The court expressed the further opinion that the policy of not designating as reserve agents stock exchange banks as compared with commercial banks, was sound and commendable, and was recognized by Congress in framing the Federal Reserve Act.
The court denied all of the prayers of the plaintiffs in their bill of complaint, except the one asking that the Treasurer of the United States be enjoined from converting into the Treasury the five thousand dollars interest due on the bonds of the bank on deposit as security for circulation, which had been retained upon the order of the Comptroller of the Currency to pay the penalty imposed by him upon the bank for neglect or refusal to make and transmit the special reports called for.
In regard to this the court said a temporary restraining order had been granted because the contention had been raised that if this money was unlawfully covered into the Treasury it might require an Act of Congress to get it out, which would occasion considerable delay.
The court declared that the only question at issue in this case was as to the power of the Comptroller of the Currency to assess the penalty imposed, and this question would be taken under advisement and a decision rendered by the first of July following.
Although this case was taken under advisement by the court May 21, 1915, a decision was not rendered until May 31, 1916, a year and ten days thereafter. It was then ordered that the temporary injunction restraining the payment into the Treasury of the United States of the $5,000 due the bank as interest on its bonds on deposit as security for circulation, be permanently continued.
The decision concludes as follows:
Except for the purpose of compelling payment of the interest due the bank and retained, and of enjoying the assessment of penalties because of the failure to comply with the demands for the reports the bill will be dismissed as to all the defendants.
It was contended by counsel for the plaintiff in the argument of this case that the Comptroller of the Currency had no authority to impose upon the bank the penalty of one hundred dollars a day prescribed by Section 5213 of the Revised Statutes for failure to make and transmit within five days the special reports called for. It was held by counsel that this penalty was applicable only as against failure to make and transmit what are known as reports of condition, containing a statement of the resources and liabilities of the bank, sworn to by the president or cashier and attested by at least three of the directors, which the banks are required by law to make not less than five times a year on call of the Comptroller.
In defining the Comptroller's powers in regard to requiring reports from the banks the court expressed the opinion that with the exception of Section 5240 of the Revised Statutes the most suggestive provisions of the national banking laws to aid in the interpretation of Section 5211, under authority of which the Comptroller claimed the right to call for the special reports in connection with which the five-thousand-dollar penalty was imposed, were to be found in Section 5169 of the Revised Statutes, which the court stated practically defines the word "condition" to mean every fact relating to a bank including those showing an intention to use the association for any other than the legitimate objects contemplated by the national bank act.
The court then referred to Section 3 of Chapter 290, Act of July 12, 1882, relating to the extension of the corporate existence of national banks and expressed the opinion that the exam;nation authorized by this section contemplated the same kind and scope of an examination as that provided for in Section 5169 relating to the organization of banks.
It is significant that the court should have deemed it necessary in determining this case to have referred to the section of the law governing the extension of the corporate existence of a bank and interpret its meaning at the very time the application of the Riggs National Bank for extension of its corporate existence was under consideration by the Comptroller of the Currency and Mr. Williams was seeking legal advice as to whether he could lawfully refuse to extend the bank's charter because of his pronounced and uncompromising objection to the management.
Section 3 of the Act of July 12, 1882, relating to the extension of charters of national banks reads as follows:
That upon the receipt of the application and certificate of the association provided for in the preceding section, the Comptroller of the Currency shall cause a special examination to be made, at the expense of the association, to determine its condition; and if after such examination or otherwise it appears to him that said association is in a satisfactory condition he shall grant his certificate of approval provided for in the preceding section, or if it appears that the condition of said association is not satisfactory, he should withhold such certificate of approval.
The court held that the examination required by this section is the same kind of an examination and for the same purpose as that provided for in Section 5169 of the Revised Statutes relating to the inquiry to be made by the Comptroller before granting permission to begin business.
Congress, the court held, used the word "condition" to indicate an inquiry of the broadest scope.
It is not believed that the Supreme Court of the United States would sustain the opinion rendered by Justice McCoy in his interpretation of the law relating to the discretionary powers of the
Comptroller of the Currency with respect to extensions of charters of national banks. No such interpretation as that placed upon the language of the statute by the court ever was entertained by any Comptroller since its enactment, except Mr. Williams.
John Jay Knox was Comptroller at the time the Act of July 12, 1882, was passed, providing for extensions of charters. He recommended this legislation to Congress in his annual report for 1881, and drafted the original enactment.