# Petition for Writ of Certiorari — Coral Gables First National Bank v. American Surety Co. > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385602_1147%3A1 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1966 - **Citation:** 383 U.S. 912 ## Text 7 si Lt i cote SUPRin ole Tk pe OCTOBER TERM, 1 1965 No. aa THE CORAL GABLES FIRST NATIONAL BANK and PAN AMERICAN BANK OF MIAMI, Petitioners, vs. AMERICAN SURETY COMPANY OF NEW YORK and . JOHN C. NICHOLAS, As Trustee, Respondents. PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS, Warp & Warp Wru1aM B. Rowan 1240 duPont Suilding Pan American Bank Miami, Florida 33131 Miami, Florida 33131 Aitéfneys for The Coral and Gables First National Bank Lzo L. Foster os Brock Building Tallahassee, Florida - Attorneys for Pan American — | = . _ PEN PN STAN APE INEST NI ONL LASER ATP EES TIRE OT LSI NANI BPE OLE NET SE A AEE EIRENE) FIORE NEAR OER TS BL. Mueernas, Inc., 1108 Osk Strest, Kanses City, Mo. 64106, HAsrison 1-9080 TABLE OF CONTENTS ¢ Opinion and Decision of U.S.C.A. 5, 349 F. 2d 595, Opinion Appéndix A, Decision Appendix B ................ 1-2 Jurisdiction under Title 11, U.S.C., § 47, § 24, National Bankruptcy Act, Within Time Fixed by Title 28, U.S.C., § 2101(c) QUESTIONS PRESENTED 3 Preliminary Statement As to Questions and Back- ground 3-16 SUMMARIZED QUESTIONS— ere Question (1) 16 Question (2) 16 Question (3) 7. Question (4) 17-18 Question (5) * 18-19 Question (6) 19 STATUTES AND CONSTITUTIONAL PROVISIONS INVOLVED— Amendment V, Constitution of the United States... 19 Amendment XIV, Section 1, Constitution of the United States 20. Section 5198 (Title 12, §§ 85 and 86) 20-21 Title 12, U.S.C.A., § 1, Creating Bureau of Comp- troller of Currency for National Banks: -........... 21 Title 12, U.S.C.A., § 21, Establishing the Govern- , ment of National Banks 21 U. S. Comptroller of Currency Ruling 1135A, Con- cerning Participation with National Banks and Other Banks 22 23 “ STATEMENT ... ; Analysis of Procedure and Background Leading Up : to Issuance of Opinion of U.S.C.A. 5, 349 F. 2d 595 | 23-27 ey m | INDEX | REASONS FOR GRANTING THE WRIT RO Po ARGUMENT 29-35 CONCLUSION aceon SEAT Authorities Cited John R. Alley & Co. v. Federal National Bon of Shao nee, Oklahoma, 124 F. 2d 995 dietjnn Alton v. Alton, 207 F. 2d 667 BOE gi Sad Beacon Theaters, Inc. v. Westover, data ts. ticacd 948 . 1 Black, Trustee v. Boyd, U.S.C.A. 6, 248 F. 2a 156. .. 24 Burgess v. Nail, 103 F. 2d 37 . 39 Coral Gables First National Bank v. Constructors of Florida, Inc. (Fla. App.), 119 So. 2d 741, certiorari denied 123 So. 2d 349 (S. Ct. Fla.), certiorari denied | US.C.A. 5, 365 U.S. 811, 81S. Ct. 690, 5 L. Ed..2d 691 . 8,9 Coral Gables First National Bank v. Constructors of . Florida, Inc., 132 So. 2d 806, certiorari denied Fa. S. Ct., 133 So. 2d 319, certiorari denied U.S. Supreme © “Ct. 82 S. Ct. 687, 369 US. 813 eee en 7 Ye hl Coral Gables First National Bank v. Constructors, 299 i ee : 11, 13, 14 Coral Gables First National Bank v. Constructors of Florida,’ Inc., 349 F. 2d 595 2 Coral Gables First National Bank v. Constructors of Florida, Inc., 365 U.S. 811, 81 S. Ct. 690, 5 L. Ed. 2d , 691 a. v. Greaney, 309 U.S. 190, 60 S. Ct. 480, 84 L. Ed. Gene Durfee et uz. v. Julia E. Duke, 375 US. 106, 84 S. Ct. 242 42 First National Bank of Charlotte v. Morgan, 132-U.S. , 141, 10 S. Ct. 37, 33 L. Ed. 282 21 Gondeck v. Pan American World Airways, Inc, 86 S ; i oe INDEX mI Granville-Smith v. Granville-Smith, 349 U.S. 1, 75 S. Ct. ( 553 een . 30 Kalb v. Feuerstein, 308 U.S. 433, 60 S*Ct. 343, 84 L. Ed. 370 | 43 Leonardi v. Chase National Bank of the City of New York, (U.S.C.A. 2, 1936) 81 F. 2d 19 38 McCollum v. Hamilton National Bank, 303 U.S. 245, 58 » &. Ct. 568, 82 L. Ed. 819 1, 16, 27 Mercantile: National Bank at Dallas v. Langdeau, 83 -S. Ct, 520, 371 U.S. 555 15,27_ ae National Bank v. Robinson, 83 S. Ct. 914, 373 -U.S. 591 15, 27 Republic National Bank of Dallas v. Langdeau, 371 U.S. 555, 83 S. Ct. 521 east ae Riley v. New York Trust Co., 315 U.S. 343, 349, 62 S. Ct. 608, 612, 86 L. Ed. 885 42 Schulnacher v. Lawrence, 108 F. 2d 576 28 Southern Construction Company v. Rickard, 371 U.S. 57, 83 S. Ct. 108 14, 27, 32 Sulil Realty Corp. v. Rye Motors, Inc., 257 N. Y.S. 111 36 United States v. Simms, 1 Cranch (U. S.) 252, 2 L. Ed. 98 36 United States v. Stevenson, 215 U.S. 190, 54 L. Ed. 153, 30 S. Ct. 35 is ce 43 United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 60 S. Ct. 653, 84 L. Ed. 894 : 7 Texts 1 Am. Jur. 2d 558, § 20 ...... 23 Am.:Jur., §§ 64 and 65 .....: 35, 23 Am. Jur., § 45 | LA. L. R. 3d 904 3 Title 11, US.C., § 47 Title 12, U.S.C.A., § 21 21 21 Title 12, US.C.A., § 1 Title 12, U.S.C.A., §§ 85 and 86 6, 7, 20, 21 3 Title 28, U.S.C., § 2101(a) National Bankruptcy Act, § 24 -.... 3 Amendment V, Constitution of U. S. 20 Amendment XIV, Constitution of U. S. Comptroller of Currency Ruling 1135A i a SUPREME COURT OF THE UNITED STATES OCTOBER TERM, 1965 - No. ~~ THE CORAL GABLES FIRST NATIONAL BANK and PAN AMERIGAN BANK OF MIAMI, Petitioners, Vs. AMERICAN SURETY COMPANY OF NEW YORK and JOHN ,C. NICHOLAS, As Trustee, Respondents. : PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT To Tae Honoraste Eart C. WARREN, CHIEF JUSTICE OF THE SuPREME CouRT OF THE UNITED STATES; AND THE ASSO- CIATE JUSTICES OF THE SUPREME COURT OF THE UNITED STATES: The petitioners, THE. CORAL GABLES FIRST NA- TIONAL BANK, a federal banking institution, with its . principal place of business in the City of Coral Gables, '‘ County, Florida, and PAN AMERICAN BANK OF a banking institution created under the laws of the State of Florida, having its principal: place of business in Miami, Dade County, Florida, respectfully pray that a writ of cer- 2 tiorari issue to review the judgment and opinion of the United States Court of Appeals for the Fifth Circuit, in case No. 21448, rendered on June 30, 1965, petition for rehearing denied Septeniber 3, 1965, reported in 349 F. 2d 595. Judg- ment of the United States Court of Appeals for the Fifth Circuit in the same case was entered on the same day as the opinion, June 30, 1965. The petition for rehearing from the order of June 30, 1965, was timely filed. -A copy of the opinion is certified as a part of the Transcript of the Record forwarded simultaneously herewith (Tr. 475). A copy of the said judgment is certified as a part of the same Record (Tr. 491). -A copy of the petition for rehearing is certified as a part of the same Record (Tr. 493). A copy of the order a ee ee the Record (Tr. gon 3 - OPINIONS scat The opinion of the United States Court ofAppeals, Fifth Circuit, dated June 30, 1965, is now reported as afore- said, 349 F. 2d 595, and a copy thereof is not only in the Record as aforesaid, but is reproduced and attached hereto . as Appendix A, page Al. The judgment of the United States Court of Appeals for the Fifth Circuit, is reproduced and attached hereto as Appendix B, page A13. The peti- ‘tion for rehearing is reproduced and attached hereto as "Appendix C, page“Al5. The order and judgment deny- ing the petition for rehearing is reproduced and attached - hereto as Appendix D,-page ‘42. ‘The opinion and judg- ment of the United States District Court, Southern District of Florida, dated December 20, 1963, which was the sub- ject matter of the opinion and judgment of the United ‘States Court of Appeals, Fifth Circuit, is shown in. the - Transcript of the Record at pages 411 to 429, and is re- produced and attached hereto as Appendix E, page A44. - - JURISDICTION This petition for certiorari is filed with this Court under the provisions of Title 11, U.S.C., Section 47, and Section 24, of the National Bankruptcy Act, and within the time permitted under Title 28, US.C., Section 2101(c). * QUESTIONS PBESENTED The Coral Gables First National Bank, a United States banking institution, in 1956 in the pursuit of its purposes as a national bank in Coral Gables, Dade County, Florida, made certain loans to “Constructors of Florida, Inc., a Florida corporation. Two loans were made in July, 1956, | both secured by recorded chattel mortgages valid under the Florida law, said mortgages creating a lien upon cer- tain itemized road machinery and collateral type of equip- ment. After, the recording of these two mortgages in July, 1956, Constructors of Florida, Inc., a general contractor, entered into.a contract with the municipality of West Palm Beach, Florida, covering certain sewer installations. That contract was negotiated and entered into in the latter part of August, 1956, and at or about that time Constructors - of Florida, Inc., applied for and’ received a performance bond from American Surety Company of New York. There was no relationship between the transaction involv- ing the two chattel mortgages of July, 1956, and the sub- sequent entry into the contract,and bonding arrangements On or about November 14, 1956, The Coral Gables First National Bank entered,into a third type of loan with Constructors of Florida, Inc., in the original face amount of approximately $442,000.00. A mortgage was executed by Constructors of Florida, Inc., dated November 14, 1956,. which was securell by a second equipment lien on much of the equipment which had been covered by the first mortgages of July, 1956, and with the addition of some “minor pieces of equipment that had not been previously mortgaged. In addition thereto, as the main security, Con- structors of Florida, Inc., assigned to The Coral Gables First National Bank the proceeds of the contractual pay- , ments from the City of West Palm Beach sewer contract. This mortgage was duly recorded and consent was ob- tained from the American Surety Company, as well as from the City of West Palm Beach. The Pan American. Bank of. Miami, a Florida banking institution, which with The Coral Gables First National Bank was a member of the Federal Reserve System of the United States, took a participation under a separate agree- ment under the rules and regulations of the Federal Re- serve Board and the Coniptroller of Currency, as super- visor of ‘national banks, for approximately 55% of the third loan and a slightly higher percentage of the first two . chattel mortgages of July, 1956. There was no assign- ment of any title of the mortgages or liens held by the National Bank. The: participation of the State Bank un- der the separate contract on the November 14, 1956, mort- gage was not tered into until several weeks after No- vember 14, 1956.% The National Bank had made the initial loans and held title to all three mortgages. In March, 1957, the National Bank; pursuant to the terms of the third. mortgage of November 14, 3956, contended that there had been a.default in that mortgage and also that there was a default for non-payment of certain install- ment payments on the July, 1956, mortgages. The American Surety Company took over the control and possession of Constructors of Inc., on or about March 15, 1957, and the stock o Constructors of Florida, Inc., was assigned to certain designated representatives of the Surety Com- 5 pany. The November 14, 195g mortgage and notes were then renegotiated and certain new trust agreements wer@ entered into under whith the payments from all three mortgages were paid under the trust agreement to The e Coral Gables First National Bank, as trustee, which in turn under the contract was to make distribution on a certain prorata basis of the sums collected from the City of West Palm Beach contract. This was the first instance where the proceeds of the West Palm Bach sewer con- tract were pledged as additional security for the first two mortgages, as well as for the third mortgage of November ° 14, 1956. Constructors of Florida, Inc., through its con- trol by the Surety Company, continued on the construc-_ mek tion work and certain payments were made through June, 1957. No payments were made by the City of West Palm : Beach directly to The Coral Gables First National Bank Ras pursuant to that trust after June, 1957, but the payments | were made diréctly by the City of West Palm Beach to Constructors of Florida, Inc., for use by the Surety Com- Pany in the completion of the sewer contract. = In September, 1957, the National Bank instituted a eke ae Circuit Court of Dade County, Florida, to tore- close all three mortgages. The Pan American Bank of Miami had been joined as a co-party plaintiff because of the requirements of the Federal Comptroller's regulations - governing the protection of participation interests with a national bank where the loan was in default under Comp- troller of Currency Ruling 1135A. There was no claim “ by the Pan American Bank that it held any title or legal hi me 6 + who had been officers of Constructors of Florida, Inc., and who had endorsed or guaranteed the payments. The Cir- cuit Court of Dade County, Florida, was the State Court of genera) jurisdiction. The procedure was for the purpose of foreclosing the lien of the National Bank on the equipment, as well as cabs for the purpose éf seeking an accounting and impressing a lien or judgment against American Surety Company and/or the City of West Palm Beach on the proceeds of the West Palm Beach sewer contract, the proceeds of which were claimed to have been wrongfully diverted from the National Bank. Application for the appointment of a State Court receiver had been filed but had not been presented to the Circuit Judge for a because within a very ‘short time after the suit was fil& an involuntary petition in Bankruptcy had been filed in the United States District Court, Southern District of Florida, and a federal Bankruptcy receiver had been appdinted, to-wit: John Nicholas, who held possession and custody of all of the assets, including the mortgaged equipment. The receiver i and Constructors of Florida, Inc., through the receiver, filed an answer in the State Court proceedings contending that the National Bank had exacted usury in the loan _ Of November 14, 1956. There was no claim of usury inter- \"_gased by anyone with reference to the two chattel mort- gage loans of July, 1956. - Upon the filing of the claim for usury in the State Court against the National Bank, the National Bank im- mediately filed motions to strike or dismiss those portions 4 of the answer which set up usury against the National Bank, because such a procedure for claiming usury against a national bank by way of counterclaim in an equity fore- | closure action by a national bank was prohibited by the ° . ‘provisions of the Federal Statutes, Title 12, U.S.C.,.