Respondents Reply Brief — Alaimo v. United States

Ba Fiat ue Oftice- Supreme Court, U.S.

{| PR, f ARY ; F' gm ED

vs * FEB 23 1967

JOHN F. DAVIS, CLERK

? , - penenenaia ene

- No. 690

_ Inthe .

‘Supreme Court of the United States

- OCTOBER TERM, 1961

ee

G. C. NUNN, RECEIVER, HORACE SMITH, FRED NEMEROVSK\,

ie HABRY- BALLI6 AND MYRTLE BALLISs, °

j ae 6 Petitioners, ae,

y, : . oe

R. L, FELTINTON, LypiA M. FELTINTON, SAMUEL C. LURIE,

JOSEPHINE M: LuRteE, WILLIAM L. LURIE, INDIVIDUALLY iA

- AND AS ‘TRUSTEE, AND RITA M. LURIE, :

\. spice mae ts, :

RESPONDENTS’ REPLY BRIEF 4

ae Re Ane .. : Pp Oe ;

a ‘ . «7

LIAM D. NEARY,

300 Republic Bank Building,

Dallas, Texa

s,

Attorney for Respondents:

PINKNEY GRISSOM, Py ee v4

HAROLD F. THOMPSON, "aes

MORRIS HARRELL, ; if

THOMPSON, KNIGHT, WRIGHT “

& SIMMONS,

All of Dallas, Texas,

Of Cornsei.

— =

WARLICK LAW. INC.-—2263 VALOINA STREET—-DALLAS—-ME 1-3130

* .

.

SUBJECT INDEX

- Opinion Below

Jurisdiction ge ccd

Questions Presented *y

" The Statutes Involved

Statement Under First Question _

Argument of First Question ~ —

' Statement Under Second Question

- Argument of Second Question

Conclusion.

Certificate of Service

Appendix ,

Ci

k

® Q

o 99 ooh bO

ii. _List of Authorities Me he

; Page

- Adams ve Bow les, 149 Texas 52, 228 S, W.2d849°. :,

41950 es , ' 23 -

Alaska Packers Association v. Industrial Accident.

Commission of the Stateof California, 294 U.S. 532, Testy

558. Ct. 518, 79 L. Ed. 1044 (1935) \ | 21.

‘American Fire & Casualty Co. v., Finn, 341 U. S. 6,

71 S.-Ct. 534, 91 L. Ed. 702 (195]) " 9

: Aranias Pass Harbor Co. y. Manning. Oo Tex. 558, :

63S. W. 627 (1901) . & -18

_ Baldwin vy. Johnson, 95 Tex, 85, 65S. W.171 (1901) 17, 21

Ballard v. Carmichael, 17.5. W. 393 ¢Tex. Sup. 1891)-°- 23

Banigan ¥. City of EN 30 F, 392. tees

(CL. Mass. 1X87) Seas rags te. ee

‘Barnett v. Poole, 23 Tex. 518 (1859) ! 7 16

Barney v. Latham, 103 U.S. 205, 26 1. Ed. 514 (1881) 8

“Bates v. New Orleans B. R. & V. R. Co.’ oF. 392.

_AC.C.N.D. N.Y. 1883) 1 10

~ Carrofl vy, Lanza; 349 U.S: 408, 75S. Ct. S04, ae

-* 99 L: Ed, 1183 (1955) 4. 21

* Clark v. Williard, 292 U.S. 112,54 Ct. 615,

48D. Ed. 1160 (1934) ae « 13, 24

Colden v. Alexander, 141 Texas 134, Rac ieee ¥ ‘

171 8. W. 2d 383.(1943) 19

Cole v. Cunningham, 133 U, JS. 107,108. Ct. 269. -

~ (1880) | . Soe a, 3

Courseview, Inc. v. Phillips Petroleum Co.,

158 Tex. 397, 312 S. W.:2d 197. °° 7 1G.

Denny v. Bennett. 128 U.S. 489, 9S. a8 134 (1888) 24

5 Evans v. Ropte, 128 Tex. 75, 96 S. W. 2d 973 (1936) 16.

Fall vy. Fastin, 216 ULS. 1, 30 Sup. Ct. 3 os oe.

Fischer v. American United Life Ins. Co., 314 -U. S "

549, 62S. Ct. 580, 86 L. Ed. 444 11942) 4

- Fritz, “The Texas Law of Conveyancing,” Sections 5°

and 6, Supplement to Volume 3, Vernon’ s Annotated”

Revised c ivil Statutes of Texas . 18

ie

List of Aisthorities—(Continued) ii

Page

Keafley v. Furey. 26U.S $. 399, 33 S.Ct. 121 (1921) - 13,

Lee v. Lehigh Valley Coal Co., 267.U. 8: 54211925) 7

Humble Oil & Refining Co. v. Blankenburg, > cae os

149 Tex. 489, 235 S. W. 2d 891 : Pa

.. John: Hancock Mutual Life Insurance Company v.

Yates, 299 U.S. 178 , 67.8. Ct. 129, 81 L. Ed. 106

(1936) . ; ~ 24

McElreath vy. McElreath, 345 8. W. 2d 722 ,

~* “(Tex. Sup..1961) Tne 19,21,22

Mcllvaine v . City National Bank and Trust Co.,

314 IIL App, 496, 42 N. E. 2d 93,101 (1942) | 13-14 -

Morris v. Hand, 70 em. 481,85. W. 210 (1888). © 20)

Moseby. v. Burrow, 52 Tex. 396 ( 1S80) rue . 16°

Pacific Sables. inate Company’ v. Industrial

Accident Commission of California, 306 U. S. 493,

59 S. Ct. 629, 83 L. Ed. 940°(1939) 21

_ * People v. Chicago Lloyds, 391 it. 192, 63.N..E. 2d 1m)

| TAS. W. 2d 981 19399 15

_ Purifoy v. Wiebusch, 132-Tex. 36, 117 S. W. 2d 773 16

Relfe v. Rundle, 103 U.S, 222, 26 L. Ed, 337.1 1881) 3

Salem Trust Co. v. Manufacturers Fin: ince Co,, 264 —

- 3. §. 182, 44S, Ct. 266, 68 L. Ed, 628 19247 8

Second National Bank v. New York Silk Mfg. Co., see

11 F. 532 +1882) + --40°

Security Trust Company v. Dodd: 17 3, 5.624, © ?

_ 19S. Ct. 545 11899) : -, 24

Shropshire v, Shaw, 121 Tex. 463, 49S. W. 2d TOS 16

(1945) | 13.

People ex rel Palmer v. Nichaus, 356 Il. 104,

190'N. E. 349 (1934). 2 - - 13

Pink v. State, 105 S. W. 2d 265 (Texas Cfvil hnteale:

1937), affirmed in Carpenter v. Pink, 133 Tex. 82,

Smith v. Sperling, 354'U. S. 91, 77 S. Ct. 1112, :,

1 L. Ed. 2d 1205 (1957) : 9

tt. ~ List of Authorities—(Continued)

Xe: ate Basslal intone. Betts, 158 Tex. 83,

BOS. S. W. 2d 846 (1958)

Teas v. Kimball, 257 F, 24.817 (5th Cir, 1958)

To & PL Railway Company v. Gay, 86 Tex. 571,

468. W. 599 (1894) :

* Young v, Masei, 287 1 S$, 253, 53S. Ct. 599,

NW2 oRd, 1158 11983) 2 tes

Rev ee Civil Statutes of Texas:.

"Article d8Ob 7

Articles 1288-1301

Articlé 1322 ¢ |

Article 1388 -

Article 2203131 5 *

“Articles 2293-2320

Article 2297

Article 2310

Article 2313

Supreme Court Rules: oes

Subdivision (br, Section 1, Rule 19

Texas Business CorporationQet : leit

Article 5306 AM) JQ

i \as Insurance Code: i

- Article 21.28

‘United-States Code: ,

‘Subsection (ei, Section 2101, Title 28 :

Subdivision (1), Section 1254, Title 28

: Section l 332; Title 28

Section 1441, Title 28

4 Bogert, Trusts and Trusiees, Part t 1 (1948),

459-4645 See. 870.*

16, 18,

16, 18,

‘ 4, 7

15, 16,

4,

19

18>

18

19

18

a:

16°

16

16

Ow H 09

_4 ° No. 690

.* the

Supreiie Court of the United States

| OCTOBER TERM, 1961.

é

G. C. Nv NN, RECEIVER, Horace SMITH, FRrep NEMEROVSKI,

HARRY BAAS 3 AND MYRTLE BALLIS,

Petitioners,

Vv.

