1. The property of a national bank organized under the Act of
Congress of June 3, 1864, attached at the suit of an individual
creditor, after the bank has become insolvent, cannot be subjected
to sale for the payment of his demand, against the claim for the
property by a receiver of the bank subsequently appointed.
2. A suit against a national bank to enforce the collection of a
demand is abated by a decree of a district court of the United
States dissolving the corporation and forfeiting its rights and
franchises, rendered upon an information against the bank filed by
the Comptroller of the Currency.
On the 15th of April, 1867, a Treasury draft of the United
States was presented to the First National Bank of Selma,
Page 88 U. S. 610
a bank organized under the Act of Congress of June 3, 1864,
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," [
Footnote
1] the act commonly known as the National Banking Act. Payment
of the draft was refused. On the morning of the following day, the
16th, the bank did not open for business, and during that day
possession was taken of the bank -- meaning, of course, by this
term its place of business, its property, effects, books, and
papers -- by the military authorities of the United States under
instructions from the Secretary of the Treasury. On the 17th, its
president absconded. An examination had that day into its affairs
showed a deficiency in its cash account of $200,000, and on the
30th of April, a receiver of its effects was appointed by the
Comptroller of the Currency. Subsequently -- that is to say on the
28th of May -- an information was filed by the comptroller charging
violation of its charter, and a summons issued to the directors to
appear; the day of appearance (by a clerical error apparently)
being put as "the 13th day of this instant." On the 1st of June, a
decree was entered on nonappearance,
pro confesso, in the
District Court of the United States forfeiting all the rights,
franchises, and privileges of the bank and adjudging its
dissolution.
Whilst the bank was in possession of the military authorities --
namely on the 17th of April, 1867 -- one Colby sued out an
attachment in one of the state courts of Alabama against it upon an
affidavit alleging that it was indebted to him in the sum of
$4,800, and that it had moneys, property, or effects liable to
satisfy its debts which it fraudulently withheld. The attachment
was levied the same day on its real property, consisting of a
dwelling house and grist mill. On the 22d of May following, a
declaration was filed in the case in which the plaintiff alleged an
indebtedness of the bank to him in the amount stated on three
certificates of deposit.
Page 88 U. S. 611
Nearly two years afterwards, in March, 1869, the attachment suit
came on for trial. The receiver was then allowed, without
objection, to appear by counsel and make proof of the facts above
stated and produce his appointment as receiver, and the decree
dissolving the bank and forfeiting its rights, privileges, and
franchises. And thereupon he moved the court to dissolve the
attachment and discharge the levy, and that the suit abate. This
motion was overruled. The receiver then offered, without objection,
the same evidence to the jury, and requested the court to instruct
them, among other things, that if they believed the evidence, the
suit could not be maintained by the plaintiff, and that they must
find for the defendant.
No objection was taken to the accidental error as to return
day.
The court refused the instruction asked for, and the jury gave a
verdict for the plaintiff for the full amount claimed. Judgment
being rendered accordingly, the case was taken to the supreme court
of the state. That court said:
"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. These being the only
causes enumerated, others are excluded by their omission. And
matter of abatement cannot be given in evidence on an issue upon
the merits, a default or a failure to plead."
The circuit court accordingly affirmed the judgment of the
inferior state court, and the case was now here for review under
section 709 of the Revised Statutes, the modern substitute of the
second section of the Act of February 5, 1867, repealing and
replacing the old twenty-fifth section of the Judiciary Act
Page 88 U. S. 612
MR. JUSTICE FIELD delivered the opinion of the Court.
Two questions are presented in this case for our determination:
1st, whether the property of a national bank organized under the
Act of Congress of June 3d, 1864, [
Footnote 2] attached at the suit of an individual creditor
after the bank has become insolvent, can be subjected to sale for
the payment of his demand, against the claim for the property by a
receiver of the bank subsequently appointed, and 2d, whether a suit
against a national bank to enforce the collection of a demand is
abated by a decree dissolving the corporation and forfeiting its
rights and franchises.
To the first question the Act of Congress furnishes an answer in
the negative; to the second, the general law respecting
corporations gives one in the affirmative.
The act of Congress prescribes the conditions upon which
national banks shall be created, the powers they shall possess, and
the consequences of their failure to meet their obligations. All
persons dealing with these institutions can only acquire and
enforce rights against them under the limitations there
designated.
The object of the act, as its title imports, was to create a
national currency secured by a pledge of the bonds of the United
States. And to that end it requires security in government bonds
for all notes issued, and in case any bank fails to redeem its
notes on demand, it provides for their payment on presentation at
the Treasury of the United States.
Page 88 U. S. 613
To make good any deficiency which may exist in the proceeds of
the bonds to meet the amount expended in paying the notes of a
bank, the act declares that "the United States shall have a first
and paramount lien upon all the assets" of the association.
Whatever disposition, therefore, may be made of the property of an
insolvent bank, the lien of the United States thereon must exist
until the government is fully reimbursed.
As to the general creditors, the act evidently intends to secure
equality among them in the division of the proceeds of the property
of the bank. The fiftieth section provides for the appointment of a
receiver of an insolvent bank, who shall take possession of its
assets, collect its debts, and upon the order of a court of record,
sell its real and personal property and pay over the money to the
Treasury of the United States, subject to the order of the
Comptroller of the Currency; that the comptroller shall then
advertise for creditors to present their claims against the
association, and after making provision for refunding to the United
States any deficiency in redeeming its notes, shall make a ratable
dividend of the money on all claims proved to his satisfaction or
adjudicated in a court of competent jurisdiction.