§§ 85, . ; ‘ > b£ 7 and 86; Ait was contended at the outset that the only remedy permitted for a suit by way of claim of usury against a national bank was first of all limited to either a forfeiture of the interest not yet paid, or for double the amount of the interest actually paid, and it was claimed that the State Court first-had no jurisdiction to entertain any action by a borrower-against a national bank except strictly in the amount of claim permitted under the statute and in procedure which called for a separate action in the nature of debt where only two parties could be in- volved—one the borrower and the other the national bank. - The claim of the National Bank was based upon the - controlling opinion of this Court in the case of McCollum v. Hamilton National Bank, 303 U.S. 245, 58 S. Ct. 568, 82 L. Ed. 819. The State Court and counsel for the defendants in that case, while admitting that the McCollum case had laid down such a rule in the construction of the Statute, Title 12, U.S.C., §§ 85 and 86,-and that those principles of law and the determination of the restfictive jurisdiction, both as to amount and procedure, such a counter- claim in an equity suit, yet the Constructors of Florida, Inc., contended that the opinion in the McCollum case (which was issued by this Court in 1938) was based " upon facts which arose before the adoption of the Federal Rules of Civil Procedure which authorized compulsory counterclaims, and that the Federal Rules of Civil Pro- cedure established a new doctrine of substantive law rather than mere adjéctive law, and superseded or by implication amended the exclusive statutory provisions and remedies _in Title 12, U.S.C., §§ 85 and 86. It was pointed out to the Circuit Court of Dade County, Florida, that the United States Court of Appeals for the Tenth Cifcuit, in the,case of John R. Alley & Co. vy. Federal National Bank of vee, Oklahoma, a 1942 decision, 124 F. 2d 995, had held that such an amendment had been created by’ the adoption of the Federal Rules of Civil Procedure, and while , that was the only case of any appellate Court, state or federal, the Circuit Court of Dade County, Florida, applied that doctrine and ruled that the procedure by way of counterclaim in the equity foreclosure action in said Court ‘could be carried on under the provisions of the Florida Rules of Civil Procedure concerning compulsory counter- claims, notwithstanding the strict prohibition as to proce- dure and jurisdiction of any Court, state or federal, covering both the procedure and the amount of a claim for recovery of usury. ; . -- The National Bank continued this same objection as to . jurisdiction and power of the Circuit Court of Dade County, Florida, to. entertain these counterclaim procedures for usury against a national bank in this.-manner and form and in this amount throughout every stage of the procedure. This same objection was made not only in the State Court, but it was made in the various appellate Courts of Florida, and in two instances by a petition for certiorari to this ‘The ‘amount of the usury award and the procedure was discussed in certain cases by the State Court in The Coral Gables First National Bank v. Constructors of Florida, Fla. App. 119 So. 2d 741, certiorari denied 123 So. 2d 349 (S. Ct. Fla.), certiorari denied in this Court, 365 US. 811, o 81S. Ct. 690, 5 L. Ed. 2d 691. These cases are mentioned ae in the opinion by the United States Court of Appeals, Fifth Circuit, in the reported case to which certiorari is ~ sought, on page 596 of the reported opinion. In addition, there were other cases in the State Court which the United States Court of Appeals, Fifth Circuit, did not even men- ‘tion in its opinion (see opinion of District. Court of Ap- peal of Florida, Third District, 132 So. 2d 806, and denial of certiorari to the Supreme Court of Florida, September 26, a me —— f 9 1961, 133 So. 2d 319). A second petition for certiorari was filed in this Court on the 21st day of December, 1961, and certiorari denied March 5, 1962, 369 U.S. 813, 82 S. Ct. 687. In the meantime, in November, 1958, after the Circuit Court of Dade County, Florida, had rendered its decree of July, 1958, upholding a large usury claim in an amount com- pletely excessive of the amounts provided for in the Fed- eral Statutes, 12 US.C., §§ 85 and 86, and in which the said State Court had upheld the right to enforce usury by way of counterclaim under the doctrine of the R. H. Alley & Co. case, supra, and while an appeal was pending under supersedeas, Constructors of Florida, Inc., filed a volun- tary Chapter X Reorganization proceeding in the United ‘States District Court, Southern District of Florida. ‘That Court took fyll jurisdiction of all‘of the physical assets of Constructors of Florida, Inc., including title, possession and custody of the chattel equipment under the mortgages, and proceeded to liquidate the actual “tangible personal property by having an open sale in April, 1959. After the sale of those tangible assets in April, 1959, The Coral Gables First National Bank purchased the assets ‘on a credit bid, so that the Circuit Court of Dade County, Florida, had no jurisdiction in any way over those tangible assets. The District Court of Appeal of Florida, District, on March 22, 1960, rendered its opinion on initial appeal from the judgment and decree of July : ‘and made a substantial reversal of certain of the of the July, 1958, decree. Not satisfied with the decision the Banks then pursued an attempted certifearl prosend- ing to the Supreme Court of Florida, and when that Court in September, 1960, denied certiorari without taking ju- risdiétion, a petition was then filed in this Court on De- cember 1, 1960, which was denied in February, 1961, 365 © US. 811, 81 S. Ct. 690, 5 L. Ed. 2d 691. The supersedeas had been extended so that there was nothing final in the 10 State Court litigation until after this Court in February, 1961, denied the petition for certiorari. It was contended that the litigation was then back for reconsideration for new proceedings in the State Court, and the Chapter X Reorganization Court was required to take over all pend- 4 ing litigation. Such an application for an injunction was | made to the United States District Court, Southern Dis- trict of which denied the injunction; but with cer- tain tions requiring that the proceeds of any judg- > ments for usury in the State Court be forthwith paid over to John Nicholas, as Trustee in the Reorganization proceed- @ ings. In April, 1961-(see Tr. p. 201), the Circuit Court of | Dade County, Florida, entered a modified decree, and as a part of that amended decree, in paragraph 3, the Circuit Court of Dade County, Florida, found that there were due to The Coral Gables First National Bank,. et al., certain sums of principal and interest on the loans of July 25 and “July 24, 1956, and then ruled: “but the mortgages al- legedly securing said loans are not enforceable as said Banks are not in equity with clean hands.” In the very | next sentence the Court said: “The Court does not deter- § mine whether or not said loans are now in default inas | much as the United States District Court for the Southern District of Florida, in the proceedings for the reorganiza- tion of Constructors of Florida, Inc. has assumed juris- diction of said claims.” It is true that in other parts of that decree (see Tr. 201) the Circuit Court of Dade County, Florida, in compli- ance with the ruling of the Appellate Court of Florida, reduced the interest penalties for usury from the sum of several hundred thousand dollars, found in the decree of . July, 1958, to about $80,000.00, yet that amount under the \ provisions of the Federal Statutes could not have amounted | : - to more than twice $11,500.00, which was interest actually , ‘. paid. The Banks took an immediate-appeal, but without ‘ ® | 11 , Supersedeas, to the Supreme Court of Florida by applying . for a writ of certiorari, and also took an appeal to the United States Court of Appeals for the Fifth Circuit, which resulted in the opinion of the Fifth Circuit, 299 F. 2d 736. The amount of something over $400,000.00 in penalties was - _ paid to the Trustee in the Reorganization proceedings, and said funds are still on hand with the Trustee in the said Reorganization proceedings. The Stete Court proceedings on appeal, which were ignored by the United States. Court of Appeals for the Fifth Circuit in its last opinion, consisted of procedures in the Supreme Court of Florida by certiorari, which was denied, and then by a new’ petition for certiorari in this - Court filed in December, 1961, which was denied by this Court on the 5th day of March, 1962, 82 S. Ct. 687. Facts and opinion referred to Florida Appellate 132 So. 2d 806, Florida Supreme Court 133 So. 2d 319. After this Court in March, 1962, denied the writ of certiorari, then for the first time proceedings were activated in the United States District Court, Southern District of Florida, in the Chapter X reorganization. Objections to the various claims had been made in 1959 and all parties _ had agreed that the hearings in the United States District © Court on the objections would not be heard or the issues determined until the then pending procedures in the State - Appellate Court had been determined. None of the parties, to-wit: the Trustee, the Banks or the Surety Company, in the plan of reorganization ever stipulated or agreed that they would be bound in the Federal Court by the deter- mination of the State-Court procedures. The Trustee has made no such contention, and while thefe is an inference from the last opinion by the United States Court of Appeals for the Fifth Circuit that such was the ease, that is not borne out by the Record (see-Tr. pp.'91-94). (For a de- 12 tailed: discussion of this point see Petition for Rehearing, pages 18 and 19, App. C, p. AlS), There were many factors in the State Court litigation and several parties involved who were not primarily in- volved in the reorganization proceedings. The National Bank had persisted in continued objections to the jurisdic- tion of the Circuit Court of Dade County, Florida in its at- tempt to entertain a cbunterclaim for usury in the State Court foreclosure proceedings. That point had been_as- signed as one of the errors in the lower State Court ‘and© > had not been disposed of by the Florida Appellate Court. The stipulation of the Banks, as above referred to in the Record, did not contain any consent that it, the National Bank, would accept the jurisdictional deterntination by the State Court of its claim of jurisdiction in view of the spe- cific language to the contrary in the Federal Usury Stat- ute, 12 US.C.A., §§ 85 and 86. The plan itself did not make any such requirement and these rights were all re- served by all parties. This point is one of the fundamental errors which we say was committed by the United States Court of Appeals for the Fifth Circuit in the last opinion. r The Record is clear that after March, 1962, and after ’ all appellate procedure had been concluded, both in the Supreme Court of Florida and in this Court on the applica- tion for petition for certiorari, the Trustee and his counsel, John H. Gunn, then set down for argument and disposition the various objections which had been filed by the Trustee to the claims of American Surety Company and the claims of the Banks, and the objections of the Banks to the claims of American Surety Company had also been set down. The Record does not disclose that the Trustee took the posi- tion that the Banks had waived any right of further contest because of the ct of the State Court litigation. The issues were before the Referee, sitting as Special 13 Master, in the first instance and then before the District Judge on these issues. The District Judge himself pro- ceeded to determine the issues in the light of the mandate _ and opinion of the United States Court of Appeals for the Fifth Circuit in the decision in 299 F. 2d 736. These issues were d ed after lengthy litigation and the opinion and judgment of the United States District Court, Southern District of Florida, was entered on December 20, 1963, which is referred to in the Record and a copy of which is ‘attached hereto as‘ Appendix E, page A44. The United States District Judge undertook this lengthy trial under ‘the provisions of the opinion of the United States Court of Appeals, Fifth Circuit, 299 F. 2d 736 (see text p. 740), in which that Court in note 16 said: — “As in note 15, supra, we likewise expressly disavow any purpose here to indicate any view on the extent to which, if any, the State Court judgment is to de- termine priorities, enforcement of security by the Banks, or other creditors, or the Jike. Although the Bankruptcy Court refused to enjoin execution on the State Court judgment, the funds received by the Re- ceiver are now, and will remain, subject to the sole con- Pere cere It is clear that.in April, 1961, when the State Court entered its second decree, it did not have any jurisdiction of any kind over the chattel mortgages of July, 1956, nor of any of the chattels or equipment used as security for any . of the three’ mortgages, with the exception of the claim ‘against American Surety Company and the City of West Palm Beach. ‘In brief, in ‘the order of the District Court since all of these assets had been for a number of years in the Reorganization Court and had been sold and dis. posed of; there could be no judgment of the Circuit Court -®f Dade County, Florida, that could control the disposition of the lien of those two-July, 1956, mortgages. In our ‘ © 14 ‘opinion the District Court properly held that the so-called ‘doctrine of “clean hands” which would prevent the fore- closure of those mortgages in the State Court against cer- ‘tain équipment would not determine any question of ulti- ‘mate title or lien on the assets and could not in any way ‘bind the District Court of the United States in the Re- organization proceedings. Therefore, as a result of the pro- ceedings in the United States District Court and under the authority granted to it by the Appellate Court in the opin- ion, 299 F. 2d 736, both the United States Court of Appeals for the Fifth Circuit and the subsequent opinion by the United States District Judge specifically held that there could be no doctrine of res judicata with reference to some $131,000.00 as to the specific liens on the chattels which | had always been in the possession of the Bankruptcy Court, — either in the involuntary bankruptcy of 1957, or the subse- quent Chapter X proceedings which began in 1958. It was pointed. out in the opinion of the United States District Court that the law of Florida, as well as the de- cisions of various Federal Courts, clearly held that the mere -refusal of a State Court to enforce a claim on the doctrine of unclean hands could not act as a forfeiture of the lien claims which were definitely fixed by- state law, and it was the duty of the Court to enforce both the claim and the liens of the mortgages in the Bankruptcy Court against the assets in the