R. L. FELTINTON, LypIA.M. FELTINTON, SAMUEL C. LURIE,

JOSEPHINE M. LURIE, WILLIAM ‘L, LURIE, INDIVIDUALLY. *

AND AS TRU STEE, AND RITA M. L URIF, :

| ae Respondents.

RESPONDENTS’ REPLY BRIEF

To the Hoporable Chief Jistice and Asso iarte Juices

of the Ciaie me Court of the United States: |

Respondents, R. L. Feltinton et al., hereby submit their

tep!y Brief in- opposition to the Petition for Writ of Cer-

tiorari filed herein’on January 29, 1462. .

‘OPINION BELOW ~

: . . ’ . Ce, o.. . . j

The opinion of the United States Court of Appeals (Rh.

345-363) is reported at. 29; F.it2d 450. The United States

ee

; 2

District. Court. for the Western Distriet of Texas did not

i render an opinion.

. JURISDICTION -

The judgment of the United.States Court of Appeals (R.

364) was entered September 15,1961. A petition for rehear-

ing was filed on October 30, 1961 (R. 372) pursuant to an.

extension of time for such filing granted ori October “9,

1961 (R. 371) and the petition was denied on December 12.”

1961 (R..416). The petition for a writ of certiorari was .

filed on January 29, 1962. The jurisdiction of the Court is

inveked under Subdivision (1), Section 1254, Title 28,

United States Code. Jurisdiction under that: statute is sub-

ject to Section 2101, Subsection (c), of Title 28, United

States Code (Appendix, page 27 below). _Also, Petitioners —

invoke Subdivision (b), Section 1, Rule 19, Supreme Court

Rules,

Qu ESTION S PRESENTED —.

1. Whether’ Federal jurisdiction on the ground of the

diversity of citizenship existing between the plaintiff-Re-

ceiver, a resident of Texas, and defendants. residents of.

. Illinois and New’ York, is defeated by the joinder as plain-

tiffs of individuals, citizens of Illinois, who are not neees-

sary “parties because under the law of Texas, the State

where the receiver was appointed and this action was -

brought, they are represented by the plaintiff, a. general

receiver, who alone is authorized to prosecute the causes of

action alleged in the complaint.

3

2. Whether a court in Texas may recognize a succession

pursuant to the ‘corporate charter, of which the Illinois

Banking Act is a part, to the title to Texas realty owned by

an insolvent Illinois banking corporation.

THE: STATUTES INVOLVED

As to the jurisdiction of the Federal Courts on the basis

of diversity of citizenship, the statutes involved are Sections

(1332 and'1441(a) of Title 28, United States Code, ( Appen-

dix, page 27 below), which provide for removal to United

‘States Courts of actions involving controv ersies between Citi-.

zens of different states.

As to the decisions of the District Court and the Court of

Appeals on the merits, Respondents do not believe. that consti-

tutional issues are involved in this case.

STATEMENT UNDER FIRST QUESTION .

; Horace Smith; of Texas, and Fred Nemerovski and Harry

and Myrtle Ballis, of Illinois, procured in 1959 the appoint-

ment by a state district court in Texas, in an action to which

Respondents are not parties, of G. C. Nunn, a citizen of

' Texas, as general receiver for the property and causes of

action in Texas of a dissolved Ilinois state bank and the

inter ests of its stockholders, depositors and creditors in Texas

proper ty and causes of action which remained vested’ in the

bank at the time of. its dissolution i in 1948.

Following his appointment, G. C. Nunn, the general ie

ceiver for the bank and of the claims and causes of. action of

oe

its shareholders, instituted the present suit in a state distri

ccurt in Texas. -The Receiver was joined by Horace Smith, a -

purchaser of shareholder’ s rights,.and Fred Nemerovski and

Harry and Myrtle Ballis, alleged former stockholders and de-

positors of the bank. The complaint refers to the 1959 Texas —

receivership proceeding, the pertinent. provisions of which

ure stated in the opinion of the Court.of Appeals (294 F. 2d

. at, $52). The real estate described in the order of appoint-

: ment includes’ the nonparticipating royalty. which is the sub-

ject of this suit. That opinion (294 F. 2d at 452 and 453).

also quotes the applicable statutes [Articles 2293(3), 2297

‘and 2310 R.C.S. of Texas). ens

This suit is in trespass to try title and to quiet title and:

for declaratory judgment, with consequent pleas for cancel-

_lation and removal of cloud, far the recovery of cértain non-

participating rovalty interests in lands in Pecos County, |

Texas, which are alleged to have been owned by the bank and

to have passed to its shareholders on. dissolution of the bank.

This suit was removed to the United States District Court

for the. Western District of Texas, Pecos Division, on the

~ grounds that diversity of citizenship exists between the Re- .

ceiver, G. C. Nunn, and all the defendants, who are citizens

of Illinois and-New York, and that the other parties who join

with the Receiver as plaintiffs are mere formal and. unneces- .

“sary parties whose claims were vested in the Receiver at

their own request. and whose citizenship should not be con-

sidered in determining whether the requisite, diversity of —

citizenship exists. Petitioners filed a motion to remand Ww hich ;

Was 0 overruled by the district court.

Cc

Motions for Summary Judgment were filed by Petitioners

‘and Respondents and the district courttoverruled Petitioners’ -

Motion, sustained Respgndents' Motion and entered judgment

_ for Respondents. The rulings of the district court on the Mo-

tion to Remand and the Motions for Summary Judgment :

were affirmed by the United States Court of Appeals for

the Fifth Circuit and rehearing has been denied.

ARGUMENT OF FIRST QUESTION

Diversity of citizenship exists between plaintiff-Nunn,

Receiver, and all defendants. (Petition for Writ, p. 5); Peti-

tioners do not question that this receiver has authority to

represent all other Petitioners in this case ( Petition for

Writ, Question 1, p. 3). |

As stated by the Court of Appeals, the ‘question relating

to the diversity jurisdiction of the Federal Courts depends

upon the exetent of the capacity of -G. C. Nunn, Receiver,

under the laws of Texas, to represent the three Illinois resi-_

dents who were joined with-the-Receiver-as plaintiffs. The

| proceedings. in the state court. in whieh Nunn was ap-

. pointed Receiver for the bank and its stockholders, depositor s

| and. creditors were referred. to in ‘the complaint filed by the

Receiv er, and the other parties joining with him, against Re-

spondents, which complaint was the basis of this action. An

examination of the appointment pr oceeding, and particularly ©

the. order of appointment (R: 39), makes it clear that -the.

: appointing court ihtendéd-to mz ake eG. C. Nunn the owner for

the purpose of the receivership of all causes of action for the

6

recovery of the nonparticipating royalty interests involved

in this suit and imposed upon him the power and duty to

present, on behalf of the bank and its stoykcholders, — :

‘and creditors, all such causes of action. ;

The Texas. statutes. and the decrees of the appointing pm

are set forth in the opinion of the Court of Appeals (294 F

2d at 452 and 453}. -Atlse, the many Texas cases relating to

the exclusive right of a general receiver to pursue a cause of

: } action placed under his control by the order of the appointing

court or by operation of law are discussed by the court in

detail. By

However, Petitioners have attacked ‘the diversity juriedic-

tion of the United States Courts in this case on the ground

that Smith, Nemerovski and Ballis, who sought the appoint-

ment of the Receiver, G. C. Nunn, in the state district court, |

retained, after-his appointment, a joint and direct. interest.

with the _Receiver_in the alleged Causes, of action for the

recovery of the nonparticipating royalty interests involved

‘in this suit. This contention ignores the terms, of the order

"of appointment of the Receiver, G. C. Nunn, and the statutes

and laws of Texas applicable toa general receiver such as

Nunn.

| Contrary to the contention of Petitioners,’ the interest of |

the Illinois plaintiffs in the subject matter of this case, after

the appointment of Nunn, Receiver, was not direct nor was it

joint with their Receiver. The interest, if any, of the indi-

_ vidual’ plaintiffs, including the’ IHinois Petitioners, was de-

-rivative and contingent only. If Nunn, Receiver, should re-

7

cover the property from Respondents, the Illinois Petitioners

would participate with other shareholders in the division of

whatever might remain after administration in receivership.

