The question presented is whether the National Bank Enabling Amendment of June 25, 1930 (12 U.S.C.A. § 90), which granted power to national banks to secure deposits of public funds, validates or makes deposits of public funds, validates or makes enforceable previous pledge agreements made to protect such funds deposited before the enabling amendment became effective.
'Any association may, upon the deposit with it of public money of a State or any political subdivision thereof, give security for the safekeeping 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.'
Before and at the time this Enabling Amendment was passed, the laws of Florida authorized state banks to give security for public deposits and also imposed upon public officials a duty to obtain such security. In 1929 and 1930, before the passage of this amendment, the First National Bank of Perry, Fla., by agreement with the officials of Taylor County, Fla., pledged collateral security for the protection of county funds thereafter to be deposited from time to time in the bank.
This contractual relationship, established by the pledge agreement and deposits made thereunder, continued to exist until the bank was closed October 18, 1930. The receiver for the closed bank at first recognized the pledge agreement as valid and enforceable and accordingly paid the county the income he received from the pledged securities. In 1935, however, the receiver filed this suit in equity in the federal District Court for the Northern District of Florida, alleging that the pledge agreement was ultra vires and illegal and praying that it be canceled and annulled. Upon motion of the county, the District Court dismissed the bill. Ross v. Knott, 13 F.Supp. 963. The Circuit Court of Appeals for the Fifth Circuit affirmed. 87 F.2d 817. This Court granted certiorari. 301 U.S. 677, 57 S.Ct. 930, 81 L.Ed. 1337.
The issues raised require that we determine:
(1) Did Congress intend to validate existing ultra vires pledges?
(2) Could this pledge agreement be validated by changing the law which was in force when the transaction was initiated?
First. The language of the amendment, read in the light of the conditions that brought about the necessity for its passage, leads irresistibly to the conclusion that Congress did intend to make existing pledges enforceable.
The amendment does not expressly exclude existing contracts from its field of operation. On the contrary it extended a general grant of the broad power to give security for public deposits, with a single limitation relating to the kind of security given by state banks. If Congress had desired to limit the remedial grant to subsequent security contracts, it would doubtless have provided an additional limitation relating to prior agreements. This it did not do. Congress alone had the power to write such a limitation in the bill.
Agreements to secure public deposits did not violate any express statutory prohibition; no statute imposed a penalty for making such agreements. Since the banking act of 1863 Congress has passed many laws requiring that security be given to protect deposits of certain public funds.
For many years Comptrollers of the Currency assumed that national banks had power to give security for public deposits and approved the practice of the banks in pledging such security. It has been, and is now, the policy of most states to require security for public funds whether deposited in state or national banks. The weight of judicial authority in the state courts has supported the doctrine that banks could pledge security for public deposits, but not for private deposits.
The Senate Committee on Banking and Currency which made a favorable report on the Enabling Amendment gave information to the Senate in its report that millions of dollars worth of collateral had been pledged by national banks as security for public deposits. The Senate and House Committee reports show that the sponsors of the amendment desired it not merely to permit future pledges but also to assure that agreements under which 'millions of dollars' of pledges had been made by national banks would be enforceable. One of the chief reasons for the enactment of the amendment was the need for validation of pledges already made. The amendment was designed to meet this need. To determine that Congress did not intend to validate pledge agreements existing when the amendment was passed would greatly limit its curative effect. Such a construction would be an unwarranted departure from the plain intent of this curative and enabling statute.