Bankruptcy Court over which the Bankruptcy Court had had jurisdiction at all times. The United States District Court also pointed out that since these other decisions of the State Court had been rendered this Court had decided the case of Southern Con- ‘struction Company v. Pickard, 371 U.S. 57, 83 S. Ct. 108. This case involved the determination. by this Court that where a statute of the Congress,:such as the. Miller Act; de- fined and oreated the rights of contractors or claimants un- ‘ 15 der a Miller Act bond and also specified the exclusive method of remedy and enforcement, that the law was final and exclffsive and no Courts under the guise of rules of procedure had the jurisdiction to go beyond and in con- — tradiction of the specific sections on the matter of proce- dure, venue and jurisdiction. Under the doctrine of this case the original theory of the Tenth Circuit in the Alley case, supra, was completely exploded, so that the question of jurisdiction of the State Court to entertain suits against a national bank for usury by way of counterclaim was def- initely held in effect to be improper and without jurisdic- tion. The District Judge in his opiniofi also specifically pointed out that this Court in the case of Mercantile Na- tional Bank at Dallas v. Langdeau, 83 S. Ct. 520, 371 U.S. 555, and in the case of Michigan National Bank v. Robin- son, 83 S. Ct. 914, 373 U.S. 591,-had revitalized and clarified the provisions of Title 12, U.S.C.A., §§ 85, 86 through 94, and that all of the provisions of these protective statutes pertaining to suits against national banks were still in force and effect and had not been changed by implication. The Mercantile National Bank of Dallas case involved suits against the Republic National Bank of Dallas for fraud claims in the 98th District Court of Travis County, Texas. ' Notwithstanding the venue provisions of the Texas Regula- . -tory and Procedural Laws, this Court said that these na- tional banks: under Federal Statutes specifying the place - where proceedings may be had against federal associations could be sued only in the county wHfére the national bank is located, whether the suits are filed in a Federal Court or a State Court. It held that the action in a State Court could not be brought unless that State Court was sitting in the county in which the bank had its principal place of business, 3 5 In the Michigan National Bank case.above referred to, 372 U.S. 591, there was an actual claim for usury in certain ~ 16: a transactions in Nebraska, and subsequent suits in the Dis- trict Court of Lancaster County, Nebraska, affirmed by the - Nebraska Supreme Court upholding the doctrine that the state law would control as to venue and procedure. In this case on appeal this Court in applying the doctrines of Title 12, US.C., § 94, and Title 12, U.S.C., § 86, said that the United States Statutes as to the procedure in usury claims against a national bank had to be strictly applied and were exclusive and controlled over any so-called concept of the state laws. Therefore, summarizing the questions presented, they « May be briefly stated, as follows: -* (1) Under the provisions of Statute 5198, of which 12 ' US.C.A. §§ 85 and 86, are a part, does any court, ‘state or federal, in an action by a national bank to foreclose chattel mortgages haye the right, juris- diction or power to entertain a claim of usury as a counterclaim to that foreclosure action, or must the jurisdiction and power of that court, or any o other court, be limited to entertain a suit by the person who has paid usurious interest in an action in the nature of an action of debt? (2) Even in an action in the nature of an action for debt as specifically recognized and authorized under the decision of this court in McCollum v. Hamilton ’ National Bank, 303_U.S. 245, 58 S. Ct. 568, 82 L. Ed. this the United States and has it always been tle of the United States since it was rendered in 1938, so as to make null and void the in the State Court of Florida in the case at bar? 9 Pa H] (3) 17 Has the national bank in this case been denied the protection of the Fourteenth Amendment of the United States Constitution, in that by certain state processes it has been deprived of its property with- out due process of law and has been denied by the State Courts of Florida the equal protection of the laws which are guaranteeed to it by the Acts of LR TING SRT SI LO © ROLE (4) ne ieee : ii i is a ee ee under Title 12, U.S.C.A., § 85 and 86, any suit for Suny’ geuitics Geum ahas% ‘bank of an nature is restricted to a suit in the affirmative nature of an action for debt by the borrower against the national bank, in which suit the bank is en- - titled to a jury trial, and where the extent of the claim is restricted to a claim for the amount of the usurious interest paid, can any court, state or federal, grant a claim in excess of the amount limited by the Act of Congress on the alleged usurious third mortgage and at the same time enter which are not even in contest, as an ~ penalty which would be binding upon a Chapter X or bankruptcy court which at all times had posses- ceedings? . - (5) In this circumstance does the State Court have any jurisdiction under the doctrine of unclean hands to - pass a judgment which is res judicata upon a reor- court so as to preclude the ganization bankruptcy district judge of the United States Court in the re- organization terest, of the liens against the proceeds of the bank- ruptcy sales? (Note: All of the money, some - $400,000.00, as a result of the executions in the through its Trustee in the Reorganization proceed- ings and have not been distributed or expended.) The United States District Judge in the decree and judgment of December 20, 1963, had separately or- dered that this fund of $131,000.00, plus interest, in rEitEt ia if H. i ae il E i i : ‘ FAN (6) Where usury is claimed against a national bank in a Florida Circuit Court in ordinary foreclosure on an original mortgage loan of $442,200.00, and where only $11,500.00 was paid by the borrower for interest, does any court, state or federal, under the restrictive terms of Section 5198, also known as 12 US.C.A., $§ 85 and 86, have the jurisdiction or power to render a judgment based solely upon claim of usury, the effect of which is t6 wipe ou the balance of a principal claim of $282,000.00, and 2 STATUTES AND CONSTITUTIONAL PROVISIONS INVOLVED (1) Amendment V, Constitution of the United States: “No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual serv- teh te then ot Wee ox pete Senge; Se ae be subject for the same offence to be twice put jeopardy of life or limb; nor shall be compelled in any criminal case fo be a witness against himself; nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” eee 20 (2) Section 1, Amendmerit XIV, Constitution of the United St | “All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citi- zens of the United States and of the State wherein _they reside. No State shall make or enforce any law b which shall abridge the privileges or immunities of citi- zens of the United States;-nor shall any State deprive any person of life, liberty, or property, without due . " “process of law; nor deny to any person within its juris- : diction the equal protection of the laws.” - (3) Section 5198, General Statutes of the United States, Por- tions of Which Are Involved in This Case, under Title 12, US.C.A., §§ 85 and 86: S “§ 85. Rate of interest on loans, discounts and pur- chases Any association may take, receive, resefve, and charge on any loan or discount made, or upon any.notes, bills of exchange, or other evidences of debt, interest at the rate allowed by the laws of the State, Territory, or District where the bank is located, or at a rate of 1 per centum in excess of the discount rate on ninety- day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and no more, except that where by the laws of any State a different te is limited for banks organized under State laws, the rate so limited shall be allowed for associations or- _ ganized or existing in any such State under this chapter. When no rate is fixed by the laws of the State, or Territory, or District, the bank may take, receive, re- serve, or charge a rate not exceeding 7 per centtim, or 1 per centum in excess of the discount rate on ninety- - day commercial paper in effect at the Federal reserve bank in the Federal reserve district where the bank is located, whichever may be the greater, and such in- terest may be taken in advance, reckoning the days for ~’ which the note, bill, or other evidence of debt has to —s 21 run. The maximum amount of interest or discount to be charged at a branch of an association located out- side of the States of the United States and the/District — of Columbia shall be at the rate allowed by the laws { of the country, territory, dependency, province, domin- ion, insular possession,’ or other political subdivision where the branch is located. And the purchase, dis- count, or sale of a bona fide bill of exchange, payable at another place than the place of such purchase, dis- count, or sale, at not more than the current rate of ex- change for sight drafts in addition to the interest, shall not be considered as taking or ren 5 ape rate of interest.” § 86. Usurious interest; penalty for taking; limitations . The taking, receiving, reserving, of charging a rate of interest greater than is allowed by the preceding | section, when knowingly done, Shall be deemed a forfeiture of the entire interest which the note, bill, or other evidence of debt carried with it, or which has been agreed to be paid thereon. In caséthe greater rate of interest has been paid, the person by whom it has op been paid, or his legal representatives, may Tecover / back, in an action in the nature of an action of debt, | twice the amount of the interest thus paid from the - association taking or receiving the same: Provided, That such action is commenced within two years from the time the usurious transaction occurred.” (4) U.S.C.A., Title 12, § 1, which authorizes the crea- tion of the Bureau of the Comptroller of Currency for na- tional banks, and U.S.C.A., Title 12, § 21, authorizing the creation of national banks through the operation of the Comptroller of Currency, which creates a complete system for not only the establishment by the Government of na- ‘ tional banks a8 distinct and separate from any power of State Courts or the laws of the States in interference with the operation and control, except as it may be permitted by Congress (Deitrick v. Greaney, 309 U.S. 190, 60 S. Ct. 480, 84 L. Ed. 694). | ” 22 -/ 1 am? COMPTROLLER OF CURRENCY — “1135A. Sale of loan participations to other banks on a ‘last in-first out’ basis. The sale of a participation in a loan to another bank (usually the sale of the ‘overline’ or legally ex- . cessive portion of a loan) under an arrangement whereby the placed portion of the debt must first be subordinates the interest of the selling ’ bank. It is unsound to place the selling bank in a posi- tion whereby any loss that may occur on the entire pose BSG opera bad pace Farge! tees tion must be borne by it, and ‘overline’ * the intent and purpose of RS. $200 woul be nullified under an agreement having this effect. To avoid this possibility, participation arrangements giving to one of the participating banks an earlier maturity or prefer- ence with respect to payment of the obligation(s) in the regular course Uf business, should provide that in _the event of default. (interest and/or principal pay- ments “past due and unpaid for such period as the participants may by agreement determine) on the loan, * the appointment of a receiver, or bankruptcy of the borrower, the participating banks shall share in all sub- sequent loan payments and collections in proportion to the percentage of participation held by each bank at the time of the default, the appointment of a receiver, or bankruptcy. With respect to participations in real es- tate loans see Paragraph 2715.” e STATEMENT In the statement of questions involved and the refer- ences to the various opinions. we have set forth in detail - the steps taken in the Courts of Florida, the timely objec- tions made and the proceedings in the United States Dis- trict Court, Southern District’ of Florida, in both the in- voluntary bankruptcy of Constructors of Florida, Inc., which began in October, 1957, and the subsequent proceed- ings in the voluntary Chapter X Reorganization proceeding which began in the early part of November, 1958. * As the result of the questioned procedure beginning in the Circuit Court of the Eleventh Judicial Circuit in and for Dade County, Florida, in Chancery, in September, 1957, the National Bank sought only to foreclose a,mortgage on chattels. The chief defendant was Constructors of Florida, Inc., a Florida corporation. There was no diversity of citizenship. The chattels were present in Florida. Relief was sought against the City of West Palm Beach, a Florida municipality, and against the American Surety Company of New York, which was authorized to do business in the State of Florida. There were numerous individual defend- ants who had endorsed or guaranteed the various notes se- cured by the mortgages. The Chancery Courts, or equity Courts as they are called in Florida, are for the purpose, among other things, of foreclosing certain liens, jurisdiction of which is fixed in the Constitution of Florida and by the statutes. There are no jury trial systems used in Florida in the Chancery or equity side of the Court. Shortly after the equity foreclosure suit had been ‘started an involuntary petition for bankruptcy had been filed by outside creditors against Constructors of Florida, me 24 Ine, ed ahah tt th sinitega) eens A reaivel te Bankruptcy was appointed pending the question of adjudi- cation. That receiver, together with the Constructors of_ Florida, Inc., principals, filed an answer in the nature of a counterclaim, claiming an action affirmatively against the National Bank for usury. At that stage of the procedure, as we have heretofore set forth, the National Bank raised the question by motions to strike and dismiss the counter- claims, setting forth §§ 85 arid 86, U.S.C., Title 12, in which the question was squarely presented that even though the foreclosure could continue in the State Court against the chattels, Constructors of Florida, Inc., had no right to raise the question of affirmative usury in that proceeding; that it was relegated to a separate suit in the nature of an action for debt where the only issues to be involved would be a claim by Constructors of Florida, Inc., or its receiver, on the one hand, as plaintiff, and the National Bank as defend- ant. A jury trial was allowed and was mandatory in such a case under the Florida