Petition for a Writ of Certiorari — Colonial Trust Co. v. Fidelity Trust Co.
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*. uv Ee UUL ‘
FILED
AUG 41949
CHARLES ELMORE CROF
CLER
FILE COPY
In THE
Supreme Court of the United States
OCTOBER TERM, 1949.
NO. .. e ” 2 v. 3 Pr
FIDELITY TRUST COMPANY, Trustee Under the Will
of John A. Harper, Deceased, Respondent,
Vv.
THE COLONIAL TRUST COMPANY of Pittsburgh, Pa.,
Agent for the Shareholders of The Bank of
Pittsburgh National Association,
Petitioner.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT AND
BRIEF IN SUPPORT THEREOF.
C. Rosco—E HOFFMAN,
2213 First Natl. Bank Bldg.,
Pittsburgh, Pa.,
\ RICHARD W. AHLERS,
1310 Commonwealth Bldg.,
Pittsburgh, Pa.,
Attorneys for Petitioner.
SMITH BROS. CO. INC., LAW PRINTERS, 434-436 BOULEVARD OF ALLIES, PITTSBURGH, PA.
SUBJECT INDEX.
ay sat PAGE
Petition for Writ of Certiorari..............+-+4+ 1
BE NUS no vic eres oe cere sees seccces 1
EE eee ey er er Phe ee re eer 6,11
Questions Presented .............seeeeeeees 7
Reasoas Relied on for Allowance of Writ..... 8
PN ME re bc adinescacvctcesceescadss 10
Brief in Support of Petition...................6- 11
Opinions Below ........scccccccccccccccese 11
POT sin o6 00 se wibin vine vain mecccsccsivess 11
DS vasloe se Sade Seas Pass Seba e's ks 11
Specifications of Error to be Urged.......... 12
Summary of Argument..................65. 13
CT Ae Perr ee Te eee ey TT 15
I. The questions involved are of paramount
importance in the administration of the
national banking laws and have not been,
but should be, settled by this Court....... 15
Decree of Distribution of the Orphans’
Court of Allegheny County, Penn-
Ee ce Pere 19, 22
II. The majority opinion of the learned United
States Court of Appeals conflicts in prin-
ciple with the case of Griggs et al. v.
Subject Index.
a
PAGE
Baumer, 130 Fed. (2d) 399 (C.C.A. 3, 1942)
and Karn v. Andresen et al., 51 Fed. (2d)
521 (District Court, D. Minnesota, Sixth
DEVON, BOL): sci nce nnn Toure wad ewe bledé
The majority opinion of the learned United
States Court of Appeals is contrary to law
and works an injustice and is inequitable tu
thé many shareholders other than the Re-
spondent. The opinion of the learned
United States Court of Appeals is in error
in concluding, among other things, the fol-
lowing: ..... Cake Pe ihe hak Rae aw wee
(a) That Petitioner has refused to
pay all the shareholders in the
32
ES ok nic cas cc smegonios 32, 33
(b) That the parties did not agree as
to the value of the assets when
they entered into an agreement of
CINE 6 6 it ansesieacn 32, 33
(c) That the function of an order of
court is to, in effect, make an
agreement of compromise for the
parties rather than order that an
agreement previously made by the
parties be carried out;.. .16, 28, 29, 32
(d) That because the Receiver held
the assets more than 214 years
before requesting approval of the
settlement the equitable result
would have the increase in value
inure to the benefit of the Re-
GEE Sa svidatviver sees 32, 37, 38
Cases Cited. tii
PAGE
(e) That the Petitioner should be pe-
naliged for the derelictions of the
Receiver and the Comptroller in
holding the assets for that length
of time; ..... salibiealed a aiats: phe 32, 39, 40
(f) That the decree of the Orphans’
Court of Allegheny County, Penn-
sylvania, and the order of the Dis-
trict Court can be collaterally at-
(g) And that Petitioner is not entitled
to interest from May 16, 1932 to
February 13, 1935
IV. The majority opinion of the learned United
States Court of Appeals is contrary to “In-
structions to National Bank Receivers” in
accordance with which the assets in the
possession of receivers of national banks
have heretofore been administered. . .46, 47, 48
The majority opinion of the learned United
States Court of Appeals entirely ignores
the fact that under their theory they were
without jurisdiction
CASES CITED.
Griggs et al. v. Baumer, 130 Fed. (2d) 399 (C.C.A.
3, 1942)
Griffith v. Creighton, 81 Mo. App. 1
Hamilton v. Moore, 4 W. & S. 570
‘Heath v.-Page, 48 Pa. 130 at 148
tt AO A GR OT NE te
iv Statutes Cited.
Howard et al. v. Norton, 65 Barb. (N.Y.) 161...... 25
Hulse v. Argetsinger, 18 F. 2d. 944, 945 (C. A. 2,
dy hee oe OE Tee Oop ee eee eee Per re 29
Karn v. Andresen et al., 51 Fed. (2d) 521 District
Court, D. Minnesota, Sixth Division, 1931..... 8, 31
Mitchell v. Joseph, 117 F. 2d 253, 255 (C. A. 7, 1941) 29
McCarty v. Gault, 24 Fed. Supp. 977 (District Court,
D. Oregon, October 3, 1938)................. 42
McCormack v. Sharples, 254 Pa. 541, 542, 543, 99
PE 5 6. ick kb ik ke MRA MREMD IN 00 o0 ek uA 42
Oosterhuis v. Palmer, 137 F. 2d. 322, 325 (C. A.
Rt ane ait kaa aap iia Na aL ae Piao 29
Richabaugh v. Dugan, 7 Barr. 394................ 25
West Republic Mining Co. v. Jones & Laughlin, 108
Ply We On od cae Nh cae Cav eee h a ceeer eee 42
AUTHORITY CITED.
Restatement c* the Law of Contracts, Section 34... 26
Volume 1, Cyclopedia Law and Procedure 335...... 25
Volume 1, American and English Encyclopedia of
Law, Second Edition, 418.................... 25
STATUTES CITED.
Act of June 30, 1876, as amended (12 U.S. C. A.
BE sk ies p45 Cee WO RNG Kb RK ee 4, 27
Act of February 25, 1930 (Title 12 U.S.C. A. #67) 5
Judicial Code
Section 240 (a) as amended by Act of February
13, 1925, C. 229, #1, 43 Stat. 938, U.S.C. A.
Title 28, Section 347...........ccccceces 6
—
Supreme Court of the United States
OCTOBER TERM, 1949.
FIDELITY TRUST COMPANY, Trustee Under the Will
of John A. Harper, Deceased, Respondent,
v.
THE COLONIAL TRUST COMPANY of Pitisburgh, Pa.,
Agent for the Shareholders of The Bank of
Pittsburgh National Association,
Petitioner.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT.
To the Honorable, the Chief Justice and the Associate
Justices of the Supreme Court of the United States:
The petition of The Colonial Trust Company of
Pittsburgh, Pa., Agent for the Shareholders of The
Bank of Pittsburgh National Association, respectfully
shows:
MATTER INVOLVED.
The matter involved arises by reason of the suspen-
sion of business of The Bank of Pittsburgh National
Association, a national bank, and the stock assessment
which was imposed. Fidelity Trust Company, Trustee
Pict ha ne ee
2 Petition for Writ of Certiorari.
Under the Will of John A. Harper, deceased, was the
owner of 693, of a total of 60,000, shares of stock of that
bank when it suspended business. This stock had a par
value of $50 per share and 2 one hundred percent assess-
ment was made against all the shareholders which, as to
the Respondent, amounted to $34,650.
A claim for said assessment plus interest, being a
total debt of $35,654.85, was filed with the Respondent,
a decedent’s estate. After the payment of administra-
tion expenses the Receiver was the only creditor of this
estate and he agreed to accept all the assets of the Re-
spondent (R. 13a, 14a), consisting entirely of market-
able securities with the exception of less than $20 in
cash, in settlement of his claim. The Orphans’ Court
of Allegheny County, Pennsylvania, by its decree of dis-
tribution, directed that all the said assets should be
delivered in kind to the Receiver “in fuli of assessment
of $50 a share on 693 shrs. Bank of Pitts. N. A.” (R. 17a,
18a). This delivery was on July 8, 1932 (R. 20a). Ex-
cepted from this decree were assets sufficient to pay the
administration expenses and the 693 shares of stock of
The Bank of Pittsburgh National Association which
were decreed back to the debtor. Had the Receiver
taken these 693 shares of bank stock, which he could
have done, there would not have been any possibility of
this litigation.
