Nagel v. Ghingher

Parke, J., delivered the opinion of the Court. The original party complainant on the record at bar was Ethel E. Nagel, who began her suit against the bank commissioner of Maryland and the Union Trust Company of ²³³ M aryland, a banking institution incorporated under the laws of the State of Maryland, on behalf of herself and any other depositor of the trust company, who might join in the proceedings. Two other depositors united with the plaintiff, by the permission of the court, and the bill of complaint • was subsequently amended. The bank commissioner demurred to this amended bill and the trust company answered, and the plaintiffs demurred to the answer of the trust company.

Upon hearing on the demurrers the chancellor sustained the demurrer of the bank commissioner to the amended bill of complaint, as far as it raised the question of the constitutionally of section 71-1 of chapter 46 of the Acts of the General Assembly of Maryland of 1933, and overruled the demurrer of the bank commissioner, as far as it questioned the propriety of making the bank commissioner a party defendant, with leave to answer in fifteen days; and the bill of complaint, as far as it sought to- enjoin the defendants, or either of them, from doing the acts or seeking the relief prayed in the bill of complaint, other than ascertaining the value of the several complainants’ interests in the trust company, was dismissed. The allegations of the amended bill of complaint are that the three plaintiffs were severally depositors of the Union Trust Company of Maryland, upon the agreement that they could withdraw the amount of money so deposited on demand, but that they have been unable to withdraw the deposits since February 24, 1933, because on that day a bank holiday was proclaimed by the State of Maryland, and was thence continued and prolonged to March 4th, 1933, when, without any intermission, the custody, control and management of the trust company was, on March 5th, 1933, assumed by the bank commissioner of Maryland under the authority and pursuant to the provisions of chapter 46 of the Acts of 1933 of the General Assembly of Maryland. The bill further charges that on February 24th, and at all subsequent times, the assets of the trust company have not been sufficient to pay in full the depositors and other creditors of said trust company. ²³⁴ ■The-further averments .of the-bill are that.the trust company on May 2'9tb,--1933y-formulated, a plan of reorganization of the trust--company that purported to-be under the terms and-provisions of the said'chapter 46-, and -particularly section 71T, and that had the approval-of the bank commissioner of Maryland.- On the date of the adoption, of the plan, the trust eompany sent to the plaintiffs and -to- the other credifcors,; depositors and stockholders-a letter, and -a-circular entitled “Plan of Reorganization of Union- Trust Company,” with á form of assent thereto. The circular contained a condensed-summary-of the plan of reorganization, .and .was intended to be- a compliance with the provisions of section 7 IT of chaptor'46 of the-Acts-O-f 1933.

The plaintiffs thereupon demanded- of the trust- company and the bank commissioner certain- detailed information which was alleged to' he- necessary' for the plaintiffs intelligently to decide whether to assent or disagree tó the proposed plan. - The respondents- refused to'furnish the information, and thereupon the depositors dissented' from the proposed plan, and evidenced that dissent by filing the'present hill 'of complaint. • The plaintiffs not only dissented from the proposed plan of reorganization,, but also asserted that chapter 46, and especially'section 71-I-of thfe act, under which the reorganization is to be made, -are-unconstitutional and void, and that, neither at the time of the enactment of - the statute nor since, has there-existed any emergency with respect to the hanks and banking institutions of the state,- and -that, therefore, the- proposed reorganization is. invalid-and void'.' The relief sought by this Till of complaint is-either: (l)-Au injunction to- restrain the defendants from‘carrying out-the proposed plan, of reorganization;' (2) that• chapter 46’ of the Acts of 1933 be de-clared unconstitutional and void; (3.) that.,-the-proposed plan of reorganization be declared'illegal and void. ■ Or-(a) that the respondents-'m'ay' make- discovery óf the- information which the respondents-refused-to give on-demand'of the plaintiffs-;(b)' that the-fair-liquidating value of the claims • of- the plaintiffs-against’the> trust company be ascertained, -and the- trust ²³⁵ company be required to pay- the amounts thereof to tho plaintiffs in money;, and (c) that general relief be accorded the plaintiffs. - . The answer of the trust, company admits, the preliminary and formal 'allegations of the- bill of complaint; denies the contention that chapter 4(5 of the Acts of 1933, or its section 71-1,'is unconstitutional and void; asserts that -the refusal of the -demand of the plaintiffs, for specified details of the affairs'of the trust-company is not-material; 'but admits that the pla intiffs arer entitled to receive the fair liquidation value of their claims as provided iir section 71-1 of-the act because of their dissent/and that the defendant corporation is willing to pay to said plaintiffs said fair liquidating value of their claims upon tho proper and'-legal ascertainment‘of such fair value. - • • " - ■ • • ’ Thb argument'of-plaintiffs, is addressed to section-71-1 of chapter 4’6 of the Acts of 1933, in'support Of the theory that this section of the act (Emergency'Bank Act)'is unconstitutional, on two grounds. Thei first, in the words of their brief, is that the section deprives depositors' of existing legal remedies against banking'institutions to enforce payment of deposits-,■ without affording- an alternative remedy substantially equivalent'in' coercive force to that provided by-law'when'the obligation was contracted. Tho second, similarly quoted, is that tho section provides iro standards for -a, 'reorganization plan to be proposed by-the directors,-andmo' standards-for the approval of any plan, by the bank commissioner.