It is the Receiver, and: not the shareholder claimants for

whose claims the Receiver was appointed, who has authority.

to sue for property claimed to belong to the shareholders of

the bank on dissolution. It is the duty of ‘the Receiver to re-

cover and administer what assets he can; to this end he is

authorized by the receivership proceedings and statutes to

sue in his own name. “Any legal action that may be insti-

— shall be in the name of the Receiver.” (R. 49; 294 F.2d

452.) This provision: includes the present action in which

~ individual Petitioners hate joined without n necessity or.

legal authority. |

The Receiver, G. C - Nunn, was authorized and directed to

assert the causes of action which he and the individual plain-

tiffs have asserted in this, case. Neither the receivershiyi pro

ceedings or statutes Or ‘decisions require the. presence or

joinder of the shareholders in the suit. The Receiver is given

charge and contré! of the causes of action. The causes. of

‘action cannot have two masters. The receivership proceedings |

do not commit the causes of action to the joint control of the

Receiver and’ those he represents, In the rec@ivership pro- ° ~

ceedings any causes of action which any shareholder, creditor -

. or depositor might have with respect to the properties .in-

- volved in this suit wére surrendered to the Receiver. The

Receiver was empowered and had authority under Texas law

and the order of the appointing court to institute suit in his

: 8

own name for the recovery of ‘the nonparticipating royalty -

interests. Although the Illinois Petitioners join in the asser-

_ tion of the same claims asserted by the Receiver! the com-

plaint shows on its face, when considered in connection with

the receivership proceedings referred to in the complaint, that

these Petitioners have no direct claim but only a derivative

one though the Receiver. Thus on the face of the complaint,

the Illinois Petitioners are not necessary to the asseruion of

any causes of action asserted in the complaint. There ts com-

“plete diversity of citizenship between all necessary parties.

>

After- appointment of the Receiver, the shareholders had no

direct or joint interést in the causes of action. They are repre-

_sented by the Receiver and their presence as plaintiffs in

the case is immaterial. The individual Pgjtioners are%qually

bound by the judgment against the Receiver’ which denied

him and those’he represents all right and title to the prop- _

erty sued for, whether those individual Petitioners are named

in the complaint or not.- They are mere formal and unneces-.

_sary parties whose citizenship is to be ignored in detérmining .

whether the requisite diversity. of citizenship exists in this

Care,

The cases of Barney v. Latham, 103 U.S, 205, 26 : Ed.

314 (T881 ); Salem Trust Co. v. Manufac turers Finance - ®

264U 8S. 183; 44.8 : Che 266, 68 L. Ed, 628 (1924 )-and Lee v.

L ehigh Valley Coal Co., 267 U.S 2 (1925), which are

‘+. cited by the Court of Appeals, “hold that the joinder of formal

: ..0F “unnecessary parties cannot prevent the removal of an |

action to a federal court. Statutes and decisions_prescribing

9

or defining Federal diversity jurisdiction-do not distinguish

between the joinder of unnecessary parties as — or

defendant.

Contrary to the assertions of Petitioners, there is no con-

flict’ between the decisions below in this case’ and A merican

Fire’& Casualty Co. v. Finn, 341 UOS. 6,71 S. Ct. 534, 91

L. Ed. 702 (1951). The instant case was not removed under

* 1441\c) of Title 28, United States Code. The amendment

of that statute chanying the basis for removal from a “sep-

arable controversy” to a “sepgrate and independent claim ‘or

-eause of action” is immaterial. Respondents have never as-

serted that a separable controversy er a séparate and inde-_

_ pendent claim or cause of action exists between the Receiver

and any of the other Petitioners on the one hand and Respond-

ents on the other. On the contrary, all controversies, claims

or causes of action of parties to the receivership action, in-

cluding the individual Petitioners, for the recovery of the

nonparticipating royalty interests involved in this suit on

behalf of the dissolved bank or its shareholders, depositors

or creditors are vested in the Receiver, G. C. ‘Nunn. No

question of representation was involved in Finn. * :

i Smith r, Sperling, B54 U.S: 91,77 S. Ct. 1112. i L624.

2d 1205 (1957), cited by Petitioners, is not applicable. Tn

Sperling aquest. n of representation was involved. However,

the pleadings and the nature of the dispute showed that the’

_ claimed representative was hostile: and antagonistic to the

enforcement of the claim of the stockholder it was supposed

to represent. Under these circumstances, the claimed repre-

‘sentative did not represent the stockholder. No antagonism or

oO

10

hostility between the Receiver and the individual plaintiffs is

presented in this case. The Receiver and the shareholders-are

antagonistic to Respondents, The Receiver was appointed to

recover the realty from Respondents, adverse claimants, on

behalf of the shareholders of the dissolved bank, whom the Re-

ceiver represents, and to administer. the assets, if recovered,

for the benefit of those represented: The Receiver has, in

accordance with his appointment and the applicable statutes,

- represented and sued in behalf of the shareholders.

Pe Petitioners also cite Second National per v. New Work.

‘Silk Mfg. Co., 11 F. 532 (1882), which is inapplicable. That .

- case involved an attachment proceeding filed prior to the ap- -

pointment of the receiver and the receiver did not acquire,

therefore, a right to possession anid control of the property

which was in legal custody at the time of his appointment.

Further, the case involved a specific New Jersey statute

which provided that even though a receiver was appointed

for an insolvent corporation, the corporation could continue -

to use and exercise its franchises and transact ordinary busi-

ness in its own name for four months after the appointment

of the receiver, Such a continuing right is not provided by the

Texas law: The Texas cases cited by the Court of Appeals”

hold that title to the-insolvent corporation’s property passes

by operdtion of law to the réceiver at the time of his ap-

| pointment.

In Bates v. New Orleans B.R. & VR. Co, 16 F. 392

(C.C.N.D.N.Y.-1883), cited by Petitioners, the citizenship of —

certain trustees was ignored for the purpose of determining

diversity of citizenship. The opinion is a memorandum deci-

11

sion and does not reveal the function for which the trustees

“were appointed. The terms of the trust may have been such

as to permit the cestui to sue. 4 Bogert, Trusts and Trustees,

Part 1 (1948) 459-464, See: 870..The case states that the

‘trustees’ connection with the controversy was “collateral and

subsidiary to the main issue”. Such is not the situation here.

The Receiver, G. C, Nunn, is an active represeptative of the

other plaintiffs, enjoined by Texas law to carry on the suit

in their behalf. -

In Banigan v. City of Winicolen 30 F. 392 (€. C. Mass,

*1887), cited by Petitioners, the trustee’s citizenship was

ignored because the trust was apparently created for the sole

purpose of creating diversity of citizenship. So far as the

opinion discloses, it was a dry trust,

.. None of the cases cited by Petitioners has any bearing on

the instant case where the Receiver is vested with all causes

of action for the recovery, from persons not parties to the

receivership action, of the property in suit, in accordance with

Texas statutes and under specific order of the court which

? 5 gare him,

ST. ATEMENT UNDER SECOND QUESTION

_ The property involved in this suit was owned by the West

Sidé Trust. and Savings Bank of Chicago, Illinois, an IIli-

- nois banking corporation, Section 11 of the Banking Act of

Illinois ( Appéndix, page 27 below) was in effect when -

the bank’s charter was amended (R. 209-213) and at all

subsequent times during the existence of the bank, including

the bank’s final dissolution in 1948. That Section 11, pro-

12

vides that on a finding of the state Auditor of Public Ac-

counts that the bank should, be liquidated, he should appoint

a receiver for liquidation who should have title to all of ‘the ;

"assets of the bank for purposes f the receivership, with au-

thority to sell the real and personal property of the bank on

_ order of a court of record of the county in which the Bank

“was located. Such finding-was-made by the Auditor (R. 189)

and successive liquidating receivers appointed in writing by

him (R. 11-12). The last liquidating receiver, on orders

(R: 214 and 235) of the Superior Court of Cook County,

Illinois, a court of. record of the county in which the bank was

located (R. 182) in an action in chancery to which the bank

was a party by. personal service on its president and to which

_ the liquidating receiver was a party (R. 203), sold to Re-

spondents’ predecessor the property involved in this suit

(R. 235). The Superior Court found that- all assets of the

* bank hag] been disposed df by. the Illinois liquidating receiver —

, and ordered dissolution of the bank (R. 268". Petitioners

" claim that Article IV, Sections 1 and 2, Article VJ, and

Amendments, Articles X and XIV, Ségtion 2 of the Constitu- °

tion of the United States prohibit the Court of Appeals, in

this case arising in Texas, from giving effect to the provi-

sions of the IIlinois Banking Act giving title to the receiver °

for liquidation. Petitioners contend that-the property here in

~ suit wag not disposed of before, dissolution of the bank, ot-

, withstanding the adverse finding of the Superior Court i ina

suit to which the bank was.a party, but une to the bank’s

shareholders on its dissolution.. “

A full discussion of the facts relating to the liquidation of

the bank, dispgsition of all of its assets, and the sale:to Re-

%

spondents’ predecessor in title is contained in Respondents’

Motion for Summary Judgment (R. 133-159). .

