8489. Peoples Bank (Cumberland, MD)

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VALIDITY OF BANK LAW QUESTIONED Woodin Calls Parley Today On 2 New Baltimore Banks Constitutionality Of ferred Deposits Provision Attacked At Hearing TEST CASE BEING MADE Decision Expected On Whether Will Aid Baltimore Trust And Union Trust To Acquire National Charters Arguments Are Presented Before Three Members Of Supreme Bench Preferential provisions in Maryland's emergency bank act bore the brunt of the legal attack on the constitutionality of the measure whole which opened yesterday in the Circuit Court No. here. The attack was launched hearing the injunction suit recently filed here in behalf of Craven son and Horace Wennagle positors in the Baltimore Trust Company. Judge Eugene presiding the hearing. which and adjourned tomorrow as the hour for its resumption. Sitting with Judge O'Dunne, his invitation. were Judge Eli Frank. of the Superior Court, and Judge Charles Stein. of the City Court. Attack Led By Page Charles G. Page, attorney, who led the attack on the concentrated argument against the sections which would give the city, counties and State the right to withdraw their deposits in full from banks operating under restrictions preventing the private depositor from doing the same. He held that. in connection with Institution unable to pay off its positors full, the public monies preference operated unconstitutionally deprive the individual depositor property without due process and just compensation. On similar grounds, he attacked that section of the Maryland Emergency Bank act which would allow county banks priority their deposits from banks here. also attacked the section which would release from among the frozen posits of bank any represented funds realized from the liquidation bank in receivership and deposited another bank pending distribution among the depositors of the first. Ghingher, Bank Defendants Defendants in the case are John Ghingher, State Bank on whom rests the responsibility administering the Emergency Bank act, and the Baltimore Trust Company, which holds among its deposits $2,107,347.90 of city funds. Mr. Page, who opened the argument for counsel for the plaintiffs, was lowed by Willis Jones, Deputy Marshall, City Solicitor, sel to the receiver for the Chesapeake Bank, who outlined the defendants' Characterizing the claim ority on the $2,101,347.90 holds checks for payments substantial Mr. Page asserted: "We claim in effect, but allowing to depositors who drew these checks preference which takes from other depositors the equal protection of the Received Up To February 28 The checks in question were ceived in payment of taxes by City before on February the third day of the banking holiday, and presented for deposit March "We are indignant that any such provision be inserted in the there no excuse for Mr. said. "Unless the emergency great that the city can reach down into our pockets and take what few dollars have to apply to its holy cause, the argument for falls." Mr. Jones pointed out that the law enacted under the police powers the State and was of the most pieces of legislation ing out of extraordinary conditions.' legislation under which, he said. right of private contract yield to the greatest public good.' Marshall Pleads Mistake The City Solicitor followed Mr. Jones, who explained that he opening case for his side. the Baltimore Trust Company under the jurisdiction of the United States, where this act in Marshall asked. application can only begin to apply when the Baltimore Trust Company declared unable open. Federal thority would be withdrawn and goes back to its status State bank under its charter and would liquidation under the terms of this is this so-called preference the city gets under the terms of this act? If restriction of five or ten per cent imposed general deposits and there no restriction on the checks and they are paid 100 per there will be no preference in amount. only in point of time. Both Paid In Full, Claim city will tax get payments full to take care essential requirements. Others will theirs get in stallments of ten twenty cent. the act called for per cent. (Continued Page 16) the Currency let be understood Treasury as provided in executive der of March night that as far as his office is conFRANKLIN D. ROOSEVELT." cerned. the new bank charters might be issued. 