Court Opinion

ID: 9484332
Source: CourtListenerOpinion
Date Created: 2023-08-05 09:49:12.79662+00
Date Added: 2024-06-11T17:50:10.523018
License: Public Domain

WILLIAMS, Circuit Judge,
dissenting:
Because I believe that Coastal Virginia Bank’s security interest is enforceable against the debtor-in-possession, I would affirm the district court.
Section 6.1-60-l(A) provides that:
No bank shall acquire or own its own stock except to protect itself against loss froni debts previously contracted, in which case it shall be disposed of within twelve months from the time acquired, and except as herein permitted. No bank shall make loans collaterally secured by the stock of such bank.... This provision shall not prevent any bank: (1) From acquiring any such stock, notes or other obligations to protect itself or any fund in its custody or possession against loss from debts theretofore contracted....
Va.Code Ann. § 6.1-60.1 (Michie Supp.1992). The section has no legislative history, and no court in Virginia has had the occasion to interpret it.
I agree with the majority that § 6.1-60.1 unequivocally prohibits a bank from taking a security interest in its own stock. But the statute does not declare such security interests void. In fact, § 6.1-60.1 fails to prescribe any remedy for a violation. Section 6.1-60.1 is, however, part of the Banking Act, and § 6.1-123 (Michie 1988) provides that the officers, directors, agents and employees of a bank who knowingly violate or who knowingly cause a bank to violate any provision of the Banking Act shall be guilty of a misdemeanor and shall be punished accordingly. Thus, looking to the statutory scheme alone, it seems that, to ensure compliance with § 6.1-60.1, the Virginia legislature has chosen to employ only criminal sanctions against the responsible individuals. The appropriate remedy for a violation of the statute is to prosecute bank officials, not void the bank’s security interest.
This interpretation accords with the purpose of the statute. Section 6.1-60.1 contains language similar to a parallel provision in federal law governing national banks:
No association shall make any loan or discount on the security of the shares of its own capital stock, nor be the purchaser or holder of any such shares, unless such security or purchase shall be necessary to prevent loss upon a debt previously contracted in good faith....
12 U.S.C. § 83 (1988) (originally enacted as U.S.Rev.Stat. § 5201). In construing § 83, the Supreme Court has stated that “[t]he obvious purpose of prohibiting the purchase by a bank of its own stock is to prevent the impairment of its capital resources and the consequent injury to its creditors in the event of insolvency.” Deitrick v. Greaney, 309 U.S. 190, 195, 60 S.Ct. 480, 482, 84 L.Ed. 694 (1940). By invalidating Coastal Virginia’s security interest, the majority demotes the bank from its position as a secured creditor to that of an unsecured creditor. Because this result “impairs” the financial security of the bank and frustrates the purpose of § 6.1-60.1, I would enforce the security interest against March, and leave to the Commonwealth of Virginia the responsibility for punishing violations of § 6.1-60.1. See Lantry v. Wallace, 182 U.S. 536, 551-53, 21 S.Ct. 878, 883-84, 45 L.Ed. 1218 (1901); Scott v. Deweese, 181 U.S. 202, 210-212, 21 S.Ct. 585, 587-588, 45 L.Ed. 822 (1901); Nat’l Bank of Xenia v. Stewart, 107 U.S. 676, 678, 2 S.Ct. 778, 779, 27 L.Ed. 592 (1883); see also Thompson v. St. Nicholas Nat’l Bank, 146 U.S. 240, 251, 13 S.Ct. 66, 69, 36 L.Ed. 956 (1892); Nat’l Bank v. Whitney, 103 U.S. 99, 101-03, 26 L.Ed. 443 (1881); Nat’l Bank v. Matthews, 98 U.S. 621, 627-29, 25 L.Ed. 188 (1879).
Although the decision in Feckheimer v. Nat’l Exchange Bank, 79 Va. 80 (1884), gen*35erally comports with the result reached by the majority, it was based upon the Supreme Court’s interpretation of § 5201 of the Revised Statutes which the Court has since rejected, see, e.g., Lantry, 182 U.S. at 551-53, 21 S.Ct. at 883-84, and which the courts of Virginia are likely to reject as well, see City Coal & Ice Co. v. Union Trust Co., 140 Va. 600, 125 S.E. 697, 699 (1924) (recognizing the “new and growing doctrine that whether a corporation has acted ... in face of an expressed or implied statutory prohibition, is one which cannot be raised in litigation between it and a private party, but can only be raised by the state”) (citing National Bank v. Matthews, 98 U.S. 621).**
Relying on the same authority, I would also hold that March does not have standing to contest the validity of the security interest. Consequently, the decision of the district court should be affirmed.

 Moreover, to the extent the cases relied upon by the majority are based upon the doctrine of ultra vires, it should be noted that the Virginia legislature has since repudiated that doctrine. See Va. Code Ann. § 13.1-629(A) (Michie 1989) ("[C]or-porate action may not be challenged on the ground that the corporation lacks or lacked the power to act.”).