Court Opinion

ID: 3397850
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:07:16.156221+00
Date Added: 2024-06-11T13:42:25.625588
License: Public Domain

The First National Bank of Fort Meade became insolvent and was taken over by the Comptroller. Had this event occurred prior to the enactment of Chapter 11849, Acts of 1927, as an amendment to Section 6108 C. G. L., 4167 Rev. Gen. Stats., 1920, the Comptroller would have been required by the then banking statutes to retain the possession he had taken until such time as the affairs of the insolvent bank might be placed in a safe and sound condition, or until a receiver (liquidator) should be appointed to liquidate and wind the same up according to law. Thus, the old statute prior to the 1927 amendment was very much like the National Banking Act from which it was taken, and left no discretion in the Comptroller after he once took charge of the affairs of an insolvent or weak bank except either to (1) have its existing affairs placed in a safe and sound condition by directing the stockholders to put more capital into it for that purpose, or (2) finally wind it up by liquidation of its assets and paying off its creditors to the extent that the assets would warrant.
In 1927, however, the Legislature of this State realized that banks might in some instances become insolvent, so as to necessitate a closing out of their business as of the date of that happening, and yet have so much long drawn out liquidating to do in the course of winding up of its existing *Page 201 
affairs as to practically make it necessary to continue to operate a new banking business at the same old stand, in order to realize anything of consequence out of the liquidation of the insolvent bank's assets.
Accordingly in 1927 and again in 1929 a proviso was written into the banking statute known as Section 4167, Rev. Gen. Stats., to the effect that in case of insolvency of a bank, the Comptroller might, in lieu of either of the two old procedures provided for, "upon conditions as may be approved by him, surrender possession of such bank for the purpose of permitting (it) to resume business, and the Comptroller shall have authority to authorize a reduction in capital," etc., if found necessary for the resumption of business. Another proviso put into the statute was what is known as the "freezing provision (an innovation which was adopted from the Florida law by the U.S. Government during the national banking crisis of 1933) by which the Comptroller might "freeze" deposits and let the bank reopen on a restricted basis in order to continue in business as a bank at the same stand, under the same name, in the same community.
In this case, we have a situation where the First State Bank of Fort Meade, finding itself insolvent, was taken over by the Comptroller. At that time one of its stockholders was Mr. B. H. Griffin, the plaintiff in error in this case, who held $4,000.00 in stock which, by the very act of insolvency, became liable to a 100 per cent. assessment to pay the debts, engagements and obligations of the insolvent bank, The Comptroller in fact made such assessment and imposed a 100 per cent. liability on Mr. Griffin to raise funds with which to pay off as far as possible the debts, engagements and liabilities of the First State Bank of Fort Meade up until the date of itsinsolvency and taking over *Page 202 by the Comptroller. See Section 4128 R. G. S., as amended by Chapter 13576, Acts 1929; Section 6059 C. G. L., 1934 Supplement.
In this case, after Mr. Griffin's liability as a stockholder of the insolvent First State Bank of Fort Meade had becomefixed by law in favor of the creditors of the defunct bank who were entitled to look (in part) to the enforcement of the stockholder's statutory liability as a means of realizing payment of their deposits and other claims, the Comptroller made an order under authority of Chapter 14487, Acts of 1929, and other laws of Florida, by which he invoked the "freezing" provisions hereinbefore referred to and permitted the bank to reopen to operate on a new but restricted basis, with reduced capital stock as to its future business.
This order permitting reopening of the bank was duly approved by the Circuit Court on February 18, 1930, in a proceeding which by virtue of the statute, became binding upon Mr. B. H. Griffin, as a stockholder, so as to preclude any collateral attack by him upon its legality or propriety — the latter questions being subject to review on writ of error. See Amos v. Conkling, 99 Fla. 206, 126 Sou. Rep. 283.
The "freezing order" did not cancel the already accrued liability of Mr. Griffin as a stockholder of the defunct bank. On the contrary, the Comptroller expressly wrote into the "freezing" order, and the Circuit Court approved it as thus written in, a provision to the effect that "this order shall not be construed to __________ release any person or persons, or corporation, from liability or liabilities, existing against them, or hereafter existing against them, the sole purpose and intent of this order being to freeze the deposits upon the consent of the depositors."