law which has maintained a sepa- ration between equity and law actions. Even where only the cause of action is maintained under the Federal Rules of Civil Procedure, yet where the issue is one that was - triable in a law action with a jury, before the adoption of the rules the right to a trial by a jury was preserved (see Black, Trustee v. Boyd, U.S.C.A. 6, 1957, 248 F. 2d 156. See also Beacon Theaters, Inc. v. LA me ocaal 359 US. 500, 79 S. Ct. 948). The question was also raised that since there was only an actual payment of interest on the mortgage of November ' 14, 1956, of $11,500.00, the total claims under Title 12, US.C.A., § 86, would be limited to a claim of double that amount. It was pointed out that the relief sought, which called for forfeiture of principal and excessive interest re- payments and other penalties under the Florida statutes, was not applicable and that the Circuit Court of Dade ‘25 * County, Florida, while having jurisdiction for the fore- ‘closure of the lien of the mortgages did not have any right or jurisdiction in face of the federal statutes to enter- tain such an action. Notwithstanding this plain objection the Circuit Court of Dade County, Florida, proceeded, which ultimately resulted in a usury penalty exaction wip- ing out the principal of the National Bank’s claim and ex- acting affirmative damages in excess of $400,000.00. That Court also attempted to hold that certain mortgages which were not involved in the usury feature could not be en- forced in the equity Court of the State of Florida because the Bank was in equity with unclean hands, As we have heretofore pointed out, all of the tangible personal property had heen seized by the Bankruptcy Court under its receiver and that property was never under the control or legal custody. of the Circuit Court of Dade ‘County, Florida. . In the fall of 1958, there was a voluntary petition for reorganization filed by Constructors of Florida, Inc. The ‘technical difference that was brought about by ‘the ap- proval of the Chapter.X Reorganization petition was that the trustee in Chapter X was then vested not only with possession and custody, but full title to all of the assets of Constructors of Florida, Inc. Claims were filed by the Na- tional Bank in the Chapter X proceedings and a tentati = allowance in the amount of approximately $282,000.00 on its three mortgages was entered. Was Waris Coast Wee eal cemebiad bn'o acres ta the Circuit Court of Dade County, Florida, on June 26, 1958, amended on July 2, 1958, and a complete and full super- sedeas bond had been filed pursuant to an appeal from that decree to the District, Court of. Appeal of Florida, Third District. That Court, the appellate Court,-did not. make "any ruling until March, 1960, when there was a decree par- 26 tially in affirmance and partially in reversal on certain - points. Prior thereto, in April, 1959, the United States Dis- trict Court, sitting as a Reorganization Court, ordered a sale of all of the tangible property. This property was sold and the proceeds of that sale were held under the supervision ¢ of the United States District Court in the name of the trustee for the entry of proper orders of distribution. _ After the decree based upon the mandate of the Florida Appellate Court was entered in April, 1960, the mat- ter was again appealed, but as a result of the judgment of boar 1960, no supersedeas was granted and the trustee in ptcy was paid new money in the sum of approxi- mately $400,000.00, which was then taken over by the trus- tee in the Chapter X proceedings and that fund, together -with the proceeds of the original sale in 1959, in the orig- inal amount of $106,000.00, plus irterest, is still held in the trustee’s account under the supervision of the United States District Court in the reorganization proceedings. Other features of the background of the litigation have been dis- cussed by the United States Court of Appeals for the Fifth - Circuit in its opinion, 299 F. 2d 736, and later in the opin- ion of the United States District Judge, dated December 20, 1963, a copy of which is attached to this petition as Appendix E, page A44. Other features were discussed in * the opinion, the review of which is now sought, by the United States Court of Appeals for the Fifth. Circuit, 349 F. 2d 595. ' As the result of the last opinion by the United States 3 Court of Appeals for the Fifth Circuit these penalties ex- acted by the State Court have been upheld without any retrial of the issues in the Federal Court insofar as the distribution of money is concegned. There has never been any trial in any action brought by Constructors of Florida, Inc., romepete or the trustee, Oy rer entity 21° visions of Title 12, U.S.C.A,, §§ 85 and 86. The provisions of the mandatory law of the United States through the Acts of Congress have been ignored. The actual errors in the opinion of the United States Court of Appeals, Fifth Circuit, have been specifically pointed out in the petition for rehearing, which for the sake of brevity we refer to, _a copy of which opinion is attached hereto as Appendix C, page A15. | REASONS FOR GRANTING THE WRIT ‘ I. The Courts of Florida, as well as the United Sta District Court, Southern District of Florida, .and - United States Court of Appeals for the Fifth Circuit, have failed or refused to give any consideration of or weight to the mandatory and exclusive provisions of Title 12, U‘S.C.A., §§ 85 and 86, in the allowance of certain exorbi- tant claims in the nature of penalties and forfeitures ‘against a national bank. I. The United States Court_of Appeals for the Fifth Circuit in its opinion, 349 F. 2d 595, has rendered an opin- -ion which is in conflict with the decisions of this Court in the cases of McCollum v. Hamilton National Bank, 303 U.S. 245, 58 S. Ct. 568, 82 L. Ed. 819; Mercantile National Bank at Dallas v. Langdeau, 371. U.S, 555, 83 S. Ct. 521; Michigan National Bank v. Robinson, 372 U.S. 511, 83 S. Ct. 914; Republic National Bank of Dallas v. Langdeau, 371 US. 555, 83 S. Ct. 521; Southern Construction Company v. Pickard, 371 U.S. 57, 83 S. Ct. 108. The opinjon of the United States Court of Appeals for the Fifth Circuit is also in conflict with the 6pinion of the United States Court of Appeals for the Sixth Circuit in the case of Schumacher v. Lawrence, 108 F. 2d 576. The controlling subject matter of the federal opinion, beginning with the McCollum case and the Schumacher case, is as follows, and we quote from page 570 of the McCollum case, 58 S. Ct. 568, where this Court said: . Se a “One paying a national bank usurious interest and entitled to enforce the penalty may not cia be it by way of set-off in a suit brought upon his note to : SARE. »” | F « at Il ’ d ¢ When a Chapter X Reorganization Court has obtained moneys through the process of a State Court, which said ‘Cot was acting under a procedure prohibited by the federal law in an action against a national bank and now over $500,000.00 of funds received from the“hational by way of usury penalties, is that Chapter X Reor- ganization Court to be permitted to disburse those moneys which are claimed to have been wrongfully extracted and, therefore, wrongfully held by the trustee when the said United States District Court has not of itself determined the equitable issues? We respectfully say that this Court should grafit this writ so as to determine whether a Federal Court sitting in reorganization proceedings is en- titled to make disbursements of money which it has re- ceived in contravention of and in non-compliance’ with the federal fequirements, to the end that it is aiding and abet- ting in the disbursement of funds which have been col- lected by other sources without due process of law and icc tol eto gee bury ARGUMENT : We are not seeking at this stage of the procedure to have this Court on this petition for certiorari examine the records in all of these cases and to try de novo the. amount of usury penalties, if any, that should have been extracted or exacted from the National Bank. That is a matter that no Court having competent jurisdiction, in our opinion, has ever passed upon iri the type of procedure or suit exclusively authorized by the federal law. If the -federal decisions—particularly the decisions of this Court in the McCollum case, supra,”and other cases—can be ignored, then what is the use of having a separate federal banking system? What is the use of having rules and reg- ulations by the Comptroller of Currency, and what is the use of having statutory enactments by the Congress? dn suits against a national bank for usury, if the Congress many years ago saw fit to set up’restrictive provisions to prevent suth a condition as resulted in this case, then where is the protection today which Congress intended at the inception of the creation of the Federal Banking System? - ‘ In the opinion of the United States Court of Appeals for the Fifth Circuit, 349 F. 2d 595, we have pointed out in the petition for rehearing to that Court the many errors which we contend were -committed by the Court, as well as many features of -that opinion, which do not clearly disclose the actual record and wherein the opinion is based upon erroneous conclusions of fact as shown in the Record. The doctrine of res judicata as so sweepingly invoked by _ the United States Court of Appeals, Fifth Circuit, is not based upon any real determination of issues determined by a companion or éollateral State Court where that Court ~ had jurisdiction over.the subject matter. 3 A , senieiiaaenenenes eee 2 mn meer nearer samnerm PRIES oo 6 An interesting and, we think, applicable case in theory is a decision by this Court of Granville-Smith v. Granville- Smith, 349 U.S. 1, 75 S. Ct. 553. This case was a review of two decisions by the United States Court of Appeals for the Third Circuit—the first one the case of Alton v. Alton, 207 F, 2d 667—and the original Granville-Smith case in the United States Court of Appeals for the Third Circuit, 214 F. 2d 820. .These decisions involved the ju- risdiction of certain District and Territorial Courts set up under the Act of Congress for the Virgin Islands, Division of St. Thomas and St. John. Divorces had been granted by that District Court in hundreds of instances based up- on the actions of the Territorial Assembly which had pro- Vinee ene © Cre. Be, ees, Semmens th Snes teretesy qualified a plaintiff to bring an action for divorce. In the Alton case Sonia Alton, a resident of West Hart- ford, Connecticut, went to the Virgin Islands, where she arrived February 10, 1953. After six weeks and one day of continuous presente there she filed a suit for divorce on March 25, 1953. Her husband, David Alton, the de- _ fendant, entered an appearance and waived service. The case was referred to a Commissioner, who recommended that the plaintiff be granted a divorce. When the cause’ came on to be heard before the judge of the District Court, that judge questioned the evidence as to domicile. The District Judge entered a judgment denying ‘the divorce and the plaintiff appealed to the United — Court of Appeals, Third District. In the Granville-Smith case, 214 F. 2d 820, involving a similar set of facts, the United States Court of Appeals for the Third Circuit relied upon its decision in the Alton case, 207 F. 2d 667, and, affirmed. The basis for the de- cision in the Alton case which was relied tpon was that notwithstanding the act of te Territorial Assembly and . = -_- 31 the passage of the divorce law and procedure thereunder authorized and determined that a six weeks continuous residence was sufficient to give the Court jurisdiction to enter a divorce, yet that provision in itself did not comply with the due process clauses of the United States Constitu- tion as set forth in the Fifth Amendment or in what was called the Organic Act where the Congress had authorized the Assembly to pass certain laws for ifs own internal . jurisprudence and procedure. The Third Circuit pointed out that the parties can not by their consent confer ju- risdiction of the subject matter upon a Court which does not have authority to deal with the subject matter. When this Court reviewed the Granville-Smith case above mentioned, it discussed in detail the Organic Act of 1936, wherein the Congress of the United States provided a.complete government for the Virgin Islands, including a Legislative Assembly. Without burdening this Court at this stage of the proceeding with all of the details of that landmark decision, the results established that the Congress of the United States assumed the power to legislation over subject matter which it clearly had right to control—and even to create in this instance—that the granting of power or the restriction of power as con- tained in the Congressional Act was binding. This Court pointed out that the Congress had limited the type of powers which the Legislative Assembly for the Virgin Islands was granted, and held that the grant by the Legislature did not authorize the passage of a law which would give the District Court of the Virgin Islands the power to accept the mere proof of a six weeks residence ‘as proof of honest intent and domicile so as to give the District Court jurisdiction over a divorce action where those facts and none other were established in record. Here was a case where the Congress acted, Legisla- tive Assembly then acted and created these which . —- 32 had full and complete power as a matter of general ju- ~ risdiction over divorces in general, but as this Court said, _ the Congress had not granted to the Legislative Assembly _or to that Court the power to set up procedural standards which were not in accord ith the fundamentais of the United States Constitution on due process under the Fifth Amendment or the Fourteenth Amendment. We think it sufficient by reference to this case to show this Court at this time and at this stage of the procedure that where the Congress adopted a full and comprehen- sive system for the creation and operation of national banks as a. banking system separate and apart from state procedure or state laws, and as a part of that act permitted both state and federal Courts to entertain and have ju- risdiction over usury claims against a national bank, they had not only the power but perhaps the duty to see what kind of usury claims could be filed, what kind of procedure could be used, and what was the limit of the jurisdicti grant to either the state or the federal Courts in aw: g penalties for usury against a national bank. The Con- gress did so in no uncertain terms. We think the doctrine of the cases above mentioned, together with the consideration by this Court of its own Opinion in the case of Southern Construction Company v. Pickard, 371 U.S. 57, 83 S. Ct. 108, should convince this Court that this