Dodson, Leo F.

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Penn State Dickinson Law: IDEAS

Volume 37 Issue 4 Dickinson Law Review - Volume 37, 1932-1933 6-1-1933 "Family Settlements" of Estates of the Dead in Pennsylvania Leo F. Dodson Follow this and additional works at: https://ideas.dickinsonlaw.psu.edu/dlra Recommended Citation Leo F. Dodson, "Family Settlements" of Estates of the Dead in Pennsylvania, 37 DICK. L. REV. 272 (1933). Available at: https://ideas.dickinsonlaw.psu.edu/dlra/vol37/iss4/6 This Article is brought to you for free and open access by the Law Reviews at Dickinson Law IDEAS. It has been accepted for inclusion in Dickinson Law Review by an authorized editor of Dickinson Law IDEAS. For more information, please contact lja10@psu.edu. DICKINSON LAW REVIEWThe agreement of compromise must be complete in it-self and not a mere plan looking to future adjustment ofdetails.20 The agreement should be in writing, signed andsealed by all the parties in interest; it should be designatedas a "family agreement"; it should contain a recital ofevents leading up to the agreement and the purpose to beeffectuated; a statement that all the debts of the testatorhave been fully paid and satisfied; and that the settlement isbased upon a "valuable consideration"; it should recite thatit is intended to be a full, final and immediate settlement ofall matters in controversy.In the construction of these agreements the courts willseek the real intention of the parties.21 If the estate con-sists of real property have the agreement acknowledged bythe parties and recorded in the office of the Recorder ofDeeds of the county wherein the property is situated.Even though such agreement be executed, the heirs mustsee that an appraisement is made of the property and aninventory filed in the office of the Register so that the DeathTransfer tax may be properly assessed.Leo F. Dodson.THE CONSTITUTIONALITY OF BANKINGRELIEF MEASURESWithin the past few months almost all of the stateshave taken drastic steps for the relief of banks. Supple-menting these steps was the Couzens Resolution in the re-cent Short Session of Congress providing for concurrentaction as to national banks by the Federal Comptroller ofthe Currency. The decree by President Roosevelt onMarch 5th closing all banks throughout the country climaxedthese relief measures. The question has been asked, "Whatis the source of authority for these legislative and executiveacts?"21Cocker's Estate, 1 Dist. Rep. 158 (1892).20Wister's Appeal, 180 Pa. 484 (1876).DICKINSON LAW REVIEWThe "bank holiday" has been accomplished in a varietyof ways. In some states the banks were closed by execu-tive decree; in others, by emergency legislation; in others,while banks were not closed, withdrawals of deposits werelimited. Finally, the Proclamation of President Rooseveltwas an executive decree, differing from the decrees of thegovernors of the several states in that the former closedstate banks as well as national banks.The following relief measures have affected banks inPennsylvania:1. The Resolution of February 27th of the Pennsyl-vania Legislature' authorizing the Secretary ofBanking not to take possession of any banking in-stitution because of the decision of such institutionnot to meet in full its liabilities for deposits. (Thusallowing banks to limit withdrawals.)2. Senate Bill No. 527 (The Sordoni Bill) approvedby the Governor March 8, 1933, which was passedto more fully effectuate the Resolution of February27th.3. Proclamation of Governor Pinchot of March 4th,closing Pennsylvania state banks on Saturday andMonday, March 4th and 6th.4. The Couzens Resolution passed by Congress dur-ing the week of February 24th which gave theFederal Comptroller of the Currency authority toregulate national banks in a given state in the same1Resolved (if the House of Representatives concur), That the Sen-ate and House of Representatives of the Commonwealth of Pennsyl-vania in General Assembly met, hereby authorize and direct the Secre-tary of Banking not to take possession of any banking institution underthe supervision of the Department of Banking of this Commonwealthbecause of the decision of such institution not to meet in full its liabil-ities for deposits made prior to the passage of this resolution or prior toany future date fixed by such institution, if such institution shall haveaccepted such terms as the Secretary of Banking shall have imposed,which terms shall include the segregation of new deposits in a separatefund available for withdrawal without limitation by the depositors mak-ing such deposits and invested only in liquid assets.Further resolved, That this resolution shall be effective immediate-ly upon its approval by the Governor.DICKINSON LAW REVIEWmanner in which that particular state regulated itsown state banks.5. The Proclamation of President Roosevelt of March5th which closed all banks, national and state, andplaced the regulation of all in the Secretary of theTreasury.The Resolution of February 27th of the PennsylvaniaLegislature was passed for the purpose of avoiding thenecessity of a bank holiday in Pennsylvania. It changedthe existing law of Pennsylvania in that where it wasformerly the duty of the Secretary of Banking to close bankswhich could not meet their obligations, the Secretary ofBanking is by virtue of the Resolution authorized to allowthem to remain open for current business though limitingthe amount of deposits which may be withdrawn. TheResolution further provided that a bank is not entitled tothis relief until it shall accept "such' terms as the Secretaryof Banking shall have imposed." The Legislature also de-clared its intention to follow up this Resolution with ap-propriate legislation. An analysis of the text of the Reso-lution, and of the Bill of