1. Under the Act of June 25, 1930, which authorizes any national
bank, upon the deposit with it of public money of a state or any
political subdivision thereof, to
"give security for the safekeeping and prompt payment of the
money so deposited of the same kind as is authorized by the law of
the state in which such association is located in the case of other
banking institutions in the state,"
the authority is not limited to the pledging of specific assets
to secure the public deposits, but is broad enough to authorize a
general lien on present and future assets of the national bank
wherever banks organized under the laws of the state have that
power. P.
292 U. S.
564.
2. The main purpose of the Act of June 25, 1930, was to equalize
the positions of national and state banks; and, without the power
granted, national banks would be at a disadvantage in competing for
deposits with state banks possessing it. P.
292 U. S.
564.
3. A national bank is subject to state law unless that law
interferes with the purposes of its creation, or destroys its
efficiency, or is in conflict with some paramount federal law. P.
566.
Page 292 U. S. 560
4. Under statutes of Georgia, a bank, state or national, may be
appointed depository of state funds upon giving a bond for the
faithful performance of all such duties as shall be required of it
by the General Assembly or the laws of the state, and the bond,
with sureties, creates a lien on all the bank's assets, existing
and subsequently acquired, for the security of the bond.
Held:
(1) That the execution of such a bond by a national bank was not
objectionable upon the ground that the state legislature might in
the future impose duties which the bank would be without authority
to undertake. P.
292 U. S.
566.
(2) That acceptance of the appointment as state depository is
not objectionable because of a power in the Georgia governor to
issue a
fieri facias which, if exercised against a
national bank, might conflict with R.S. § 5242. P.
292 U. S.
566.
(3) Accepting conclusions of the court below as to the
application of the lien under the state law and its results in long
practice, it is not to be anticipated that it will interfere with
performance by national banks of their duties to the public or
produce conflict between their duties to the state and to the
United States. P.
292 U. S.
567.
(4) Though limited in its operation upon commercial assets to
such moneys, stocks, bonds, notes, etc., as shall be captured by a
receivership, the lien, in the event of insolvency, is not legally
a preference, and to give it effect would not conflict with the
policy expressed by § 50 of the National Bank Act. P.
292 U. S.
568.
(5) A provision of the state law requiring that the bond of a
national bank shall be double the deposit secured and that of a
state bank only equal to it does not appear to conflict with or
cloud the clear provision attaching the lien to depository bonds as
such and without qualifications. P.
292 U.S. 569.
5. A national bank became a depository of state funds and gave a
bond which, under the state law, created a general lien on its
assets in favor of the state to secure the bond. The contract was
for a term of years extending before and after the passage of the
Act of June 25, 1930, which first empowered such banks to give such
security under state laws; but, during the entire period, both
parties believed the lien valid and deposits were made, withdrawn,
and renewed on the faith of that assumption until some time after
the date of that Act, when the bank became insolvent.
Held
that the lien became operative as to deposits made after the date
of the Act, and that execution of a new bond was not necessary. P.
292 U. S.
570.
6. A statute is not retroactive merely because it draws on
antecedent facts for its operation. P.
292 U. S. 571.
67 F.2d 961 affirmed.
Page 292 U. S. 561
Certiorari, 291 U.S. 658, to review the reversal of a decree in
equity denying a prior lien on assets of an insolvent national bank
to the surety on a bond which it had furnished for the security of
deposits of state funds.
MR. JUSTICE BRANDEIS delivered the opinion of the Court.
Under statutes of Georgia, in force since 1879, a bank, state or
national, may be appointed depository of state funds. To qualify,
it must give a bond for the faithful performance of its duty. A
bond with surety creates a lien on all the bank's assets, both
those held at the time of the execution of the bond and those
subsequently acquired. [
Footnote
1]
Page 292 U. S. 562
In July, 1928, the Governor of Georgia appointed the Hancock
National Bank of Sparta, Georgia, a state depository for the term
of four years. It gave a bond with the Fidelity & Deposit
Company of Maryland as surety in the sum of $10,000 for the
faithful discharge of its duties. From time to time thereafter,
until May 23, 1932, the tax collector of Hancock County deposited
in the bank moneys collected on account of state taxes. On that
day, the Comptroller of the Currency declared the bank insolvent
and appointed a receiver for whom the petitioner, John C. Lewis,
was later substituted. The amount of state funds then on deposit
was $6, 157.41. This sum, and the accrued interest, the company
paid to the state and received an assignment of its rights arising
out of the deposit. Then, the company brought in the federal court
for the Middle District of Georgia this suit in equity against the
receiver to enforce a lien for the amount upon all the assets in
his hands, claiming priority according to the date of the bond.
