Hospelhorn v. General Motors Corp.

Urner, J., delivered the opinion of the Court. The questions presented by the cross-appeals in this case are to be determined upon the basis of the following stipulated facts: General Motors Corporation had a deposit account with the Baltimore Trust Company, under an agreement that, when the account exceeded such figure as the depositor should designate from time to time, the trust company would, without further instructions, telegraph the excess amount to the Guaranty Trust Company of New York for the account of General Motors Corporation with that institution. On February 17th, 19,33, a letter was mailed by General Motors Corporation to the Baltimore Trust Company reducing the limits previously specified for its account and thus imposing upon the trust company the duty to telegraph the excess over $90,000, in accordance with its agreement, to the Guaranty Trust Company of New York. That notice was received by the trust company on February '20th, 1933.

The balance to ■the credit of General Motors Corporation’s account was then $217,550.33, and therefore the sum which should have been telegraphed to New York was $127,550.33. But, as stated in the stipulation, the letter which required such a remittance “received no attention from the officers or employees of the Baltimore Trust Company prior to the closing thereof on February 25, 1933.” ⁵⁶⁷ Beginning with that date, the Governor of Maryland by various proclamations made a legal holiday of every week day until and including March 4th, 1933, when the Legislature of Maryland passed the Emergency Banking Act (Acts 1933, ch. 46, Code, art. 11, secs. 71A to 71Q), whereby all banks incorporated under the laws of Maryland were placed in the custody of the bank commissioner, who thereupon assumed custody of the Baltimore Trust Company, and refused to permit it to open for business upon a normal basis, or to permit the unrestricted withdrawal of deposits. The custody of the bank commissioner continued until January 5th, 1935, when it was terminated by his appointment as receiver in this proceeding. The balances in the account of General Motors Corporation with the Baltimore Trust Company on and subsequent to February 20th, 1933, were as follows: February 20th, 1933, as already noted, $217,550.33; February 21st, $237,483.75; February 23rd, $299,783.74; February 24th, $230,958.69.

As adjusted by subsequent minor debits and credits, the final deposit balance in the account became $230,761.73 as of March 4th, 1933, when the Baltimore Trust Company passed into the custody of the bank commissioner. Upon the ground of an alleged breach of contract of the Baltimore Trust Company in failing to transfer by telegraph to the Guaranty Trust Company in New York for account of General Motors Corporation, prior to the closing of the Baltimore Trust Company on February 25th, 1933, the excess above $90,000 of the final deposit balance of $230,761.73, a certain Willard Doty, assignee of General Motors Corporation as to such excess, but not an assignee for value, obtained from the Supreme Court of New York County, New York, on March 3rd, 1933, a warrant of attachment against certain funds of the Baltimore Trust Company then on deposit with the Guaranty Trust Company, which attachment was actually laid in the hands of that company on March 8th. The sheriff had attempted to lay the attachment on the morning of ⁵⁶⁸ March 4th, but was not then permitted to enter the banking rooms of the Guaranty Trust Company, as that day had been declared a legal holiday by the Governor of New York. The Maryland Emergency Banking Law was signed and became effective at 9:55 a. m. on March 4th, 1933.

The bank commissioner of Maryland and the Baltimore Trust Company appeared' specially by counsel, and filed a motion to vacate the attachment. That motion having been overruled, the Baltimore Trust Company appeared generally and filed an answer in the suit. On November 16th, 1933, Willard Doty, as assignee of General Motors Corporation, recovered a judgment therein against the Baltimore Trust Company in the amount of $134,970.18, upon which judgment he collected on that day the sum of $74,387.30 from the funds of the Baltimore Trust Company attached in the hands of the Guaranty Trust Company. In that proceeding Willard Doty acted as plaintiff merely for the convenience of General Motors Corporation, and the recovery by him constituted a payment to be credited on the judgment which he obtained for its use and which he later assigned to it, the uncollected portion thereof being approximately $60,-582.88, with interest from November 16th, 1933, at six per cent.

The stipulation continues as follows: “On March 20th, 1933, subsequent to the levy in said attachment proceeding, the bank commissioner permitted General Motors Corporation to withdraw five per cent, of its aforesaid deposit, namely, the sum of $11,538.-09, leaving a restricted deposit of $219,223.64. At the same time the bank commissioner permitted all other depositors of the Baltimore Trust Company to withdraw 5 per cent, of their respective deposits. Subsequently thereto, a plan of reorganization in accordance with the provisions of the Emergency Bank Act was submitted to the said bank commissioner by the Baltimore Trust Company, and was approved by him. Among other things this plan provided for the formation of the Baltimore National Bank as the successor, in part, of the Baltimore ⁵⁶⁹ Trust Company, and that ten per cent, of all restricted deposits in excess of $10.00 as of the date of the consummation of the plan would be made available to those becoming parties to the plan, either by unrestricted deposits in the new bank or by direct payment by the old bank.

