The opinion of the court was delivered by: LETTS
There is before the court the motion of plaintiff for summary judgment and that of defendant Wade H. Cooper for like relief. These motions relate only to the issues raised by defendant Cooper in his substituted counterclaim.
The material facts are not in dispute. The United States Savings Bank, a West Virginia corporation organized in 1906 for the purpose of engaging in a banking business in the District of Columbia, conducted its business exclusively in the District from the time of its organization until it was closed by the President's Proclamation of March 6, 1933. Defendant Wade H. Cooper was the owner of 56% of its capital stock and for many years was its president and chief executive officer.
By unanimous resolution of the Board of Directors at a meeting presided over by defendant Cooper on February 28, 1933, withdrawal of deposits payable on demand were restricted. Thereafter the bank was closed by the Proclamation of March 6, 1933, a conservator was appointed by the Comptroller of the Currency on March 14, 1933, under 12 U.S.C.A. § 203, and a receiver on February 10, 1934, under 12 U.S.C.A. §§ 191, 192, the Comptroller in each instance acting pursuant to the provisions of Title 5, Sec. 298 of the 1929 D.C. Code, Sec. 26 -- 101 of the 1940 D.C. Code.
It is disclosed by the books and records of the bank that during the four years immediately preceding the closing of the bank in 1933 the following annual dividend distributions were declared and paid quarterly to the stockholders: 40% in 1929; 30% in 1930; 30% in 1931; and 26 1/2% in 1932.
At the time of the resolution of February 28, 1933, and of the closing of the bank on March 6, 1933, 3% interest was being paid on savings deposits and no interest on commercial or checking deposits.
Since the appointment of the receiver, dividends totaling 100% of the principal amount of the depositor and creditor claims have been paid as follows: 65% June 28, 1934; 15% October 22, 1935; 10% July 25, 1936; and 10% March 15, 1938. Claims totaling $ 45,264.19, which existed against the bank at suspension, remain unproved against the receiver, but may be proved at any time prior to the closing of the receivership. The sum of $ 204,724.56 (plus $ 5,680.20 on said unproven claims) is necessary to pay the full interest dividend of 6% claimed by the plaintiff receiver to be due and owing to the depositors and creditors; and, to meet said claim, the receivership has on hand, as proceeds of the assets and collections on the stock assessment, only about $ 178,000 from which certain remaining administrative expenses must first be paid.
Defendant Cooper asks the court to find that the bank was solvent when closed; he asks that the decision of the Court of Appeals in United States Savings Bank v. Morgenthau, 66 App.D.C. 234, 85 F.2d 811, be vacated and set aside and that the judgment of this court entered upon the mandate of the Court of Appeals be vacated; he asks the court to find that the bank was arbitrarily and fraudulently liquidated; he asks that the remaining assets in the hands of the receiver be restored to the stockholders; he asks the court to prevent further dissipation and waste of the assets; he asks that the receiver be required to render an accounting; he asks the court to declare what rate of interest, if any, is due the creditors or the depositors.
To summarize the demands of defendant Cooper in his substituted counterclaim he asks the court to direct the distribution of the assets now in the hands of the receiver. It is his contention that the remaining assets, in whole or in major part, should be paid over to the stockholders and so deprive the depositors of interest on their claims.
The court finds that the substituted counterclaim of defendant Cooper is without merit. It will not be necessary to analyze in detail the various contentions which have been presented by the substituted counterclaim. In the argument, oral and written, the emphasis has been placed upon the following contentions: Defendant Cooper maintains that the business of the bank after February 28, 1929, was ultra vires and that the depositors and creditors should be denied interest from such date; he says that if any interest is allowable it should be limited to the contract rate, viz., 3% on time deposits and no interest on commercial or demand deposits; he says that no interest should in any event be paid for the period of the conservatorship.
In support of his contention that the business of the bank was ultra vires defendant Cooper cites Sec. 3131, 1932 W. Va. Code (act of February 28, 1929), which provides as follows: 'No banking institution chartered and authorized to engage in business under the laws of this State, shall hereafter install or maintain any branch bank, or engage in business at any place other than at its principal office in the State of West Virginia; or engage in any business other than as authorized in this article.'
The statute quoted does not apply to a bank such as the United States Savings Bank, legally incorporated in West Virginia for the express purpose of conducting its banking business solely in the District of Columbia. The United States Savings Bank was not engaged 'in business under the laws' of West Virginia. The bank was not subject to the supervision of the West Virginia Commissioner of Banking and was not required to make the usual reports required by West Virginia law. This seems clear from the West Virginia enactment of February 4, 1937, Sec. 3224(3), 1937 W. Va. Code. The business of the bank conducted in the District of Columbia was subject to the supervision of the Comptroller of the Currency under the National Bank Act.
The contention that the business of the bank was ultra vires may not be raised collaterally but may be raised only by the State of West Virginia in a proper proceeding. Bank of Tupelo, Miss., v. Stonum, 220 Mo.App. 152, 281 S.W. 110. See also 50 A.L.R. 1359. American Surety Company of New York v. Moran, 64 App.D.C. 127, 75 F.2d 646; Thompson v. Park Savings Bank, 64 App.D.C. 308, 77 F.2d 955.
Defendant Cooper, a stockholder, director, and officer of the bank during and after 1929, may not be heard to say that the bank exceeded its corporate powers in continuing to transact its banking business. He is estopped to deny the corporate existence of the bank or the validity of its transactions. Benefits have inured to him during the entire period in question; as is evidenced by his receipt of dividends upon his stock for the years 1929, 1930, 1931 and 1932. To permit defendant Cooper to deny the validity of the bank's transactions would be to prefer him as a stockholder and officer over depositors whose deposits were invited by defendant Cooper and those associated with him in the management of the bank. See Casey v. Galli, 94 U.S. 673, 24 L. Ed. 168; American Surety Company of New York v. Moran, supra; Thompson v. Park Savings Bank, supra; Deitrick v. Greaney, 309 U.S. 190, 60 S. Ct. 480, 84 L. Ed. 694.
When assets of an insolvent bank being liquidated under the Comptroller of the Currency are sufficient to pay more than 100% of the principal amount of depositors' claims, said depositors are entitled to interest on their claims from the date of suspension until paid, computed at the statutory or legal rate of the jurisdiction in which the liquidation is had. Elliott v. First Inland National Bank of Pendleton, D.C. Or., 32 F.Supp. 839; Richmond v. Irons, 121 U.S. 27, 7 S. Ct. 788, 30 L. Ed. 864. Interest on time and savings deposits should be computed to the date of closing at the contract rate. Cronkleton v. Ebmeier, 8 Cir., 38 F.2d 748; American National Bank of Arkansas City, Kansas v. Williams, 9 Cir., 101 F. 943. After the date of closing, ...