ARGUMENT OF SECOND QUESTION

The Illinois Banking Act became part of The charter of the

bank. That charter is a contract. The contract thus provides,

voluntarily, that when the State Auditor makes a finding that a |

the bank should be liquidated, the Auditor may appoint a

liquidating receiver ‘with title to the assets of every descrip-

tion of the bank, By that provision of the Banking Act the

receiver's title extends to property ‘within and without — b

. nois. _— v. Chicago Lloyds, 391 Ill: 492, 63 N. E. 2d 4

(1945), considered with People ex rel Palmer v. Niehaus, 356

fil: 104, 190 N. E. 349 (1934). Article 21.28 of the Tevas

Insurance Code, has a similar provision” (Appendix, p. 37

below). The Auditor made a finding that the hank should he

liquidated, and by an (eramen in writing appointed, the

liquidating receiver, The- ‘receiver succeeded to.title.to the ©

_. bank’s assets. Relfe vr. Rundle, 103 U. $. 222, 26 L. Bd. 337

(1881); Keatley v. Furey, 226 U. S. 399, 33 S.Ct. 121

(1921); Clark-v, Williard, 292 U. S. 112, | 54 8S. Ct. 615

(1934). The liquidating receiver, -with the approval ‘of the -

local court? as provided in the Banking Act, sold the property ~

in suit to Respondent’s predecessor. The Superior Court of

Cook County, Illinois, having jurisdiction of the subjeet

matter: of the liquidation, personal jurisdictioh of’ thé bank

. through service on its President, and: personal jurisdiction

‘of the Auditor and. the liquidating yeceiver, who repre- .

sented the shareholders, depositors and créditors, [Mc- °

Ilvaine vy. City National Bank and Trust Co., 314 Ill. App.

-_

14

ji, 42 N. E. 2d 93, 101 (1942), ordered the liquidating

‘receiver to convey the property to Respondent’s predé@cessor,

and this was done. The Superior Court found that all of the

assets of the bank were disposed of by the liquidating receiver.

Petitioners claim that a recognition in Texas, by comity,

of a statute or d

| ixion of another state in its application to

Texas realty is nder the facts of this case an “adoption” by

_ Texas of the fdreign law. It was the bank, not Texas or the

——TCourt of Appeals, that adopted the Illinois Banking Act. The

hark ac cepted the benefits of that Act, w hich became part of

the bank’s charter. The courts below merely applied, against

“the. representative of those claiming under the bank on disso-

lution, the suecession provided by the bank’s charter through

its inclusion of the Banking AS

This casesdoes’ not invelve an application of Ilinois Jaw

. by voluntary choice of the distri&-court and the Court of

i Appeals. The valuntary choice was that of the incorporators

~ and directors 6f.the bank, who chose the benefit of Illinois

-corporation laws with its attendant provisions for universal

succession in event of insolvency to title to all the bank’s

properties by a receiver appointed by.the Illinois Auditor of |

Public Accounts. This-is not a discretionary: invocation of.

statutes and proceedings of another state and application of -

them as a Texas rule of property contrary to the Texas law

for transmission of realty. This is not a case Where, without

more, a Federal court in Texas applies an Illinois statute to .

deter mine succession to title to Texas land when Texas has

, an exchisive and different law for such succession.

15 oe

Petitioners’ argument assumes that the courts below have

“applied [linois law and not Texas law. It is not Minois law -

but Texas Jaw which is applied by the Court of Appeals;.-°

Texas law, w hich indirectly gives effect to the Illinois Bank-

ing Act because it is part of the charter compact. In applying.

a Texas rule that. succession ‘to corporate title to property in

Texas may be provided hy. the corporate charter, which em-

_ braces provisions of the statutes of the state of incorporation

as to succession on insolvency, where no public policy of Texas

is violated, the Court of Appeals is not ther eby applying I]li-

’

nois law rather than Texas law.

Tex xas law which permits succession to corporate property

to be determined by the corporate charter or to be deter-

‘mined by a statute of the state of incorporation which is part

of the corpo ‘ate charter is applicable alike to domestic and

foreign corporations. It is not discriminatory. .

An essential element of Petitioners’ claim is that Articles

2293-2320 R.C.S., Texas, are exclusive and have not been

complied with. Those statutes are not applicable. Those stat-

-_ utes apply to ordinary receivers, such as G. C. Nunn, and not

to statutory liquidating receivers such ag the liquidating re-

ceiver appointed by the Illinois Auditor. Texas recognizes |

that corporate ‘liquidation may be accomplished through a

process other. than a receiver appointed under Article 2293,

R.C.S. Texas. State Board of Insurance v. Betts, 158 Tex, 83,

308 S. W. 2d 846 (1958); Pink v.-State, 105 SW. "ad 265°

~ (Fexas Civil Appeals, 1927), affirmed in Carpenter v. Pink,

133 Tex, 82,124 S.W.2d 981 (1939) ; Texas Insurance Code,

16 My oh

Article 21.28 ¢Appendix, page 37 ee Article 489,

R.C.S. Texas (Appendix, page 39 below) Ae

‘Petitioners cite, many cases’ involving sales of prop-

erty by common law receivers such as Barnett 1. Poole, 23

Ter, 518 (1859); T. & P. Railway Company v. Gay, 86 Tex.

571, SL W. 599 (1894); Moseby v, Burrow, 52, Tex, 396

(1880), and Evans v. Ropte, 128 Tex. 75, 96 S. W. 2d. A738

(1936), These eases are. inapplicable because Tex is ree og:

-nizes the distinetion between common law or equity receiver=.

ship and statutory liquidation.

Articles 2293-2320, R. C. S. Texas, do not apply to the

type of liquidatio:. involved in this case. Article 2313 by its

terms applies to’court-appointed: receivers. It does not apply

to the liquidator appointed by the Illinois Auditor. It declares

a common law rule. |

Petitioners also cite Humble oil Refining Co, r. Blanken-

hurg, 149 Tex. 489, 235 8; W. 2d 891, and Courseview, Ine.

:. Phillips Petroleum C 0., 158 Tex. $97, 312 S. W. 2d 197,.

“and infer that they express an exclusive Texas rule as to suc-

cession to title to Texas realty owned by a corporation. Both

of those cases are baséd on Purifoy v. Wiebusch, 132 Tex.

36, 1178S BY. /d 773, which upon this point is in-turn based

upon Article 1388-R. C. S., Texas, ( Appendix below, p. 399...

While Article 1388 provides a succession, it is not exclusive

and_is inapplicable when the corporate charter or the law

of the state of incorporation provides a different succession.

Thus, in Shropshire v. Shaw, 124 Tex? 463, 49 S. W. 2d 708,

Article 1388 is held not to be éxclusive when applied to a

.

17

Texas state bande The authority conferred under Section

1388 is subordinate to the authority of the State Banking

Commission to take over the affairs of the bank for the pur-

pose of administration under the provisions of the Texas

Banking Laws whenever he finds it necessary to do so for

the protection of the rights of depositors and premibors. Texas

recognized in Baldwin v.-Johnson, 95 Tex. 85, 65.8. W. .177

aaa) that the property of a Louisiana corporation might

be liquidated by a Commission appointed in accordance with -

charter provisions conforming to Louisiana law if the Com-

‘mission was appointed by w ritten instrument as required by

Texas conveyancing statutes. In the present ae an Illinois

_ liquidator was appointed he State Auditor by such a

written instrimnent. In Ba eR Texas recognized zi pass-—

age of corporate titlé inay be to statutory liquidators rather .

than shareholders, and that i ce receivership.provided

‘in Articles 2293-2320 R. C. S. Texas, ts not the ncn sive

means of liquidation ofa corpor ation.

’ There is nothing in the statutes or decisions of Texas

which prohibits succession to title to Texas realty by a, statu-

. tory liquidator for a corporation. There is nothing that re-

quires a corporation to be liquidated by .a receiver appointed

under Article 2293, R. C. S., Texas rather than a statutory

liquidator. There is nothing that requires that corporate

property in Texas pass to’ the shareholders, if the corporate

charter or law of the state of incorpération to which the

charter. is subject provides otherwise.