The market value of the assets delivered to Peti-
tioner upon the date of their receipt on July 8, 1932,
was $30,159.58 as set forth in the Decree of Distribution
and the Certificate of Settlement (R. 17a, 18a, 19a, 20a,
21a) which was admittedly less than the amount due
the Receiver (R. 13a). The Receiver, apparently be-
lieving that title to these assets vested in him upon
7
Petition for Writ of Certiorari. 3
delivery without any approval of the Comptroller or
order of court, had them transferred to his name
promptly after he received them. The Receiver decided
to sell the securities the latter part of 1934 and pro-
ceeded to obtain the approval of the Comptroller to do
so. He was then advised by the Comptroller that ap-
proval of the acceptance as well as the sale of these
assets was required. At this time the Comptroller also
said it was necessary to secure approval of a compro-
mise which it was claimed resulted by reason of the pro-
ceedings before the Orphans’ Court of Allegheny County,
Pennsylvania. The approval of the acceptance and sale
of the assets and of the alleged compromise was given
by the Comptroller of the Currency by his letter dated
January 7, 1935 (R. 15b, 16b) and an order of the Dis-
trict Court of the United States for the Western District
of Pennsylvania was obtained on February 13, 1935 (R.
1b, 5b, 6b, Tb, 8b, 22b, 23b, 24b, 25b) when the market
value of the assets plus the income therefrom paid to the
Receiver amounted to $42,783.35 (R. 5la, 52a). No
reason has been found as to why the Comptroller did
not direct the Receiver to approve or disapprove of the
transaction and proceed to obtain an order of court be-
fore these dates. Apparently the Receiver and the
Comptroller were of the opinion that such approval and
order of court were unnecessary under the existing cir-
cumstances because the transaction was only a payment
on account or because of the Instructions of the Comp-
troller to Receivers hereafter discussed.
All the debts of The Bank of Pittsburgh National
Association having been paid, the receivership was ter-
minated and as of February 25, 1941, The Colonial Trust
Company was elected agent for the shareholders pur-
—
suant to Act of Congress approved June 30, 1876, as
amended (12 U. S. C. A. 197). On December 4, 1941,
the remaining assets of the said The Bank of Pittsburgh
National Association were turned over to that agent,
your Petitioner.
4 Petition for Writ of Certiorari.
The Petitioner proceeded to liquidate the assets and
from the proceeds of the liquidation made partial re-
payments on the assessments to the shareholders in the
following amounts on the following respective dates:
February 20, 1943—First partial repayment of—
$3.24 per share;
February 21, 1944—Second partial repayment of—
$3.00 per share;
March 3, 1945—Third partial repayment of—
$6.00 per share.
No repayments, however, were made to the Respondent
until those to which it otherwise would have been en-
titled amounted to a sum sufficient to liquidate the
unpaid amount of the debt which the Petitioner claimed
was due it from the Respondent; in other words, the
difference between the value of the assets when deliv-
ered, which was $30,159.58, and the debt, which was
$35,654.85 plus interest.
Not until November 2, 1945, or about thirteen years
and four months after the delivery of the assets by the
Respondent to the Receiver did the Respondent claim
that it should have been treated the same as those share-
holders who had paid one hundred percent of their as-
sessment, and at that time it entered suit to recover on
that basis. Respondent also claimed the excess received
from the income and sale of the assets owwr and above
the debt. It denied any obligation to pay interest on the
—
Petition for Writ of Certiorari. 5
unpaid balance of the debt after delivery of the assets
to the Receiver. The District Court entered judgment
in favor of the Respondent and against Petitioner in the
sum of $15,318.26, with interest from November 2, 1945.
Petitioner appealed to the United States Court of Ap-
peals for the Third Circuit which affirmed the opinion
of the District Court.
Petitioner has contended that the transaction before
the Orphans’ Court of Allegheny County, Pennsylvania,
was in law only a payment on account and therefore it
was not necessary to secure the approval of the Comp-
troller and an order of court since the Act of February
25, 1930 (Title 12 U. S. C. A. #67)1 only applies in case
of a compromise. Petitioner has also argued in the al-
ternative that if the Court should decide that said trans-
action was in fact a compromise, then that compromise
was converted to writing in the form of the Decree of
Distribution of the Orphans’ Court of Allegheny County,
Pennsylvania (R. 17a, 18a, 19a) and the Comptroller
approved it (R. 15b, 16b) and the District Court ordered
that it be carried out on the basis set forth in that
decree (R. 22b, 23b, 24b, 25b).
Petitioner has paid the Respondent on the basis of
the compromise set forth in the said Decree of Distribu-
tion in the Orphans’ Court entered May 24, 1932, but
Respondent asks that it be paid on the basis of values
1 Act of February 25, 1930 (Title 12 U.S. C. A. #67)
provides as follows:
“Any receiver of a national banking association is
authorized, with the approval of the Comptroller of
the Currency and upon the order of a court of record
of competent jurisdiction, to compromise either be-
fore or after judgment, the individual liability of
any shareholder of such association.”
7
prevailing on February 13, 1935, the date of the decree
of the District Court, contending that the compromise
was not effective until the latter date.
Briefly, Petitioner claims that the negotiations be-
tween the parties in 1932 resulted only in a payment on
account and that therefore title to the assets vested in
Petitioner upon delivery. In the alternative, Petitioner
also contends that if it should be decided that there was,
in 1932, a compromise of the claim then that compromise
was converted to writing in the form of the Decree of
Distribution of the Orphans’ Court of Allegheny County,
Pennsylvania (R. 17a, 18a, 19a) and in that form the
compromise was approved by the Comptroller and an
order of court was obtained directing that it be effected
on the basis of the values set forth in that decree (R.
22b, 23b, 24b, 25b). Respondent argues that there was
no payment on account and that since there was no
order of court until February 13, 1935, the compromise
agreement made by the parties in 1932 and converted
to writing in the Decree of Distribution of the Orphans’
Court of Allegheny County, Pennsylvania, did not be-
come effective until the said date of February 13, 1935.
Under this theory it is contended that the values on
February 13, 1935, would be controlling rather than those
agreed to as of May 24, 1932 by the parties and set forth
in the said Decree of Distribution of the Orphans’ Court
of Allegheny County, Pennsylvania.
6 Petition for Writ of Certiorari.
JURISDICTION.
The jurisdiction of this Court is invoked under
Section 240 (a) of the Judicial Code, as amended by the
Act of February 13, 1925, C. 229, #1, 43 Stat. 938;
U. S. C. A., Title 28, Section 347.
>"
Petition for Writ of Certiorari. 7
QUESTIONS PRESENTED.
L
If it was necessary to obtain from the United States
District Court authorization to accept assets in accord-
ance with a decree of the Orphans’ Court of Allegheny
County, Pennsylvania, and such authorization was in
fact obtained, the question is, which is the controlling
date:
May 24, 1932, the date of the Decree of Distribution
of the Orphans’ Court of Allegheny County, Penn-
sylvania, which evidenced the agreement of com-
promise between the parties,
or
February 13, 1935, the date of the order of the
District Court of the United States for the Western
District of Pennsylvania, directing the Receiver to
accept the assets in accordance with the Decree of
the Orphans’ Court of Allegheny County, Pennsyl-
vania?
Il.
If the approval of the compromise by the District
Court was necessary, should the Respondent be charged
with interest to the date of such approval?
eee pase omnes
pena tap enaeay an manioee
in ino! en ARETE a
Petition for Writ of Certiorari.
REASONS RELIED ON FOR ALLOWANCE OF
WRIT.
Petitioner respectfully submits that the decision of
the United States Court of Appeals for the Third Cir-
cuit should be brought before this Court for review for
the following reasons:
(1)
(2)
(3)
The questions involved are of paramount im-
portance in the administration of the national
banking laws and have not been, but should
be, settled by this Court.
Where the consideration in a compromise be-
tween a Receiver of a national bank and a debt-
or is property, other than money, it has never
been decided whether that property should be
valued as of the date of the agreement of com-
promise between the parties or the date of the
order of court directing that the compromise
agreed to by the parties be effected. To assist
receivers in the performance of their duties
this question should be decided. In this case
there is the further question of whether or not
the agreement of the parties should be control-
ling rather than the date of the’ order of the
District Court.
The majority opinion of the learned United
States Court of Appeals conflicts in principle
with the case of Griggs et al. v. Bawmer, 130
Fed. (2d) 399 (C. C. A. 3, 1942) and Karn v.
Andresen et al., 51 Fed. (2d) 521 (District
Court, D. Minnesota, Sixth Division, 1931).
The majority opinion of the learned United
States Court of Appeals is contrary to law and
_
(4)
Petition for Writ of Certiorari. 9
works an injustice and is inequitable to the
many shareholders other than the Respondent.
