Opinion · Supreme Court of the United States

Lewis v. Fidelity & Deposit Co. of Md.

Lewis v. Fid. & Deposit Co. of Md., 292 U.S. 559 (1934)

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1934-06-04
Topic
general

How later courts describe this case

  • “A statute is not retroactive merely because it draws upon antecedent facts for its operation.”
  • bank bond required by statute held to secure subsequent deposits, holding a state statute is not retroactive merely because it draws upon antecedent facts for its operation
  • condition in surety bond, given by national bank to state on deposit of state funds, providing that bank would "faithfully perform all duties required" by state, could be complied with by bank and did not invalidate bond when "duties," as currently defined, were not contrary to NBA
  • order denying defendant’s motion for summary judgment

Citator

UpLaw has not yet analyzed Lewis v. Fidelity & Deposit Co. of Md.. The absence of a flag is not a finding that it is good law.

Cited by
136 opinions

Headnotes

  1. Banking & Financial Services — National Banks — Authority to Secure Public Deposits Under the Act of June 25, 1930, which authorizes a national bank, upon the deposit with it of public money of a State or political subdivision, to give security "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 granted is not limited to pledging specific assets but extends to a general lien on present and future assets wherever state banks possess that power. 292 U.S. at 564
  2. Banking & Financial Services — National Banks — Equalization with State Banks The main purpose of the Act of June 25, 1930, was to equalize the positions of national and state banks; absent the power the Act confers, national banks would be at a disadvantage in competing with state banks for deposits. 292 U.S. at 564
  3. Banking & Financial Services — National Banks — Applicability of State Law A national bank is subject to state law unless that law interferes with the purposes of its creation, destroys its efficiency, or conflicts with some paramount federal law. 292 U.S. at 566
  4. Banking & Financial Services — National Banks — State Depositary Bonds The execution by a national bank of a state depositary bond conditioned on the faithful performance of duties required by state law is not objectionable on the ground that the state legislature might in the future impose duties the bank would lack authority to undertake; any such unenforceable obligation would to that extent be invalid, but the bank is not shown to have assumed duties contrary to the National Bank Act. 292 U.S. at 566
  5. Banking & Financial Services — National Banks — Enforcement of Depositary Bond The acceptance of appointment as a state depository by a national bank is not rendered invalid by a state law empowering the Governor to issue a fieri facias for amounts due, even assuming such process might conflict with R.S. § 5242, where that enforcement method was not employed and presents no occasion for complaint. 292 U.S. at 566
  6. Banking & Financial Services — National Banks — General Lien and Federal Functions Where a general lien under state law has long been in force and in practice has not interfered with the performance by banks of their duties to the public, a national bank's acceptance of a state depositary appointment subject to that lien is not to be anticipated to produce a conflict between its duties to the State and to the United States. 292 U.S. at 567
  7. Banking & Financial Services — Insolvency — Preferences Sections 50 and 52 of the National Bank Act do not prohibit liens given prior to insolvency and not in contemplation of it, whether arising from express agreement, implication from the parties' dealings, or operation of law; a lien limited in its operation upon commercial assets to property captured by a receivership is not legally a preference merely because it takes effect in insolvency. 292 U.S. at 568
  8. Banking & Financial Services — State Depositary Bonds — Parol Terms A state law requiring the depositary bond of a national bank to be double the amount of the deposit while that of a state bank need only equal it does not conflict with or cloud the clear statutory provision attaching the lien to depositary bonds as such, without qualification. 292 U.S. at 569
  9. Statutory Interpretation — Retroactivity A statute is not retroactive merely because it draws upon antecedent facts for its operation. 292 U.S. at 571
  10. Banking & Financial Services — Depositary Lien — Effect of Later Enabling Act Where a national bank was appointed state depository and gave a bond purporting to create a general lien at a time when federal law denied it power to give such security, the lien becomes operative as to deposits made after the Act of June 25, 1930 removed that obstacle, entitled to priority from the date of the Act, without the necessity of executing a new bond. 292 U.S. at 570-571
LEWISv. FIDELITY CO.,292 U.S. 559(1934)
54 S.Ct. 848
LEWIS, RECEIVER,v. FIDELITY DEPOSIT CO. OF MARYLAND.
CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE FIFTH CIRCUIT.
No. 802.
Argued May 4, 1934.
Decided June 4, 1934.
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. 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. 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 5604. 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. 566. (2) That acceptance of the appointment as state depository is not objectionable because of a power in the Georgia governor to issue afieri faciaswhich, if exercised against a national bank, might conflict with R.S. § 5242. P. 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. 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. 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. 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.Heldthat 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. 570. 6. A statute is not retroactive merely because it draws on antecedent facts for its operation. P. 571.67 F.2d 961, affirmed.Page 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.
Messrs. Wallace MillerandGeorge P. Barse, with whomMessrs. Samuel H. Wiley, John F. Anderson, andF.G. Awaltwere on the brief, for petitioner.Mr. Max F. Goldstein, with whomMr. Arthur G. Powellwas on the brief, for respondent.

By leave of Court,Messrs. F.G. AwaltandGeorge P. Barsefiled a brief on behalf of the Comptroller of the Currency, asamicus curiae.
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.1Page 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 and 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 apro ratadividend. The Circuit Court of Appeals for the Fifth Circuit reversed the judgment and remanded the cause for further proceedings, holding thatPage 563the asserted lien was valid, subsisting in favor of the company, and entitled to the priority claimed.67 F.2d 961. This Court granted certiorari.