Petitioners claim that Téxas has an exclusive means of

passage of. corporate title to Texas land-which does ‘not in-

18

| ¢lude the means involved in this case. They claim that in-

-stead of applying the exclusive Texas means, the Court of |

Appeals has applied an Illinois statute and: proceeding. It is

claimed that by applying the Illinois statute and proceeding,

instead of the exclusive Texas means, the Court of Appeals

denies due process and° equal protection of the laws, and.

abridges the privileges and immunities of citizens.

Articles 1 288-1. 701, R. C.S. Penne: the Texas convey:

ancing statutes cited-by Petitioners, are not exclusive means

_ Of passage, of title to Texas lands. Fritz, “The Texas Lai of

Conveyancing,” Sections 5 and Gi, Supplement to Volume 3,

Vernon’s Annotated Rev ised CiyitStatutes of Texas; Article

1388, R. C. S. Texas (Appendix, page 39 below); Texas

~ Business Corporation Act, Article 5.06 A(4) (Appendix,

page 42 below) ; Texas Insurance Code, Article 21.28 (Ap-

pendix, page 37 below) ; Articlé 489b, R. C. S. Texas (Ap-

pendix, page 39 below). Article 1322, R. C. S. Tevras (Ap-

pendix, page 41 below) authorizes conveyances on behalf of —

_a corporation but it is not — Aransas Pass Harbor

Co, v. Manning, 94 Tex. 558, 63 8. W. 627 (1901). |

In the instant case there is no'conflict betwéen Texas policy

and the Illinois Banking Act and the orders of the Superior ~

Court. Only Illinois lias, specifically legislated with regard to

the succession to title of property of an insolvent Illinois bank.

Mlinois had power over this corpor ation, control of its exis--

tence and a governmental interest in its dissolution. Texas

has no policy denying Mlinois the right to grant corporate

existence to an Illinois corporation or the right to provide

~ for succession to property belonging to that corporation upon

__ & Hn. :

19

dissolution. On the contrary, Texas policy with rega ” to the

di ssolution of Texas cor por ations, as expressed {n the statutes

tefer red to-above and in the opinion of the Court of Appeals, is

the same as the policy of Illinois. Thus, under the doctrine of

comity, the ‘Texas courts may properly recognize the suc-

cession to title by the Illinois liquidator.

No public policy. of Texas is violated by recognition of the

Hlinois liquidation, the title of the liquidating receiver, or the

orders and decrees of the Superior: Court of Cook County.

| McElreath v. McElreath, 345 S.W. 2d 722 (Tex Sup. 1961);

Articles 489b (Appendix p. 39 below) and 1388 (Appendix

p. 39 below) R. CLS. Texas, Article 21.28, Teras Insurance

Céde (Appendix p. 37 below).

— Colden v. Ale ander, 141 Texas 134, 171 S. W. 2d 383

(1943) and Teas }. Kimball, 257 F. 2d 817 (Sth Cir.

1958), cited by Petitioners, do not conflict with the decision

-of the Court of. Appeals in this case. Those cases decline’ to

enforce an oral contract (Colden) and a partnership with. a

married woman (Teas) affecting Texas land which are

‘unenforceable under Texas Jaw. In the present case neither

the charter contract of the bank nor the decisions of the.

Superior Court of Cook County, having jurisdiction of the

parties and subject matter, are unenforceable in Texas,

- even though they are pursuant to the Illinois Banking Act

and to that extent- such act indirectly affects the title to

the Texas realty. In the present case the Court of Appeals

applies Texas law to, determine whether there has been an

effectiێ transfer of title. Texas has no policy against suc-

‘cession to corporate title to Texas realty provided by the

corporate charter or the law of —— of incorporation.

-

u

20

This is not a case where Illinois, by force of its fiat, pro-

vides succession of title to Texas néalty contrary. to the suc-

cession pr ovided by Texas law. e

Morris v. Hand, *) Tex. 481 8S. W. 210 (1888); Fall v.

Fastin, 216 U.S. 1, 30 Sup. Ct. 3, and other similar cases

cited by Petitioners refer only to the well recognized limita- :

tion on the power of a court in one state by its own decree

direc tly to divest title to-realestate"in a foreign state. ‘The-

cases have ‘no relation to the effect of a foreign decree. in

, personam as res judicata where, as in this case, there i is juris-

"diction of the person and the general subject matter.

The. liquidating receiver did not get his title solély Scales

of the Illinois Banking Act or the decrees or-orders-of the

Superior Court. The bank’s charter created a right of prop-

erty in the liquidator on his-appointment by the auditor. This

right of property was subject to recognition and enforcement

in Texas. |

The question here is not whether the law of Texas author -.

izes Texas courts to adopt the statutes of another state as a

rule of decision. It is whether the law of Texas is contrary to

the Constitution of the United States when it permits Texas

courts to recognize and ertforce-the contractual rights of the

‘ parties by giving effect to the charter of the Illinois bank,

when that charter ‘encompasses provisions of the Illinois stat-

ute as to-successiofi to title in event of insolveney. This en-

forcement of contractual rights is not a denial of due process.

Since neither the Texas conveyancing nor receivership stat-

utes cited by Petitioners are exclusive or applicable, there is -

id .

21

no denial of due process or equal protection and no abridg-

me . of privileges and immunities.

Petitioners cite the cases of Pacific Employers Insurance

C umpany v, ied a Accident Commission of California,

306. US. 493, : S. Ct. 629, 83 L. Ed. 940 (1939); Young

. Masci, 287 “4 S. 253, 53 §. Ct. 599, 72 L. Ed. 1158

as Alaska. Packé rs Association v. Industrial Accident

a ‘Commission. of the State of California, 294 U.S. 532.55 8.

- 7.

@y ip

Ct. 518, 79 L. Ed. 1044 (1935): wid Carvéll v Lanza, 349

U. Ss, Z08, a5 Pa A SO}, 99 | I Ed. 1183 (195 oO a), to illus- ,

trate an alleged violation of due process and equal protec-

tion, All of these cases involve direct conflicts between work-

men’s compensation legislation of the states involved. They

hold a state is not requjred to give full faith and credit to a

statute or decision of.a sister state which-is contrary to the

policy of the forum. None of the cases deal with the doc ‘trine

of comity.

Petitioners refer to the case of Fischer +. American

United Life Ins. Co., 314.U. S. 559, G28 Ct, 380, 86 1. Ed.

444 (1942), as the only case Shichi the Aolantary “appli-

cation of the law of another state in determining possession

of property, and contend that such voluntary application:

may only -be had with regard to personal property. This

contention is not Seacie by the cases such as Baldivin +

dohnson, 95 Tes, 85 ’, Ss JW, I? ] (1901), and McElocath

vr. McEtreath, 2455 S. ha 2d 722 (Ter. Sup. #961), }

The decision of the Court of Appeals was not based solely

on the Illinois statutes and proceedings as Petitioners’ imply.

Additional facts in this case are that: Illinois is the state of

y

22

incorporation and domicile of the bank; the corporate Charter

includes the I}linois Banking Act; the bank. and the liquidat-

"ing receiver who represented the shareholders, depositors-and

creditors were parties to. the liquidation proceeding in the

Superior Court in which the sale was ordered and confirmed

and all assets were found to-have beén disposed of before dis-

sglution of the bank: in that proceeding the Superior Court

had personal jurisdiction of all interested parties and juris-

diction of the subject matter whidh was the liquidation of the

hank; TeXas requirements for passage of title to Texas realty

were satisfied. - ner

Texas may, without exceeding the limitations of the Con-

stitution of the United States, have a rule of decision, ap-

—plicable alike 10 domestic and foreign corporations, that suc-

cession to title to corporate property on insolvency shal] be

goyerned by the law of the state of incorporation; but it is

not necessary in this case to go so far as to hold that the

Illinois statute is to-be applied as such. -It is only necessary

here to say that Texas may enforce a charter provision of a

foreign: corporation for succession to title to Texas land: or

_ that Texas may give effect to findings of the Superior Court

‘of Illinois, having jurisdiction of the parties and of the sub-

‘ject matter, that the realty in suit was duly sold to Respond-

ent’s predecessor, and all the bank’s assets disposed of. by the

liquidating receiver before dissolution. McElreath r, Me-

Elreath, 245.8. W. 2d. 722 (Tex. Sup. 1961). The decisions

- below may be sustained on either ground. U nder Texas law

# party suing. for or asking affirmative relief-as to Texas

realty must recover if at all, on the strength of his own title.

23

‘Adame v. Bow les, 149 Sant 52, 228 S. W..2d 849 (1950);

Ballard -v, Carmichael, 17'S. W. 393_(Tex. Sup. 1891).