certiorari should be granted. This was a | case involving certain conflicting claims under a Miller Act ? suit against a contractor and surety growing ‘out of a . federal project. The claim was made that the Miller Act, 40 U.S.C. 270b, 40 U.S.C.A. 270b, provided, and we quote from page 109, second column of the reported decision in ess eR Cl “The Miller Act, ‘however, since, that: atte i stituted under its provisions ‘shall be brought * * * = 33 in the United States Distriet Court for any district in which the contract was to be performed and executed and not elsewhere * * *.’” . Under this statute Mr. Pickard determined that he would have to file an action for work which he had per- formed in Tennessee in the United States District Court for the Middle District of Tennessee and that he would “have to file his claim for work done in Georgia in the appropriate United States District Court there. He first brought a suit in the United States’ District Court for the Middle District of Georgia and then, in determining that he was wrong in including a part of the Tennessee project in the Georgia suit, he filed suit in Tennessee for that portion of the work. The contention was-made that under the Federal Rules of Civil Procedure, Rule 13(a), Pickard ‘was required to file any claims or counterclaims in the first suit brought, which would include claims for both the Georgia and the Tennessee projects. This Court re- versed such a holding by the United States Court of Ap- --peals for the Sixth Circuit and said (see text, second column, page 110): “The requiremeht that counterclaims arising out of the same transaction or occurrence as the opposing — party’s claim ‘shall’ be stated in the pleadings was designed to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all- disputes arising out of common matters: The Rule was partic- © utarly directed against one who failed to assert a counterclaim in one. action and then instituted a second action fn which that.counterclaim became the basis of the complaint. * * * It is readily ‘eppatent that thig policy has fib 'ap- plication hefe. In this instance, the plaintiff-respond- ent, who originally sought: to combine all his claims ina single suit, correctly concluded that he was re- od mon to both. Under these circumstances, we‘hold that Rule 13(a) did not compel this counterclaim to be meds in wiketere: of the two sults the first respon- sive pleading was filed.” The gist of this case as applied to the facts in the case at bar was, in our opinion, to hold that where the Congress creating an act such as the Miller Act, created substantive rights and provided for a special and exclu- sive remedy,that remedy was a part of the whole sub- stantive act and was not amended or cast aside by any provisions of the Federal Rules of Civil Procedure or any other rules of civil procedure in any state Court. We have never questioned on behalf of the National Bank that Constructors of Florida, Inc., in the early fall of 1957 could have filed a suit in the nature of an action for debt on the law side of the Circuit Court of Dade County;—Blorida, where Constructors of Florida, Inc., ' through its receiver, -would be the sole plaintiff and the National Bank would be the sole defendant. The receiver could have sought double the amount of $11,500.00, if he , could have established before a jury sufficient facts from * which the jury could find usury. A total claim under the Federal -Statute, Title 12, U.S.C.A., § 86, would have been approximately $23,000.00. This suit could have been carried on while the suit on the equity side of the Court could have proceeded for the foreclosure of these mort- gages. Had.this orderly and statutory procedure been certied on Tn Tine with the stattitory restrictions, this case 35 would not be before this Court. It was not carried on on that basis and the results have been shocking. We do not say that there is any evidence of bad faith or over- reaching intentionally by the Courts of the State of Florida, or that any real prejudice was shown against a national bank. However, regardless of the intent, the results were shocking and amounted to a taking and confiscation of the National Bank’s property rights without due process of law. We can find no other reported case within the ju- risprudence citations of this country, either state or federal, where such a proceeding has ever been upheld. CONCLUSION _ There seemed to be some confusion in the opinion of the United States Court of Appeals, Fifth Circuit, in both of its opinions, 299 F. 2d 736, and 349 F. 2d 595, as to what the Congress meant when it inserted in Title 12, U.S.C.A., § 86, what was intended by the designation of a particular procedure .in the nature of an action for debt, with a strict limitation as to the amount that could be recovered. In 1 Am. Jur. 2d 558, 5 ye PG, TT Soe SNe a action of debt, stating: \/ 9 “The common-law action of debt lies for the re- covery of a fixed and definite sum of money or of a ‘sum of money which can be ascertained from fixed data by computation or is capable of cee readily re- duced to certainty.” — The quotations from 1 eee: Soethd O00 bor chamamlans ' by the authors’ reference to 23 Jur., § 65, page 655, under the general heading of “Forfeitures and Penalties”, Before referring to Section 65 we will point out the state- ments in the prior Section 64, which are as follows: : . © 36 “Thus, where a new-and independent obligation for a penalty is created by a statute, the statute must be strictly followed, and where the only remedy is by in- dictment, and the penalty is not certain, an action for debt will not lie as it lies upon an ordinary penal stat- ute. The rule which excludes other remedies where a statute creates a right and provides a special remedy for its enforcement rests upon the teem prohibi- tion of all other remedies.” In the notes in support of the statement that the penalty procedure is exclusive and prohibits all other pro- . cedure where it is defined in the statute (see United States ~ y. Simms, 1 Cranch (U.S.) 252, 2 L. Ed. 98; United States v. Stevenson, 215 U.S. 190, 54 L. Ed. 153, 30 S. Ct. 35. In 23 Am. Jur., § 45, p. 637, in the last paragraph of said section, the authors make this statement: “The remedy by the infliction of a statutory penalty may or may not be exclusive. When a statute imposes a duty. where none exists before and pre- scribes a penalty for.failure to perform it, eee ciple is that such remedy is exclusive.” | See also the case of Sulil Realty Corp. v. Rye Motors, Inc., ‘Westchester County Court, January 19, 1965, 257 N. Y. S. 111. ' We submit that usury penalties were unknown at the common law. There is no general usury legislation under the Acts of Congress. The laws of usury in the various states have no application to claims for usury against na- tional banks. Congress could just as well have prohibited any claim for usury against a national bank, regardless of the statutory provisions of the various states. Instead of that it created a special exclusive definition of; usury in Title 12, US.C., § 85. It. provided for the exclusive and only remedy and the limitation of the amount of a claim 37 for usury against a national bank. The common law action for debt or action in the nature of debt was a specialized type of exclusive remedy to be used only in certain par- ticular instances. At the time of the inclusion of this stat- utory provision by the Congress in the national banking laws of this country there was no ambiguity about the pro- cedure or the raaximum penalties authorized in said Act. As we have pointed out above, Florida maintains a dual system where law and equity actions are still separate. We have heretofore pointed out that even in a suit in a United States District Court where there is supposed to be only one form of action under the Federal Rules of Civil Procedure, yet if such a suit was brought in the United States District Court under the Federal Rules of Civil Pro- cedure it would require the same classification and entitle the national bank to a jury trial. The United States District Judge determined in the decree of December 20, 1963, that the National Bank had . maintained its objections to the procedure in the State Court by way of counterclaim in an equity action and to the penalty sought to be enforced right from the inception in every stage of the procedure. We emphasize that we have not waived our position at any time. The United States Court of Appeals for the Fifth Circuit in the opinion in 349 F. 2d 595 now under attack recognized that finding - by the Court below, but reversed the impact of those ob- - jections by holding that since we had raised that point in the State Court at every stage of the procedure, it had cer- tainly been passed upon by the State Court and, therefore, ee ee federal limitations was res judicata. There have been certain opinions which have been collected in the notes in 1 A. L. R. 3d, beginning at page 904, which have set forth and held in certain instances that 38 the venue features in Section 5198, United States Statutes, Title 12, U.S.C.A., § 94, could be waived. The controlling case on this point is a decision by this Court in the case of First National Bank of Charlotte v. Morgan, 132 U:S. 141, 10 S. Ct. 37, 33 L. Ed. 282, an 1889. decision, and while this Court said that the actions of a national bank in enter- ing into and defending a suit in a State Court not in the ‘county of its domicile, without objecting at any time until appellate proceedings took place, would amount to a waiver, but ‘the editorial writers in referring to that case haye overlooked the fact that this Court in that same opinion said that in the absence of circumstances creating a waiver, that statute is a fundamental restriction and that the mere waiver of the venue situation would not give the State Court in that particular instance jurisdiction where the claim itself was contrary to the restrictive provisions of the federal statutes. "Perhaps the leading case—or at least one of the first - applicable cases on this subject—is the case of Leonardi v. Chase National Bank of the City of New York (U.S.C.A. 2, 1936), 81 F. 2d 19. In this case a resident of Florida sued a national bank with its principal and central office in the Southern District of New York. It had a branch of- fice at Brooklyn, in the Eastern District of New York. The ‘bank appeared specially to contest the Court’s jurisdiction and moved to set aside the service and dismiss the com- plaint on the’ ground that the National Banking Laws spe- cifically provided for venue of suits against national banks. After the Judge of the Eastern District of New York denied the bank’s motions as to venue, then the bank instead of attempting an interlocutory appeal, which it could not do, tried the case of the merits. Plaintiffs recovered (see 11 . F. Supp. 85), but the appellate Court reversed. In a rather comprehensive opinion the Court pointed out that the terms and conditions of the Federal Statute, particularly § 86, 39 Title 12, as well as other pertinent provisions of Section 5198, was clearly a restriction on jurisdiction. It held that _ once a national bank makes 4 timely objection to jurisdic- - tion of the Court based upon the specific limitations of the federal act which conditionally granted jurisdiction and that objection was overruled,.it could go ahead and try the case on the merits without waiving or consenting to juris- diction. This did not keep the lower Court from being re- versed and, as was-said in this opinion,-there was no way. in which the proceeding in the Eastern District of New York could be maintained since the Court had “no jurisdiction”. The case at bar presents even a stronger situation, be- ‘cause the question of the inherent lack of jurisdiction in. the State Court was maintained throughout the entire pro- ceedings. The learned Judge who prepared the opinion for the United States Court of Appeals, Fifth Circuit, in holding that the proceédings in the State Court could not be col- laterally attacked in these ‘proceedings in the Federal Court relied largely upon the decision from the Tenth Circuit in Burgess v. Nail,.103 F. 2d 37, and he extracted from that ee a quotation: ; ” “Error in determination of questions of law or fact on which the court’s jurisdiction in particular case de- _ pends, the court having general jurisdiction of the cause and of the*person, is ‘error in exercise of juris- diction’ and affords no ground for collateral attack.” He quotes several other decisions in footnotes 2 and 3, as shown in the reported decision, 349 F. 2d, on page 600: We respectfully say that the citations in question are not — in point, because it is shown in the Burgess decision: relied upon in the opinion that while the State Court of Oklahoma hhad. general jurisdiction over certain trusts, and even ‘in- - volving Indian affairs, it did not have jurisdiction because 4 . 40 of the Federal Statutes to set aside the trusts. The Burgess decision was written for the Tenth Circuit by Judge Phillips, who was then a Judge of the Tenth Circuit. This same Judge Phillips wrote the opinion for the United States Court of Appeals, Fifth Circuit, now in question. He was sitting by designation in the Fifth Circuit, designated as Senior Judge of the Tenth Circuit. His own interpretation in the last opinion now under question of the Burgess case opinion which he wrote in 1939, differs from the actual wording and holding of his decision in the Burgess case. Great stress is laid upon-the fact that the Circuit Court of Dade County, Florida was a Court of general jurisdic- tion and tinder the Constitution of Florida that jurisdiction is set forth as follows (see second column, page 600, of the reported decision): - “*Thescircuit courts shall have exclusive original jurisdiction in all cases in equity except such equity jurisdiction as may be conferred on juvenile courts, in all cases at law not cognizable by subordinate courts os a™. We do not question that the Circuit Court had juris- _ diction of the. foreclosure proceedings as originally insti- tuted. We do say, however, that the Circuit Court of Dade County, Florida under its guise of equity power had ' no jurisdiction. under the doctrine of equity to violate the provisions of Title 12, U.S.C.A., § 86, which only authorized a common law suit in the nature of an action for debt on a claim for usury against.a national bank. The Circuit Court of Dade County, Florida is not a Court of general ‘jurisdiction in law matters, because that is determined by -—the amount in controversy of the type of procedure in- ~ volved. gist, pa However, there is one point now raised in this petition to.this Court which has not heretofore been raised in the 41 a sarin faintest taints ae sepa tad tee Miia cia determinations. 