Coffin Brothers & Co. v. Bennett

Background

In 1926 a Georgia state bank closed and the State Superintendent of Banks took over. The Superintendent notified stockholders that a 100 percent assessment on the par value of their stock was levied to pay depositors, under a Georgia Banking Act provision that lets the Superintendent issue an execution and create a lien if assessments are unpaid. Stockholders sued in equity asking a court order to stop the Superintendent, arguing the law denied them due process of law. Georgia courts sustained a general demurrer and upheld the statute.

Reasoning

The main question was whether the statute’s procedure — an execution and an automatic lien issued by a state officer before any court judgment — denied stockholders a fair chance to be heard under the Fourteenth Amendment. The Court explained that stockholders get personal notice and may file an affidavit of illegality to bring the issue to court for trial. The execution is therefore a method of starting suit, and if a defense is presented the matter is tried in court. Allowing an officer to issue the execution initially, combined with the right to a judicial hearing, satisfies due process. The Court also noted that creating a lien in advance, like an attachment, is a common practice.

Real world impact

The ruling lets Georgia bank regulators use the statutory assessment, execution, and lien procedure to seek funds for depositors while preserving stockholders' right to contest liability in court. It affirms state-court decisions upholding the law and leaves in place the power of state officials to begin collection steps under that statute.