Argument for Petitioner. 291 U.S. F. & G. Co., 22 F. (2d) 644, cert. den., 276 U.S. 637; Parks v. Knapp, 29 F. (2d) 547, cert. den., 278 U.S. 660; Burrowes v. Nimocks, 35 F. (2d) 152; Baltimore & Ohio R. Co. v. Smith, 56 F. (2d) 799; Texas & Pacific Ry. Co. v. Pottorff, 63 F. (2d) 1; Illinois Central R. Co. v. Rawlings, 66 F. (2d) 146; Feather v. School District, June 7, 1933, Dist. Ct., Western Dist. of Penna.; Friend v. School District, October 19, 1933, Dist. Ct., Western Dist. of Penna.; Evans v. New Haven Bank, September 21, 1933, Dist. Ct., Dist. of Conn.; Pottorff v. Road District, 62 F. (2d) 498; Fidelity & Deposit Co. v. Kokrda, 66 F. (2d) 641; Mays v. Board of Comm'rs, 164 Okla. 231; Interstate Nat. Bank v. Ferguson, 48 Kan. 732. The amendment of June 25, 1930, to § 5153, Rev. Stats., clarified and enlarged, but did not limit the powers previously possessed by national banks to pledge assets as security for the deposit of public moneys of States or political subdivisions thereof. Sen. Rep. No. 67, 71st Cong., 3d Sess.; H.Rep. No. 1657, 71 Cong., 2d Sess. See Pottorff v. Road District, 62 F. (2d) 498; dissenting opinion in case at bar. Also 58 F. (2d) 341, 347; Fidelity & Deposit Co. v. Kokrda, 66 F. (2d) 641. State banks in Illinois have this general power. There is no constitutional or statutory prohibition of any kind. Ward v. Johnson, 95 Ill. 215, upholds the power. This decision has never been questioned, but long been relied upon. No subsequent legislation has been inconsistent with it. The inherent power of banks to pledge assets as security for deposits of public funds is generally recognized. McFerson v. National Surety Co., 75 Colo. 482; First American Bank & T. Co. v. Palm Beach, 96 Fla. 247; Schornick v. Butler, 185 N.E. 111; Richards v. Osceola Bank, 79 Iowa 707; Interstate Nat. Bank v. Ferguson, 48 Kan. 732; U.S. Fidelity & G. Co. v. Bassfield, 148 Miss. 109; French v. 262 Argument for Petitioner. School District, 223 Mo. App. 53; Consolidated School District v. Citizens Savings Bank, 223 Mo. App. 940; Ainsworth v. Kruger, 89 Mont. 468; Melaven v. Hunker, 35 N.M. 408; Smith v. Lansing, 22 N.Y. 520; Application of Broderick, 140 Misc. Rep. 861; In re Bank of Spencerport, 143 Misc. Rep. 196; State Bank v. Stone, 261 N.Y. 175; Page Trust Co. v. Rose, 192 N.C. 673; Snider v. Fulton, 44 Ohio App. 238; Mays v. Board of Comm'rs, 164 Okla. 231; Maryland Casualty Co. v. Board of Comm'rs, 128 Okla. 58; Mothersead v. U.S. F. & G. Co., 22 F. (2d) 664; Cameron v. Christy, 286 Pa. 405; Ahl v. Rhoads, 84 Pa. 319; Grigsby v. Peoples Bank, 158 Tenn. 182; Pixton v. Perry, 72 Utah 129; Millard County School District v. State Bank, 80 Utah 170. Cf. Williams v. Hall, 30 Ariz. 581; Williams v. Earhart, 34 Ariz. 565; Bliss v. Mason, 121 Neb. 484; Bliss v. Pathfinder Irrigation Dist., 122 Neb. 203. The courts in the following States, denying this power, represent the minority view. Arkansas-Louisiana Highway Imp. Dist. v. Taylor, 177 Ark. 440; Arkansas County Road Imp. Dist. v. Taylor, 185 Ark. 293; Wood v. Imperial Irrigation Dist., 216 Cal. 748; Commercial Bank & T. Co. v. Citizens T. & G. Co., 154 Ky. 566; Farmers & Merchants State Bank v. Consolidated School Dist., 174 Minn. 278; Divide County v. Baird, 55 N.D. 45; Foster v. Longview, 26 S.W. (2d) 1059; Austin v. Lamar County, 26 S.W. (2d) 1062. Cf. op. of Alschuler, J., in this case, 64 F. (2d) 731; and Grigsby v. Peoples Bank, 158 Tenn. 182; First American Bank & T. Co. v. Palm Beach, 96 Fla. 247. State statutes, generally, recognize that the public welfare demands that public funds deposited in banks be adequately protected, and have utilized the power of banks to pledge their assets as security for public funds. Opinion of the Court. 291 U.S. In any event, the Receiver of the Bank can not, after the pledge has been fully executed and deposits made in reliance thereon, come into a court of equity and disaffirm the transaction consummated in good faith while the Bank was solvent. Messrs. Hosea V. Ferrell and John Hay, with whom Mr. Charles C. Murrah was on the brief, for respondents. By leave of Court, briefs of amici curiae were filed as follows: by Messrs. William Cattron Rigby, Fred W. Llewellyn, Serafin P. Hilado, and Kyle Rucker, on behalf of the Philippine Islands; Messrs. William H. Sexton and Leon Hornstein, on behalf of the City of Chicago; and Mr. Leland K. Neeves. MR. JUSTICE BRANDEIS delivered the opinion of the Court. The Act of June 25, 1930, c. 604, 46 Stat. 809, amends § 45 of the National Bank Act of 18641 by adding thereto the following: "Any association may, upon the deposit with it of public