Court Opinion

ID: 6903528
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:57:25.699493+00
Date Added: 2024-06-11T16:06:15.259506
License: Public Domain

O’CONNELL, Circuit Judge
(dissenting).
I too believe that the agreement made by the receiver of the National Bank and the Harper estate was a compromise agreement of the type contemplated and authorized by the Act of February 25, 1930, 12 U.S.C.A. § 67. Unquestionably, under the provisions of that Act, the approval of the Comptroller and the authorization of the court were necessary; and, once those endorsements were given, the liability of the Harper estate was discharged. I am of the opinion, however, that such compromise agreement, having been sanctioned by the district court in 1935, cannot in a collateral proceeding initiated in 1945 be modified in effect so as to substitute new values for those approved ten years before.
Summarized, my position is that an essential feature of the compromise agreement which was approved by the district court in 1935 was the váluation of the assets of the Harper estaté as proposed by the Harper estate and decreed by the State probate court as of 1932.
Because of the importance of the questions here involved in the administration of the national banking laws, I shall discuss them at some length.
What did the district court consider and pass .upon when it entered its order of February 13, 1935, approving the compromise agreement?
The answer to this question in the first instance is to be found in the 1935 decree of the district court. It authorized the receiver “to accept from the Fidelity Trust Company of Pittsburgh [appellee here] the following assets of the Estate of John A. Harper * * * in accordance with a' decree of Orphans’ Court in and for Allegheny County, Pennsylvania, at No. 205, January Term, 1932.” The receiver, then, was not to accept the assets qua assets but in accordance with a specific decree of a state court of competent jurisdiction.
When I turn to the Orphans’ Court proceeding, I find a colloquy, reprinted in the footnote below,1 disclosing that the representative of the Harper estate and the receiver both acted with complete understanding that the assessment due the receiver was greater than the value of the assets which the Harper estate tendered in compromise; further, that the Harper estate recognized and intended that the then market value of the securities should be an integral part of the compromise agreement it proposed to the receiver and which the probate court in the first instance had to approve, because it offered in evidence an exhibit appending a list of the assets with their then market value. It is not inapposite to note that, had the Harper estate and the receiver not intended such values to 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; and so, to relieve itself of any charge of neglect in duty in this respect, the trustee notified the children and life tenants of Harper that if the proposed compromise was not satisfactory to them, they should appear at the audit and bid more than the receiver.2 Moreover, the Orphans’ Court decree ordered that “the funds in the hands of the accountant, *105to-wit, $32,759.12, be paid in accordance with the schedule of distribution hereto attached”; which schedule of distribution, an elaborate document reproduced in the footnote below,3 likewise gave a stated value for each item in the assets of the estate.
As though this were not sufficient, the Harper estate advised the Comptroller in writing several weeks later, in 1932, that the assets as listed and evaluated in the decree were “in full settlement of the stock assessment liability of the [Harper] Estate * * *, $34,650.”
In view of these facts, was the compromise agreement one in which the Harper estate merely undertook to furnish a list of assets which the receiver could acquire? or was it one in which the value of those assets received consideration and became a prime object of the negotiations? I think reality dictates the latter. 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 whatever date the district court approving the compromise happened to take statutory action.4
*106I' can find nothing iñ the record to indicate that any of the participants intended or expected the 1935 approval to change one iota of the agreement previously negotiated between the receiver and the Harper estate. In this connection, a review of the cases reveals that, in approving or rejecting sales or compromise agreements proposed by a receiver of a national banking association, the court is “a superior and advisory administrative officer,” whose "approval is merely an administrative condition precedent to the congressionally granted executive power to sell.” Mitchell w. Joseph, 7 Cir., 1941, 117 F.2d 253, 255. See also Hulse v. Argetsinger, 2 Cir., 1927, 18 F.2d 944, 945; Griggs v. Baumer, 3 Cir., 1942, 130 F.2d 899, 901; and Oosterhuis v. Palmer, 2 Cir., 1943, 137 F.2d 322, 325, 153 A.L.R. 475.
If it is to be held nevertheless that the terms of a compromise with a stockholder of a national bank are to be modified as a matter of law so that the market value of securities offered in discharge of a stockholder’s obligation in such instances is to be affixed as of the date of the decree of the district court approving such compromise, I find some difficulty in resolving the following questions:
(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 condition of the security market as of the date of a decree by the district court approving such compromise settlements? Why the date of the decree? By adopting such a date, we have the incongruous result that neither the stockholder nor the Comptroller. of 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 consults ■the ticker-tape, is at sea at the time of entering the decree. If something other than the value agreed upon by the stockholder and the receiver and submitted to and approved by the district court is to be subsequently substituted, it seems to me more logical to await the actual sale of such securities by the' receiver, for then and only until then, can it be determined what funds the receiver has actually realized upon the assessment.
(b) Why, under the holding of the majority of this court, was the approval of the Comptroller or authorization of the court necessary .in this case? If we are to disregard the values agreed upon by the Harper estate and the receiver of the National Bank, and to substitute therefor the market value as of the date either of submission of such matter to the district court for approval or the date of the decree of the district court, it would appear in the matter sub judice that the district court was without jurisdicion: for, the market value of the securities then being in excess of the debt due the receiver, there was no compromise for the court either to approve or disapprove in its discretion.
The majority of this court appears to place some reliance upon the argument that if the assets of the Harper estate had declined in value, and if the Comptroller had disapproved of the compromise, the Harper estate would still have been liable for the deficiency in its assessment. Of course. Disapproval by either the Comptroller or the district court would have restored the Harper estate to the position it would have had if no agreement had been made, regardless of whether its assets depreciated, appreciated, or remained constant in value. 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 and a stockholder under which such debtor turned over to the receiver securities having a readily ascertainable market value, even where the receiver or the 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. If the receiver’s estate has suffered under such circumstances, it may well be that some question of surcharge might be lodged against the receiver, but surely the district court would not penalize the innocent stockholder for *107the dereliction in duty of the receiver or Comptroller.
Accordingly, I believe the judgment of the lower court should be reversed.

