Montgomery B. & T. Co. v. Walker , 181 Ala. 368 ( 1913 )

ANDERSON, J.

“While forms of procedure and practice may be altered, due process requires that the substance of property rights be preserved, and that an opportunity remain to invoke the equal protection of the law by some judicial proceeding adequate and appropriate. The fourteenth amendment does not undertake to control the power of a state to determine by what process legal rights, may be asserted or legal obligations be enforced, provided the method of procedure adopted for these purposes gives reasonable notice and affords fair opportunity to .be heard before the issues are decided.” — 8 Cyc. 1095. The essential elements of due process of law are notice and opportunity to defend, and, in determining whether such rights are denied, the courts are governed by the substance of things and not by mere form. — Simon v. Graft, 182 U. S. 427, 21 Sup. Ct. 836, 45 L. Ed. 1165; L. & N. R. R. Co. v. Schmidt, 177 U. S. 230, 20 Sup. Ct. 620, 44 L. Ed. 747. Section 10 of the Act of 1911, p. 50, which said act created the banking department of the state, requires that, before the banking board shall declare a bank in default or turn its affairs over to the Superintendent of Banks, the superintendent must first submit to the board the matters of default or misconduct in the affairs of the bank, of which the bank shall have notice and upon which it may be heard in person or by counsel. This section also authorizes the bank, if it feels aggrieved by the action of the board to apply, within ten days, to the chancery or circuit court for an injunction, and authorizes a reinstatement in case the application is meritorious. We think that the act meets the due process requirement of the federal Constitution.

Moreover, we do not understand the act as making this proceeding operate as a change in the ownership or legal title to the property, but the superintendent is in reality a receiver who takes charge of the bank for the benefit of the stockholders, depositors, and other creditors.

We also think that the superintendent has the authority, under the terms of the act, to maintain this bill or to bring suit for the recovery of the assets of the bank. The act not only authorizes the superintendent io collect all debts due and claims belonging to the bank, but “to do such acts as are necessary to conserve its assets and business.” The state banking law, and under which this bill is filed, in some of its features is modeled largely after the National Banking Laws. Section 5234 of said National Bank Act (U. S. Comp. St. 1901, p. 3507) reads as follows: “Appointment of Receivers. On becoming satisfied, as specified in sections fifty-two hundred and twenty-six and fifty-two hundred and twenty-seven, that any association has refused to pay its circulating notes as therein mentioned, and is in default, the Comptroller of the Currency may forthwith appoint a receiver, and require of him such bond and security as he deems proper. Such receiver, under the direction of the Comptroller, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, upon the order of a court * * * sell all real and personal property,” etc. We find no other authority in the act looking to the end of collecting the assets of the insolvent banks. The question as to the authority of the receiver to maintain suits and prosecute causes arising with respect to winding up the affairs of the bank has been repeatedly settled by the decisions of the Supreme Court of the United States. “It being a part of the affirmed duty of the receiver to collect the assets of the bank, he. may, as statutory assignee, sue therefor in his own name as in the name of the bank.” — National Bank v. Kennedy, 17 Wall. (U. S.) 19, 21 L. Ed. 554; Bethel Bank v. Pahquioque Bank, 11 Wall. (U. S.) 383, 20 L. Ed. 840; Stanton v. Wilkeson, 8 Ben. (U. S.) 357, Fed. Cas. No. 13,299.

Section 3509 of the Code of 1907 says: “The assets of any insolvent corporations constitute a trust fund for the payment of the creditors of such corporations, which may be marshaled and administered in courts of equity in this state ” Independent, however, of this statute, and whether it does or does not cover this identical cause, this court, in speaking of insolvent banks, in the case of Bank of St. Mary’s v. St. John et al., 25 Ala. 612, through Ligón, J., said: “The capital stock of the bank, with all of its property and assets, is to be regarded as a trust fund for the payment of creditors; and the stockholders, directors, and agents of the bank are trustees for their benefit, and as such may be made to discover and account in chancery. So, also, if any one interfere with the trust fund without authority, and squander or misappropriate it, he Avill be held to be a trustee and made to account as such. — 7 Beav. 175.” — City Bank & Trust Co. v. Leonard, 168 Ala. 404, 53 South. 71.