money of a State or any political subdivision thereof, give security for the safe-keeping and prompt payment of the money so deposited, of the same kind as is authorized by the law of the State in which such association is located in the case of other banking institutions in the State." The controlling question is whether Illinois has conferred upon banks organized under its laws power to pledge assets as security for deposits of public moneys of political subdivisions of the State. In 1931, the city of Marion, Illinois, was operating under the "Commission Form of Government." Cahill's 1931 Rev. Stat., Chap. 24. Pars. 323-384. That statute 1Act of June 3, 1864, c. 106, § 8, 13 Stat. 101; R.S. 5336; 12 U.S.C. § 24, Seventh. 262 Opinion of the Court. required the treasurer of a city to give a bond; and to "make his daily deposits of such sums of money as shall be received by him from all sources of revenue whatsoever, to his credit, as treasurer of said city . . . in one or more banks to be selected by the president of said council, the commissioner of accounts and finance, and the treasurer of such city . . . or any two of them, and any such bank before any such deposit is made therein. . . shall also execute a good and sufficient bond with sureties to be approved by the president of said council and conditioned that such bank will safely keep and account for and pay over said money. (Par. 374.) ... Carroll having been appointed treasurer of Marion, applied to the Fidelity and Casualty Company of New York to become surety on his official bond. Although Marion has a population of 9,000, it was then without a bank. The Fidelity Company agreed to become surety on Carroll's bond provided he would get elsewhere a bank which would give satisfactory collateral security for the repayment of his deposits of the public moneys. The City National Bank of Herrin agreed to do this. Thereafter, it delivered to the Continental Illinois National Bank and Trust Company of Chicago, as escrow agent, negotiable bonds of the par value of $23,000, under an agreement so to secure the City's deposit; the Fidelity Company executed Carroll's official bond; and he made his initial deposit in the Herrin bank of the City's moneys. That bank was then solvent. On October 31, 1931, it failed and a receiver was appointed. At the time of the failure the City's deposit was $16,430.00. Ben Sneeden, the receiver, brought, in the federal court for eastern Illinois, this suit against the City, its treasurer, the surety and the escrow agent. Setting forth the above facts, he prayed that the pledge be declared ultra vires and void; that the bonds be delivered to him as receiver; and that, meanwhile, the defendants be enjoined from dis posing of them. 58 F. (2d) 341. Opinion of the Court. 291 U.S. The District Court dismissed the bill. Its decree was reversed by the Circuit Court of Appeals, one judge dissenting. 64 F. (2d) 721. This Court granted certiorari. The petitioners contend that the pledge is valid because the Act of 1864, as originally enacted, conferred upon national banks, as a necessary incident of the business of deposit banking, the power to pledge assets to secure deposits; and that the amendment of June 25, 1930, did not limit the power so originally conferred. They contend further that even if the 1930 amendment be construed as denying to a national bank power to make such a pledge unless it is located in a State which grants the power to its state banks, the pledge here challenged is valid, because in Illinois, state banks have the power to pledge assets as security for deposits of public moneys of any political subdivision of the state. The petitioners contend also that even if the pledge was without authority in law, the bill was properly dismissed by the District Court, because the bank could not have required return of the bonds without repaying the deposit and that it would be inequitable to permit the receiver to do so. We think these contentions are unsound. First. For the reasons stated in Texas & Pacific Ry. Co. v. Pottorff, decided this day, ante, p. 245, we are of opinion that the Act of 1864 did not confer the power to pledge assets to secure any public deposits except those made under § 45 by the Secretary of the Treasury of the United States. The power conferred by each later act, except that of 1930, was limited to securing specific federal funds. A national bank could not legally pledge assets to secure funds of a State, or of a political subdivision thereof, prior to the 1930 amendment; and since then it 2 * See Texas & Pacific Ry. v. Pottorff, ante, p. 245, note 11. |