'The moneys, whether rightfully or wrong- fully extracted from the National Bank, are in the posses- sion of the Federal Court sitting as a Reorganization Bank- ruptcy Court. $400,000.00 of the money was extracted by proceedings in the State Court under such type of proteed- ings that were utterly barred by the Federal Statutes. “$106,000.00, plus interest, which had always been within © the custody of the Federal Court, was not extracted by any order of an affirmative nature by the equity Court of the State of Florida. That came about solely by virtue of the proceedings in the United States District Court. It is, therefore, clear that we, on behalf of the Banks, make.the contention that since the State Court had no ju- risdiction on the usury situation although some $400,000.00 was extracted from the Banks, yet that money has come to repose in the Federal Reorganization Court. The $106,000.00, plus interest, has always been in the Federal Court. It is, therefore, the error of-the Federal Court in the disposition of these sums wrongfully extracted that we Say the Federal Courts have committed error. The District ‘Judge fully recognized that he certainly could not be bound ‘by any orders of the State Court with reference to the tangible property and the,limits thereon which had always beeh under the control of the Federal Court, and he af- firmatively ordered those sums repaid in furtherance of the admitted valid liens of the two July, 1956, mortgages. In addition thereto, an analysis of the opinion of the United ‘States District. Judge reflects that he felt that under the decisions relied upon by the Banks he was not bound by the State Court determination of issues as to the usury claims, but that he might be bound under the construction of the United States Court of Appeals, Fifth Circuit, in the first opinion, 299 F. 2d 736. The-United States District - a 42 ‘Court did not uphold any usury claim, nor did the United States Court of Appeals, Fifth Circuit, ever pass upon the ‘validity of that claim. We feel that we will not be carrying out our responsi- bility to this Court if we do not point out with utter candor that we, as attorneys for the Banks, are concerned with our inability to properly construe.certain language by this Court in the opinion in the case of Gene Durfee et ux., Petitioners, v. Julia E. Duke, 375 U.S. 106, 84 S. Ct. 242, a 1963 opinion. This case involved a dispute about some border land on the southern boundary of Nebraska and the northern boundary of Missouri. In the reported decision of the Durfee case, 84 Supreme Court Reporter, text page 244, this Court discussed the constitutional command of full faith and credit as implemented by Congress, to the end that . “judicial proceedings * * * shall have the same full faith and credit in every court within the United States * * * as they have by law or usage in the ee We further quote: “Full faith and credit thus generally requires every o- State to give a judgment at least the res judicata effect. —— the judgment would be accorded in the State it. “By the Constitutional provision for tok tee ok the local doctrines of res judicata, : speaking generally, become a part of national juris- prudence, and therefore federal questions cognizable here.’ Riley v. New York Trust Co., 315 U.S. 343, 349, 62 S. Ct. 608, 612, 86 L. Ed. 885.” It is then pointed out in this opinion, second column of the text on page 244, that in mdny decisions this Court _has held that a judgment ofa Court in one state is con- Se ee ee ee 43 if the Court in the first state had the power to pass upon , the merits—had jurisdiction, that is, to render the judg- ment. The Court quoted from Mr. Justice Bradley, as fol- lows: » “As Mr. Justice Bradley stated the doctrine in the lead- ing case of Thompson v. Whitman, 18 Wall. 457, 21 L. Ed. 897, ‘we think it clear that the jurisdiction of the court by which a judgment is rendered in any State may be questioned in a collateral proceeding in andther State, notwithstanding the provision of the fourth ar- ticle of the Constitution.and the law of 1790, and not- withstanding the averments contai in the record of | the judgment itself.’” While the ultimate decision by this Court in the Durfee case would—inferentially at least—imply that where parties.are before a state Court and the matter of the’ state Court’s jurisdiction is litigated, regardless of whether the state Court was right or wrong, there could be no collateral attack, yet we do find in this Durfee case an explicit determination that there is another rule where the doctrines of federal preemption or — immunity may be controlling. Tite Coliee Geld wpens Kall ¥: Pendiabelid The U8. 433, 60 S. Ct. 343, 84 L. Ed. 370, and United States v. United States Fidelity & Guaranty Co., 309 U.S. 506, 60 — S. Ct. 653, 84 L. Ed. 894. We submit that these two cases are directly applicable to the facts at bar and are con- trolling. , iented Kallygens heve.sons,n,qquiition au: be the. pieoan of the Wisconsin County Court, which had general jurisdic- tion over mortgage foreclosures under the Wisconsin law. The Frazier-Lemke Act enacted by Congress in the exer- cise of its supreme power over bankruptcy denying to any state court jurisdiction over a petitioning farmer-debtor or’ 44 ‘his property rendered the confirmation of a mortgage fore- closure sale and/its enforcement without bankruptcy court’s "consent the county court’s power, and, that when such a decision was entered it was beyond the jurisdiction of the Court and’ void. In headnote 4 we find this state- ment, as announced by the Court in its opinion: , Headnote 4: » “The ftates cannot, in the exercise of control over local laws and practice; vest state courts with power : to violate the supreme law of the land.” Headnote 5: fannie ensittbidiandh antie-te sepdate butt ruptcy, Congress can limit the jurisdiction which Sein forts has. tie hard bas eee, re “pe ane aadinadin neciomed wala ruptcy law. Headnote 8: “The language and broad policy of the Frazier- Lemke Act conclusively show that Congress deprived a Wisconsin county court of jurisdiction to continue or maintain in any manner mortgage foreclosure proceed- ings against farmer-debtors without consent, after hear- ing, of bankruptcy court in which farmer-debtors’ peti- tion was pending, and hence confirmation of mortgage foreclosure sale, execution of sheriff's deed, writ of assistance, and ejection of farmer-debtors from their ___ property, to the extent based upon county court's ac- tions, were all unlawful.” + Ry, ite This Court further held in that case that such an act deprived the County. Court, a Court of general jurisdiction, ( ra “the jurisdiction to make any valid or binding orders in the face of the restrictive provisions of the federal law. The second case mentioned, United States v. United ¢ States Fidelity & Guaranty Co., raised a problem that is somewhat similar, but not exactly on factual similarity, to j the facts in the Kalb case. There was a reorganization —~ proceeding in the Federal District Cofft tor Missouri where the lessee of certain coal lands of the Choctaw and Chickasaw Nations were seeking a reorganization. Two questions were involved in that certiorari proceeding to this ee ee ee eee porter, page 655, as sapeeponee “This certiorari bri tio alight Na a view: (1) Is a former judgment against the United States on a cross-claim, which was entered without » statutory authority, fixing a balance of indebtedness to , ~ be collected a provided by law, res judicata in. this litigation for collection of the balance; and (2) as the controverted former judgment was entered against the Choctaw and Chickasaw Nations, appearing by the United States, does the jurisdictional act of April 26, 1906, 34 Stat. 137, authorizing adjudication of cross de- ae aa a a ee ee eee ons, permit the.former credit, obtained by the prin- . dpa ns bac cnet te ee ant here, to be set up in the present suit.” There was no question but what there had been some prior adjudications in one of the Missouri courts, in which | all of the parties had apparently joined, but this Court held that the Congress had exempted suits against the Indian Nations, except as. seemed authorized by” Congress. g 46 ‘This Court held that this immunized the Indian Nations and the United States acting for them from direct suits, or even suits by way of counterclaim, except in the event of the cross or counterclaim provision being made for such a -counterelaim in “any United States Court in the Indian : territory”, and the Court pointed out that with this ex- pressed @9NMMMEgEEm restriction by the Congress such a 7, judgment was not only void, but.that it did not and could not have any effect as res judicata. This Court is certainly not precluded by any of the past procedure in the State Court, or even in the two attempted applications for certiorari from the State Court proceedings, to review this whole matter and to render such judgments as are reqifired in the control of the disposition of the funds now under the control of the United States District Court, Southern District of Florida. We need only to mention the last expression by this Court as of October 18, 1965, in the case of Gondeck v. Pan American World Airways, Inc., case No. 919, reported in the November 15, 1965, Advance Sheet of 86 S. Ct. 153. One statement con- tained-in headnote 1 of the reported decision will show the pertinency of this case to the question at hand: “Interest, in finality of litigation must yield where interests of justice would make strict application of rules unfair.” @ We respectfully say-that this Court is not precluded from the consideration of this case because of any doctrine of-éstoppel or res judicata by the invalid State Court pro- cedures, but that it should determine the federal questions’ involved and require that the statutory procedure and lim- ,. vs ed \ eee ee | od , 47 itations of the Acts of Congress, Title 12, US.C.A., § 86, be strictly followed. Respectfully submitted, Warp & Warp 1240 duPont Building Miami, Florida 33131 ‘ fa By WILLIAM GresHAm Warp Attorneys for The Coral Gables First National Bank. ~~ Wittram B, Roman Pan American Bank Building Miami, Florida and % Leo L, Foster Brock Building Tallahassee, Florida : By _. Witr1am B. Roman “ae Attorneys for Pan American Bank of Miami. Fs aad o a & Al APPENDIX A. IN THE | United States Court of henecks FOR THE FIFTH CIRCUIT No. 21448 IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization AMERICAN SURETY COMPANY OF NEW YORK, Appellant, ~ versus 4. THE CORAL GABLES FIRST NATIONAL BANK and JOHN NICHOLAS, Trustee, Appellees. IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization THE CORAL GABLES FIRST NATIONAL BANK, Appellant, AMERICAN S COMPANY OF NEW YORK and Berg NICHOLAS, Trustee, Appellees. — ae : Appeals from the United States District Court for the Southern District of Florida. (June 30, 1965.) : - Before TUTTLE, Chief Judge, and PHILLIPS,*.and WISDOM, Circuit Judges. *Senior Judge of the Tenth Circuit, sitting by designation. ( | ¢ = 7 2 Oe A2 PHILLIPS, Circuit Judge: These appeals are from an order of the United States District Court for the South- ern District of Florida entered in a Chapter X reorganiza- tion proceeding, The reorganization debtor, Constructors of Florida, Inc., will hereinafter be referred: to as Con- structors. A phase of the reorganization proceeding here in- volved was before this court on a former appeal, Coral Gables First Nat. Bank v. Constructors of Florida, Inc., 5 Cir., 299 F.2d. 736, and much of the facts here pertinent are set forth in the opinion in that case. Many of the facts here pertinent are also set forth in more detail in a related state court proceeding, Coral Gables First Nat. Bank v. Constructors of Fla.,. 119 So.2d 741, c.d. 123 So.2d 349, c.d. 365 U.S. 811. In January, 1957, the‘Coral Gables First National Bank and the Pan: American Bank of Miami, a Florida state bank, hereinafter referred tg individually as Coral Gables and Pan-American and collectively as the Banks, brought an action in the Circuit Court of Dade County, Florida (Chancery No. 205613E) to foreclose three chattel mort- gages given to them by Constructors to secure three loans dated July 24, 1956, July 25, 1956, and March 20, 1957, upon which there was ali to be due the sums of $13,888.95, $92,690.85 and $151,802.46, respectively. Ameri- can Surety Company of New York, hereinafter referred to as Surety, and the City of West Palm Beach were joined as defendants, the Banks alleging that they were liable for any deficiency remaining after foreclosure. Con- structors counterclaimed against the banks for penalties’ for usury allegedly charged by the Banks in connection with the March 20, 1957, loan in violation of Federal and State law, and Surety counterclaimed against the Banks for damages it allegedly incurred because of false infor- J Se ? AZ, mation furnished to it by the Banks as to the financial _ condition of Constructors and also claimed a prior lien on the property described in the mortgages. In October, 1957, an involuntary petition in bank- ruptcy was filed Sgainst Constructors and the Bankruptcy Court by appropriate orders authorized the State*Court litigation to proceed to final determination and the receiver to appear therein in behalf of the debtor. In November, 1958, a petition for reorganization under Chapter X was filed and an order was entered authorizing the Trustee in the reorganization proceeding to continue to prosecute te claims asserted by the debtor in the State Court action. In December, 1958, a proposed plan of reorganization was filed which provided for the continuation of the State Court litigation. The plan in part read: “Article I. ' Definitions. “* * * the following terms, when used in the Plan, shall have the meanings respectively attributed to them below. > _*. ss * & #8 “Bank Litigation: That certain litigation entitled Coral Gables First National Bank, et al, v. Construc- tors of Florida, et al, in the Circuit Court of the Eleventh Judicial Circuit, in and for Dade County, Florida, in Chancery, case number 205613, togethér with all appellate or review proceédings which have arisen or may hereafter arise therefrom. “Net Pr®ceeds of Bank Litigation: The net amount recovered by Debtor or Trustee out of Bank litigation, after payment of all costs, expenses and attorney’s fees arising therefrom. e * ¢.