On September 28, 1921, a suit was entered in the United States District Court for the District of Maryland at Baltimore, by the United States Attorney, in the name of the Comptroller of the Currency, to annul the charter of the First National Bank of Hagerstown, Md., for violations of the national banking laws.

The court being of the opinion that the mere filing of a complaint of such a character would precipitate a run on the bank and cause irreparable injury and damage to the institution and many of its creditors, appointed National Bank Examiner Robert D. Garrett temporary receiver, until a hearing could be had on the bill of complaint and an answer thereto filed by the defendant.

Upon filing a bond with the Clerk of the Court in the penal sum of fifty thousand dollars the receiver was directed to take immediate charge of the bank and all of its assets of every character and description and to hold the same subject to the further orders of the Court, to suspend all payments, and to collect all maturing notes and obligations of every character owned by the bank. The receiver was also authorized by the Court to do and perform any and all things that were necessary or proper for him to do as receiver.

The authority of the court to appoint a receiver to take charge of a national bank pending the hearing of a complaint of the Comptroller of the Currency in a suit to forfeit the charter of the association for violations of law was seriously questioned. There was no precedent for such action. The law specifically stated the conditions under which a receiver might be appointed for a national bank, but was silent as to the method of procedure in the case of forfeiture proceedings.

In discussing with representatives of the Department of Justice, previous to the institution of the suit, the method to be followed in the Hagerstown case, the Deputy Comptroller advised them that he would arrange to have a national bank examiner in readiness to take charge of the bank in the name of the Comptroller of the Currency in the event that a run on the institution should develop when it became known that a suit had been filed to forfeit the charter of the bank. The Comptroller being fully satisfied that the bank was not in a condition to meet all demands that would be made upon it by depositors and other creditors, would have been well within his authority to appoint a receiver under such circumstances and take possession of the institution to prevent preference of creditors.

It always has been contended by the Comptroller's office that when a court of competent jurisdiction declared the charter of a national bank forfeited, the Comptroller of the Currency, under authority of such decree, could appoint a receiver for the bank to liquidate its affairs. On the other hand, it has been contended that the directors of the bank would have authority to liquidate the bank the same as if the association had been voted into voluntary liquidation by its stockholders, but no precedent or authority was known for the Court to appoint a receiver pending a hearing of a suit brought by the Comptroller to forfeit a charter

Between the date of filing of the complaint and the time fixed for a trial of the case, the United States Attorney telephoned the Comptroller's office that the president of the defendant bank was in his office and had indicated a willingness to make such changes in the management of the bank and in its personnel as would satisfy the Comptroller of the Currency, if further proceedings would be discontinued, and requested an expression of the Comptroller's views on the subject.

The Deputy Comptroller, in the absence of the Comptroller, advised the United States Attorney that the Comptroller's office had no confidence whatever in the management of the bank and was satisfied that no permanent improvement in its condition could be effected or correction be made of the abuses which had prevailed so long while the association remained in the control of the then management, and that it was his desire that the suit to forfeit the charter be vigorously pressed to a conclusion.

Later the United States Attorney telephoned that the president or his counsel now proposed to reorganize the board of directors and transfer the control of the bank to some of the best and most reputable bankers in the State of Maryland, and stated that he would submit the plan to the Court if the proposition met with the approval of the Comptroller's office.

The United States Attorney was advised in reply that the Comptroller's office would be satisfied with any plan which contemplated the entire elimination of the Wingerts from the bank, who owned or controlled a majority of the stock, the disposal of their stockholdings and the election or appointment of an entire new board of directors, cashier and minor officers, but before submitting any proposition to the Court for a withdrawal of the suit the directors should be required to execute a binding and enforceable contract specifically covering the agreement, to insure its being carried out in good faith. Later the United States Attorney and Mr. Alexander Armstrong, Attorney General for Maryland, called in person at the Comptroller's office and submitted a copy of the contract entered into by the president and directors of the bank with the parties who were to succeed them in control, by which the entire stockholdings of the Wingerts and their interests, consisting of 5,500 shares, would be disposed of and a new board of directors appointed, composed of W. B. Lowndes, first vice-president of the Fidelity Trust Company of Baltimore; Emory L. Coblentz, president of the Central Trust Company of Frederick, Md., and president of the Hagerstown and Frederick Railway, Hambleton and Company, brokers, of Baltimore; Cyrus F. Flook of Myersville, Md., connected with the Central Trust Company of Frederick, Md.; Robert H. Mc-Cauley, a prominent lawyer of Hagerstown, Md.; John P. Baer, of Baltimore, and Alexander Armstrong, Attorney General for the State of Maryland, and vice-president of a Hagerstown bank.

Upon receipt by the United States Attorney of a copy of the agreement signed by the retiring members of the board of directors, to transfer control of the bank to the parties above mentioned, the Court, on motion of the United States Attorney, ordered the temporary receiver withdrawn, and the bank was then turned over to Directors Armstrong and Baer, of the new management, who reopened it for business on the morning of October 8, 1921.

On October 17, 1921, one of the defendant directors served notice on the clerk of the Court that he intended to take an appeal from the Court's order placing the bank in the hands of a temporary receiver, pending a hearing of the suit to forfeit its charter, but no further proceedings were had in this connection. The former directors having resigned to make place for the new board and having sold their stockholdings, were no longer in a position to make an appeal in the name of the bank.

The vital question raised by the appellant in this case was whether or not, in the absence of any allegation of insolvency, the Court had a right under the circumstances to appoint a temporary receiver pending a hearing of the suit to forfeit the charter of the bank. The Court of Appeals, on motion of the United States Attorney, dismissed the appeal, and in doing so took occasion to express itself as follows:

The disposition of the case upon the motion to dismiss, makes it unnecessary to pass upon the merits of the original appointment. Without meaning so to do, we may say, in passing, that it appears to the Court that the action taken in the circumstances of this case, was not only in the discretion of the chancellor, but that the exercise thereof was wise and prudent. Pomeroy's Eq. Jur. 2nd Ed. (1919), Vol. 4, Sees. 1537, 1541, 1542. No loss was sustained by the appointment of the receiver, and it certainly resulted in averting serious consequences. The contrary course might have proven most disastrous from a financial viewpoint, to the bank and all parties in interest.

The First National Bank of Hagerstown was organized on May 2, 1865, by conversion of the Hagerstown Savings Bank, a State institution, and was successfully and conservatively conducted until the Wingert interests secured control in January, 1918. For several years following this change and preceding the institution of the suit to forfeit the charter of the bank, the records of the Comptroller's office show that the bank under the Wingert management was a most persistent violator of the law, and not only deliberately ignored the instructions of the national bank examiners at each examination, but openly and continuously defied the admonitions and repeated warnings of the Comptroller of the Currency, until the Comptroller was forced to apply to the Court for revocation of the bank's charter.

Charters of other national banks have been revoked by order of the Courts from time to time for various reasons, but the suit brought in the name of the Comptroller of the Currency to annul the charter of the First National Bank of Hagerstown was the first and only suit instituted up to that time in the history of the national banking system to revoke the charter of an active national banking association for violations of the banking laws in the conduct of its business, and the reason why no such suit was ever brought before is that Comptrollers of the Currency had regarded the penalty of revocation too severe and drastic a measure to be resorted to, in the case of a solvent bank, if there was any hope of saving the institution from compulsory liquidation because of the unlawful acts of its management. Therefore the Comptroller was very willing to accept the offer of compromise in the case of the First National Bank of Hagerstown of a complete change of management and personnel, and thus preserve an old and previously reputable and successful institution to its patrons and the community of Hagerstown.