 “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, representing 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 Pittsburgh 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 $35,054.85. The Receiver will accept the securities in the estate in satisfaction of his claim.”

 “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
Receiv *105N. A. -would appear at the audit of this account on May 16, 1932 and would bid up to $31/,650.00, with interest, for the securities shown to be in the hands of the Tmstees, exclusive of The Bank of Pittsburgh stock, and that if they cared to bid moro 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’.” (Emphasis supplied.) Supplemental Audit Statement.

 “Schedule of Distribution
* * *
“To O. O. Thomas, Rec. of Bk. of Pitts. N. A. Balance in full of assessment of $50 a share on 693 shrs. Bank of Pitts. N. A.
13 shrs. General Cable Corp. Glass ‘A’ at 1-1 /2 19.50
43 “ General Cable Corp. Class ‘A’ Warrants 0.00
144 “ General Cable Corp. Common at 3/4 ■ 108.00
43 “ General Cable Corp. Preferred at 6-1/8 263.38
20 “ Pittsburgh Coal Co. Preferred at 20 400.00
$6500 Bonds Gen. Cable Corp. 5-l/2s 47 ‘A’ at 43-3/4 2,843.75
$ 600 “ Chic. Milwaukee St. P. & Pac. 5s 75 at 20 120.00
$2400 “ Chic. Milwaukee St. P. & Pac. 5s 2000 at 4 96 00
$3000 “ Pgh. & Alie. Toleph. 1st M. 5s 49 at 100-1/2 3,015^00
$2000 “ Pgh. Terminal Warehouse & Trans. Co. 5% 1st Ref. Mtg. 36 at 10 200.00
$3000 “ Southern Ry. Co. 6-1/2% Deb. & G. M. 56 900.00
$2000 “ West Penn Power Co. 5% 1st Mtg. Ser. E 63 2,025.00
Interest in the following Participation Mortgages:
Installment Mtge. Fund 6% 16,150.00
A. Shapiro “ 6% 4,000.00
Cash 18.95
30,159.58”

 I point out in passing that, by virtue of the provisions of 12 U.S.C. § 197, 12 U.S.C.A. § 197, the parties before ns are. in effect, the same as those which engaged in the extensive negotiations culminating in the 1935 court order. It was the Harper estate which tendered the assets at stated value 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 assessment. The Harper estate advised the Comptroller that the assets as valued were “in full settlement.” The Harper estate made no move to block the approval 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? Of. the principles of collateral estoppel and law of the case.