The bill charges that Clark, the president, after the Bank of Geneva became insolvent, and Avhich fact was known to the respondent, fraudulently and collusively with said respondent surrendered a large amount of collaterals of said insolvent bank, not only to secure the debt of $7,000 presently contracted, but in order that said respondent could use and handle said collaterals for the additional purpose of paying itself in full or partially a debt owing by the First National Bank of Geneva, and Avhich was not owing by the present Bank of Geneva. The bill questions the authority of the president, Clark, to assign the collaterals at all, but offers to do equity, in case the respondent has a right to the collaterals to the extent of securing the loan actually made, and to pay said indebtedness upon the surrender of the collaterals, and it is difficult to conceive of adequate and complete relief by an action at law.

The president of a corporation, by virtue of his office,' has no implied power to sell or mortgage property of the corporation. — Drennen v. Jasper Tnvestment Co., 153 Ala. 322, 45 South. 157. See, also, note to Buchirald Transfer Co. v. Hurst, 19 Ann. Cas. 623. This rule applies to presidents of banks as well as presidents of other corporations, and who have no authority other than what is expressly granted by the charter, by-laws, etc. — Gibson v. Goldthwaite, 7 Ala. 283, 42 Am. Dec. 592; Spyker v. Spencer, 8 Ala. 333. “He has no more poAver of management or disposal over the property of the corporation than any other single member of the board. These remarks, of course, refer to his inherent powers enjoyed virtute officii, for, of course, if any resolution or any established usage gives him the power, either at all times or under special circumstances, to draw against the corporate deposits, he may do so within the limits of the power. * * * When the general management of the affairs of the bank is left, as is customary, with the directors, the president has not power to mortgage, assign, or pledge any more than he has to dispose otherwise of any of its property of any description whatsoever, or for any purpose, however justifiable and proper in itself.” — Morse on Banking, §§ 143, 144. It has been held, however, in many cases that, where the president has no inherent power, he binds the bank in many instances by usage or express authority. “The cases, though largely occupied in deciding that a president has no" authority by virtue of his office, yet hold the bank bound by his action whenever the charter, or a vote of the directors, or usage of'the bank, or long acquiescence by the bank in a course of action by the president, or any facts constituting a holding out of the president by the bank as having a right to act for it, lay a foundation for authority actual or inferred, and whenever the bank has ratified his action.” The present bill expressly charges that the president of the Geneva bank had no authority to pledge the collaterals to the respondents, and this feature of the bill is challenged by demurrer upon the idea that the office of president necessarily carries with it the authority to do what Clark did, and that the bill should charge wherein Clark’s authority was properly curbed or restricted. As heretofore observed, the office did not carry with it the inherent power to pledge the collateral in the manner charged in the bill, and if special authority was given Clark, or his action was ratified or acquiesced in so as to make the bank legally responsible for same, this would be defensive matter which the bill did not have to anticipate by a negative averment.

The cases of First National Bank of Birmingham v. First National Bank of Newport, 116 Ala. 521, 22 South. 976, and Wynn v. Tallapoosa Bank, 168 Ala. 469, 53 South. 228, each deal with the acts of the cashier and not the president of the bank, and the books recognize a decided distinction between the inherent authority of these two officers. Moreover, the authority was upheld in- each of said cases upon the idea that the dealing was with innocent people and by cashiers acting within the general scope of duty and in whose acts there were years of acquiescence and ratification. The bill here charges that the respondent was not only an innocent purchaser, but that the $25,000 claimed of the old Geneva bank was not owing by the present one, and that the second loan was made collusively with Olarlc and for the purpose of surrendering collaterals greatly in excess of said last loan, for the fraudulent purpose of using said collaterals to liquidate the old debt of the First National Bank of Geneva, and for which the present Bank of Geneva was not liable.

The case of Citizens’ Bank v. Waddy, 126 Ky. 169, 103 S. W. 249, 11 L. R. A. (N. S.) 598 128 Am. St. Rep. 282, involved the authority of a cashier, and not a president, to borrow money and pledge the securities of the bank. Moreover, there was no governing board, and the cashier, seems to have been in entire control for the stockholders who had no board of directors.

The cashier is the chief executive officer of the bank through whom the financial operations of the bank are conducted, and, while his authority is not unlimited, it exceeds that of the president. — Morse on Banking, § 152. The cashier has no inherent power, however, to pledge the assets of the bank' for the payment of an antecedent debt. He may dispose of the bank’s negotiable securities in the regular course of business, but he cannot pledge its assets for the payment of an antecedent debt. — Morse on Banking, § 169.

The chancery court did not err in overruling the respondent’s demurrers to the bill of complaint, and the decree is accordingly affirmed. •

Affirmed.

All the Justices concur, except Dowdell, C. J., not sitting.