The "freezing" provisions of the 1929 statute (Chapter 14478, Acts 1929, Section 6108, C. G. L., 1934 Supplement) *Page 203 
were held constitutional by this Court in McConville v. Fort Pierce Bank  Trust Co., 101 Fla. 727, 135 Sou. Rep. 392. So the order of the Circuit Court above referred to became binding upon Mr. Griffin as one of the statutory "conditions" which the Comptroller was authorized to impose on him as a condition to letting the bank reopen under the "freezing" agreement.
Had Mr. Griffin been dissatisfied with the terms of the "freezing" order continuing in force and effect his stockholder's liability against him, or otherwise felt that the same was illegal or improvident, he should have pursued the remedy that was pursued by Mr. Conkling in like situation, by suing out writ of error to the Supreme Court from the "freezing" order. See Amos v. Conkling, supra. No such writ of error was sued out, therefore the order is final and binding. Especially is it binding on a stockholder of bank which has accepted a privilege under it that without such order could not have been enjoyed by such bank, namely, a reopening of the bank with the deposits "frozen," thereby benefiting the stockholders petitioning for its reopening.
The practical operation of the "freezing" law is to allow a bank to reopen for business at its old stand and under its own name and there re-engage in the banking business under its pre-existing franchise, which banking franchise as Mr. Justice STRUM pointed out in Ex Parte: Amos, 94 Fla. 1023, 114 Sou. Rep. 760, is not ipso facto forfeited by the mere fact of a bank's being taken in charge by the Comptroller because of insolvency.
Thus the insolvent bank becomes in effect a liquidator for its own insolvency. And as such it is allowed to reopen with a new banking set up, receive new deposits which are required tobe kept separate from its old business, and thus keep going as an active institution. Such privilege is given *Page 204 
to it not only for the purpose of enabling it to transact any new business which it may obtain, but for the purpose of assisting it to collect in its old debts for the benefit of its old creditors and depositors. See: Doty v. Love, 55 U.S. Sup. Ct. Rep. 588, 79 L.Ed.
The policy of the legislation is predicated upon the well known fact that persons owing banks will pay their obligations to a going concern still carrying on a banking business, quicker than they will pay them to a defunct one from which they can expect no further banking accommodations. The Legislature appreciated this fact and decided that it would be good public policy to realize the maximum of benefit for the depositors of an insolvent bank, by setting up a new and novel scheme by which the bank's insolvent affairs could be liquidated by itself acting as its own liquidating agency, and yet not involve its new and future depositors into any entanglement with what had happened to its banking affairs prior to the time the bank had first become insolvent.
What plaintiff in error claims in this case is the right to be absolved from a "condition" of the Comptroller's judicially confirmed freezing order by which he has lawfully become bound, namely, the "condition" that he shall make good his already accrued and fixed stockholder's liability to the creditors of the bank at the time it became insolvent. This right is claimed by him merely because the bank has been allowed to re-engage in the banking business in total disregard of the fact that its right to do so rests entirely upon the 1927 and 1929 Acts. His contention, moreover, ignores the fact that the now effective banking laws of Florida permit several kinds of bank reopenings — some unconditional and some restricted or conditional. Had the Comptroller in this case released the First State Bank of Fort Meade as a bank whose affairs had been placed in a *Page 205 safe and sound condition, as he had undoubted jurisdiction to do if such had been the fact, plaintiff in error's contention that his accrued stockholder's liability could no longer be enforced, would be sustainable. But it is not sustainable under the 1927 and 1929 "freezing" statutes.
In this case it affirmatively appears that the bank was released under the terms of 1929 "freezing" law upon special "conditions" that such statute allows to be imposed upon both stockholders and depositors as conditions precedent to having their bank reopened. The condition in this case was that all stockholders remain bound. They had already become bound at the time the bank first became insolvent, therefore their liability was not enhanced by the fact that the insolvent bank was permitted to reopen on a restricted basis.
The conditions imposed by law and approved by the Court became binding on Mr. Griffin when he made no objection to them before the Circuit Court, and prosecuted no appeal from the Circuit Court's approval of same as a condition precedent to the reopening of the bank.
In the McConville case, 101 Fla. 727, 125 Sou. Rep. 392,supra, this Court upheld the constitutionality of Chapter 11849 (the 1927 Act) as against a suit brought by a depositor to recover the amount of his deposit from a reorganized bank that had become insolvent and thereafter allowed to reopen under a "freezing" agreement as provided for in 1927 Act. Thus we construed the "freezing" law of 1927 as allowing no remedy for the past deliquency of the defunct bank to be enforced against the reorganized and reopened bank, although the identically named bank had once been closed by reason of insolvency and had thereafter been allowed to reopen without discharging its pre-existing debts. The McConville case has recently been cited *Page 206 
with approval by the Supreme Court of the United States in its late decision in Doty v. Love, supra, decided April 1, 1935, which has sustained the right of the State to provide for the reopening of defunct banks, without restoration to solvency thereof, as a changed means of liquidation for the protection of creditors by continuing the bank as a going concern for the purpose of collecting its obligated assets and applying them on its existing debts.