¢«/*# ¢ P : ° “et” A4 “Article IV. Classification of Creditors “A. Secured Claims: “Class I—The claim of American Surety Com- pany of New York, Or the claim of Pan American Bank of Miami and Coral Gables First National Bank, : against the Debtor, to the extent of the value of the / Debtor’s property encumbered to secure such claim, it being understood that whether either of said claim- ants shall be entitled to be considered secfred, and the relative priority of their said claims, if valid, will be dependent upon the final outcome of Bank Litiga- tion; * * *” (Italics ours) The plan ,;was approved by the court on December 15, 1958. On January 5, 1959, Coral Gables filed a claim in the amount of $282,548.83. Its claim stated in part as follows: “That the consideration of said debt is for moneys loaned on security. (See in detail all proceedings © _Circuit Court of Dade Co., Florida, Chancery No. 205613E and reference to matters on appeal, District Court of Appeals, Third District, No. 58-526, said pro- ceedings being referred to in the petition and previous orders of this Court entered herein, full reference to same made a part hereof.)” On the same date Surety filed a claim in the amount of $1,691,483.72 “of which $50,000.00 is estimated to be secured and $1,641,483.72 unsecured.” On March 6, 1959, Coral Gables filed a consent to the plan which: stated that it “approves and accepts the plan of reorganization and consents to the Court entering an order confirming the plan of reorganization.” AS On March 11, 1959, the Bankruptcy Court confirmed the reorganization plan with certain modifications not here material. a . Meanwhile, on June 26, 1958, the Florida State Court had entered its “Partial Final Decree” in the Bank liti- gation. That court found that the Banks were joint ad- venturers and agents of each other and that the Banks had charged usurious interest in connection with the March 20, 1957, transaction in violation of §§ 687.04 and 687.07, Florida Statutes, 1957. The court held that because of such usury Coral Gables was liable to Constructors under 12 U.S.C.A. § 86 for double the amount of interest collected; that Pan American was liable to Constructors under § 687.07, supra, for all the principal and interest paid by Constructors on the usurious transaction; and that under § 687.0% supra, the principal and interest allegedly re- maining due the Banks on the March 20, 1957, transaction should be cancelled. With respect to the other two mortgages, foreclosure of which was sought, the Court adjudged that while the ~ debts were still owing, the Banks were barred from ob- taining foreclosure of the mortgages, relief equitable in nature, because they were “not in equity with clean hands,” and that the lien of Surety against the personalty de- scribed in such ‘mortgages: was superior to that of the Banks. That judgment was appealed to the District Court of Appeals, Third District, where it was held-that the Cir- cuit Court of Dade County erred in forfeiting Coral Gables’ proportionate share of the unpaid principal-of the March -20,. 1957, loan since. such forfeiture constituted a ? _ AG © | penalty in excess of that permitted to be imposed upon a national bank by 12 U.S.C.A. Sec. 86,’ adjusted the pro- portionate participation of the two Banks in the trans- action of March 20, 1957, and modified the judgment in one other respect not here material. In all other respects the judgment below was affirmed. Certiorari was denied by the Florida Supreme Court (123 So.2d 349) and by the United States Supreme Court (365 U.S. 811). There- after, the court below made additional findings, modified its decree to conform with the mandate of the Court of Appeals and adjudged that the Banks were also barred from obtaining foreclosure of the mortgage made in con- » nection with the transaction of March 20, 1957, because they were “not in equity with clean hands.” No appeal was taken from the modified decree. . In April, 1961, the Banks petitioned the Bankruptcy Court for an injunction prohibiting further State Court proceedings and any enforcement of or execution on «the State Court judgment. That relief was denied and the Bankruptcy Court authorized the Trustee to execute on the State Court judgment. The Banks appealed from that order to this court and we affirmed, holding that the Bank- ruptcy Court had the power to permit continuance of the State Court litigation and that the State Court had ju- risdiction to make and had made a judicial determination 1. 12U.S.C.A. S@. 86 provides as follows: “The taking, receiving, reserving, or charging a rate of en ee ee eee oe eacee. senlien, when knowingly done, shall be.deemed a forfeiture of the AT 2% of the claims and cross-claims of the Constructors and the - Banks. We refrained from expressly determining the questions of priorities and* enforcement of security by the Banks and other creditors as those issues were not di- rectly before us on that appeal. Based upon this court’s opinion and the State Court judgment the Trustee then filed additional objections to the claim of the Banks, objecting to the allowance and classification of the Banks’ claim as a secured claim, and to participation by the Banks in the proceeds of the re- covery made by the Trustee in the Bank litigation- and asserting that the Banks’ claim should be allowed as an unsecured claim only in the amount determined to be ow- ing by the State Court. : The Banks moved for an order directing-the Trustee to pay to them the moneys previously recovered by him in the State Court action stating as its grounds. therefor the following: “The decree of the State Court is void in- sofar as the usury fea are concerned, and any money erroneously collected therefrom is a trust fund now in the hands of the Trustee in Chapter X Reorganization Pro- ceedings in this case. The opinion of the State Court is therefore subject to the claim that it lacked jurisdiction, and therefore it is a void judgment which is not binding on anyone and particularly not binding upon this Court. It is the duty of this Court sitting as a Court of equity as well as a Chapter X Reorganization Court, to direct the return of funds which have been specifically traced and which have not yet been disbursed. These funds should be returned to the parties from whom they were recei Nod a sok aobimhie oe iseccimad ance objections of the Trustee to the claim of the Banks, the U. S. District Court for the Southern District of Florida, oP (PAT CR etch alee Seth SM TC sedi MH te e x coe ‘Miami Division, held that the Banks were barred by res judicata from attacking the determination by the State Court of its jurisdiction, but that the mortgages held by the Banks were valid and enforceable. The Court ordered that the motion of the Banks for an order directing the Trustee to pay to them the moneys collected in the State Court action be denied; that the Banks and Surety had valid liens against the proceeds from the sale of the prop- erty covered by the mortgages; that the matter of the relative pridrities between the Banks and Surety be re- ferred to the Referee in Bankruptcy as Special Master; that the Banks be awarded a secured claim in the amount found by the State Court to be due to them against the proceeds from the sale of the property covered by their mortgages and an unsecured claim for the deficiency; and that the Trustee’s objections to the allowance of the Banks’ claim as a secured claim be overruled. The Banks have appealed from thst order insofar as it sustained the objections of the Trustee to their claim, failed to determine the priority of the Banks’ ,claim as against Surety’s claim, and overruled their motion order- ~ ing the Trustee to pay over to them the moneys recovered in the State Court action. Surety has appealed from that order insofar as if al- lowed the claim of the Banks as a secured claim and over- ruled the objections of the Trustee to the allowance of the claim of the Banks as a secured claim. The Trustee has taken the position that the order of the Court below should be reversed to the extent that it fails to give full force and effect to the State Court judg- ment and in all other respects should be affirmed, but has not filed a notice of appeal. 5) ‘ A9 The’ Banks contend that. the Circuit Court of Dade County, Florida, had no jurisdiction to determine the issue of usury committed by a national bank raised by Constructor’s counterclaim. We are of the opinion, how- ever, that that question has been finally adjudicated and - conclusively settled as between these parties by previous adjudications not now open to attack by the Banks. The doctrine of res judicata embodies two main rules which may be stated as follows: is (1) The final judgment or decree of a court of com- petent jurisdiction upon the merits concludes the parties / and their privies to the litigation, and constitutes a bar to a new action or suit upon the same cause of action either before the same or any other tribunal. — (2) Any right, fact or matter in issue and directly adjudicated, or necessarily involved in the determination of an actiofi before a competent court in which a judg- ment or decree has been rendered upon the merits, is con- clusively settled by the judgment therein and cannot again be litigated between the same parties and their privies, whether the claim, demand, purpose or subject-matter of the two suits is the same 6r not. The principle of the first rule is referred.to as “bar by former judgment,” and the secohd as “conclusiveness of judgment.” The action brought by the Banks for an injunction prohibiting further State Court proceedings which was the subject of the earlier appeal to this court directly presented on the merits the issues of whether the’ Bank- ruptcy Court had the power to direct. the continuance of the State Court litigation and whether’ the Circuit Court 9. Henderson v. United States Radiator Corporation, 10 Cir. 78 F.2d 674, 675. To the same effect see: United States v. Burch, 5 Cir., 294 - F.2d 1, 5; Kelliher v. Stone & Webster, 5 Cir., 75 F.2d 331, 333. A10 of Dade County, Florida, had the power to determine the claims between-Constructors and the Banks. The order of the Bankruptcy Court denying such injunctive relief and permitting execution by the Trustee on the State Court judgment, after affirmance by this. court conclu- sively settled those issues between the parties. Such is- sues cannot again: be litigated on the petition of the Banks for an order directing the Trustee to pay back the funds obtained through execution on the State Court judgment. Although the demand is different, the issues are identical. Furthermore, the. Banks are also concluded by the is- sues adjudicated by the State Court and may not relitigate _those issues in this. proceeding. The claim of the Banks that the State Court was without jurisdiction to adjudicate ' the issues of usury and the right to foreclose the. mort- - gages and relative security rights of the Banks and the Surety to the property described in the mortgages is not well taken. The determination by a court of general jurisdiction of. its own! jurisdiction is conelusive as to the parties and their privies. “In Burgess v. Nail, 10 Cir., 103 F.2d 37, 43-44, the court said: “* * * Error in the determination of ‘questions . of law or fact upon which the Court’s jurisdiction in ‘the particular case depends, the court having general jurisdiction of the cause and the person, is error in the exercise of jurisdiction. Such an error affords no ground for collateral attack.’* 4 The Florida Constitution, Article 5, Sec, 6(3), (FS.A. Const. Article 5, Sec. 6{3)) establishes the jurisdiction of Circuit Courts in that State as follows: 3. See also: Bostwick v. Baldwin Drainage Dist., 5 Cir., 133 F.2d 1, 4-5, c.d. 319 U.S. 742; Greene v: Uniacke, 5 Cir., 46 F.2d 916, 920-921, c.d. 283 U.S. 847: Stoll v. Gottlieb, 305 U.S. 165, ate ‘Baldwin. v. Travelling Men’s Ass’n., 283 US. ‘$22, "825-526; CIS. Judgments, Sec. 427, p. 840. ** A eek % All ae “(3) Jurisdiction. The circuit courts shall have exclusive original -jurisdiction in all cases in equity except such equity jurisdiction as may be conferred on juvenile courts, in all cases at law not cognizable by subordinate courts * **.”. - ‘The. Banks. poncede that: they. contested. the juriadie- Aion. of the State Court in that forum and the court below so found. Moreover, the Circuit Court’ of Dade County was required of necessity to determine its own jurisdiction as an integral part of thé proceedings in the Bank litiga- tion. Therefore, that determination is conclusive as to that issue as among the parties to that action and the Banks may not litigate it again. The court*below did not err ‘in. denying the motion of the Banks for an order directing the Trustee to pay back to them the funds obtained through execution on the State Court judgment. - However, we are of the opinion that’ the court below erred in failing to treat the determination by the Circuit 6) of Dade County that the chattel mortgages of the - Banks were unenforceable as conclusive upon the parties ‘to. that proceeding. “The doctrine of conclusiveness of judgment applies alike to the decrees of courts exercising ‘equity jurisdiction and to the judgments of courts of law.”* The Circuit Court of Dade‘ County’ had exclusive equity jurisdiction.* Since the’ Bank litigation was com- menced by the Banks for the purpose of foreclosing its that court of that action, ‘and the parties to the Bank litiga- tion are also in the instant case. Thus, the deter- mination by Circuit Court of County ‘that the mortgages were unepforceable for equita ee is _ conclusive as t6 those parties oP poe, not. agairf be ry Sg ST Addin nck’ WA. hd ; 5. ¥-.S.A. Const. Art. 5, Sec. 6(s), supra. me ' Also, Article IV of the Reorganization Plan, supra, clearly contemplated that the validity of the claimed secu- rity of Surety and the Banks would be left for determina- tion by the State Court in the Bank litigation. Not only did the Banks fail to appeal from the order confirming that plan, but also they affirmatively approved and ac- cepted the plan and consented to its confirmation by the court. 11 U.S.C.A. Sec. 624, provides in part as follows: Z “Upon confirmation of a plan— “(1) The plan and its provisions shall be bind- ing upon the debtor, upon every other corporation is- suing securities or acquiring property under the plan, and upon all creditors and stockholders, whether or not such creditors and stockholders are affected by the plan or have accepted it or have filed proofs of their claims or interests and whether or not their claims or interests*have-been scheduled or allowed or are allowable.” ei ts Anciin: tip er edt “br “a0 ganization plan and since the confirmation order was not appealed, the détermination by the Bankruptcy Court in its confirmation order pursuant to 11 U.S.C.A. Sec. 621 that the plan complied with subchapter X of Chapter X . ee cone one an equitable and feasible is not now open to attack.