The opinion of the United States Court of Ap-
peals is in error in concluding among other
things the following:
(a) That Petitioner has refused to pay all the
shareholders in the same way;
(b) That the parties did not agree as to the
value of the assets when they entered into an
agreement of compromise;
(c) That the function of an order of court is
to, in effect, make an agreement of compromise
for the parties rather than order that an agree-
ment previously made by the parties be carried
out;
(d) That because the Receiver held the assets
more than 21/4 years before requesting approval
of the settlement the equitable result would
have the increase in value inure to the benefit
of the Respondent;
(e) That the Petitioner should be penalized
for the derelictions of the Receiver and the
Comptroller in holding the assets for that
length of time;
(f) That the decree of the Orphans’ Court of
Allegheny County, Pennsylvania, and the order
of the District Court can be collaterally
attacked;
(g) And that Petitioner is not entitled to in-
terest from May 16, 1932, to February 13, 1935.
The majority opinion of the learned United
States Court of Appeals is contrary to “In-
structions to National Bank Receivers” in ac-
cordance with which the assets in the posses-
——
10 Petition for Writ of Certiorari.
sion of receivers of national banks have here.
tofore been administered.
(5) The majority opinion of the learned United
States Court of Appeals entirely ignores the
fact that under their opinion they were without
jurisdiction.
WHEREFORE, your Petitioner respectfully prays that
a writ of certiorari may issue out of and under the Seal
of this Court, directed to the United States Court of Ap-
peals for the Third Circuit, commanding said Court to
certify and send to this Court, on a date to be designated,
a full and complete transcript of the record of all pro-
ceedings in said United States Court of Appeals in the
case entitled “Fidelity Trust Company, Trustee Under
the Will of Jobn A. Harper, Deceased, Plaintiff, Appellee
v. The Colonial Trust Company of Pittsburgh, Pa., Agent
for the Shareholdres of The Bank of Pittsburgh National
Association, Defendant, Appellant, No. 9708,” filed May
6, 1949, to the end that said case may be reviewed and
determined by this Court; that the judgment and order
of the United States Court of Appeals for the Third
Circuit may be reversed by this Court and that your
Petitioner may have such other and further relief as to
this Court may seem proper.
Respectfully submitted,
THE COLONIAL Trust COMPANY OF Prrts-
BURGH, PA., AGENT For THE SHARE-
HOLDERS OF THE BANK OF PITTSBURGH
NATIONAL ASSOCIATION
By: C. Roscozt HorrMan,
By: RicHAarp W. AHLERS.
Attorneys for Petitioner.
_ a
Brief im Support of Petition. 1
BRIEF IN SUPPORT OF PETITION FOR WRIT
OF CERTIORARI.
To the Honorable, the Chief Justice and the Associate
Justices of the Supreme Court of the United States:
OPINIONS BELOW.
The opinion of the District Court (Gibson, J.) was
filed February 23, 1948 and appears in the record at
39a but is not officially reported.
The opinion of the majority and the dissenting opin-
ion of Judge O’Connell of the United States Court of
Appeals for the Third Cirucit were filed May 6, 1949 but
have not yet been officially reported.
JURISDICTION.
The judgment sought to be reviewed is a final judg-
ment of the United States Court of Appeals for the Third
Circuit affirming a decision of the District Court of the
United States for the Western District of Pennsylvania.
The jurisdiction of this Court is invoked under Section
240 (a) of the Judicial Code, as amended by the Act of
February 13, 1925, C. 229, #1, 43 Stat. 938; U.S.C. A.,
Title 28, Section 347.
STATEMENT.
The essential facts are summarized in the Petition
for Certiorari under the title “Matter Involved”, supra.
“7
12 Brief in Support of Petition.
SPECIFICATIONS OF ERROR.
1. The learned United States Court of Appeals for
the Third Circuit erred in holding that the value of the
assets should be taken as of February 13, 1935, the date
of the order of the District Court.
2. The learned United States Court of Appeals for
the Third Circuit erred in refusing to hold that the assets
should have been valued in accordance with the valua-
tions agreed to by the parties and set forth in the Decree
of Distribution of the Orphans’ Court of Allegheny
County, Pennsylvania, dated May 24, 1932.
3. The learned United States Court of Appeals for
the Third Circuit erred in refusing to hold that it was
proper for Petitioner to charge Respondent interest on
the unpaid balance of the debt from May 16, 1932, the
date when all the assets of the Harper Estate were turned
over to the Receiver, to February 13, 1935, the date of
the order of the District Court.
as
Brief in Support of Petition. 13
SUMMARY OF ARGUMENT.
(a) The parties themselves agreed to the compro-
mise proposition which included values of the assets.
This agreement, was converted to writing in the form of
the Decree of Distribution of the Orphans’ Court of
Allegheny County, Pennsylvania. The Comptroller of
the Currency approved the compromise proposition and
an order of the District Court was obtained expressly
directing that the compromise be consummated in ac-
cordance with the said decree of the Orphans’ Court.
The Respondent never withdrew his offer of compromise
and never demanded the return of the assets. There-
fore, after the order of the District Court was obtained,
the proceedings could not be collaterally attacked.
Under this theory of the case the compromise became
effective on February 13, 1935, the date of the order of
the District Court, but the consummation of the com-
promise was in accordance with the terms of the agree-
ment between the parties set forth in the Decree of
Distribution of the Orphans’ Court of Allegheny County,
Pennsylvania.
(b) The transaction between the parties was only
a payment on account and therefore no approval of the
Comptroller of the Currency or order of court was re-
quired. The reason for this is that a value was placed
upor. the assets when they were delivered to Petitioner
and under such circumstances delivery in law is the
equivalent of the payment of so much money. If this
argument is sustained the title to the assets vested in
Petitioner upon delivery on July 8, 1932, without the
necessity of obtaining the approval of the Comptroller
of the Currency or an order of court.
oo ee
Bis
(c) If it should be decided that there was a com-
promise, Petitioner is entitled to interest on the unpaid
balance of the debt from May 16, 1932 to February 13,
1935, for the reason that in such case it was legally
impossible for Petitioner to sell the assets before the
latter date and, consequently, no funds were available
to liquidate the indebtedness. To hold otherwise would
be inequitable to those shareholders who paid their
assessments on time and in cash and to those who, by
agreement with the Comptroller, paid their assessments
on a quarterly basis. Those in the last mentioned cate-
gory were even charged interest on their unpaid bal-
ances.
i4 Brief in Support of Petition.
_ —
Brief in Support of Petition. 15
ARGUMENT.
I,
The questions involved are of paramount importance
in the administration of the national banking laws
and have not been, but should be, settled by this
Court.
The Respondent insists that there was a compromise
in this case. In a compromise the debtor negotiates
with the receiver and effects a compromise agreement.
The statute then provides that the Comptroller of the
Currency must approve this compromise agreement and
that then an order of court of competent jurisdiction
must be obtained. In other words, in practice the terms
of the compromise agreement made by the debtor and
the Receiver are approved by the Comptroller and the
order of court then authorizes and directs the Receiver
to consummate the transaction in accordance with the
terms of that compromise agreement. If the agreement
of compromise provides that assets other than money
are to be turned over, as was done in this case, Petitioner
contends that the values agreed to by the parties in the
form of the compromise agreement and converted to
writing in the Decree of Distribution on May 24, 1932,
are the proper amounts of credit to be given the debtor.
The learned United States Court of Appeals, on the
other hand. decided that the debtor should be credited
with the values prevailing at the time the order of the
District Court was signed on February 13,1935, because
the compromise was not effective until that time. But
this would mean that the parties intended that the com-
promise was to be effective on the basis of values at
16 Brief in Support of Petition.
some future undetermined time and there is absolutely
nothing in this record to indicate that the parties had
any such intention.
If the date of the order of the District Court, and
not the date of agreement of compromise between the
parties, is to be taken as the controlling date, then it
would be practically impossible for a receiver of a.
national bank to administer his trust. Receivers were
generally instructed to accumulate cases and the Comp-
troller’s letters often read that “you will include in some
future petition to be presented to the court in connection
with other completed matters, a request for the approval
of the court.” An illustration of the last quotation can
be found in R. 20b. If court orders are to be the con-
trolling factor instead of merely being approval of a
contract or agreement previously entered into by the
parties it means that in future receiverships it will be
necessary for receivers to be in court every day a com-
promise is negotiated. This would be an impossibility
because of the time required in obtaining the approval
of the Comptroller and an order of court.
When a debtor presents a compromise proposition
which is acceptable to the Receiver it is first sent to the
Comptroller of the Currency for approval. Sometimes,
during the thirties, when this case arose, because of the
conditions of the times and the resulting large volume
of work which the Comptroller was called upon to per-
form, it took a month or longer before a reply was re-
ceived. If and when approval of the Comptroller was
had, the receiver then turned over the compromise
agreement with that approval to legal counsel for the
preparation of a petition to be presented to court for
Brief in Support of Petition. 17
authority to execute the agreement of compromise.