Senator Sordoni, as well as of therules prescribed by Dr. Gordon, Secretary of Banking,which must be accepted by all banks who wish to availthemselves of this relief measure, discloses that the Resolu-tion and supplementary legislation are for the purpose ofprotecting creditors of banks which are insolvent, or whosesolvency is threatened, from preferences in the distributionof assets. It sets up the machinery for the administrationof the estates of insolvent banks, or banks whose solvencyis threatened, just as our Federal bankruptcy laws set upthe procedure for administration of the estates of insolventindividuals and private corporations and associations. Theadministration of the affairs of an insolvent bank really fallswithin the scope of our Federal bankruptcy laws, but be-cause of the peculiar nature of the banking business Con-gress specifically excludes banks from the operation of thebankruptcy laws.2 The administration of the affairs of aninsolvent bank is one of those rights over which Congress2Section 4, Federal Bankruptcy Act.DICKINSON LAW REVIEWmay take jurisdiction when it sees fit, and over which thestate may take jurisdiction in the absence of Federal action.The constitutionality of the power of a state to administerthe affairs of an insolvent state bank has not been ques-tioned. In normal times when a state bank fails and theDepartment of Banking closes it and pro-rates the assetsamong the creditors, the depositors are frequently not paidin full, yet the act of the state is not assailed as being an im-pairment of the obligation of contracts and thus repugnantto Section 10 of the Federal Constitution. The act of thestate is no more unconstitutional than our Federal bank-ruptcy laws, which enable the Federal courts to take juris-diction of a debtor's estate in certain instances and pro-rateassets among creditors. Here, again, creditors are not paidin full and yet we do not regard it as a violation of theproperty right of contract guaranteed under the FifthAmendment of the Constitution.Before a bank may avail itself of the Resolution andof the new Act. it must submit to certain fixed rules as laiddown by Dr. Gordon, Secretary of Banking, and theserules clearly indicate that the whole procedure is one forthe protection of assets for the benefit of creditors and notan impairment of the obligation of contracts. For example,the bank must agree to be bound by the "rules and regula-tions from time to time imposed by the Secretary," and thathe alone shall determine the interpretation thereof. Nodividends may be paid to stockholders, and directors andcommittees are not entitled to fees. New loans are pro-hibited and all new accounts must be kept completely sep-arate from the old accounts, must be held in cash or invest-ed in government securities, and must be paid in full at anytime on demand. Thus, as to new deposits the bank is real-ly only a trustee or bailee. It has no right to do a generalbanking business. The bank must supply monthly or moreoften to the Secretary of Banking a complete statement ofthe institution's financial condition. At all times the Secre-tary of Banking has the right to say to what extent with-drawals may be limited. The Secretary of Banking maycompel reduction of expenses and the decreasing of person-DICKINSON LAW REVIEWnel and the salaries of officers and employees. Only olddepositors may make deposits in the new fund, with certainexceptions. From this examination of the rules it is appar-ent that the state is not impairing the obligations of contractbut is protecting the parties to the contract. It is practi-cally closing the bank so far as distribution of assets is con-cerned. It is conserving the assets for the benefit of the de-positors. If the bank is actually insolvent, the depositorswill get their proportionate share of the assets just as if thebank had been closed outright. On the other hand, if thebank is not insolvent but takes advantage of the relief meas-ure because its solvency has been threatened, the depositorswill be paid in full as per their contracts. At most, themeasure postpones payment as per the contract, (or pro-portionate share thereof in the case of insolvency) and byno means can be said to impair the obligation of the con-tract.The Resolution of February 27th and the subsequentlegislation does not impair the obligation of contracts anymore than does the prior law which required the Secretaryof Banking to close an insolvent bank. In both instancesthe bank is insolvent, or its solvency is threatened, and de-positors are required to "stand by" until the assets may bemarshalled and pro-rated. In neither event is the contractimpaired in the sense that the amount due is lowered. Thepurpose of both is to prevent a few depositors from beingpaid in full to the exclusion of the general depositors. Theofficial act of a state in preventing preferences amongcreditors where assets cannot meet liabilities is not an im-pairment of the obligation of contracts within the meaningof Section 10 of the Constitution.Contemporaneous with the relief statutes of the var-ious states was the Couzens Resolution of Congress passedduring the week of February 24th which gave the FederalComptroller of the Currency authority to regulate nationalbanks in a given state in the same manner in which thatparticular state regulated its own state banks. This wasto promote uniformity as well as to protect national banksfrom "runs" in districts where the state banks were closedDICKINSON LAW REVIEWby state action. If the Resolution of February 27th of thePennsylvania Legislature is unconstitutional, regulation ofnational banks by the Comptroller of the Currency underthe Couzens Resolution is also unconstitutional, as being adeprivation of the property right of contract without dueprocess of law, thus