Before BIGGS, Chief Judge, and MARIS, GOODRICH, McLAUGHLIN, O'CONNELL, and KALODNER, Circuit Judges.
This appeal involves a dispute between a bank (Colonial Trust Company, appellant) which is acting for all the shareholders of a defunct national bank, and another bank (Fidelity Trust Company) which is trustee under the will of a shareholder of the defunct bank who died prior to the happening of the events here related. The issues concern the proper distribution among the shareholders of funds available after the creditors and depositors had been fully paid. The individual shareholder's trustee won in the court below.
A 100% assessment was made upon all the shareholders of the defunct bank when it became insolvent in 1931. One of these shareholders was the estate of John A. Harper. Mr. Harper had held 693 shares of the bank's stock (per value $50) and the assessment was $34,650. This, with interest up to the critical date about to be described, brought the total claim to $35,654.85. On May 16, 1962, the trustee tendered to the Receiver of the defunct bank all the assets in the Harper estate in settlement of the claim. These assets, consisting entirely of listed corporate shares and an interest in certain mortgages, are said to have been worth, at the time, $32,759.12. We do not know that the Receiver agreed that they were worth that much, but that seems to be the value put upon them in the inventory by the trustee at the time. It is, however, the market value as of May 14, 1932, which the parties to this case have stipulated. The Orphans' Court of Allegheny County stated as to the settlement: "The balance of the fund in the hands of the trustee * * * will be distributed to the Receiver * * * in full satisfaction of his claim * * *." After deducting administration expenses, the Receiver took assets valued, in the way described above, at $30,159.98 as against the $35,654.85 then due. The stock of the closed bank was awarded to the trustee of the Harper estate at the nominal sum of $1.
The National Bank Act authorizes a receiver to compromise the individual liability of a shareholder, with the approval of the Comptroller of the Currency and a court of competent jurisdiction.*fn1 The approval of the arrangement in this case by the Comptroller of the Currency came January 7, 1935 and approval by the District Court February 13, 1935. In the meantime, the value of the securities which came to the Receiver from the Harper estate had greatly increased. At the time of the final confirmation by the Court on February 13, 1935, they were worth $42,783.35.Things had gone well in the settlement of the affairs of the bank also. As receivership progressed its creditors were paid, the remaining assets were turned over by the Receiver to the appellant bank as agent for the shareholders, and beginning in 1943 distributions were made to the shareholders.*fn2 By March 3, 1945, three distributions had been made totalling $12.24 per share. The appellant, however, refused to pay to the Harper trustee any part of this distribution until the dividends which that trustee otherwise would have received were sufficient to make up the difference between the amount of the original assessment against the Harper estate and the value of what the Harper estate paid the Receiver as of May 16, 1932. Appellant also added to the amount due from the Harper estate interest on the unpaid portion from November 21, 1931, the date of the assessment, until it was paid by the dividends credited to the Harper account.
The appellant's argument in justification of its refusal to pay the trustee of the Harper estate in the same way it has paid dividends to the other shareholders of the defunct bank rests on the doctrine of consideration at common law. The appellant says that the payment of 1932 was not a compromise but a payment on account and did not discharge the Harper estate's liability to the Receiver. It says that such payment could not be a discharge because there was no consideration for accord and satisfaction. The reason there was no consideration, the argument runs, is because the trustee gave property of determined value to the Receiver. If the property had been of undetermined value, like the hawk or the robe or the beaver hat talked about in the old books, it is admitted by the appellant that the payment of a chattel could have constituted discharge of the debt. But not so, it is said, when the parties have determined the value of the property which is turned over to the creditor.
The argument is interesting, but does not settle the question here. There is no need to dispute the well known common law rule that there is no consideration for payment of a liquidated claim by a lesser sum. Restatement, Contracts § 76 (1932). Assuming the appellant is right when he says that property transferred at a value fixed by the parties cannot discharge a debt for a greater sum than the value fixed, we do not find that the parties made any valuation here. An Orphans' Court inventory indicates no agreement by a creditor that the property was worth what the inventory showed. We do not think that the common law rule of consideration contended for by the appellant fits the facts of this case as we see them.
More important, however, is that the appellant's argument ignores the wording of the statute which has to do with the authority of receivers of defunct national banks. The statute*fn3 gives the receiver of the bank authority to compromise the shareholder's liability either before or after judgment. We do not think that the term "compromise" as used by Congress is to be put in the straitjacket of common law rules respecting consideration. What Congress was after here, it seems to us, was to give authority to the receiver to close up claims against shareholders of failed banks. The safeguard for compromises made by receivers is found in the necessary approval by Comptroller and court. To limit the authority thus given by the artificial common law concepts of consideration would seem to us an unfortunate departure from the purpose of the statute. The turning over of Mr. Harper's estate to the Receiver was, just as it purported to be, a full settlement of the Receiver's claim against the Harper estate on the assessment.
When did this compromise of the Harper liability become effective? That is not so easy a question.The statute, as we have said above, authorizes the receiver to compromise, with the approval of the Comptroller of the Currency and a court of competent jurisdiction. There can be no doubt that the statutory approval is essential to completion of the compromise settlement. A strong argument can be made that the approval, when given, validates the settlement as of the time the receiver and shareholder made it.*fn4
We think, however, on full consideration, that the compromise is to be given effect as of the date of District Court approval. This result is, first, harmonious with the wording of the statute already quoted. It recognizes also the status of the Comptroller of the Currency as the federal official primarily responsible for the conduct of the receivership.*fn5 The Comptroller's regulations specifically indicate that official's understanding that final statutory approval must precede an effective compromise.*fn6 An analogy may be drawn to the case of a receiver in bankruptcy whose proposed sale of property of the bankrupt estate does not become effective until court approval is obtained.*fn7 The appellant concedes that the compromise settlement has but the effect of an offer until the statutory approval is given. Cf. Griggs v. Baumer, 3 Cir., 1942, 130 F.2d 899. The effective acts for acceptance are the approval of Comptroller and court. This supports a conclusion that the time the bargain becomes effective is the time when such approval is given.
Moreover, in this case, the Receiver took over all of the Harper assets and held them for more than 2 1/2 years before requesting approval of the settlement. If the securities had declined in value and the Comptroller had disapproved the settlement, there is no doubt that the Harper estate would have continued liable to the Receiver for the deficiency in the payment of its assessment.*fn8 It seems to us the equitable result that the increase in value which occurred during that time should accrue to the benefit of the shareholder.
We think, therefore, that the settlement was not legally complete until February 13, 1935 when the District Court order was made. At that time there was no discrepancy between the Harper estate's debt and its payment. There was, therefore, no reason to postpone payment of dividends to the estate's trustee, and it was entitled to share pro rata with other shareholders whose assessments had been paid in full.
Argument has been made by both sides as to what interest is owed and from when. If we are right in what we have said so far, the only dispute about interest concerns the period between May 16, 1932, the date when all the assets of the Harper estate were turned over to the Receiver, and February 13, 1935, the date when the settlement became final. Interest up to May 16, 1932, was included in the settlement and was taken care of by its approval. We think no other interest should be charged to the Harper estate. When the trustee of that estate turned over all its assets to the Receiver on May 16, 1932, it had done everything it could to pay the assessment. From that day the Receiver had full control of the securities and was entitled to collect the income on them. The question of ...