This step also frequently required considerable time. If
the critical time is the date of the court order, it neces-
sarily follows that much time will elapse between the
time when the compromise offer is received from the
debtor and the signing of the order of court. Where
assets other than money are transferred in liquidation
of a debt, due to the fluctuation of security values dur-
ing that interim, the parties themselves would never be
making the agreement. It would depend upon when
the lawyer presented the petition and when the order
of court was signed. And, as said by Judge O’Connell
in his dissenting opinion, “By adopting such a date, we
have the incongruous result that neither the stockholder
nor the Comptroller of the Currency has the slightest
idea of the values they are said to have agreed upon
until the court actually signs the decree, probably days
or weeks later; and the court likewise, unless it con-
sults the ticker-tape, is at sea at the time of entering the
decree.”
Before the Comptroller approves a compromise
proposition made by a debtor it would, of course, be
necessary for him to have available information dis-
closing just what the proposition of the debtor was.
Otherwise, the Comptroller would never know what he
was approving. In this case, the Comptroller stated in
his letter of approval (R. 15b) that the assets were de-
livered to the Receiver pursuant to a decree of the
Orphans’ Court. It is therefore respectfully submitted
that the Comptroller was familiar with the details of
the decree and when he approved the transaction he also
approved these values as a part of the transaction.
I
However, in connection with the value of the assets
transferred by the Respondent to the Petitioner in this
case, the majority opinion of the learned United States
Court of Appeals says that “we do not find that the par-
ties made any valuation here. An Orphans’ Court in-
ventory indicates no agreement by a creditor that the
property was worth what the inventory showed.” Of
course, and Petitioner has never at any time during this
dispute contended that the inventory indicated any
agreement. It justifies its contention for several other
reasons. First, there is the colloquy between counsel
for the Respondent and the Receiver at the time of the
audit of the account of Respondent before the Orphans’
Court of Allegheny County, Pennsylvania, which is set
forth in footnote 1 of the dissenting opinion of Judge
O’Connell in this case and which is as follows:
“1 Mr. Stoner (counsel for estate): The assets of
the estate are several thousand dollars less than an
amount sufficient to pay the Receiver of the Bank of
Pittsburgh N. A., but I understand Mr. Frazer, rep-
resenting the Receiver, is prepared to put upon the
record the fact that he will accept the securities
composing this trust, other than the Bank of Pitts-
burgh stock, in full of the liability of the trust to
the Bank of Pittsburgh, Receiver Mr. C. O. Thomas.
“Mr. Frazer (counsel for receiver): 'That is right.
The amount of the claim is $34,650 and interest to.
date amounts to $1004.85, a total of $35,654.85. The
Receiver will accept the securities in the estate in
satisfaction of his claim.”
18 Brief in Support of Petition.
Also, Respondent informed the parties interested
in the Harper Estate that the value of the assets was
—
Brief in Support of Petition. 19
less than the debt due the Receiver. This is set forth
in footnote 2 of the said dissenting opinion of Judge
O’Connell and reads as follows:
“2 The market value of the securities shown to be
on hand, listed on pages 2 and 3 of the account, is
less than the claim of the Receiver for the Bank of
Pittsburgh, N. A. Fidelity Trust Company notified
Alberta Harper Irish, Florence Harper Byram and
Lydia E. H. Brush, children of John A. Harper and
the life tenants under his will, that the Receiver
of the Bank of Pittsburgh, N. A. would appear at
the audit of this account on May 1, 1932 and would
bid up to $34,650 with interest, for the securities
shown to be in the hands of the Trustees, exclusive
of The Bank of Pittsburgh stock, and that if they
cared to bid more than that amount they should so
inform the accountants or appear at the audit and
make an offer therefor. A list of the securities,
together with the present market value, is attached
hereto and marked Exhibit ‘A’.”
Further, since this compromise involved the delivery
of assets of a decedent’s estate over which the Orphans’
Court of Allegheny County, Pennsylvania, had exclusive
jurisdiction, the Respondent was without authority to
make delivery thereof unless the compromise was made
a part of the decree of distribution of the said Court
and that Court ordered that such delivery be made.
This was done and, as it relates to the transaction here
involved, said decree is as follows:
“DECREE
And now, to wit, May 24th, 1932, the account
in this case having been filed and confirmed nisi,
i
and having been examined and audited by the Court,
upon consideration thereof, it is agreed that the
account be confirmed absolutely and that the funds
in the hands of the accountant, to wit, $32,759.12,
be paid in accordance with the schedule of distribu-
tion hereto attached and made a part hereof, unless
exceptions be filed within ten days.
PER CURIAM.
20 Brief in Support of Petition.
Balance Per First Account
filed 127043.05
$32,759.12
Deficit per supplemental
audit statement 177.13
Reduction in value of securi-
ties to conform to market
values at 5/14/32 16407.80
Reduction in carrying val-
ues of 693 shrs. Bank of
Pittsburgh N. A. owing to
Bank failure per supple-
mental audit statement
filed 77699.00 94283.93
Balance for Distribution $32,759.12
To Fidelity Trust Company,
Compensation Principal-
Personalty 2% comm. on
$92,363.84 1847.27
Principal-Realty 2% Com-
mission on $37,563.34 751.27
—
Brief in Support of Petition. 21
To Fidelity Trust Company,
Trustee in trust for pur-
poses specified in will, viz:
693 shrs. Bank of Pitts-
purgh, N. A. 1.00
To C. O. Thomas, Rec. of
Bk. of Pitts. N. A. Bal-
ance in full of assessment
of $50 a share on 693 shrs.
Bank of Pitts. N. A.
13 shrs. General Cable
Corp. Class A @ 1% 19.50
43 shrs. General Cable
Corp. Class A War-
rants 0.00
144 shrs. General Cable
Corp. Common @ %4 108.00
43 shrs. General Cable
Corp. 7% Pfd. @ 6% 263.38
20 shrs. Pittsburgh Coal
Co. Pfd. @ 20 400.00
$6500 Bds. General Cable
Corp. 544% ist Mtge.
Series A due 7/1/48 @
4334, 2843.75
$ 600 Bds. Chicago, Mil-
waukee, St. Paul and
Pacific Railroad Co. 5%
50 yr. Mtge. due 2/1/75
@ 20 120.00
SR EL NO I ON
ffi a RO le ee
22 Brief in Support of Petition.
$2400 Bds. Chicago, Mil-
waukee, St. Paul and
Pacific Railroad Co. 5%
Conv. Adj. Mtge. due
1/1/2000 @ 4
$3000 Bds. Pittsburgh &
Allegheny Telephone
Co. 5% ist Mtg. due
12/1/49 @ 100%
$2000 Bds. Pitts burgh
Terminal Warehouse
and Transfer Company
5% 1st. Ref. Mtge. 30
yr. due 11/1/36 @ 10
$3000 Bds. Southern Rwy.
Co. 614% Deb. and Gen.
Mtge. due 4/11/56 @ 30
$2000 Bds. West Penn
Power Co. 5% ist
Mtge. Series “E”’ due
3/1/63 @ 101%,
Interest in the following
participation mortgages:
Installment Mtge. Fund
6%
A. Shapiro Mortgage
6%
Cash
96.00
3015.00
200.00
900.00
2025.00
16150.00
4000.00
18.95
30159.58
=
$32,759.12”
a
Brief in Support of Petition. 23
It is respectfully submitted that all prior negotia-
tions of the parties were merged in this decree and this
decree therefore represents the agreement of the parties
converted to writing.
Additional evidence of the agreement as to the
values of the assets is contained in a letter from Mr. A.
P. Reed, then Vice President of Fidelity Trust Company,
the Respondent, to the Comptroller of the Currency,
dated July 8, 19382 (R. 20a, 21a), which is as follows:
“CERTIFICATE OF SETTLEMENT OR SALE
July 8, 1932
Comptroller of the Currency
Washington, D. C.
Sir:
Under an agreement of settlement made with
C. O. Thomas, Receiver of The Bank of Pittsburgh,
N. A., Pittsburgh, Pennsylvania, we hereby cer-
tify that on July 8, 1932, we delivered to said Re-
ceiver the sum of $18.95 in cash and securities listed
below awarded under decree filed in Orphans’ Court
of Allegheny County to No. 205 January Term,
1932:
13 shrs. General Cable Corp. Class
“A” @1% $ 19.50
43 shrs. General Cable Corp. Class
“A” Warrants 0.00
144 shrs. General Cable Corp. Com-
mon @ % 108.00
43 shrs. General Cable Corp. Pre-
ferred @ 64% 263.38
Brief in Support of Petition.
20 shrs. Pittsburgh Coal Co. Pfd.
@ 20
$6500 Bonds Gen. Cable Corp. 5148 47
“A” @ 43%
600 Bonds Chic. Milwau. St. P. & Pac.
5s 75 @ 20
2400 Bonds Chic. Milwau. St. P. & Pac.
2000 @ 4
3000 Bonds Pgh. & Alle. Tel. ist M. 5s
49 @ 100%
2000 Bonds Pgh. Terminal Warehouse
& Trans. Co. 5% 1st Ref.