violating the Fifth Amendment of theConstitution. Both resolutions are probably valid, how-ever, as neither goes further than to prevent preferences tocreditors of banks which are insolvent, or whose solvencyis threatened.The Resolution of February 27th of the PennsylvaniaLegislature indicated an intention of the General Assemblyto "enact suitable legislation more fully to effectuate thisResolution". In pursuance thereof, the Sordoni Bill, (Sen-ate No. 527) was drafted and became law upon the signa-ture of the Governor on March 8th, to be effective as ofFebruary 27th, the date of the Resolution. The preambleof the Act is as follows:"Whereas- the stress of economic conditionsthroughout the country has resulted in the closing ofmany banking institutions with resultant loss to thedepositors thereof, and,Whereas the moratoria declared in other jurisdic-tions and the widespread fear of further loss is causingcertain depositors in banking institutions in this com-monwealth to seek a preference by abnormally with-drawing funds therefrom, thereby threatening theclosing of such institutions with attendant disaster tothe remaining depositors and the community generally,and,Whereas in order to insure fair and impartialtreatment of all depositors to the preference or pre-judice of none and to safeguard the banking institu-tions of this commonwealth ..........The Act then provides that the Secretary of Bankingin his discretion may extend the period of time deposits ofany bank; he may postpone the payment of demand de-posits; and he is "authorized and directed not to take pos-session of any institution under his supervision for failureimmediately to meet its deposit liabilities ..... . .. ThisDICKINSON LAW REVIEWpower terminates after six months, but the Governor mayextend it for a period not exceeding two years. The Secre-tary of Banking is authorized to set up certain, rules whichmust be accepted by the banks before they are entitled tothe benefits of the Act.It will be seen, therefore, that this Act does not impairthe obligations of contract but merely protects assets forthe benefit of creditors in the manner indicated above inthe discussion of the Resolution of February 27th. TheResolution and the Act may be regarded as one and thesame measure, and taking them with the rules laid downby the Secretary of Banking, the entire procedure is quiteconsistent with the Federal Constitution.The Proclamation by Governor Pinchot of March 4thclosing Pennsylvania state banks on Saturday and Mon-day, March 4th and 6th respectively, may be justified onthe same ground. The right to regulate state banks is inthe police power of the state. His act of closing the banksis no more a violation of Section 10 of the Federal Consti-tution than the Resolution and Act above discussed. Ithad the same effect and purpose, namely, to conserve assetsand prevent preferences. Whether he had the authorityunder the Pennsylvania Constitution is not our questionhere. He acted for the State of Pennsylvania and inasmuchas contract rights were not violated it cannot be said thatthe State of Pennsylvania has impaired the obligation ofcontracts.As for the Proclamation of President Roosevelt ofMarch 5th closing all banks, national and state, and pro-viding for their regulation by the Secretary of the Treasury,his act was probably valid so far as the violation of theproperty right of contract is concerned. The only questionis as to whether he had the authority under the Constitu-tion to close the banks of the nation without some author-ization from Congress. It is true that within a few daysafter the Proclamation was issued Congress in special ses-sion ratified his action. Does this ratification so relate backas to supply authority for the unauthorized Act of March5th? Under the law of agency we know that an unauthor-DICKINSON LAW REVIEWized act may be ratified and that the ratification suppliesthe authority which was lacking at the time the act wasdone. Whether the President of the United States may beregarded as an agent of Congress to the extent that an actsuch as his Proclamation may be ratified at a later date isa problem which will not be here discussed. We knowthat the regulation of our currency is a Federal problem andthat. where the entire financial structure of the country is injeopardy, Congress would have authority under the Consti-tution to regulate the banks both Federal and state.3Legislative authority for the President's Proclamationhas been based upon the "Trading with the Enemy Act"of October 6, 1917, which, though passed as a war meas-ure, gave the President sufficient authority to allow him toclose banks. The law was not repealed, and the act of thePresident might well be justified thereunder. Even in theabsence of such legislative authority the proposition hasbeen advanced that the Proclamation might be sustained asan exercise of an inherent right in the Chief Executive toexercise extraordinary powers in periods of national crisis.'C. M. Strouss.THE PURCHASE MONEY TRUST ACT OF 1901 INTHE LIGHT OF THE RECORDING ACTSThe Act in question provides that purchase moneytrusts shall be void against bona fide creditors, and mort-gagees and purchasers of or from the holder of the legaltitle unless such takers had notice of the trust.'8Federal Constitution, Article 1, Section 8. McCulloch v. Mary.land. (Supreme Court of the United States, 1819. 4 Wheat. 316, 4 L,ed. 579).40 Stat. L. 411.5Wilson v. New, 243 U. S. 332, 345, 346; Block v. Hirsh, 256 U. S.135.'Section 1 of The Act of 1901. P. L. 425; 21 Purd. Stat. Sec. 601provides: "Whenever hereafter a resulting trust shall arise with respect

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Family Settlements of Estates of the Dead in Pennsylvania

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