Illinois had both power over and an interest in the liqui-¢

dation of the Illinois bank which was the subject matter of

the liquidation proceedings in the Superior Court of Cook

County, Illinois. Such liquidation was within the subject

matter of the pertinent provisions of the Illinois Ranking

~ Act. The -Superior Court’ had jurisdiction of that subject.

matter and personal jurisdiction of the bank, the liquidating

receiver; and, through his representation, the shareholders,

depositors afd creditors. It was not necessary that the

Superior Court have territorial jurisdiction of all property

owned by the bank. There is not -involved here a dirett trans-

fer of property by fiat of the Illinois ‘court such as “Was

involved in Fall v, Eastin, 216 U. S. 1, 30 Sup. Ct. 3, and

similar cases cited by Petitioners: The orders of the Superior

Court are in personam, They affect only indirectly the Téxas

’ realty. am: . =

Since the Superior Court had jurisdiction of the subject

matter and personal jurisdiction of “el, parties, its orders .

and decrees are entitled to full faith anc, credit in Texas. -

However, because of the law of Texas regarding comity, ‘it

ch this constitutional point, as the

ly decided (294 F. 2d at page 458).

is not necessary

Recognition by coyrts in Texas that the Bank has, by its

charter made in I]linois, subjected the bank to certain condi-

tions prescribetl by the Illi

. to the Illinois Banking Act any ‘extra-territorial effect.

“ j

is Banking Act, does not give

24

John Hancock Mutual Life Jncubenee Company v. Yale.

299 U. S. 178, 57 S. Ct. 129, 81 L. Ed. 106 (1936).

_ In short, it may be said that-the Texas law applied in the

instant case, which is applicable to domestic and foreign

corporations alike, is that provisions of .a corporate charter

for succession to the title to corporate property, including

realty, will be given effect where not contrary to public

policy. The corporate charter may provide for succession by - _

adoption of the provisions of the law of the state of incor-

- poration.. The question presented is whether such a Texas

law is invalid under the Constitution of the United States.

The Illinois Banking Act, although ‘it deals with insolvent

banks, is not in the nature of a bankruptcy or insolvency

law. It provides no discharge. Denny v. Bennett, 128 U. S.

489, 9 S. Ct. 134 (1888). No claims of Texas creditors are

shown to be involved here. The passage of title from the

bank to the liquidating receiver is comparable to ‘a volun-

tary, not an involuntary transfer. Clarke v. Willard, 292 U.

S. 112, 54 S. Ct. 615, 78 L. Ed. 1160 (1934); Headnotes ,

4 and 6. The distincticn is recognized in Cole v. Cunning-

ham, 133-U. S. 107, 10 S. Ct, 269 (1890) and Security Trust

—— v. =? 173 U. S. 624, 19 Ct, 545 (1899).

CONCLUSION ie

Petitioners have not demonstrated any conflict sie

the decision below and any decision of this Court or any

court of appeals or Texas court. Neither have they shown.

_ any violation of their Constitutional rights to due process

and equal protection of the laws, or that privileges or

f>

25

immunities of citizens ate abridged. The decision below was

clearly correct both as tb the capacity of the Receiver, G. C.

Nunn, under Texas law, to represent the shareholders joined

with him as plaintiffs in the@suit and as to disposition of

the realty in suit through sale by the Illinois liquidator.

Respondents respectfully submit that the petition for cer-

tiorari should be denied. |

Respectfully submitted,

WILLIAM D. NEAry,

» 2300 Republic Bank viene

_ Dallas, Texas,

re for Respondents.

PINKNEY GRISSOM, ._

_ HARQLD F. THOMPSON,

MORRIS HARRELL, -

THOMPSON, KwicHr, WRIGHT

& SIMMONS,

A Dallas, a

Of Counsel.

-

CERTIFICATE OF SERVICE

" ‘The undersigned hereby certifies that copies of the absve

Brief were sent by United States mail, postage prepatd, to

attorneys for Petitioners by sending the same to Maurice

Bullock, Fort Stockton, ‘Texas, and F. H. Panhill and Boyd —

Laughlin, P.O. Box 670, Midland, Texas, this - day of

February, 1962. - ,

PT TTT TEE ee

y

——

27

_APPENDI®

ARTICLE 2101 (c), TITLE 28, UNITED STATES CODE _

(ey Any other appeal or any writ of certiorari intended

_ to bring any judgment or decree in a civil action, suit or -

proceeding before the Supreme Court for review shall be

taken or applied for within ninety days after the entry of.

such judgment or decree. A justice of the Supreme Court, for

good cause shawn, may extend the time for: applying for a

writ of imatsianl ra period not exceeding s sixty cay

ARTIC LE 1441(a), TITLE 28, U NITED STATES CODE

_ (a) Except as otherwise expressly provided ,by Act of

Congress, any civil action brought in a State court of which

the district courts of ‘the United States have original juris-

diction, may be removed by the defendant ov theaféfendants,

to the district court of the United States forthe district and

- division embracing the place where such action is ‘pending.

SMITH-HURD ILLINOIS STATU TES

Chapter 16! “ —Banks |

£11. Minimum capital determined by Jocation — Impsir-

ment of capital — Misconduct of business ,

7

(a) Banks and banking associations may be organized

_ under the provisions of this Act, at any-place within the

State, with minimum capital stock as follows:

1. If not within a city, village or incorporated town, or

> if in a city, village or incorporated town of twenty-five-hun-

ffs (2,500) inhabitants or less, of twenty-five thousand

4

ae C58. : ; oo.

dollars ($25,000) provided no. bank exists in such place at

the time the application to-organize is filed with the Auditor

of Publie ‘Accounts.

~2. If ina city, village or incorporated town of more than

_ twenty-five hundred (2,500) and less than ten thousand.

(10,000) inhabitants, of fifty thousand doliars ($50,000.00).

3. If in a city, village or in@rporated town of ten thousand

(10,000) inhabitants and lesg than fifty thousand (50,000)

inhabitants, of one hundred thousand dollars ($100;000).

4. If in a city, village or incorporated town of fifty thou- |

sand (50,000) inhabitants or more, of two hundred thousand

dollars ($200,000).

(b). Should the capital stock of any bank organized under

this Act become impaired, the Auditor shall give notice to the -

directors to have the impairment made good by assessment of

thie stockholders, pro rata, for an amount, if necessary, equal .

to. the par value of the stock held by each, or to reduce the

capital stock of such bank, if the reduction should not bring ’

the capital below the provisions of this section, and if any.

stockholder .or stockholders of such bank shall neglect or re- |

fuse after thirty days notice to pay the assessment as )ro-

vided in this section it shall be the duty. of the board of direc-

tors to cause’ a sufficient amount of the capital stock of. such

-stockholder or stockholders to be sold at public-auction (after. -

tw enty days notice shall be given by ‘posting such notice of

a sale j in the office of the bank, and by publishing such notice in —.

_ a Newspaper of the city or town in which the bank i is located

-or in a newspaper: pubjished nearest thereto) to make good

29

* the delitones, and the balance, if any shall be returned to

such delinquent stockholder or stockholders. If the capital

stock of said bank shall remain impaired for sixty days after

such notice by the Auditor, or, if it appears from the reports

"made to the Auditor under this Act, or from any examination .

made by or on behalf of. the Auditor that the conditions of

any bank organized under this Act are such that the impair-

ment of the capital stock cannot be made good if in the opin-

ion of the Auditor, it is operating with an insufficient portion

of its assets in cash or readily convertible securities, or that

the business of any such bank is being conducted in an illegal,

fraudulent vr unsafe manner, he may, in his discretion, with-

out having taken the steps provided in this section to make

| good the impaired capital stock, forthwith, for the purpose of

reorganization or liquidation through receivership, take pos-

session and control of the banking house, furniture. and fix-

tures, books, records, and assets of every < lescription, of such _ ;

_bank. If the Auditor determines that the bank cannot be

reo} ‘ganized and that the same should be liquidated through

receivership he shall appoint a receiver, and require. of him

- such bond and security as he deems proper. Such, receiver,

under the direction of the Auditor, shall take possession of,

_ and for the purpose of the receivership, the title to the books,

_ records and assets of every description of such bank, and shall

- proceéd to collect all debts, dues and claims belonging to it,

and, upon the order of a court of record of the county in

which said bank is located, thay sell or compound all bad or

doubtful debts, and on a like order may sell the real and

personal property of such bank, on such terms as the court’

shall direct.