* randiede, Gi ‘seteniantét Coscia’ beliw dient be affirmed insofar-as it gives effect to the’ judgment. of the State Court in the Bank litigation and reversed inso- far as it sustained the ‘validity of the mortgages of the Banks determined by the State Court to be unenforceable. a ee ne eee g 11 henstngten on aed ad Sec. 4712 ((1961) Revision). v Al3 AEPENDIX B ~ United States Court of Appeals, FOR THE FIFTH CIRCUIT OCTOBER TERM, 1964 eee ee Ee eee ee No. 21448 | : D. C. Dockét No. 3736-Bk-Ec | IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization AMERICAN SURETY COMPANY OF NEW YORK, Appellant, - . ‘versus THE CORAL GABLES FIRST NATIONAL BANK and , * JOHN NICHOLAS, Trustee, Appellees. IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization \ THE CORAL GABLES FIRST NATIONAL BANK, mh? ee: % as 4 4 AMERICAN SURETY COMPANY OF NEW YORK and JOHN NICHOLAS, Trustee, \ Appellees. Pe Southern District of Florida. Before TUTTLE, Chief Judge, and PHILLIPS,* and . WISDOM, Circuit Judges. *Senior Judge of the Tenth Circuit, sitting by designation. _ wy . Al4 Judgment This cause came on to be heard on the transcript of the record from the United States District Court for the Southern District of Florida, and was argued by counsel; ON CONSIDERATION WHEREOF, It is now here ordered and adjudged by this Court that the judgment of the said District Court in this cause be, and the same is hereby affirmed in part, and reversed in part; and that this cause be, and it is hereby remanded to the said Dis- trict Court for further proceedings in accordance with the ee : | It is further ordered and adjudged that the appellee- appellant, The Coral Gables First National Bank, be con- - demned to pay the costs of this cause in this Court for which execution may be issued out of the said District Docketing cause, etc. ........ $ 25.00 Cost of Printing Record ~.........$1226.75 Total .. $1251.75 Issued as Mandate: Sep 13 1965 * «June 30, 1965 w Al5 APPENDIX C United States Court of Appeals FIFTH CIRCUIT No. 21,448 & IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization. AMERICAN SURETY COMPANY OF NEW YORK, Appellant, THE CORAL GABLES FIRST NATIONAL BANK ° ahd JOHN NICHOLAS, Trustee, . Appellees. IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization. f THE CORAL GABLES FIRST NATIONAL BANK, and PAN AMERICAN BANK OF MIAMI, Appe Vs. AMERICAN SURETY COMPANY OF NEW YORK - JOHN NICHOLAS, Trustee, _ Appellees, Warp & Warp Wr11am B. Roman 1240 duPont i Pan American Bank Building Miami; Florida 33131 Miami, Florida Gables First National Lzo L. Foster Bank Brock Building Tallahassee, Florida ‘ Attorneys for Pan American Al7 AUTHORITIES CITED John R. Alley & Co. v. Federal National Bank of Shaw- nee, Okla., 124 F. 2d 995 20 Coral Gables First National Bank v. Constructors of Florida, Inc., 299 F. 2d 736 31 Couch v. United States, 235 F. 2d 519 24 Douglas v. State of Alabama, 85 S. Ct. 1074 1... 21 First National Bank of Birmingham v. Daniel, 239 F. 2d 801 ya McCollum v. Hamilton National Bank, 303 U. S. 245, 58 S. Ct. 568, 82 L. Ed. 819 Mercantile National Bank at Dallas v. Langdeau, 83 S. Ct. 521 aa 20 37 Michigan National, Bank v. Robinson, 83 S. Ct. 914... 37 37 Republic National “Bank of Dallas v. Langiom, 83 S. Gt. 521 Sibbach v. Wilson & Co., 312 U. S. 1, 61S. Ct.-422, 427, 85 L. Ed. 479 Ps 23 Southern gt ae Company " v. Pickard, 371 U. S. 57, 83 S. Ct. 1 25, 26, 37 Sulil Realty Corp. v. Rye Motors, Inc., 257 N.Y.S. 111 38,39 _ In re Wiid, C.C.N.Y. 1873, 11 Blatchf. 243 Fed. Cas. No. 17,645 21 Statutes , : Statute 5197, Title 12, U.S.C.A. § 85 ee 20, 21 Statute 5198, Title 12, US.C.A. § 86 at Bankruptcy Act, § 256, 11 U.S.C. 656 Bankruptcy Act, § 257, 11 U.S.C. 057 - : ' Texts 1 Am. Jur. 2d, p. 558 “ Judicial Comment on Federal Rules of Civil Procedure ' 83S. Ct. 43 4 einen a nsataoes * United States Court of Ap eals FIFTH CIRCUIT ey wet No. 21,448 pe IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization. AMERICAN SURETY COMPANY OF NEW YORK, Appellant, s > -. vs. THE CORAL GABLES FIRST NATIONAL BANK and JOHN NICHOLAS, Trustee, - ’ Appelless: PUNE ain pReNe Ae Po aga IN THE MATTER OF CONSTRUCTORS OF FLORIDA, INC., Debtor in Reorganization. | THE CORAL GABLES FIRST NATIONAL BANK . and PAN AMERICAN BANK OF MIAMI, ' Appellant, vs. AMERICAN SURETY COMPANY OF NEW YORK and JOHN NICHOLAS, Trustee, | Appellees. » “ : bo ce tata a aah Raa - io] > ae ‘ _ PETITION FOR REHEARING _ Come now the appellants, THE CORAL GABLES FIRST NATIONAL BANK and PAN AMERICAN BANK OF MIAMI, and respectfully petitioh the Court to grant a / ~ A20 , Yehearing and a reconsideration of the opinion of June 30, _“ 1965, for the following reasons: The opinion prepared for the Court by Judge Phillips, Senior Judge of the Tenth Circuit, and adopted without dis- sent by the other two members of this Court, seems to be based upon three assumptions. The first assumption is _a matter of law, but is not as clearly pointed out in the opinion as itjhad been in a statement from the Bench? made by Judge Phillips at the time of oral argument. The controversial case, which from a matter of law : seems to have been the focal point throughout this entire litigation, was whether the case of John R. Alley & Co. v7 Federal National Bank of Shawnee, Oklahoma was in con- flict with the then existing decisioh of the Supreme Court of the United States of McCollum v: Hamilton National Bank, 303 U. S. 245, 58 S. Ct. 568, 82 L. Ed. 819. These two cases were discussed in the brief of the appellant Banks, the first being discussed on pages 7 and 8 and the , latter case being discussed at page 36. ; In.the McCollum case the Supreme Court of the United States pointed out that usury penalties or the right to cl a penalty for usury against a national bank was by two statutes of the United States—Section 5197, whid is now referred to as Title 12, § 85, U.S.C.A., and Sectior 5198, which is Title, 12, § 86. For the purposes of this peti- tion it is only necessary to consider the McCollum case in the light of the two statutes above mentioned. seth 8: tases the-ttghl-cf-a netiensl bank Asin business in a state as to the rate of interest it may legally charge. The rate is specifically fixed, but there is the added provision in Section 85, which is put in there as an excep- tion, and we quote: eee ¢ - * A21 “except that where by the laws of any State a dif- ferent rate is limited for banks organized under State laws, the rate so limited shall be allowed for associa idns organized or existing in any such Stafe under this chapter.” . This) creates a binding control on the right of a national bank to charge interest on a loan and fix the rate thereon. This is a federal law and_ violation of Section 85 is a violation of a federal law—not a violation of a state law (see Tiffany v. National’ Bank, Mo. 1873, 18 Wall. 409, 21 L. Ed. 862). Statute 5198 (12 U.S.C.A., § 86), which section is copied in the footnote on page 6 of the’ printed opinion, fixes the ‘penalty where a federal bank violates the provisions of Section 85, and in the same act and as a part of the same section fixes the exclusive remedy, and we quote: “In case the greater rate of interest has been the person by whom it has been paid, or his legal representatives, may-.recoyer back, in an action in the nature of an action of .debt, twice the amount of the interest thus paid from the association taking or receiving the same.” ; , . Im the McCollum case and in the other federal. cases which we have mentioned in our brief, as well as in all of the state cases’on the subject, the remedy and the pro- cedure for the enforcement have been held to be exclusive. It has been held that even where there is no penalty under the state law, nevertheless where a federal bank has vio- lated the federal law there is 4 right for recovery (see In re Wild, C.C.N.Y. 1873,.41 Blatchf. 243 Fed: Cas. No. 17,645). ; , . In attempting to analyze the position of this Court in its opinion of June 30, 1965, we have sincerely sought to de” - termine just why there should be any confusion about the © A22 law of this case, because it seems clear that the result of ‘the case under consideration has clearly violated the fed- eral restrictions, rights, remedies and forfeiture penalties many times beyond the specific: and exclusive remedies In the John R. Alley case from the Tenth Circuit (January 13, 1942) the McCollum decision, which had been rendered on February 28, 1938, was discussed. In the opin- et en (see text, first column, p. 997) it is said: “It has been held without exception that the right granted by the statute can be asserted only in a sep- arate and independent action in the nature of an ac- tion in debt.” — quoting cases beginning with Barnet v. Muncie National Bank, 98 U. S. 555, 25 L. Ed. 212, and ending with the last | case of McCollum v. Hamilton National Bank, 303 US. 245, 58 S. Ct. 568, 82 L.. Ed. 819. The opinion continues further: ~ . 5 “The rationale of these cases is that where, as here, the statute creates a right or offense and provides a specific remedy or punishment, those provisions are exclusive and the liability can be eriforced only in an action brought specificaHy and exclusively for that purpose.” Then the opinion continues (see second column, p. 997): : ; f “All of these decisions antedate the adoption of the New Rules of Civil Procedure, 28 U.S.C.A. following section 723c, and our question is to determine whether the adoption of the new rules has modified the rule an- nounced in these decisions.” ¢ ( = Then the Court proceeded to hold that since the Fed- eral Rules of Civil Procedure provided for compulsory - counterclaims, the exclusive features of Title 12, § 86, were repealed. The said opinion further laid.down the rule ‘that if there is'a conflict between the procedure provided for.in-the statute for the enforcement of the right created thereby and that provided for in the Rules of Civil Pro- ‘cedure, the statutory exclusive remedy is abolished and yields to the Federal Rules of Civil Procedure. The Court relied upon the case of Sibbach v. Wilson & Co., 312 U. S. 1, 61 S. Ct. 422, 427, 85 L. Ed. 479. We respectfully say that a reading of that case would call for a different conclusion. In.61 Supreme Court Reporter, a page a4; we find this statement by-the p Reernen Court: “Hence we diaitdicdke that the Act of June 19, 1934, was purposely restricted in its operation to matters of pleading and court practice and procedure. Its two provisos or caveats emphasize this restriction. The first is that the court shall not ‘abridge, enlarge, nor modify the substantive rights’, in the guise of reg- ulating procedure. The second is that if the rules are to prescribe a single form of action for cases at law and suits in equity, the constitutional right to jury trial inherent in the former must be preserved. There are other limitations upon the authority to prescribe rules which might have been, but were not mentioned in the Act; for instance, the inability of a court, by rule, to extend or restrict the jurisdiction mies cad a statute.” The satetsent inthe’ Alley ‘chet busta: Upen this Sa- preme Court opinion of 1941, while it may have been the law of the Tenth Circuit, so far as we can tell has never been followed by any other Court, either state or federal, - unless it can be said that the Florida Courts adopted that procedure in the instant’ case. A24 In a research of this Alley case we find it mentioned only several times, but on other points. However, it was mentioned to some degree in the case of Couch v. United ‘States (U.S.C.A. Dist. of Col., 1956), 235 F. 2d 519. In that case, which involved a criminal appeal, the trial judge in the United States District Court had not strictly . followed Rule 32(a) of the Federal Rules of Criminal Pro- cedure at the time of entering sentence. The Appellate Court, in a panel consisting of eight judges, refused to hold that the Federal Criminal Rules were binding as a matter of law to the extent that a slight variation would vitiate * the trial. One judge, Judge Fahy (see second column text, p. 521), dissented and held that Rule 32(a) of the Federal Criminal Rules has the force and effect of law and that the rule meant what it said and there could be no deviation. He quoted the John R. Alley case as his authority. This Court has clearly held in the case of First National Bank of Birmingham v. Daniel, a 1956 decision, 239 F. 2d 801, that the recovery of usury against a national bank was restricted to twice the’sum paid for interest within a two-year statutory period prior to the suit. No Court so far as we can find, excepting the decision of the Tenth Circuit in the Alley case and the case now in question in the Con- structors of Florida case, has ever entertained or permitted a proceeding for usury against a national bank except in ‘strict accord with the statute as to the procedure and the right to separate suit. In speaking of the effect of the Rules of Civil Pro- cedure and proposed amendments Mr. Justice Black and ' Mr. Justice Douglas (see 83 Supreme Court Reporter, page 43) commented upon the fact that they had objected to some of the proposed amendments which were not adopted because the amendments were getting away from the lim- ited purposes of the Federal Rules of Civil Procedure and we Gj — A25 beginning to abridge constitutional or statutory rights » which were enjoyed as a matter of substance. These state- - ments are important not just because they were made by two Justices of the Court, but because they were made at a time when the entire Court had before it for consideration the case of Southern Construction Company v. Pickard, 371 U. S. 57, 83 S. Ct. 108. This was a per curiam opinion by the entire Court, without any dissent. Here was a suit “under the Miller Act. The Court points out (see text, p. 109): _ “The Miller Act, however, requires that suits in- stituted under its provisions ‘shall be brought * * * "in the United States District Court for any district in ' which the contract was to be performed and executed and not elsewhere * * *.’ Since this statute appeared to prohibit an action in the Georgia District Court on the Tennessee project, Pickard in April 1957 filed the present action against petitioners in the United States District Court for the Middle District of Tennessee re- lating to the Tennessee project only.” Then it is pointed out that the Georgia action proceeded to trial and there were some decisions reached because of s the dismissal of the counterclaim theory in Georgia. Then in the Tennessee action it was pleaded that Southern’s action wa barred by the doctrine of res judicata. In the proceedings in Tennessee the District Court apparently allowed the $35,000.00 claim which had originally been in- _ volved in the Georgia Court, but the Court of Appeals for . the th Circuit reversed (see 293 F. 2d 493). That Ap- pe [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385602_1147%3A1. Public record. Not legal advice.