Mtge. 36 @ 10
3000 Bonds Southern Ry. Co. 614%
Deb. & G. M. 56
2000 Bonds West Penn Power Co. 5%
ist Mtg. Ser. “E” 63
Interest in the following
Participation Mortgages
Installment Mortgage Fund 6%
A. Shapiro Mortgage 6%
Cash
$34,650.000.
Respectfully,
A. P. REED”
$30,159.58
In full settlement of the stock assessment lia-
bility of the Estate of John A. Harper, Deceased, as
owner of 693 shares stock @ $50 per share—
9
400.00
2,843.75
120.00
96.00
3,015.00
200.00
900.00
2,025.00
16,150.00
4,000.00
18.95
—
Brief in Support of Petition. 25
By this commnication Respondent certainly agreed
to the stated values of each of the assets involved.
Surely, the foregoing is ample proof of the contention
of the Petitioner that the parties actually did agree as
to the values of the assets to be turned over in com-
promise of the claim and Judge O’Connell so decided in
his dissenting opinion.
Where parties to a dispute fix a value to the prop-
erty transferred in compromise of a claim the delivery
of that property in law is equivalent to the payment
of that much money (Volume 1, Cyclopedia Law and
Procedure 335; Griffith v. Creighton, 81 Mo. App. 1;
Volume 1 American and English Encyclopedia of Law,
Second Edition, 418; Howard et al. v. Norton, 65 Barb.
(N. Y.) 161), and in this case that would have resulted
only in a payment on account so that no approval of the
Comptroller and no order of court would have been re-
quired. In Pennsylvania, payment of a debt by the
delivery of specific articles, not money, is recognized
(Hamilton v. Moore, 4 W. & S. 570; Richabaugh v. Du-
gan, 7 Barr. 394; Heath v. Page, 48 Pa., 130 at 143).
If the Respondent did not intend that the assets
should be delivered at the stated prices, why did it notify
the interested parties in the Harper Estate that the
value of these assets was less than the debt and that
they would be turned over to the Receiver unless a bid
was made by said parties in an amount greater than
the bid of the Receiver and that if they wished to make
such a higher bid they should appear at the audit and
do so (R. 16a). Also, as said in the dissenting opinion
of Judge O’Connell:
“It is not inapposite to note that, had the Harper
Estate and the Receiver not intended such values to
7
be binding upon all interested parties, the trustee
of the estate could and should have liquidated the
assets so as to have a fund to apply on account of
the debt due the Receiver.”
26 Brief in Support of Petition.
It is therefore respectfully contended that there
was, in fact, an agreement between the debtor and the
Receiver as to the value of the assets to be turned over
in settlement of the claim. This agreement was a part
of the compromise proposition made by the debtor to
the Receiver which was converted to writing in the form
of the Decree of Distribution of the Orphans’ Court of
Allegheny County, Pennsylvania. This proposition, as
an offer of compromise, was never terminated by the
Respondent. In accordance with the applicable rule set
forth in the Restatement of the Law of Contracts, Sec-
tion 34, the offer of compromise, “until terminated gives
to the offeree a continuing power to create a new con-
tract by acceptance of the offer.” This offer was ap-
proved by the Comptroller and an order of court directed
the Receiver to effect this compromise proposition. The
terms of this compromise agreement, including the
values placed upon the assets by the parties, were exe-
cuted and the transaction was completed. The order of
the District Court directing that the compromise be
effected provided that the Receiver should accept the
assets “in accordance with the decree of the Orphans’
Court in and for Allegheny County, Penna., at No. 205
January Term, 1932.” The substance of that decree,
which includes the value of the assets, as it is pertinent
to this case, appears in R. 17a, 18a and 19a. It also is
heretofore set forth on page 20 and may be found at
footnote 3 of the dissenting opinion of Judge O’Connell.
7
Brief in Support of Petition. 27
Judge O’Connell stated in substance that this com-
promise agreement was sanctioned by the Orphans’
Court of Allegheny County, Pennsylvania, and the Dis-
trict Court then directed that it be carried out. There-
fore, it may not be attacked, modified or changed in a
subsequent collateral proceeding. Furthermore, since
the compromise proposition was included in the Decree
of Distribution of the Orphans’ Court of Allegheny
County, Pennsylvania, if that proposition is to be
changed in any way it would then first be necessary to
have this decree of distribution amended.
It is respectfully submitted that when considera-
tion is given to the fact that one of the parties was a
large trust company, as Trustee, in the City of Pitts-
burgh, and the other a receiver of a large national bank
which had suspended business, it is most difficult, if not
impossible, to conclude that such parties did not take
into consideration the value of the assets, amounting to
more than $30,000, at the time of their transfer. As
said by Judge O’Connell in his dissenting opinion, “I
cannot believe that a compromise was effected with an
understanding that the value of the assets was to be
subsequently determined by their market value on what-
ever date the District Court approving the compromise
happened to take statutory action.” Especially is this
true, having in mind the contents of footnote 4 in the
dissenting opinion of Judge O’Connell, which reads as
follows:
“4 TI point out in , assing that, by virtue of the pro-
visions of 12 U.3.C. #197, 12 US.C.A. #197,
the parties before us are, in effect, the same as those
which engaged in the extensive negotiations cul-
minating in the 1935 court order. It was fhe Harper
ee
eee ee
——
estate which tendered the assets at stated values
in compromise. The Harper estate advised the
Orphans’ Court, with a detailed list, that the assets
were smaller than the assessment. The Harper
estate was aware that the beneficiaries, to keep the
assets, had to bid a sum greater than the assesgs-
ment. The Harper estate advised the Comptroller
that the assets as valued were “in full settlement.”
The Harper estate made no move to block the ap-
proval of the Comptroller or authorization of the
district court. The liquidation of the closed bank
was conducted throughout upon the theory that the
Harper estate had discharged its liability by an
85% payment in settlement. Why should a court
now intervene and permit the Harper estate even
to assert a value contrary to that which it has itself
assigned over a period of years? Cf. the principles
of collateral estoppel and law of the case.”
28 Brief in Support of Petition.
In fact, what more than they did do could the
parties have done to evidence an agreement as to the
value of the assets involved. Certainly, they furnished
such ample proof of an understanding in this regard that
it cannot now be questioned.
If the decision of the learned United States Court of
Appeals should be sustained in this case then it is most
respectfully submitted that the court, rather than the
parties themselves, would have made the compromise
proposition. This is true for the reason that the parties
did agree to the values as of May 24, 1932, as hereto-
fore set forth, and then the court changed that agree-
ment by substituting different values as of February
13, 1935. This should not be done because the cases
expressly set forth that a court, in approving compromise
—7"—~"~
Brief in Support of Petition. 29
propositions, merely acts in an administrative capacity.
In other words, it only directs that an agreement already
made be carried out and may not itself make an agree-
ment for the parties. Mitchell v. Joseph, 117 F. 2d, 253,
955 (C. A. 7, 1941). See also Hulse v. Argetsinger, 18
F. 2d, 944, 945 (C. A. 2, 1927); Griggs v. Baumer, 130
F. 2d, 899, 901 (C. A. 3, 1942) ; and Oosterhuis v. Palmer,
137 F. 2d 322, 325 (C. A. 1943). If the present decision
prevails, it will have a decided effect upon all other com-
promises made by a national bank receiver where assets
other than money are turned over to the receiver.
I.
The majority opinion of the learned United States Court
of Appeals conflicts in principle with the case of
Griggs et al. v. Baumer, 130 Fed. (2d) 399 (C. C. A.
3, 1942) and Karn v. Andresen ei al., 51 Fed, (2d)
521 (District Court, D, Minnesota, Sixth Division,
1931).
It is respectfully requested that it be kept in mind
that the compromise proposition in this case, which was
converted to writing in the form of a Decree of Dis-
tribution of the Orphans’ Court of Allegheny County,
Pennsylvania, set forth the values at which the assets
were to be transferred to the Petitioner pursuant to that
decree of distribution. This decree is as follows:
“And now, to wit, May 24th, 1932, the account in this
case having been filed and confirmed nisi, and having
been examined and audited by the Court, upon con-
sideration thereof, it is agreed that the account be
confirmed absolutely, and that the cube in the hands
of the accountant, to wit, $32,759.12, be paid in
accordance with the schedule of distribution hereto
nee ct YO LOA Ie
—
30 Brief in Support of Petition.
attached and made part hereof, unless exceptions
be filed within ten days.
Per Curiam.”
Then follows a detailed list of the assets with their
respective values totaling $32,759.12, of which the Re-
ceiver of The Bank of Pittsburgh National Association
was decreed $30,159.58.2 Thereafter, the District Court
of the United States for the Western District of Penn-
sylvania ordered that the Receiver should accept these
assets in accordance with this decree of distribution.