The District Court, after denying a motion to dismiss, heard the
cause substantially upon agreed facts. It ruled that the company
was entitled to the rights of the state by subrogation and by
transfer; held that neither the state nor the company was entitled
to a lien or to preferential treatment, and allowed the claim as
one entitled merely to a
pro rata dividend. The Circuit
Court of Appeals for the Fifth Circuit reversed the judgment and
remanded the cause for further proceedings, holding that
Page 292 U. S. 563
the asserted lien was valid, subsisting in favor of the company,
and entitled to the priority claimed.
Fidelity & Deposit
Co. v. Howard, 67 F.2d 961. This Court granted certiorari.
Lewis v. Fidelity & Deposit Co., 291 U.S. 658.
That court, following
Pottorff v. El Paso-Hudspeth Counties
Road District, 62 F.2d 498, ruled, as matter of federal law,
that national banks had under National Bank Act, as enacted in
1864, power to pledge assets to secure public deposits. It ruled as
matter of state law that the lien is a contractual one arising not
proprio vigore by reason of the statutes, but by contract
of the bank as an incident of giving a personal bond; that these
statutes apply to both state and national banks and the scope of
the lien is the same in respect to both; declared, in describing
its character, that from the date of the bond the lien attaches to
all property real and personal then owned or thereafter acquired;
that a grantee of real estate having constructive notice would take
subject to the lien; that, as to money, bonds, stocks, notes,
drafts, and other choses in action, the lien of the state is
inferior to the rights of third persons who receive the property
bona fide in the ordinary course of business prior to
insolvency or sequestration, and that the lien is inferior even to
the right of depositors to set off against their own indebtedness
that of the bank to them.
The court took judicial notice of the fact that, throughout the
fifty-three years since the enactment of the law both national and
state banks had acted as state depositories; that the lien had been
enforced against money and choses in action when captured by a
receivership, but had never been asserted as to commercial assets
transferred in due course of business; that the existence of the
lien had presented no obstacle to the ordinary operations of the
banking business or interfered in any way with the performance by
national banks of their federal functions, and that a bank's
appointment as state depository is customarily advertised and
accepted as evidence
Page 292 U. S. 564
of soundness and credit.
Compare In re
Blalock, 31 F.2d
612.
In
Texas & Pacific Ry. Co. v. Pottorff,
291 U. S. 245, and
Marion v. Ben Sneeden, 291 U. S. 262,
decided after the entry of the judgment below, we held that a
national bank had, prior to the Act of June 25, 1930, no power to
make any pledge to secure deposits except the federal deposits
specifically provided for by acts of Congress. It follows that, in
1928, no lien arose when the bank was appointed depository, and
that the judgment of the Circuit Court of Appeals must be reversed
unless the Act of June 25, 1930, c. 604, 46 Stat. 809, authorizes a
national bank to give as security a general lien of the character
prescribed by the Georgia statutes.
That Act provides:
"Any association may, upon the deposit with it of public money
of a state or any political subdivision thereof, give security for
the safekeeping and prompt payment of the money so deposited, of
the same kind as is authorized by the law of the state in which
such association is located in the case of other banking
institutions in the state."
First. The receiver contends that the Act of 1930
should be construed as authorizing merely a pledge of specific
assets to secure public deposits, and that the giving of a general
lien upon the bank's assets is still
ultra vires. The
language of the Act is broad enough to authorize giving a general
lien on present and future assets, wherever banks organized under
the laws of the state have such power, and it should be given that
construction. For the main purpose of the 1930 Act was to equalize
the position of national and state banks, and without such power
national banks would not in Georgia be upon an equality with state
banks in competing for deposits. The policy of equalization was
adopted in the National Bank Act
Page 292 U. S. 565
of 1864, and has ever since been applied, in the provision
concerning taxation. [
Footnote
2] In amendments to that Act and in the Federal Reserve Act and
amendments thereto the policy is expressed in provisions conferring
power to establish branches; [
Footnote 3] in those conferring power to act as fiduciary;
[
Footnote 4] in those
concerning interest on deposits; [
Footnote 5] and in those concerning capitalization.
[
Footnote 6] It appears also to
have been of some influence in securing the grant in 1913 of the
power to loan on mortgage. [
Footnote 7]
Compare Fidelity & Deposit Co. v.
Kokrda, 66 F.2d 641, 642.