The section assailed is in these words: “71-1."The Board of .Directors of any banking institution whose aggregate property shall not'be sufficient in’'amount to pay its debts or'which may'be unable to pay'its debts in the ordinary cotirsd‘of business as'they mature or which may be in the custody of the Banking Commissioner under this Act, may formulate and'propose a"plan of ^organisation. -Such reorganization may provide- for a continuance of such existing institution' or -the íor'mátián of-One- -or 'more new banking institution^''Stat'e 'ornational; 'Or other-corporations and for ²³⁶ the transfer of all or part of the assets to such new institutions or corporations or to trustees for such consideration in money, securities or evidences of debt or interest of any kind approved by such Board. “Such plan of reorganization shall be filed with the Bank Commissioner. He shall make such study and investigation of said plan as he may deem necessary and no hearing before him shall be required. If the Commissioner approves the plan he .shall give notice thereof by publication once a week for at least two successive weeks in one or more newspapers having a general circulation in every county in which the institution, party to said reorganization, maintains an office or principal place of business. The word ‘County’ for this purpose includes the City of Baltimore. “The banking institution so- filing said plan shall within five days after such approval by the Bank Commissioner, cause notice to be mailed or sent to all stockholders, depositors and other creditors at their respective addresses shown on the books, of the corporation notifying them that said plan has been filed and is open to- inspection at the office of the Bank Commissioner, with a condensed summary of the important provisions of the plan.

Any failure to' notify any particular stockholder, depositor or other party in interest shall not affect the reorganization. A certificate of the President of other proper officer of such banking institution filing said plan to the effect that such notice has been given shall be prima, fade proof that thisi provision has been complied with. “Any depositor, creditor, stockholder or other person in interest who shall not have approved the plan may within thirty days from the first publication of the notice apply to the Circuit Court of the county in which the principal office of the institution is situated or to one of the Circuit Courts of Baltimore City if the principal office or place of business be located in Baltimore City and apply for the ascertainment of the fair liquidating value of his claim, stock or other interest, which liquidating value shall be made or paid either in money or in kind. Such Court shall upon such ²³⁷ application determine the present cash value o>f such objecting parties’ interest on the basis of a .judicial liquidation of said institution. “The Court may in lieu of fixing the cash value of said objecting parties’ interest apportion to said objecting parties t-heir distributive share in the assets of the corporation. Assets divisible in kind shall in this event, be so apportioned.

With respect to assets indivisible in kind between all the assenting and non-assenting parties the Court may apportion such assets by allotting to the objecting parties shares of stock, securities or certificates of interest issued by a corporation or Trustee reasonably fairly representing such non-assenting parties’ interest in such indivisible assets. The entire amount alloted to such non-assenting parties, however, shall be delivered and paid to the Bank Commissioner as ^Receiver for liquidation for the benefit of the non-assenting parties. “In ease within said period of thirty days less than 33-J% in interest of the depositors and other unsecured creditors shall file such application in said Courts, the plan shall b© binding upon all such depositors and other unsecured creditors, as fully as if they had assented to said plan. If within thirty days less than 33\°/a of the stockholders of such institutions shall have made application to said. Court as. above provided, said plan shall he binding upon all stockholders as fully as if they had assented; subject, however, as to said depositors, other creditors and stockholders to the right to the valuation of their interest as above provided for.

No party to said reorganization, however, shall he subjected by any such plan to any personal liability without his express consent. Said proceeding shall not, however, save at the option of the Board of Directors of said institution, postpone or delay consummation of such reorganization plan. If consummated prior to the conclusion of said proceeding, the reorganized or new eotaipany shall he liable and responsible for tbe performance of the decree in said proceedings. Such reorganized or new company may, however, at any time within ten days after the final decision in such proceeding ²³⁸ abandon said plan for- reorganization- and restore said property to- said--constituent institutions.” 1.

The bill of complaint alleges that on February 24th, 1933, and- at all times- since that date, the, assets of the trust company were' insufficient to- pay its depositors and other creditors in full, and' that the -trust company was in the custody of the bank commissioner, so there can be no question -that the formulation and proposal of a plan of reorganization that- provided for the continuance of the hanking business'of-the trust-company was--within -the express authorization-of-the statute.- All-the requirements of the -section with reference "to--the plan of reorganization- are shown to have been fulfilled,- and, therefore, there is nothing to prevent the plan becoming effective if the section and the plan adopted are constitutional. As was stated in Ghingher v. Pearson, 165 Md. 273, 168 A. 105 , the Emergency Banking Law, or chapter 46 of the Acts of 1933, -is -of universal application, to- alb banking institutions-a-nd credit unions-accepting .deposits-and-doing business on -March-4th,-1933, when; the: statute became-effective as emergency legislation. During the -complete:- possession, control, and management transferred- ■ by the: act and-conferred upon the bank commissioner, any banking-institution whose aggregate property; should not -bo sufficient in amount to- pay its debts',-Or which might be-un-able-"tt> pay its debts in the ordinary course-of business as-they mature:; ■ or merely because ;it might befití the custody of-the-bank-Commissioner, Could, with-the'conse-nt-of the commissioner,