Now, in this proceeding, the Respondent is endeavoring
to change those terms of the compromise. In other
words, the Respondent is attempting to have the com-
promise made on a basis much different from that set
forth in said decree of distribution, to which the parties
had agreed and which was approved by the Comptroller
and ordered to be effected by the said District Court.
In the said case of Griggs v. Baumer, in speaking of the
order directing the receiver to consummate a compro-
mise proposition, the court said:
“Once such an order is signed, the purchaser named
therein is entitled to rely upon it, and the court
cannot in the absence of fraud or mistake rescind
that order, even for the laudable purpose of secur-
ing for the creditors and stockholders of the bank
a substantial increase in the price of the assets
sold.”
In the instant case a compromise proposition was
made by the debtor to the Receiver. That proposition
was transmitted to the Comptroller who approved it and
the Receiver secured an order of court directing the
2 See page 20 for decree of distribution in detail.
—
Brief in Support of Petition. 31
Receiver to give effect to the compromise. All this was
done without the debtor ever having indicated any
thought of withdrawing his compromise proposition.
This proposition, converted to writing in the form of
the Decree of Distribution of the Orphans’ Court of
Allegheny County, Pennsylvania, as heretofore set forth,
contained stated values of all the assets. Under these
circumstances, it is pertinent to give consideration to a
portion of the opinion of the said case of Karn v. An-
dresen which reads as follows:
“T find, however, from the evidence, that the offer
made by the plaintiff to the receiver, in settlement
of all claims made against him by the receiver
growing out of his acceptance as a director of the
bank, was accepted by the receiver, approved by
the state district court, and Dr. Karn notified of its
acceptance, prior to any attempt on his part to
withdraw the offer, and that all that remained to
be done were the formal and ministerial acts of
signing the covenant not to sue and transferring
the receiver’s certificates. These acts would only
be evidence of the agreement, and not the agree-
ment itself.
“Had Dr. Karn withdrawn his offer at any time prior
to its approval by the court, the situation would
have been different.”
:
32 Brief in Support of Petition.
The majority opinion of the learned United States Court
of Appeals is contrary to law and works an injus-
tice and is inequitable to the many shareholders
other than the Respondent. The opinion of the
United States Court of Appeals is in error in con-
cluding, among other things, the following:
(a) That Petitioner has refused to pay all the
shareholders in the same way;
(b) That the parties did not agree as to the value
of the assets when they entered into an agreement
of compromise;
(c) That the function of an order of court is to,
in effect, make an agreement of compromise for the
parties rather than order that an agreement pre-
viously made by the parties be carried out;
(d) That because the Receiver held the assets more
than 214 years before requesting approval of the
settlement the equitable result would have the in-
crease in value inure to the benefit of the Re-
spondent;
(e) That the Petitioner should be penalized for the
derelictions of the Receiver and the Comptroller in
holding the assets for that length of time.
(f) That the decree of the Orphans’ Court of Alle-
gheny County, Pennsylvania, and the order of the
District Court can be collaterally attacked;
(g) And that Petitioner is not entitled to interest
from May 16, 1932 to February 13, 1935.
—
Brief in Support of Petition. 33
The majority opinion, in part, contains the follow-
ing language:
“The appellant’s argument in justification of its re-
fusal to pay the trustee of the Harper estate in the
same way it has paid dividends to the other share-
holders of the defunct bank rests on the doctrine
of consideration at common law.”
If the learned Court intended to convey the impres-
sion that Petitioner was not paying Respondent on the
same basis as it paid all other shareholders, it is alto-
gether incorrect as all shareholders in the same cate-
gory as Respondent have been paid in accordance with
the same method of computation as that for which the
Petitioner is contending in this case.
The majority opinion of the learned United States
Court of Appeals is altogether predicated upon the as-
sumption that the parties did not agree as to the values
of the assets when they were turned over to the Peti-
tioner. For the reasons heretofore set forth, and espe-
cially those contained in the dissenting opinion of Judge
O’Connell, it is respectfully submitted that there actu-
ally was such an agreement as to the value of the prop-
erty decreed and delivered to Petitioner. In fact, what
other evidence of an agreement as to values could possi-
bly have been furnished by the parties than those set
forth in this case?
The only reason assigned by the said majority
opinion of the Court for its decision that there was no
agreement as to values is that an Orphans’ Court
“inventory” indicates no agreement by a creditor that
the property was worth what the inventory showed. Of
course, this is true, but the Petitioner has never con-
Fi
tended otherwise. Petitioner has only argued that the
values set forth in the decree of distribution which evi-
denced the agreement of the parties as to the terms of
the compromise, rather than those in the inventory, were
agreed to and Judge O’Connell so found. Nothing is
said in the majority opinion about the values set forth
in the decree of distribution and those in the Certificate
of Settlement or Sale, the latter of which was signed by
the Respondent, and therkfore certainly agreed to by it
(R. 20a). Also, nothing ‘whatsoever is said in the ma-
jority opinion about the other agreements as to values
set forth in the dissenting opinion of Judge O’Connell.
Furthermore, in this case the values in the inventory
were decreased in the decree of distribution so as to
conform to the actual values on the date of the audit
in the Orphans’ Court? so that, if it is decided that the
parties agreed to the values in the inventory as the
34 Brief in Support of Petition.
3 DECREE OF DISTRIBUTION
Balance per First Ac-
count filed 127043.05
Deficit per supple-
mental audit state-
ment 177.13 $32,759.12
Reduction in value of
securities to conform
with market values
at 5/14/32 16407.80
Reduction in carrying
value of 693 shrs.
Bank of Pittsburgh
N.A. owing to bank
failure per supple-
mental audit state-
ment filed 77699.00 94283.93
Balance for Distribution $32,759.12”
=~"
Brief in Support of Petition. 35
worth of the assets they were evaluating the assets on a
pasis other than the actual market values at the time.
This, they certainly would not have done.
The majority opinion of the learned United States
Court of Appeals states that it is not an easy question
to determine when the compromise in this case became
effective. The said opinion further states that “A
strong argument can be made that the approval, when
given, validates the settlement as of the time the Re-
ceiver and shareholder made it.” It was concluded,
however, that the compromise was to be given effect as
of the date of the decree of the District Court on Feb-
ruary 13, 1935, rather than on the basis of the agree-
ment of the parties set forth in the Decree of Distribu-
tion of the Orphans’ Court of Allegheny County, Penn-
sylvania, dated May 24, 1932. The said opinion likewise
states that this result is harmonius with the wording
of the statute and that it recognizes the status of the
Comptroller of the Currency as the Federal official pri-
marily responsible for the conduct of the receivership.
It is also said that the Comptroller’s regulations specif-
ically indicate this official’s understanding that final stat-
utory approval must precede an effective compromise.
No objection can be made to any of these assertions.
However, they are equally true if the agreement of com-
promise made by the parties, as evidenced by the Decree
of Distribution of the Orphans’ Court of Allegheny
County, Pennsylvania, dated May 24, 1932, is effective.
In either event, whether it is the date of the order of
the District Court on February 13, 1935, or May 24, 1932,
the date of the Decree of the Orphans’ Court of Alle-
gheny County, Pennsylvania, which set forth the agree-
ment of the parties, it would be harmonious with the
—
36 Brief in Support of Petition.
wording of the statute and it recognizes the status of the
Comptroller as the authority primarily responsible for
the conduct of the receivership.
Of course, a compromise made by a national bank
receiver is not effective until an order of court is ob-
tained, but the question then is, not when it becomes
effective but what becomes effective; in other words,
what were the terms of the compromise approved by the
Comptroller and ordered to be effected by the District
Court. The statute provides that the Comptroller shall
“approve” the compromise proposition. The word “ap-
prove”, it is respectfully submitted, presupposes that
sanction is being given to something already done. If
the values are to be taken as of the date of the order of
court then, in reality, the Comptroller would be approv-
ing something to take place in the future and the Court
would be making a new agreement. Simply to approve
the acceptance of securities without an understanding
as to values is to perform a meaningless act because it
is not known what is being approved unless and until
a value is placed upon the assets.
The said opinion further states that an analogy may
be drawn to the case of a receiver in bankruptcy whose
proposed sale of property of a bankrupt estate does not
become effective until court approval is obtained. But
when the court approval is secured the sale is consum-
mated on the terms of the “proposed sale” and surely a
court should not approve a sale without knowing what
the terms of that sale were. The order of the District
Court, in this case, was that the Receiver should accept
the assets “in accordance with the decree of the Or-
phans’ Court in and for Allegheny County, Penna., at No.
—
Brief in Support of Petition. 37
205 January Term, 1932,” and in that decree the value
of the assets is set forth in great detail. The court
states that Petitioner concedes that the compromise
settlement has but the effect of an offer until statutory
approval is given but, again, it is respectfully submitted
that the question then arises as to what the terms of
the offer were. In this connection the Court says that
its position supports a conclusion that the time the
“bargain” became effective was the time when the order
of court was signed but still the question remains as to
what the terms of the “bargain” were.