Second. The receiver insists that, even if the Act of
1930 authorizes the giving of a general lien, the lien here
asserted must fail because there are provisions in the Georgia law
inconsistent with the National Bank Act
Page 292 U. S. 566
and because obligations are imposed upon state depositories with
which no national bank may comply.
1. Attention is called specifically to the terms of the
statutory bond, which is conditioned "for the faithful performance
of all such duties as shall be required" of the depository "by the
General Assembly or the laws of this state." The argument is that a
national bank is an instrumentality of the United States, and
cannot subject itself by contract to the laws of a state. But a
national bank is subject to state law unless that law interferes
with the purposes of its creation, or destroys its efficiency, or
is in conflict with some paramount federal law.
First
National Bank v. Kentucky, 9 Wall. 353,
76 U. S. 362;
McClellan v. Chipman, 164 U. S. 347,
164 U. S. 356;
First National Bank v. Missouri, 263 U.
S. 640,
263 U. S. 656.
What obligations to the state the bank assumes may be defined by
the law of that state. It is quite possible that the legislature
might attempt to impose, under the conditions of the bond, a duty
which the bank would be without authority to undertake, and, to
that extent, the contract would be unenforceable. But it is not
shown that the obligations as now defined by the courts of Georgia
are contrary to anything in the National Bank Act. Moreover, the
state court, which would be the controlling authority on the
question, might decide that the failure of part of the
consideration to be given would not invalidate the appointment.
2. It is urged that acceptance of the appointment as state
depository is incompatible with the functions of a national bank,
because, under § 224 of the Georgia Civil Code, it has been held
that the Governor may issue a
fieri facias against the
depository bank for the amount due to the state, whereas, Revised
Statutes, § 5242, provides that
"no attachment, injunction or execution, shall be issued against
such association or its property before final judgment
Page 292 U. S. 567
in any suit, action, or proceeding, in any state, county, or
municipal court. [
Footnote
8]"
Assuming, without deciding, that there is such conflict, it is
not material here. Section 224 of the Code provides merely a method
of enforcing the bond which has not been used here, and hence
against which there is at present no occasion for complaint.
3. It is contended that the lower court erred in its rulings on
the Georgia law; that, under the state statutes, properly
construed, the lien attaches to all kinds of property from the date
of the bond; that it applies to real estate and other tangible
property, to money, bonds, stocks, notes, drafts, and other choses
in action then owned or thereafter acquired by the bank, and that
it is not defeated even by a
bona fide sale or other
disposition of such property in the ordinary course of business;
that, consequently, the general lien would present an insuperable
obstacle to the bank's serving the public in its ordinary business
operations; that the bank could not sell the property it was
authorized to acquire, for no one would take it subject to the
lien; that the general lien would prevent the pledge of specific
bonds or other securities required in order to secure the deposits
of the United States and federal agencies pursuant to provisions of
the National Bank Act as amended; [
Footnote 9] and that it would prevent the pledge of
specific security required to authorize the issue of circulating
notes. [
Footnote 10] The
lower court took judicial notice of the fact that, for more than
half a century, the general lien described has been in force, and
has not interfered with the performance by banks of their duties to
the public, and that national banks, while serving as depositories,
have not, so far as appears, ever been
Page 292 U. S. 568
confronted with a conflict between their duties to the state and
to the United States. The reasons given by that court for its
conclusions as to the operation and effect of the lien under the
law of Georgia are set forth fully and persuasively in the opinion
of the Circuit Court of Appeals. We cannot say that it erred in the
conclusions reached either as to the state law or as to the facts.
Compare Marion v. Sneeden, 291 U.
S. 262,
291 U. S.
270-271.
4. The receiver contends that the lien, if limited in its
operation upon commercial assets to such moneys, stocks, bonds,
notes, drafts, and other choses in action as are captured by a
receivership, is not a true security at all; that, if so limited,
the alleged lien would, in the event of insolvency, be legally a
preference; that to give it effect would conflict with the policy
expressed in § 50 of the National Bank Act, [
Footnote 11] which forbids preferences made in
view of insolvency, and that Congress cannot be assumed to have
sanctioned a transaction which, though in form a security, is, in
essence, a preference.
Sections 50 and 52 do not prohibit liens given prior to
insolvency and not in contemplation thereof, whether they arise
from express agreements, or are implied from the nature of the
dealings between parties, or arise by operation of law.
