and purpose of the law was to give to the State Board of Bank Control exclusive jurisdiction in the first instance in fixing and limiting attorneys' fees, and may not be defeated or subverted by any party in interest by resort to the courts, unless such Board has refused to act, or has acted in such a way as results in an abuse of discretion. In such case the Courts of Common Pleas in this state would in a proper case have the power in the exercise of their equitable jurisdiction to review the action of the Board."
On Circuit, Judge Dennis held that the opinion in Dunlap's case was susceptible of no other interpretation than that the present State Board of Bank Control has jurisdiction, subject to review by the Court of Common Pleas, for failure to act or for an abuse of its discretion, over the liquidation of The Central Union Bank of South Carolina, with full power and authority to fix or limit the compensation to be paid to the petitioners-appellants, to supervise and control the liquidation of the institution, to require the petitioners to dispose of the remaining assets of the bank, and to complete the liquidation thereof within a reasonable time.
His decree, which will be reported, is satisfactory to this Court, and needs no amplification other than the following: "It may be laid down as a general proposition that, where a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position." Davis v. Wakelee, 156 U.S. 680, 15 S.Ct., 555, 558, 39 L.Ed., 578.
While they do not argue the issue seriously, appellants, in their brief, assert that the Board of Bank Control Act of 1936, if construed to give the State board jurisdiction over the liquidation of banks, would be unconstitutional for violation of State constitutional provisions for the separation of the judicial functions and the vesting of such functions in the Courts, and also violative of both State and Federal Constitutions providing for due process of law, and against the enactment of legislation impairing the obligation of contract, but we are cited to no authority for such contention, and our investigation shows that similar statutes in other jurisdictions have been held to be within the power of the legislative department to enact. We are unable to find any section of the State or Federal Constitutions of which the Act in question is violative. In view of the supervisory power of the Court of Common Pleas, it cannot soundly be urged that the actions of the board of bank control, as authorized by the Act of 1936 (Act No. 802 of the Acts of 1936), constitute an infringement upon the judicial functions of the Courts.
The judgment below is affirmed.
MR. CHIEF JUSTICE BONHAM, MR. JUSTICE FISHBURNE and MR. ACTING ASSOCIATE JUSTICE E.H. HENDERSON concur.
MR. JUSTICE CARTER disqualified.