The said opinion of the learned United States Court
of Appeals continues as follows:
“Moreover, in this case, the Receiver took over all of
the Harper assets and held them for more than 214
years before requesting approval of the settlement.
If the securities had declined in value and the
Comptroller had disapproved the settlement, there
is no doubt that the Harper estate would have con-
tinued liable to the Receiver for the deficiency in
the payment of its assessment. It seems to us the
equitable result that the increase in value which
occurred during that time should accrue to the bene-
fit of the shareholder.”
It is respectfully submitted that the Receiver, in
this case, should not be criticized for holding the assets
for more than 214 years before requesting approval be-
cause it is reasonable to conclude that both parties were
of the opinion that such approval was unnecssary.
Whether the Receiver held the assets one day or 214
years is unimportant because, if the theory of the Re-
spondent is accepted, it would have been entitled to any
7
appreciation in values and therefore could not possibly
have suffered any loss. On the other hand, if the theory
of Petitioner is accepted, title vested immediately upon
delivery of the assets on May 24, 1932, or ten days there-
after allowed for exceptions, or on the date of the order
of the District Court in February, 1935, but at the
values agreed upon by the parties and set forth in the
Decree of Distribution of the Orphans’ Court of Alle-
gheny County, Pennsylvania. Then, in the event of any
appreciation over and above the values set forth in the
decree of distribution, it would have inured to the bene-
fit of the Petitioner as Respondent was not entitled
thereto by reason of his having agreed to the values at
which the assets should vest in Petitioner. Therefore,
any criticism of the Receiver by the Respondent for not
having obtained approval of the settlement sooner is
not justified.
38 Brief in Support of Petition.
In this last quotation from the majority opinion of
the learned United States Court of Appeals reference
is made to a supposition that the Comptroller might dis-
approve of a settlement where the assets had declined in
value. In this case the Receiver was given all the assets
which the Respondent had. Under these circumstances,
it is respectfully submitted that it is inconceivable that
the Comptroller would not have approved the transac- |
tion. He could not have accomplished anything by with-
holding his approval because he could not possibly have
secured any additional assets. This is supported by the
dissenting opinion of Judge O’Connell when he states
in part that:
“I find it difficult to believe that any district court
would, or could, in the exercise of its discretion
refuse to approve a compromise agreement made in
good faith between a receiver of a national bank
_—
Brief in Support of Petition. 39
and a stockholder under which such debtor turned
over to the receiver securities having a readily as-
certainable market value, even where the receiver
or Comptroller delayed an unreasonable length of
time between the receipt of such securities and the
seeking of approval of the compromise agreement
by the district court and, in the interim, the market
value of the securities declined.”
As set forth in footnote 8 to the majority opinion
of the learned United States Court of Appeals, the
debtor is charged with notice that a receiver of a na-
tional bank must secure the approval of the Comptroller
and an order of court when a compromise is made. It
is respectfully submitted that under such circumstances
as existed in this case the debtor could not stand idly
by because the facts in this dispute indicate that all
parties were of the opinion that the proceedings before
the Orphans’ Court were all that were required and no
approval of the Comptroller or order of court was neces-
sary. Otherwise, surely the Comptroller and the Re-
ceiver would have promptly proceeded to obtain that
approval and order of court when the assets were deliv-
ered to the Receiver. And when this approval and order
of court were not obtained the debtor, to protect his own
interests, should have prompted the Receiver to secure
them as he is charged with knowledge that they were
necessary.
If there was any neglect in this case it was not on
the part of the shareholders of The Bank of Pittsburgh
National Association whom the Petitioner in this case
represents. It was only due to the neglect of the Re-
ceiver and the Comptroller of the Currency and, prin-
cipally the Comptroller, since he is the supervising agent
FF
responsible for the proper liquidation of the assets of
the receivership. As stated by Judge O’Connell in his
dissenting opinion, “If the receiver’s estate has suffered
under such circumstances, it may well be that some
question of surcharge might be lodged against the Re-
ceiver but surely the district court would not penalize
the innocent stockholder for the dereliction in duty of
the receiver or Comptroller.” Also, at the very incep-
tion of this matter, the Receiver and Comptroller had
control over the 693 shares of the stock of The Bank of
Pittsburgh and permitted it to be decreed back to the
estate. Had this not been done Petitioner would not
now be confronted with this claim. This is just another
act over which the shareholders had no control and for
which the Respondent, after more than thirteen years
had passed, attempted to hold Petitioner responsible.
40 Brief in Support of Petition.
At the time this compromise was made and when
the approval of the Comptroller and the order of court
were had the shareholders legally were not in a position
wherein it was possible for them to intervene. Never-
theless, according to the opinion of the learned United
States Court of Appeals, as stated by Judge O’Connell
in his dissenting opinion, the innocent shareholders are
being penalized. The end of the last quotation from the
opinion of the learned United States Court of Appeals,
quoted at page 37 hereof, contains a sentence to the
effect that it seemed to the court that the equitable
result was that the increase in value should accrue to
the Respondent in this case. Certainly, as just stated,
where the shareholders are not at fault and could not
have done anything about what the Receiver and Comp-
troller did or did not do, it is not equitable to charge
these shareholders with any shortcomings of the Re-
_
Brief in Support of Petition. 41
ceiver and the Comptroller. And, also, during the period
when this dispute arose, the Respondent was in a posi-
tion to interpose the objections and claims which it is
now presenting but it did not do so. This thought was
expressed by Judge O’Connell in footnote 4 of his dis-
senting opinion in the following language:
“The liquidation of the closed bank was conducted
throughout upon the theory that the Harper estate
had discharged its liability by an 85% payment in
settlement. Why should a court now intervene and
permit the Harper estate even to assert a value
contrary to that which it has itself assigned over a
period of years? Cf. the principles of collateral
estoppel and law of the case.”
The Receiver applied the profit made on the sale
of the assets in payment of the debts of the receivership
exactly the same as he applied profits from the sale of
any other property. In this way all the creditors and,
eventually, all the shareholders, including the Respond-
ent, benefited. Under the theory of the majority opinion
of the learned United States Court of Appeals only one
shareholder, the Respondent, would benefit and more
than 1100 would be penalized.
The majority opinion of the learned United States
Court of Appeals says that “When the Trustee of that
estate turned over its assets to the Receiver on May 16,
1932, it had done everything it could to pay the assess-
ment. From that time the Receiver had full control of
the securities and was entitled to collect the income on
them, The question of interest arises now only because
the Receiver delayed so long a time in obtaining the ap-
proval of the settlement. Under these circumstances,
¥
42 Brief in Support of Petition.
we think there is no equitable basis for a claim of
interest.”
The question of interest in this case does not arise
because the Receiver delayed such a long time in obtain-
ing approval of the settlement. By virtue of the decision
of McCarty v. Gault, 24 Fed. Supp. 977 (District Court,
D. Oregon, October 3, 1938), interest is payable on all
assessment debts until paid. The Respondent, under its
theory, was charged with knowledge that the transfer
of the assets to the Receiver was not effective until an
order of court was secured. Until that transfer was
effective it, therefore, knew that the securities could not
have been sold to provide a fund to pay the debt. Also,
when property is turned over in payment of a debt and
the value of that property at the time it is so turned
over falls short of the amount of the debt, as was true
in this case, interest runs on the whole debt until paid.
West Republic Mining Co. v. Jones & Laughlin, 108 Pa.
55, 69; McCormack v. Sharples, 254 Pa., 541, 542, 543,
99 A. 155.
If it is correct that from May 16, 1932, the date
when it is said that the assets were turned over to the
Receiver, the Receiver, “had full control of the securities
and was entitled to collect the income on them,” then
it must follow that title to those assets was then vested
in the Receiver. Otherwise, he would not have been
entitled to collect the income. But, according to the
theory of the Respondent, title did not vest until Feb-
ruary 13, 1935, the date of the order of court. If the
Receiver was, in fact, entitled to the income then, as
stated, the title to these assets had already vested and
_—_
Brief in Support of Petition. 43
this without having obtained the approval of the Comp-
troller and an order of court, which indicates that the
transfer of the assets must only have operated as a
payment on account or must have been consummated by
reason of the Comptroller’s instructions to Receivers
hereafter discussed, in either of which events no ap-
proval of the Comptroller ur order of court was nec-
essary.
In the majority opinion of the learned United States
Court of Appeals it is decided that no interest whatso-
ever is due from the Respondent, notwithstanding the
fact that payment of the debt could not have been made
under the theory of the learned United States Court of
Appeals until February 13, 1935. Consequently, the
Respondent is placed in the same category as one who
paid his entire assessment in cash when due on Novem-
ber 24, 1931, but if the Harper Estate had in fact done
this, it would have been necessary for it to liquidate the
securities at the then market value. Because Respond-
ent says that title to the assets did not vest in the Peti-
tioner until February 13, 1935, it follows that the Peti-
tioner could not have sold these assets until then and
therefore could not have realized funds with which to
liquidate the debt until that time. What the Respondent
is doing is claiming the benefit of the appreciation in
value and at the same time denying liability for interest.