Scott
v. Armstrong, 146 U. S. 499,
146 U. S. 510;
Earle v. Pennsylvania, 178 U. S. 449,
178 U. S. 454.
The lien here asserted arises out of an agreement executed at a
time when there was no question of insolvency, nor is it restricted
in its operation to the event of insolvency. It may be exercised by
execution or otherwise whenever the bank refuses to pay. It
resembles the lien which is enforced when seizure is made by the
creditor, within four months of bankruptcy, of property claimed
under an after-acquired property clause of a mortgage.
Thompson
v. Fairbanks, 196 U. S. 516;
Humphrey v.
Tatman, 198
Page 292 U. S. 569
U.S. 91. [
Footnote 12] It
resembles also those cases where, under the common law of distress
or under a statutory lien, described by the courts as "inchoate" or
"dormant," a landlord, within four months of bankruptcy, seizing or
levying upon whatever property was on the tenant's promises, was
held to have a valid lien.
Henderson v. Mayer,
225 U. S. 631;
Richmond v. Bird, 249 U. S. 174.
Compare Minnich v. Gardner, ante, p.
292 U. S. 48. The
case at bar is unlike
Davis v. Elmira Savings Bank,
161 U. S. 275,
relied upon by the receiver, where a New York statute dealing with
the administration of insolvent banks provided that, in the event
of insolvency, the deposits of a savings bank would be entitled to
a preference.
5. The receiver contends that, under a proper interpretation of
the state depository statute, no lien whatever is intended or
arises when a national bank gives a bond to secure state deposits,
because the bond required of a national bank is more onerous than
that required of a state bank.
The bond of the national bank must be double the amount of the
deposit; of the state bank, only equal to it. The lien is security
for the bond, not the deposit; thus, in the case of a national
bank, if the provision were applicable, the lien would be twice the
amount of the deposit. As the court below noted, the double bond
may have been thought necessary because the state has not the power
to examine national banks. But, whatever the occasion for the
difference, it does not appear to conflict with or cloud the clear
statement of the statute attaching the lien to depository bonds as
such, and without qualifications. The ultimate decision of this
question is for the Supreme Court of Georgia, but, until it decides
otherwise,
Page 292 U. S. 570
we see no reason for not accepting the holding of the court
below as correct.
Third. The receiver contends that, even if national
banks are authorized under the 1930 Act to give a general lien upon
their assets of the character described by the Circuit Court of
Appeals, the judgment should be reversed because the bond antedated
the Act. It appears that the balance on hand June 25, 1930, was
withdrawn soon thereafter; that, between June 25, 1930, and the
appointment of the receiver, May 23, 1932, deposits were regularly
made aggregating a large sum; that, from time to time, checks were
drawn against these deposits, and that all of the balance in bank
when the receiver was appointed represented deposits made after the
passage of the Act. [
Footnote
13] The appointment of the bank as depository in 1928 and the
bond were to cover a period of four years. Though the lien was in
form security for the bond, the extent of liability was to be
measured by the unpaid balance. Thus, the transaction was not
completed in 1928; it was contemplated that there would be
continuous dealings between the parties for four years. In fact,
the relation continued until the appointment of the receiver.
Throughout the whole period, the parties intended that the lien
should be operative, and supposed that it was. The appointment was
within the power of the state to confer and of the bank to accept,
but, by reason of the paramount federal law, one of the anticipated
incidents of the relation -- the lien -- could not arise. When that
obstacle was removed by the Act of June 25, 1930, the original
agreement could, as to the future, be given the effect intended by
the parties, and the lien became operative as to deposits
thereafter made, and is entitled to priority from
Page 292 U. S. 571
the date of the Act. A statute is not retroactive merely because
it draws upon antecedent facts for its operation.
Compare Cox
v. Hart, 260 U. S. 427,
260 U. S. 435;
Ewell v. Daggs, 108 U. S. 143;
Petterson v. Berry, 125 F. 902;
Hartford Fire
Insurance Co. v. Chicago, M. & St. P. Ry. Co., 62 F. 904,
910;
Rosenplanter v. Provident Savings Society 96 F. 721.
It was not necessary to go through the form of executing a new
bond.
Compare Jones v. New York Guaranty & Indemnity
Co., 101 U. S. 622,
101 U. S. 627.
We have no occasion to consider whether the Act of June 25, 1930,
would have validated the lien also in respect to deposits made
before that date.
Compare Gross v. United States Mortgage
Co., 108 U. S. 477,
108 U. S. 488;
West Side Belt R. Co. v. Pittsburgh Construction Co.,
219 U. S. 92;
Charlotte Harbor & Northern R. Co. v. Welles,
260 U. S. 8.
Affirmed.
[
Footnote 1]
"The bond to be made by the state depositories may be a personal
bond or may be made by a deposit with the state treasurer of United
States bonds or Georgia state bonds, or either one or both of said
methods."