That court, followingPottorffv.El Paso-Hudspeth RoadDistrict,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, notproprio vigoreby 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 propertybona fidein 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 evidencePage 564of soundness and credit. CompareIn re Blalock,31 F.2d 612.

InTexas Pacific Ry. Co. v.Pottorff,291 U.S. 245, andMarionv.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 safe-keeping 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 stillultra 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 ActPage 565of 1864, and has ever since been applied, in the provision concerning taxation.2In amendments to that Act and in the Federal Reserve Act and amendments thereto the policy is expressed in provisions conferring power to establish branches;3in those conferring power to act as fiduciary;4in those concerning interest on deposits;5and in those concerning capitalization.6It appears also to have been of some influence in securing the grant in 1913 of the power to loan on mortgage.7CompareFidelity 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 ActPage 566and 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.National Bankv.Commonwealth, 9 Wall. 353, 362;McClellanv.Chipman,164 U.S. 347,356;First National Bankv.Missouri,263 U.S. 640,656. 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 Code it has been held that the Governor may issue afieri faciasagainst 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 judgmentPage 567in any suit, action or proceeding, in any state, county or municipal court."8Assuming, 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 abona fidesale 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;9and that it would prevent the pledge of specific security required to authorize the issue of circulating notes.10The 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 beenPage 568confronted 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. CompareMarionv.Sneeden,291 U.S. 262,270-271.

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 Act11which 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.Scottv.Armstrong,146 U.S. 499,510;Earlev.Pennsylvania,178 U.S. 449,454. 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;Thompsonv.Fairbanks,196 U.S. 516;Humphreyv.Tatman,Page 569198 U.S. 91.12It 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 premises, was held to have a valid lien.Hendersonv.Mayer,225 U.S. 631;Richmondv.Bird,249 U.S. 174. CompareMinnichv.Gardner, ante, p. 48. The case at bar is unlikeDavisv.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 otherwisePage 570we 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.13The 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 fromPage 571the date of the Act. A statute is not retroactive merely because it draws upon antecedent facts for its operation. CompareCoxv.Hart,260 U.S. 427,435;Ewellv.Daggs,108 U.S. 143;Pettersonv.Berry, 125 F. 902;Hartford Fire Ins. Co. v.Chicago, M. St. P. Ry. Co., 62 F. 904, 910;Rosenplanterv.Provident Savings Society, 96 F. 721. It was not necessary to go through the form of executing a new bond. CompareJonesv.Guaranty Indemnity Co.,101 U.S. 622,627. 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. CompareGrossv.United States Mortgage Co.,108 U.S. 477,488;West Side Belt R. Co. v.Pittsburgh ConstructionCo.,219 U.S. 92;Charlotte Harbor Northern Ry. Co. v.Welles,260 U.S. 8.Affirmed.
  1. Page 561 "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, 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 Page 562 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. SeeSeayv.Bank of Rome,66 Ga. 609;Colquittv.Simpson,72 Ga. 501;Simpsonv.Mathis,79 Ga. 159;3 S.E. 646. CompareStatev.Brobston,94 Ga. 95;21 S.E. 146.Standard AccidentIns. Co. v.Luther Williams Bank Trust Co.,45 Ga. App. 831;166 S.E. 260. ↩
  2. Page 565 Acts of June 3, 1864, c. 106, § 41,13 Stat. 99, 111; Feb. 10, 1868, c. 7,15 Stat. 34; R.S. § 5219; Mar. 25, 1926, c. 88,44 Stat. 223. SeeVan Allenv.Assessors, 3 Wall. 573;Mercantile Bankv.New York,121 U.S. 138;First NationalBankv.Hartford,273 U.S. 548. ↩
  3. Page 565 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. Atty. Gen. 116, 344. ↩
  4. Page 565 Acts of Dec. 23, 1913, c. 6, § 11(k),38 Stat. 251, 262; Sept. 26, 1918, c. 177, § 2,40 Stat. 967, 968; compare June 16, 1933, c. 89, § 24(a, b),48 Stat. 162, 190. SeeFirst National Bankv.Fellows,244 U.S. 416;Burnes National Bankv.Duncan,265 U.S. 17. ↩
  5. Page 565 Acts 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 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. ↩
  6. Page 565 Act of Feb. 25, 1927, c. 191, § 4,44 Stat. 1224, 1227. ↩
  7. Page 565 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. SeeFirstNational Bankv.Anderson,269 U.S. 341,354;First NationalBankv.Hartford,273 U.S. 548,558. ↩
  8. Page 567 Act of March 3, 1873, c. 269, § 2,17 Stat. 603; R.S. § 5242. ↩
  9. Page 567 Act of June 3, 1864, c. 106, § 45,13 Stat. 99, 113. ↩
  10. Page 567 Act of March 14, 1900, c. 41, § 12,31 Stat. 45, 49. ↩
  11. Page 568 Act of June 3, 1864, c. 106, § 50,13 Stat. 99, 114; R.S. § 5236. ↩
  12. Page 569 CompareIn re Ball, 123 F. 164;In re Rogers, 132 F. 560;Woodv.U.S. Fidelity Guaranty Co., 143 F. 424;In reGlover Specialties Co.,18 F.2d 314;In re Riggi Bros. Co.,42 F.2d 174. ↩
  13. Page 570 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 petitioner in briefs and argument. ↩