This, it is most respectfully submitted, is inequitable.
Especially is this true when these transactions were al-
together beyond the control of the Petitioner and the
shareholders whom it represents. Those who paid their
assessments on a quarterly basis, beginning November
24, 1931, as was permitted, were even charged. interest
on the deferred payments. Yet here the learned United
States Court of Appeals, in its majority opinion, decided
that a shareholder who does not pay his debt until Feb.
ruary 13, 1935, should not be required to pay any in-
terest.
44 Brief in Support of Petition.
The majority opinion of the learned United States
Court of Appeals further says, in regard to interest, that
“The question of interest arises now only because the
Receiver delayed so long a time in obtaining approval
of the settlement. Under these circumstances we think
there is no equitable basis for a claim of interest.” But
again, the fact that those securities were not sold until
February 13, 1935, was not the fault of the shareholders
or the Petitioner. If interest is due it is respectfully sub-
mitted that the shareholders should not be penalized for
the derelictions of the Receiver and the Comptroller.
Assessments amounting to more than $2,500,000
were paid in cash, in full and on time on more than 85%
of all the stock of The Bank of Pittsburgh National
Association. On account of the large amounts of money
involved it is respectfully submitted that it is not incon-
ceivable that many of these shareholders who paid their
assessments on time and in cash would have found it
necessary to liquidate certain of their assets so as to
provide funds with which to pay these assessments.
Under the decision of the learned United States Court
of Appeals the payment of the assessment debt of the
Respondent was allowed to be deferred until February
13, 1935. If the other shareholders would have been
permitted to wait until that date, on account of the se-
curities market having improved, they undoubtedly
would also have made a profit which they were not per-
mitted to realize.
_
Brief in Support of Petition. 45
If the Respondent should be permitted to have effect
iven to this compromise as of February 13, 1935, rather
than as of the date of the Decree of Distribution of the
Orphans’ Court of Allegheny County, Pennsylvania, on
May 24, 1932, it will realize a considerable advantage
over the other shareholders which would be most in-
equitable. In the dissenting opinion of Judge O’Connell
in this connection the following inquiry is made:
“(a) Are the rights of stockholders, those who pay
their assessments in full in cash promptly as well as
those who settle their liability to the receiver by the
innumerable varieties of compromise settlements,
to depend upon the fortuitous circumstances of the
conditions of the security market as of the date of a
decree by the district court approving such compro-
mise settlements? Why the date of the decree?”
If the opinion of the learned United States Court of
Appeals is sustained the cost to each of the more than
1100 shareholders who paid their assessments in cash
and on time would be in excess of 36¢ per share. In
other words, a preference would be given to one share-
holder who owned only 693 shares over a number in ex-
cess of 1100 representing 51,892 shares of a total of
60,000 shares.
—
46 Brief in Support of Petition.
IV.
The majority opinion of the learned United States Court
of Appeals is contrary to “Instructions to National
Bank Receivers” in accordance with which the
assets in the possession of receivers of national
banks have heretofore been administered.
In “Instructions to National Bank Receivers”
(Office of Comptroller of the Currency, 1932) in c. IV,
Schedules H-1, H-2 and H-3, pages 22 and 23, there is
the following:
“Losses incurred through collections from bankrupt
estates and other estates which are settled and fin-
ally closed in accordance with usual legal process
through the courts may be entered without the
necessity of a court order or the permission of the
department.”
In the instant case, there was a collection made by
the Receiver from a decedent’s estate in accordance with
the practice, rules and laws relating to the Orphans’
Court of Allegheny County, Pennsylvania. Accordingly,
this account “was settled and finally closed in accordance
with usual legal process through the courts.” Therefore,
it is respectfully submitted that by virtue of this por-
tion of the instructions of the office of the Comptroller
of the Currency approval of the Comptroller and an order
of court were unnecessary in this case and that title to
the assets vested in the Receiver upon delivery. It may
be that it was on account of this instruction that the
Receiver and the office of the Comptroller of the Cur-
rency did not obtain an order of Court in 1932 when the
assets were delivered to the Receiver. Under this instruc-
tion it would seem that it was unnecessary.
_
Brief in Support of Petition. 47
Another portion of said “Instructions to Receivers”
in c. IV, pages 34 and 35, in regard to the method of
pookkeeping, is as follows:
“For example, if a receiver holds a bill receivable
secured by collateral and finds it necessary to ac-
quire title to such collateral by accepting it at an
agreed valuation less than the face of the bill re-
ceivable, the price at which it is accepted is, of
course, credited on the bill receivable, leaving a
balance still due thereon. In such cases the assets
in a receiver’s hands are not increased and so no
entry should be made in Schedule A.”
It is respectfully submitted that if title to the assets
involved did not vest in the Receiver when they were
turned over to him by the Respondent then they must
have been held by Petitioner as collateral for the pay-
ment of the debt and this is true even though it may be
said in a sense, as the opinion of the District Court in
this case stated, that they were held in trust. If they
were held in trust they were held in trust for the pay-
ment of the assessment debt and subject to an “agreed
valuation less than the face of the bill receivable” in
which case, if the Receiver acquired title to the assets,
credit, according to these instructions, would only be
given for the agreed value which was exactly what was
done in this case. Again, it may be that this was another
reason why no approval of the Comptroller or order of
court was obtained.
Also in said “Instructions to National Bank Receiv-
ers”, c. VI, Section 5, pages 44 and 45, it is said:
“When a debtor proposes to compromise his obliga-
tion to the bank the receiver should obtain the full-
7
est information possible regarding his financia]
standing and ability to pay. If he is certain the
debt cannot be collected in full the compromise
proposition should be submitted to the Comptroller,
with a full and complete statement of the debtor’s
resources and the receiver’s recommendation as to
whether the compromise should or should not be
made. If the proposition is approved by the Comp-
troller and authorized by a court of competent
jurisdiction, the compromise may be effected.
48 Brief in Support of Petition.
In this case, under the theory of the Respondent,
the debtor proposed to compromise its obligation and it
is respectfully submitted that it must be assumed that
the Receiver conformed to these instructions and ob-
tained the fullest information possible regarding the
financial standing of the debtor. The Receiver must
have concluded that the entire debt could not have been
collected because he submitted the compromise propo-
sition to the Comptroller for approval. Such approval _
was forthcoming and authorization by a court of com- _
petent jurisdiction was had. Thereupon, the Receiver
possessed authority to effect the compromise, which he
did. It is respectfully submitted that this concludes the
proposition and that, as stated in the dissenting opinion
of Judge O’Connell, the compromise may not now be
attacked in a collateral proceeding.
_
Brief in Support of Petition. 49
Vv.
The majority opinion of the learned United States Court
of Appeals entirely ignores the fact that under their
opinion they were without jurisdiction.
On February 13, 1935, the date of the order of the
District Court of the United States for the Western
District of Pennsylvania, the values of the assets in-
volved, together with interest and dividends collected
by the Receiver, amounted to $42,783.35 (R. 50a, 51a,
52a) but the debt owed to the Receiver was only
$35,654.35 (R. 2). Accordingly, there were more than
sufficient funds on February 13, 1935, to pay the debt
in full. There, therefore, could not possibly have been
a compromise under those conditions but only a pay-
ment in full. If the majority opinion of the learned
United States Court of Appeals is sustained holding that
the values are to be taken as of the said date of February
13, 1935, then the Court is having the Comptroller ap-
prove a transaction as a compromise when there were
more than sufficient funds to pay the debt in full. The
Comptroller would never have done any such thing. He
must, therefore, have approved the transaction as of the
date when the assets were delivered to the Receiver, at
which time the value of the assets was not sufficient to
pay the debt and under which circumstances a compro-
mise would naturally have been the method employed.
Under the theory of the Respondent, if the compromise
is to be effective as of February 13, 1935, then the value
of the assets was more than sufficient to pay the debt in
full and there could not have been a compromise. This
being true, the court was then without jurisdiction as
stated by Judge O’Connell in his dissenting opinion.
50 Brief in Support of Petition.
Only if the values as of the date of the decree of digs.
tribution are taken, as contended by Petitioner, could
there be a compromise in this case and would the court
have jurisdiction. Since the Respondent insists that
there was a compromise, it is respectfully submitted that
it cannot be heard to contend that the values should be
taken as of the date of February 13, 1935, when any
possibility of a compromise existing is precluded.
Respectfully submitted,
C, Rosco—E HOFFMAN,
RICHARD W. AHLERS,
Attorneys for Petitioner.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.