Source: https://supreme.justia.com/cases/federal/us/302/369/
Timestamp: 2019-04-22 20:46:07+00:00

Document:
"may, upon the deposit with it of public money of a State or any political subdivision thereof, give security for the safekeeping and prompt payment of the money on deposited, of the same kind as is authorized by the law of the State in which such association is located in the case of other banking institutions in the State."
Held applicable by intention to security given and deposits made before the date of the amendment. P. 302 U. S. 371.
2. Thus, construed retroactively, the amendment was within the power of Congress. P. 302 U. S. 372.
Certiorari, 301 U.S. 677, to review the affirmance of a decree dismissing a bill by the receiver of a national bank praying for the cancellation of a pledge agreement made by the bank.
The question presented is whether the National Bank Enabling Amendment of June 25, 1930, which granted power to national banks to secure deposits of public funds, validates or makes deposits of public funds, validates or makes enforceable previous pledge agreements made to protect such funds deposited before the enabling amendment became effective.
Before and at the time this Enabling Amendment was passed, the laws of Florida authorized state banks to give security for public deposits, and also imposed upon public officials a duty to obtain such security. [Footnote 2] In 1929 and 1930, before the passage of this amendment, the First National Bank of Perry, Fla., by agreement with the officials of Taylor County, Fla., pledged collateral security for the protection of county funds thereafter to be deposited from time to time in the bank.
This contractual relationship, established by the pledge agreement and deposits made thereunder, continued to exist until the bank was closed October 18, 1930. The receiver for the closed bank at first recognized the pledge agreement as valid and enforceable, and accordingly paid the county the income he received from the pledged securities. In 1935, however, the receiver filed this suit in equity in the federal District Court for the Northern District of Florida, alleging that the pledge agreement was ultra vires and illegal and praying that it be canceled and annulled. Upon motion of the county, the District Court dismissed the bill. Ross v. Knott, 13 F.Supp. 963. The Circuit Court of Appeals for the Fifth Circuit affirmed. 87 F.2d 817. This Court granted certiorari. 301 U.S. 677.
The Senate Committee on Banking and Currency, which made a favorable report on the Enabling Amendment, gave information to the Senate in its report that millions of dollars worth of collateral had been pledged by national banks as security for public deposits. [Footnote 6] The Senate and House Committee reports show that the sponsors of the amendment desired it not merely to permit future pledges, but also to assure that agreements under which "millions of dollars" of pledges had been made by national banks would be enforceable. One of the chief reasons for the enactment of the amendment was the need for validation of pledges already made. The amendment was designed to meet this need. To determine that Congress did not intend to validate pledge agreements existing when the amendment was passed would greatly limit its curative effect. Such a construction would be an unwarranted departure from the plain intent of this curative and enabling statute.
Chapter 604, 46 Stat. 809, 12 U.S.C. § 90.
First American Bank & Trust Co. v. Palm Beach, 96 Fla. 247, 117 So. 900; Davis v. Knott, 109 Fla. 60, 147 So. 276.
Louisville & Nashville R. Co. v. Mottley, 219 U. S. 467, 219 U. S. 479; James v. Milwaukee, 16 Wall. 159, 83 U. S. 161.
Texas & Pacific Railway Co. v. Pottorff, 291 U. S. 245, 291 U. S. 257, note 11.
Watson v. Mercer, 8 Pet. 88 (defective acknowledgment in deed validated by general law); Galveston Railroad v. Cowdrey, 11 Wall. 459 (mortgage validated by general statute); Randall v. Kreiger, 23 Wall. 137 (defective power of attorney validated by general statute); Ewell v. Daggs, 108 U. S. 143 (note validated by general statute);Gross v. U.S. Mortgage Co., 108 U. S. 477 (mortgage validated by general statute); Utter v. Franklin, 172 U. S. 416 (bonds validated by general law); West Side Belt R. Co. v. Pittsburgh Construction Co., 219 U. S. 92 (contract validated by general statute); Brown v. Boston & Maine Railroad, 233 Mass. 502, 124 N.E. 322 (agreement to purchase stock validated).
Lewis v. Fidelity & Deposit Co., 292 U. S. 559.
The challenged judgment, I think, should be affirmed upon the theory that, subsequent to the enabling amendment of June 25, 1930, both parties recognized an existing obligation to observe the terms of the pledge agreement, and, on this understanding, maintained the relationship of debtor and creditor. Discussion of other questions seems unnecessary.
Prior to June 25, 1930, the Perry National Bank obtained deposits of public funds by undertaking to hypothecate certain of its assets to secure their payment. This went beyond the corporate power theretofore conferred. Texas & Pacific Ry. Co. v. Pottorff, 291 U. S. 245; Marion v. Sneeden, 291 U. S. 262; Lewis v. Fidelity & Deposit Co., 292 U. S. 559.
The amendment empowered the bank to secure such deposits by a pledge of assets. For more than three months thereafter, the securities originally hypothecated were allowed to remain in the keeping of the trustee without suggestion of change in the outstanding agreement. And, during that period, prior deposits were allowed to remain with the bank. It closed October 18, 1930. Earlier insolvency is not relied upon.
The receiver claims that, as the hypothecation was unlawful when made, he became entitled to the assets free of lien.
accepted the benefits of the agreement and allowed the assets to remain with the trustee. All parties assumed the validity of the arrangement and acted in reliance upon it. The result was the same as if the assets had been repossessed by the bank after June 25, 1930, and again hypothecated under an agreement identical with the original one.

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