30

Such receiver shall file with the Auditor of Public Accounts ’

a copy of each report which he makes to the court, together

with such other reports and ‘records as the Auditor may

require. pe '

_ Such receiver shall have authority to sue and defend { his:

_ own name with respect to the affairs, assets, claims, debts

and choses in action of ‘such bank. He shall also have the |

authority and it shall be his duty, under the direction of the

Auditor, to surrender to customers of such banks their pri-

vate papers and valuables left with said bank for safekeeping

upon satisfactory ptoof of ownership. As soon as can reason-

ably be done, he shall resign on behalf ‘of said bank, all

trusteeships, guardianships, conservatorships, and all ap-

pointments as executor and administrator, making in each

case a proper accounting on behalf of said bank. He shall

have the power and authority to redeem or take down col-

lateral hypothecated by said bank to secure its notes or other

evidences of indebtedness whenever the Auditor deems it to

the best interest of the creditors of said bank so to do; and to

do such other things and take such other steps from time to

time under the direction and approval of the Auditor as ray

reasonably appear to be necessary to conserve the trust estate

and secure the best interests of the creditors of said bank.

_ Such, receiver may petition the Circuit Court of the’county

in which such bank is located or any judge thereof in vacation

for authority to borrow money and to pledge the assets of

such bank as security ‘therefor. Upon the filing of such peti--

tion, such court or judge shall set a date for the hearing of

such petition and shall prescribe the form and manner of the

”

- 31.

notice to be given the officers. stockholders, creditors or-other

_ persons interested in. such bank. Upen such hearing any

officer, stockholder, creditor or person interested shall have

the right to be heard: If the court by order grants such au-

thority then such receiver may borrow money and issue evi-

dences of indebtedness therefor and may secure the payment

of such loan by the mortgage, pledge, transfer in trust or

hypothecation of any or all of the property and assets of such

bank whether real, personal or mixed, superior to any charge

thereon for the expenses of liquidation. Such loan may be

obtained in such amount upon such terms and conditions and

with such provisions for repayment as may be deemed neces-

sary or expedient and may be obtained for the purpose of

facilitating liquidation, protecting.or preserving the assets,

.- expediting the making of distributions to depositors and other

ereditors, providing for the expenses of administration and

liquidation, aiding in the reopening or reorganization of such

bank or its merger or consolidation with another bank, or in

the sale of its assets. Such receiver shall be under no personal

obligation to repay any such Joan and shall have authority to

take any and 4ll action ngessary or proper to consummate

such loan afid to provide for the repayment thereof, and -

may, when required, give bond for the faithful performance

of all undertakings in connection therewith. Prior to petition-

ing the court for authority to make any such loan, such

receiver may make application-for or negotiate any such loan

subject to obtaining an order of the court approving the same.

‘ The Auditor of Public Accounts, shall, upon appointing: a

receiver, cause notice to be given by advertisement in such |

32

newspaper as he may direct, once each week for twelve con-

- secutive weeks, calling on all persons who may have claims

against such bank to present the same tosuch receiver and to

make legal proof thereo’ and in case the Auditor of Public |

Accounts, represented by the Attorney General’s office has

instituted suit or proceedings for the dissolution or winding

up of the affairs of such bank in the Circuit Court of the

county where the bank is located, such persons or.the receiver

to whom. such persons have presented their claims may pre-

sent the same to the clerk of such court and the allowance or

disallowance of such claims by said court in connection with

‘the said proceedings shall be deemed an adjudication in a

court of competent jurisdiction.

Such receiver shall deposit daily all moneys collected by -

him in any State or National bank selected by the Auditor,

‘who shall require of such depository satisfactory securities or .

satisfactory suréty bond for the safekeeping and prompt

payment of the money so'deposited. No interest upon money

so deposited shall be required of such depository. However, if

- any interest shall be paid by such depository,’ it shall accrue

} to the benefit of the particular trust to which the deposit

belongs.

From time-to time the Auditor of. Public Accounts shall

make a ratable dividend of the moneys collected by such re-

ceiver on all such claims as may have been proved to his

satisfaction or adjudicated in a court of competent jurisdic- -

tion, and, as the proceeds. of the assets of such bank are

__ collected, shall make. further dividends on all claims previ- 7

| ously proven or adjudicated.

33

The receiver of such bank shall, after the expiration of said

twelve weeks, file with the Auditor and with the clerk of such

court as may have charge of the liquidation, a correct list of

all creditors of said bank, as shown by its books, who have not.

presented their claims and the amounts of their respective

claims after allowing all just credits, deductions and set-offs’

as shown by the books of said bank, Such claims so filed shall

be deemed proven, unless objections are filed thereto by some

party or parties interested therein within such time as shall

be fixed by. the Auditor or by such court as may have charge

of the liquidation. .

All, unclaimed dividends shall be deposited with the Audi- .

tor ef Public Accounts to be paid out by him when proper

_ Claims ther ‘efor are presented to the Auditor, and the Auditor —

shell pay the same out of such sums or funds so deposited

with him. After one year from the final dissolution of the

bank, the Auditor shall make a pro rata distribution thereof

to those. claimants who have accepted dividends until such

claim or claims.are paid in full, and if any of said moneys

shall then remain in his hands, the ‘Auditor shall distribute

_ the same pro rata to.the stockholders. The Auditor shall de-

duct, from the funds so deposited with him the expenses of

distributing the same.

At the close of the receivership, it ‘shall be the duty of the

receiver to turn over to the Auditor all books of account and

ledgers of such bank for: preservation. All records of such |

receiverships heretofore and hereafter received by the ‘said

34

Auditor shall be held by him for the mit of two years after

the close of the receivership and at the termination of said

wo year period may then be destroyed.

Whenever any-such bank against which proceedings have

been instituted, or for which a receiver has been appointed as _

aforesaid, on account of an alleged impairment of its capital

stock or alleged conduct of its business, in an illegal, fraudu-

lent or unsafe manner, or because it is in the opinion of the

Auditor operating with an insufficient portion of its assets .

in cash or readily convertible securities, denies such grounds,

it may at any time within ten days, apply to the Circuit Court »

- of Sangamon County, Illinois, to enjoin further proceedings

-jn.the prémises; and such court, after citing the Auditor of

Public Accounts to, show cause why further proceedings

% should not be enjoined, and after the decision of the court or

findings of a jury that such grounds do not éxist, shall make

an order enjoining the Auditor and any receiver acting under

his direction, from all further proceedings on account of such

alleged grounds.

All expenses of such receivership, including ‘reasonab!> .

receiver's, solicitor’s and attorney's fees, approved by the

Autlitor of Public Accounts, shall be paid out of the assets of

such bank; and ‘all expenses of. any preliminary or other

examinations into the condition of any such bank or receiver-

- ship, and all expenses incident and in connection with the

possession and control of any banking house, furniture and

‘fixtures, books, records and assets of every description of

such bank by the Auditor for the purpose of reorganization

35

or liquidation through receivership, shall be ns out a the -

assets by such bank. |

When any banking association, organized under this Act.

shall have gone into liquidation under the proyisions of this

section of the Act, the individual liability of the shareholders

provided for by section six (6) of this Act may be enforced

by any creditor of such association ‘by bill in equity, in the

nature of a creditors bill, brought by such creditér on behalf

of himself and all other creditors of the association against

the shareholders thereof, in any court having jurisdiction in

equity for the county in which such bank or banking associa-

tion may have been located or established. 3

The Court in which such suit is instituted may appoint a

receiver and require of him sach bond and security as seems

-proper for the purpose of collecting, receiving, and disburs-

| ing the amounts due from the stockholders on account of their

ownership of the stock of said hank. Said receiver shall have

authority upon the order of the court apheinting him -to em-

ploy such auditors and assistants as may be necessary to

establish and recover the liabilities of the stockholders, and

" may, with the approval of the court enter into compositions

‘with insolvent stockholders, if any. The costs of such proceed-

ings. including reasonable solicitor’s fees for complainants’

solicitors, and other necessary expenses of collection, may on

the order of court, be paid out of the funds coijlected by said

recéiver. The funds so collected, after the payment of the

costs and expenses of collection, including solicitors’ fees,

shall be distributed according to law among the creditors of

said bank in sucti manner as the court shall diréct.

36

7

Whenever the receiver of any bank, who shall have duly

qualified and entered upon the discharge of his trust, shal!

find it necessary in his opinion to use and employ money of

said trust in order to fully protect and benefit his said trust

by the purchase or redemption of any property, real or per-

sonal in which said trust may-have any rights by reason of

gny bond, mor tgage, assignment, or other claim thereto, he

may certify the facts together with his opinion as to the value

of the property involved and the value of the equity his said

trust may have in said property to the Auditor of Pulte

Ag ‘counts together with ; a request for the right and authority

to use and employ so much of the money of said trust as may

be necessary to purchase said property or o redeem the same

from a sale if a sale shall have been had, and if such request

is granted said receiver may use so much of the money of said

trust as the Auditor may have authorized to purchase said

property at such sale.