157 Of Maryland's President Roosevelt tonight issued executive order giving State bankBanks Now Operating officials the authority to appoint conservators for State banks which While the conference was are members of the Federal Reserve the White House, 157. System. per cent., of 208 banks Text Of Order This order says "Whenever the appropriate authorhaving immediate supervision banking institution located any State place subject the jurisdiction of the United States, which member of the Federal ReSystem and which has not been licensed by the Secretary the Treasury resume its usual banking functions, shall deem necessary advisable in order to conserve the of such banking institution for the benefit of the depositors or other creditors, such authority may, in accordance with the provisions of the applicable laws such State or place, appoint such appropriate official may be authorized under such laws conserve the assets of such banking institution pending further disposition its business as provided by such "This order shall not authorize any such member bank reopen for the performance usual and normal functions until shall have received license from the Secretary of the were operating either in full on restricted withdrawal basis. Nineteen here operating 100 per cent. basis and seventy-six in the counties Only county banks were open on per cent. basis Friday. The number was increased seventy-six early yesterday when John Ghingher, State Bank Commissioner, authorized the Peoples Bank, Cumberland, operate 100 per cent. basis. Previously, withdrawals from that institution had been restricted per cent. Hooper Miles, president of the Eastern Shore Trust Company, announced here during the day that he expected to make public Monday the plans for reorganization of that institution, the largest in the State outside Baltimore. Will Be Reserve Member When it reopens 100 per cent. basis, he said, will be member the Federal Reserve System. Covering ten counties with its branches, the Eastern Shore Trust Company present is operating on per cent. basis. payment to the city in insolvency there would be preference. the State inherent sovereign power in right preference in assets solvent bank where public funds are deposited.' Mr. Levy, counsel to receiver the Chesapeake Bank, told the court receiver has on deposit with the Baltimore Trust Company approximately $80,000 collected for distribution among creditors of the defunct institution. that these funds are preferred under the the emergency banking act, yielded to Mr. Page to open the plaincase. "When State passes bankruptcy he asserted, "it cannot do with regard to contracts which exist the time of passage. View Of Rights Given "What were our rights against this bank when this law was passed? fundamental that when make posit make contract with the bank for the return of my money. can bring suit to enforce its obligations statute provides for receivership by the bank commissioner. That's right of mine, because share in the proceeds of liquidation, and, in effect, the bank me. "What happens my rights when this act is passed? We have condition where an act takes away my rights, and no matter how great the emergency is the State has no right come and say: need your money' and take The State only may make regulations which may fect contract with banks in future." The State of Maryland, Mr. Page unquestionably has preference ordinary institutions' by virtue sovereignty. "But there no doubt about the point that the State loses priority bank passes into the hands of receiver," he added. suspension remedies at law against banking institutions in the new law waiver the State's preference." Not Preferred. He Says Turning to the provision in the new which makes preferred deposits bank receivers funds, Mr. Page asserted he feels "unfortunate for those who'll suffer two bites if are successful." Funds deposited by ceiver, however, are entitled to no preference, he said. "Funds deposited in bank by bank receiver." he continued, not custodia legis. By depositing them the receiver has established debt due him by the bank and he, not the to the courts under common law. The bank is nothing but debtor of the receiver and not depository of the court." Reserves of smaller banks and county banks with the large metropolitan institutions, he said, in the eyes the Constitution, the deposits individuals, and entitled no more preference than is corded the general depositors. Seventeen attorneys representing interests in the suit were seated at the trial table the day coping each of the fifty more in law cited by their colleagues in the arguments. Seated with the opposing counsel were William Lee Rawls and Arthur Jr., who were invited attend the hearing of the suit by the jurists "friends the On the side of those who brought suit, besides Mr. Page, were Wethered Barroll, Paul Higinbotham, Eldridge Hood Young and John Richardson, attorneys for the suing depositors. Besides Mr. Jones, Mr. Levy and Mr. Marshall, who spoke against the granting of the injunction, those still be heard from on that score are William Preston Lane, Jr., AttorneyGeneral, who with Mr. Jones present as counsel to John J. Ghingher, bank commissioner; William MacMillan. Leonard WilL. Marbury, Jr., representatives banks receivership; T. Howard Duckett, of Prince George's county, who will contend in favor of priority given reserve funds; Allen Davis, assistant City Solicitor, and D. Ridgely Sappington, representing the Baltimore Trust Company.