Said plan further provided for the issuance of certificates of indebtedness for the balance of such restricted deposits, payable on July 1, 1938, and bearing interest at the rate of two per cent, per annum, and likewise provided that all depositors who did not express their dissent in the manner specified in section 711 of the Emergency Banking Act (Acts 1933, ch. 46) should be and become parties to the plan. General Motors Corporation took no steps to dissent in the manner specified in said plan or by section 711 of the Emergency Banking Act, and, accordingly, became a party to said plan. After the consummation of said plan, to wit, on August 4th, 1933, the said ten per cent, dividend on the restricted deposit of General Motors Corporation was entered to its credit upon the books of the Baltimore National Bank by order of the bank commissioner. This restricted deposit had become $219,599.81, made up of the original claim of $230,761.73, less the five per cent, payment of $11,538.09, or $219,223.64, plus interest of $376.17, so that the amount of said ten per cent, dividend was $21,959.98.

On the same date a certificate of indebtedness was issued to General Motors Corporation for the balance of said deposit, namely, $197,639.83. Said ten per cent, dividend of $21,959.98 has not been withdrawn from the Baltimore National Bank by General Motors Corporation, and remains intact exactly as placed on deposit there by the bank commissioner. The aforementioned certificate of indebtedness was received by General Motors Corporation, has never been returned by it, and is still in its possession. “In February, 1934, when the bank commissioner authorized the payment of a dividend of 20 per cent, on the balances then remaining due on the outstanding certificates of indebtedness of the Baltimore Trust Com ⁵⁷⁰ pany to the holders thereof, he directed said trust company to withhold said dividend from General Motors Corporation until such time as that dividend, amounting to $39,527.97, and subsequent dividends on its certificate of indebtedness, should equal the amount of money recovered by General Motors Corporation in the attachment proceeding in New York, to wit, the sum of $74,-387.30, as hereinbefore mentioned. General Motors Corporation thereupon made demand upon said Baltimore Trust Company and upon the said bank commissioner for the payment of the said dividend, with proper adjustments because of the money recovered in New York, but up to the time of the appointment of the receiver herein, the said bank commissioner steadily refused to permit the Baltimore Trust Company to make such payment.

Upon the appointment of the receiver herein, General Motors Corporation made demand upon him for the payment of the said dividend, with adjustments as aforesaid, but has been informed by said receiver that he is unable to make such payment without General Motors Corporation having first obtained from this court an order authorizing and directing him to do so. Whereupon the present petition was filed on March 22, 1935.” Upon allegations of fact similar to the recitals in the quoted stipulation, the petition of the General Motors Corporation in this case asserts that the action of the bank commissioner in ordering the dividend of $39,527.-97 to be withheld from the petitioner was in violation of its legal right as the holder of a certificate of indebtedness of the Baltimore Trust Company, and as a party to its reorganization plan, and was in excess of any power conferred upon him by the Emergency Banking Act or by any other statute of the State of Maryland, and that in the receivership proceedings now pending the petitioner, as the holder of the certificate of indebtedness referred to, is not barred from receiving the regular twenty per cent, dividend thereon by reason of the fact that, by the attachment levied twenty-two months before the institution of the receivership proceedings, ⁵⁷¹ it had, fourteen, months prior thereto, recovered a portion of the claim now evidenced by the certificate. The petition therefore prayed for an order authorizing and directing the receiver, upon the surrender of the certificate of indebtedness, in the amount of $197,639.83, to pay to the petitioner such sum of money as represents the dividend of twenty per cent, declared on August 4th, 1933, with proper additions for interest from that date, but taking into account the receipt of $74,387.30 by the petitioner on November 16th, 1933. The answer of the receiver admitted the material facts alleged in the petition, but denied that the action of the bank commissioner in regard to the twenty per cent, dividend on the certificate of indebtedness held by the petitioner was in violation of its legal rights, or was in excess of the commissioner’s statutory powers, and averred that by the petitioner’s acceptance of the preceding five per cent, and ten per cent, distributions on its claim, and by its acquiescence in the plan of reorganization, it restricted itself to the receipt of only such sums as might be paid in accordance with the provisions of the plan, and that if the prayer of the petition should be granted, it would result in the petitioner, although a party to the plan, “becoming a preferred creditor of the Baltimore Trust Company and receiving on account of its deposit claim an amount greatly in excess, proportionately, of the amounts paid to all other depositors in said institution at the time it was taken over by the bank commissioner and to all other depositors who became parties to the plan of reorganization.” The court below decreed that the receiver “pay, or cause the Baltimore Trust Company to pay, to General Motors Corporation the sum of $15,916.25, with interest at six per cent, from February 18, 1934, in full settlement for the twenty per cent, dividend in the amount of $39,527.97, declared on February 18th, 1934, upon the certificate of indebtedness of the Baltimore Trust Company in the amount of $197,639.83 theretofore issued to General Motors Corporation,” but that it ⁵⁷² “shall not be entitled to receive the payment of $15,916.25, and interest * * * until it shall first have entered upon the certificate of indebtedness aforesaid a credit of $74,-387.30, as of November 16, 1933, representing the amount of money recovered by General Motors Corporation on that date in the City of New York. * * * ” The receiver appealed from the decree because it rejected his theory as to the equalization of General Motors Corporation with other creditors in the distribution of the funds available for their claims, and the