But in the Doty v. Love case, supra, it is expressly recognized and held by the United States Supreme Court that a "freezing" statute is only valid when the assets of the insolvent bank remain subject to being devoted without impairment or diversion to the payment of its debts — the resumption of business being simply used as a more economical and efficient means to that end. Only the plan adopted by the State's banking department, and judicially approved by the State's courts, can be enforced as against the rights of the defunct bank's creditors to continue to look to the assets, tangible and intangible, of the defunct bank for payment, including any causes of action that may have accrued against stockholders at the time the bank became defunct.
Under Doty v. Love, supra, a release of the liability of stockholders of a defunct bank can be lawfully accomplished, but it can only be done when it has first been approved by the State's banking department and subsequently judicially approved by the State's courts as well.
In the case now before us the Comptroller affirmativelyrefused to approve a release of Griffin from his liability as a stockholder by writing into his "freezing" order an express provision to the effect that Griffin and all other stockholders should remain liable as such for the assessments due against them on account of the affairs of the defunct bank. *Page 207 
On top of that the Circuit Court made in its confirmatory judgment a decree to the same effect.
Therefore what a majority of the Court are doing in this case is to now adopt such a construction of the 1927 and 1929 "freezing" statutes as will render them as to creditors of the defunct bank, violative of Section 10 of Article 1 of the Constitution of the United States and thereby open the doors of the courts to creditors to sue the reopened and reorganized bank, as a successor in liability subject to being held responsible for the debts of a closed and insolvent one — the avoidance of which result is exactly what the 1927 and 1929 Acts sought to constitutionally guard against on the theory of Doty v. Love, supra.
It is certain that this Court cannot so construe the 1927 and 1929 Acts as to withdraw and cancel without any consideration whatsoever therefor, all liability that the law puts on stockholders of defunct banks for the benefit of creditors after the bank has become insolvent. To do so would unconstitutionally impair the obligation of a creditor's contract by destroying and giving away to the prejudice of depositors, and without any corresponding benefit to be conferred in consideration thereof, a cause of action against the stockholder that if enforced would help pay such creditors their claims.
To sustain the contention now made on this appeal is to nullify the Circuit Court's approval of the "freezing" order, and to wipe out part of the security of creditors in the form of the causes of action against stockholders which the law gave to the creditors of the First State Bank of Fort Meade at the time it became insolvent. The result violates the U.S. Constitution because no state statute can thus constitutionally impair the contract rights of the defunct bank's creditors in violation of Section 10 of Article I of the U.S. *Page 208 
Constitution. Furthermore, by so holding in this case, we simply render inoperative and ineffective for the very purposes for which they were designed, the Legislature's enactments designated as Chapters 14487, Acts of 1929, and 11849, Acts of 1927, insofar as reopening of banks under "freezing" provisions is concerned.
By so doing we likewise put in jeopardy the soundness of all of those State banks in Florida which have followed the provisions of these recent statutes assuming that they were effective for the purposes for which they were written and which, for that reason, invoked the provisions of these laws by reopening under their terms after this Court had upheld the constitutionality of such Acts as hereinbefore pointed out.
There is no escape from the conclusion that under Section 10 of Article 1 of the Constitution of the United States, creditors of a defunct bank may either look to the assets of the old bank as a liquidatable institution, or can go against the reopened bank as a successor in liability to the defunct one. The Legislature has no power to deny creditors all right to look either to the old resources or to look to the resources of the reorganized bank.
With due deference to the more experienced judgments of my brethren, I cannot acquiesce in any such view, nor lend my approval to a result so devastating to the financial welfare of Florida.
Accordingly I most reluctantly dissent from the holding of the majority which is to the effect that the stockholder of a defunct bank is not bound by a freezing order confirmed by the Circuit Court, when he voluntarily accepts the benefits thereof and the statute says that he is so bound, and the Constitution of the United States and of this State will not permit him to be released to the prejudice of creditors *Page 209 
of the defunct bank which has been allowed to be reopened only on condition that the stockholders asking for the reopening agree to remain bound for their assessments in consideration of the depositors' freezing their deposits.