No bill shall be filed or proceedings commenced in any

court for the disselution or for the winding up of the-affairs

_ or for the appointment of a receiver for any <uc ‘h banking

corporation on the grounds, of insolvency or impairment of

the capital stock of such banking corporation or ‘upon the

grounds that such bank is being conducted in an illegal,

fraudulent or unsafe manner, or upon the ground that it is”

operating with an insufficient portion of its assets in cash or

- readily convertible securities except in the name and by the

authority of the Auditor of Public Accounts, represented by.

the Attorney General. |

37

At any time, whenever two-thirds in number and amount

of the creditors of any such bank or association, ‘after any

such recpiver shall have been appointed by the Auditor, shan

petition the Auditor of Public Accounts for, the appointment

of any person nominated by them as receiver, who is a reput-

able person and elector of the county in which such hank or

_ association is located, it shall be the duty of the Auditor to

‘make such appointment, and all the rights-and duties of his

predecessor shall at once devolve upon such appointee. (Act

_of 1919, June 23. Laws 1919, p. 224, s11; Laws 1923, 5. 158,

<1: Laws 1929, p. 174, £1; 1932, Sept. 30, Laws 1932, .

Fourth Sp. Sess., p* 3, £1; as amended 1937, July 1, Laws

1937, p. 247, $1: 1939, June 19, Laws 1939, p. 290; $1;

1941, July 17, Laws 1941, vol. 1, p. 267, £1.)

‘12. Proceedings relating to change of name, business, ete.

. * * * o ,

And provided, further, that any corporation with banking

powers availing’ itself of or accepting the. bénefits of, or

formed, under, this Act, and al] corporatiéns with banking

powers existing by virtue of any special charter or general

law of this State, shall he subject ‘to the provisions and. re-

quirements of this Act in every particular, as if organized

under this Act.

TEXAS INSURANCE CODE

Texas Insurance Code, Art. 21.28. "Liquidation, Rehabilita-.

tion, Reorganization or Conservation of Insurers:

See. 1. Definitions. —For the purposes of this article:

*

* * * ®, * ,

; >

38 ~

“(d) “Liquitlator” means the person designated by the

Board of Insurance Commissioners as receiver, liquidator, ;

rehabilitator, or conservator of all insurers as defined herein.

Sec. 2. Conduct of Delinquency Proceedings Against Domi-

ciliary Insurers.—Whenever under the law of this State a

court of competent jurisdiction finds that a receiver should

take charge of the assets of an insurer domiciled in this State,

the liquidator designated by the Board of Insurance Com-

missioners as hereinafter provided for shall be such receiver.

The liquidator so appointed receiver shall forthwith take

possession of the assets of such insurer and deal with the

same in his own name as receiver or in the name of the

insurer as the court may direct.

The said receiver and his successors in office shall be

vested by operation of. law with the title to all of the prop-

_erty, contracts and rights of action of such insurer, where

ever located, as of the date of entry of the order directing

possession to be taken. ;

’ ” _* © & # © '

ae Heuldator.» may sell or compound doubtful debts

me may sell real or personal property under order of the

court, but no such order shall be entered or sale made with-

out notice and hearing. |

Acts 1951, 59nd Leg., ch. 491.

>

‘and: div idle

89

ARTICLE 1388, R.CS.; TEXAS 9

Art. 1388, Revised Civil Statutes, Texas, 1925, 1206-7

Liquidation by officers aie

Upon the dissolution of a corporation, unless a receiver

is appointed by some court of competent jurisdiction, the —

_president and diréctors or managers of the affairs of the

corporation at the time of its dissolution shall be trustees

airs, collect the outstanding debts,

4 and other property among the’ stock-

holders after paying the debts due and owing by. such cor-

poration at the time of its dissolution, as far as such money

and property will enable them after paying all just and

reasonable expenses: and for this purpose they may in the

name of such corporation, sell, convey and transfer all real

and personal property belonging to such company, céllect all

debts, compromise controversies, maintain or defend judicial

power to

proceedings, and exercise full power and authority of said

company over such assets and property. Said trustees shall be

severally responsible to the creditors and stockholdérs of such

‘corporation to the extent of its property and effects that

shall have come into their hands, Id. ; Acts 1919, 2nd C.S.,

p. 140:

Art. 48%, Revised Civil Statutes, “Texas, 1925, Federal

deposit insurance oe

‘-kholder= of such corporation, with.

40

Sec, 3. The Federal Deposit Insurance Corporation created

by Section eight of the Federal “Banking Ac? of 1933” (See-

tion 12B of the Federal Reserve Act, as amended) is hereby —

~ authorized and empowered to be and act without bond.as

receiver or liquidator of any banking institution, the deposits

_in which are to any extent insuréd by said Corporation, and

whieh shall have been closed on account of inability.to meet

the demands of its depositors. _

The appropriate State authority, having ihe right t6 ap-

point a receiver or liquidator of a banking institution, may in

the event of such closing, tender to said’ Corporation ‘the

appointment as receiver or liquidator of such banking institu-.

tion, and if the Corporation accepts said appointment, the

Corporation shall have and possess all powers and privileges

provided by the laws of this State with respect to a receiver

or liquidator respectively of a banking institution, its deposi-

tors and other creditors, and be subject to all the duties of

such receiver or liquidator, except in so far as such powers,

privileges or duties are in conflict with the provisions of sub-

section.(1) of Section 8 of said “Banking Act of 1933.”

Sec. 7. Upon the acceptance of the appointment of receiver

or liquidator aforesaid by said Corporation, thé possession of

and title to all the assets, business and property of such bank-

ing institution of every kind and nature shall pass to and vest

in said Corparation and without the execution of any instru-

ments of conveyance, assignment,’ transfer or endorsement.

Acts 1935, 44th Leg,, p. 459, ch. 183, ~~

|

41 : * '

ARTIC LES 2297 AND 2310. R.C.S., TEXAS

Art. 2297, R.C.S., Texas ( 1925) Receiver’s power

The receiver shall have power, ‘under the control of the

court, to bring dnd defend actions in his own name,, as

receiver, to take charge and keep possession of the property,

to receive rents, collect, compound for, compromise demands,

m: ike transfers, and generally to do such acts respecting the

property as the court may authorize.

“(Acts 1887, p. 120.)

Art. 2310, R.C.S., Texas (1925) Suit by or r against

When property within the limits of this State has iia

plac ed in the hands of a receiver who has taken charge of

* such property, such receiver may, in his official cdpacity, sue

or be sued in any court of this State having jurisdiction of

the cause of action; without leave of the court appointing him.

‘If judgment is récovered against “said receiver, the ‘court

shall order said judgment paid out of any funds in the hands

of said receiver as such receiver.

ARTICLE 1322, R.C.S., TEXAS

Any corporation, may convey lands by deed, sealed with the

common seal of the corporation, ahd signed by: the president

or Vice-president or presiding member or, trustee of said

corporation, or in common form without seal by its attorney

in fact where the instrument constituting such attorney in

fact is executed in said manner first mentioned. Such deed,

‘when acknowledged by such officer or attorney in fact to be -

the act of the corporation, or proved ° ‘in ‘the manher pre-

. *:

42

_

«

1905, p, 230; Acts 1939, 46th Leg., p. 183, $1.

TEXAS BUSINESS CORPORATION ACT

Art. 5.06, Effect of Merger or Consolidation of Domestic

Corpor ations

o

-A. When ‘auch merger or consolidation of domestic cor-

.. porations, has been effected:

* * * * a a

($i Such surviving. or new corporation ‘shall thereupon

and thereafter possess all the rights, privileges, immunities,

and franchises, as well.of a public as of a private nature, of

eac ‘h of the merging or consolidating corporations; and all

ag property, real, personal, and mixed, and all debts due on

“whatever account; including subscriptions to shares, and cll

other-choses in action, and all and every other interest, of or

helonging to or due to each of the corporations so merged or

“consolidated, shall be taken and deemed ‘to be transferred to

and vested 2 such single cor rporation. without further act or

deed.’

* a * * *

Acts 1955, 54th Leg., p. 39, ch. 64,

scribed for other conveyances of lands, may be recorded in.

like. manner. and with the same effect as other deeds. Acts -