The fifty-second section, further to secure this equality,
declares that all transfers by an insolvent bank of its property of
every kind, and all payments of money made after the commission of
an act of insolvency, or in contemplation thereof, with a view to
prevent the application of its assets in the manner prescribed by
the act, or "with the view to the preference of one creditor over
another, except in the payment of its circulating notes, shall be
utterly null and void."
There is in these provisions a clear manifestation of a design
on the part of Congress 1st, to secure the government for the
payment of the notes not only by requiring in advance of their
issue a deposit of bonds of the United States, but by giving to the
government a first lien for any deficiency that may arise on all
the assets subsequently acquired by the insolvent bank, and 2d, to
secure the assets of the bank for ratable distribution among its
general creditors.
Page 88 U. S. 614
This design would be defeated if a preference in the application
of the assets could be obtained by adversary proceedings. The
priority of the United States and the ratable distribution among
the general creditors, so studiously provided for in the act, would
in that case be lost. As justly observed by counsel, if preference
was left to the race of diligence, creditors living remote from the
location of the bank would always be distanced in the contest, and
the equality promised to them by the act would be a mere
mockery.
It is too late for counsel to question in this Court the right
of the receiver to appear in the state court and move the discharge
of the attachment and the abatement of the suit, or to contest the
case at the trial. Whatever informality may have existed in the
proceeding, it was waived by the silence of the parties. Objections
in matters of form to modes of procedure in the court below cannot
be urged here for the first time.
But, independently of this consideration, we are of opinion that
it was a proper proceeding on the part of the receiver to apply to
the court below to discharge the attachment, on proof of the facts
presented by him, and, in our judgment, it his appointment and the
decree dissolving the association. Invested with the rights of the
bank to the possession of the property by his appointment, it was
his duty to take the necessary steps to remove the levy. That levy
was void as against his claim to the property, and in our judgment
it was error for the court to refuse to discharge it on his
application.
But in addition to this, the suit had abated by the decree of
the district court of the United States forfeiting the rights,
privileges, and franchises of the corporation and adjudging its
dissolution. The act of Congress provides for such forfeiture
whenever the directors themselves violate or knowingly permit any
officers, servants, or agents of the association to violate any of
the provisions of the act. The information filed against the bank
by the Comptroller of the Currency disclosed several gross
violations of the act by the
Page 88 U. S. 615
directors, and the justice and validity of the decree were not
questioned in the state court. With the forfeiture of its rights,
privileges, and franchises, the corporation was necessarily
dissolved, as the decree adjudged. Its existence as a legal entity
was thereupon ended; it was then a defunct institution, and
judgment could no more be rendered against it in a suit previously
commenced than judgment could be rendered against a dead man dying
pendente lite. This is the rule with respect to all
corporations whose chartered existence has come to an end, either
by lapse of time or decree of forfeiture, unless, by statute,
pending suits be allowed to proceed to judgment notwithstanding
such dissolution. The prolongation of the corporate life for this
specific purpose as much requires special legislative enactment as
does the original creation of the corporation. No such enactment is
found in the Act of Congress authorizing the creation of national
banks and prescribing their powers, nor is there any provision
elsewhere that we are aware of which would prevent the dissolution
of a corporation from working the abatement of a suit pending
against it at the time.
"I cannot distinguish," says Story in
Greeley v. Smith,
[
Footnote 3]
"between the case of a corporation and the case of a private
person dying
pendente lite. In the latter case, the suit
is abated at law unless it is capable of being revived by the
enactment of some statute, as is the case as to suits pending in
the courts of the United States, when, if the right of action
survives, the personal representative of the deceased party may
appear and prosecute or defend the suit. No such provision exists
as to corporations, nor indeed could exist without reviving the
corporation
pro hac vice, and therefore any suit pending
against it at its death abates by mere operation of law."
Some criticism is made upon the fact that the decree of
dissolution was entered on the 1st of June, when the summons cited
the directors before the court on a different day.
Page 88 U. S. 616
It is a sufficient answer to this criticism that no objection of
the kind was made to the decree in the court below, nor was its
validity questioned. The presumption is, in the absence of such
objection, that an answer existed which would have been made had
the objection been taken. The decree was admitted in evidence, and
the decision of the court was placed on the ground that the
provisions of the Act of Congress did not interfere with
proceedings by attachment, in the state court, nor affect the
liability of an insolvent corporation to be thus sued, and "that
matter of abatement could not be given in evidence on an issue upon
the merits, a default, or a failure to plead," the court apparently
considering the abatement of the attachment, and not the abatement
of the suit, as the object sought by the production of the
decree.
Judgment reversed and the cause remanded with directions to
discharge the attachment levied on the property of the
bank.
[
Footnote 1]
13 Stat. at Large 99.
[
Footnote 2]
13 Stat. at Large 99.
[
Footnote 3]
3 Story 658;
see also Farmers' and Mechanics' Bank v.
Settle, 8 Watts & Sargeant 207, and
Mumma v.
Potomac Company, 8 Pet. 281.