§ 1256, Civil Code of Georgia (1910). Section 1252 provides that
the depository bond shall have "the same binding force and effect
as the bond required by law to be given by state treasurers, and,
in case of default, shall be enforced in like manner." Section 218
of the Code relating to the treasurer's bond provides that
"a lien is hereby created in favor of the state upon the
property of the treasurer to the amount of said bond, and upon the
property of the securities upon his said bond to the amount for
which they may be severally liable, from the date of the execution
thereof."
The Supreme Court of Georgia held, in cases involving state
banks, that, under these statutes, the state acquires a lien on all
the assets of a depository bank, both those at the time of the
execution of the bond and those subsequently acquired.
See Seay
v. Bank of Rome, 66 Ga. 609;
Colquitt v. Simpson, 72
Ga. 501;
Simpson v. Mathis, 79 Ga. 159, 3 S.E. 646.
Compare State v. Brobston, 94 Ga. 95, 21 S.E. 146;
Standard Accident Ins. Co. v. Luther Williams Bank & Trust
Co., 45 Ga. App. 831, 166 S.E. 260.
[
Footnote 2]
Acts of June 3, 1864, c. 106, § 41, 13 Stat. 99, 111; Feb. 10,
1868, c. 7, 15 Stat. 34; R.S. § 5219; Act March 25, 1926, c. 88, 44
Stat. 223.
See Van Allen v.
Assessors, 3 Wall. 73;
Mercantile Nat. Bank v.
New York, 121 U. S. 138;
First National Bank v. Hartford, 273 U.
S. 548.
[
Footnote 3]
Acts of Feb. 25, 1927, c.191, § 7, 44 Stat. 1224, 1228; June 16,
1933, c. 89, § 23, 48 Stat. 162, 189.
See 36 Op.Attys.Gen.
116, 344.
[
Footnote 4]
Acts of Dec. 23, 1913, c. 6, § 11(k), 38 Stat. 251, 261, 262;
Sept. 26, 1918, c. 177, § 2, 40 Stat. 967, 968;
compare
Act June 16, 1933, c. 89, § 24(a, b), 48 Stat. 162, 190.
See
First National Bank v. Fellows, 244 U.
S. 416;
Burnes National Bank v. Duncan,
265 U. S. 17.
[
Footnote 5]
Act Feb. 25, 1927, c.191, § 16, 44 Stat. 1224, 1232 (to pay no
greater interest on time and savings deposits than state banks),
and note in particular Act June 16, 1933, c. 89, § 11(b), 48 Stat.
162, 181, in which national banks are forbidden to pay interest on
demand deposits except on deposits of state, county, etc., where
state law demands it.
[
Footnote 6]
Acts of Feb. 25, 1927, c.191, § 4, 44 Stat. 1224, 1227; June 16,
1933, c. 89, § 17(a), 48 Stat. 185.
[
Footnote 7]
Acts of Dec. 23, 1913, c. 6, § 24, 38 Stat. 251, 273
(
see 50 Cong.Rec. 4819; 51 Cong.Rec. 1189); Sept. 7, 1916,
c. 461, 39 Stat. 752, 754 (64th Cong., 1st Sess.,
see
Report No. 481, p. 14); Feb. 25, 1927, c.191, § 16, 44 Stat. 1224,
1232.
See First National Bank v. Anderson, 269 U.
S. 341,
269 U. S. 354;
First National Bank v. Hartford, 273 U.
S. 548,
273 U. S.
558.
[
Footnote 8]
Act of March 3, 1873, c. 269, § 2, 17 Stat. 603; R.S. §
5242.
[
Footnote 9]
Act of June 3, 1864, c. 106, § 45, 13 Stat. 99, 113, as
amended.
[
Footnote 10]
Act of March 14, 1900, c. 41, § 12, 31 Stat. 45, 49.
[
Footnote 11]
Act of June 3, 1864, c. 106, § 50, 13 Stat. 99, 114; R.S. §
5236.
[
Footnote 12]
Compare In re Ball, 123 F. 164;
In re Rogers &
Woodward, 132 F. 560;
Wood v. United States Fidelity &
Guaranty Co., 143 F. 424;
In re Glover Specialities
Co., 18 F.2d 314;
In re Riggi Bros. Co., 42 F.2d
174.
[
Footnote 13]
The facts concerning the dates of the deposits and the amounts
were supplied by counsel for the Comptroller of the Currency, who
joined with counsel for petitioners in briefs and argument.