Mohrmann v. Fry

Edward M. Sharpe, J. The Nashville State Bank closed its doors in July, 1931, and in September, 1931, one Edward B. Finley, Jr., became permanent receiver and acted as such until May, 1933, when petitioner was appointed receiver of said bank. The money collected by the receiver was turned over to the State treasurer who in turn deposited the several remittances in five separate banks. All of these banks were closed during the banking holiday of February, 1933. Three of them later reopened and returned to the State treasurer the funds so deposited. The other two banks failed to reopen and there is now on deposit therein the sum of $119,007.39 of money collected by the receiver of the Nashville State Bank. Each of the accounts in these five banks was opened and carried in the name and official title of “State treasurer as trustee for receiver of Nashville State Bank.” The receiver was advised by the treasurer of the precise manner in which each account was opened and was notified monthly by the State treasurer of the' amount of accrued interest. The State treasurer at all times kept a separate account of all receivership funds. January 27, 1933, the circuit judge of Barry county, the court which had appointed the receiver, made an order authorizing and directing the receiver to pay a dividend of 25 per cent, and directing the State treasurer to turn over to the receiver the sum of $188,051.28 with which to pay the dividend.' Before *424 the dividend conld be disbursed to the depositors of the Nashville State Bank, the banking holiday was proclaimed by the governor. In April, 1933, the State treasurer paid over to the receiver of the Nashville Bank the sum of $69,043.89, which represented money collected by the State treasurer from the three banks that reopened. July 26, 1933, the circuit judge of Barry county entered an ex parte order upon petition of the receiver directing the State treasurer to pay over to the receiver the sum of $119,007.39 from the general funds of the State. Upon the State treasurer’s refusal, due to unavailability of funds, to comply with this order, the petitioner applied for a writ of mandamus directing the State treasurer and auditor general to pay to the petitioner the sum of $119,007.39 from the general funds of the State of Michigan. The defendants contend, first, that this action is in effect a suit against the State and therefore cannot lie; and, second, that the statute does not require the repayment of receivership funds from the gen-' eral funds of the State. Under the view we take of the case, it will be unnecessary to discuss the first question. The banking act (3 Comp. Laws 1929, § 11959) provides that upon the determination of the insolvency of any bank by the State banking commisr sioner or upon any of certain other named contingencies, application may be made to a competent court for the appointment of a receiver. The receiver may be, though need.not necessarily be, a member of the banking department. The receiver is directed to “under the direction of the court, take possession of the books, records, and assets of every description, of such bank, collect all debts, dues and claims belonging to it, and sell or compound all bad or doubtful assets and sell all the real and personal *425 property of such bank, on snch terms as the court shall direct, and may, if necessary, to pay the debts of such bank, enforce all individual liabilities of the stockholders. Such receiver shall forthwith pay over the money so collected or received to the State treasurer, and also make report to the commissioner of all his acts and proceedings.” The payment of dividends is provided for as follows (3 Comp. Laws 1929, § 11962): “From time to time, under the direction of the commissioner of the banking department, the receiver shall make ratable dividends of the moneys realized or collected by him on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction, and the remainder of the proceeds, if any, after the costs and expenses of such proceedings and all debts and obligations of the bank are satisfied, shall be paid over to the stockholders of such bank, or their legal representatives, in proportion to the stock by them respectively held; Provided however, that the commissioner of the banking department shall cause to be made an examination of the affairs and conditions of any such receivership before directing payment of any dividend or accepting final report, or at any other time he may deem an examination necessary.” While the statute does not direct the State treasurer how to make disposition of the funds or the method of repayment to the receiver for dividends; yet they have been treated for all practical purposes as special funds in the custody of the State treasurer. Obviously, this was done to distinguish them from the general funds. These funds are different than the general fund in that they are the property of a particular group of people, namely the depositors and creditors of,the Nashville State Bank, while the money in the general fund of the State of Michigan belongs to the State. Another distinction *426 is that the general fund is under the control of the legislative branch of the government while the receivership funds are under the joint control of the State banking commissioner and the chancery court. It is contended that the case of Lawrence v. American Surety Co. of New York, 263 Mich. 586 (88 A. L. R. 535), is authority that the State assumed responsibility for such funds paid to the State treasurer and became indebted for the same. But that case also held (263 Mich, at p. 607) that “as among the State, depository, and sureties, the fact that the State has taken possession of moneys pursuant to law is sufficient to constitute them State funds, although they may be held for a special purpose.” The Lawrence Case did not decide the extent of the State’s responsibility for such receivership funds. The State may become responsible to the receiver for such funds without assuming absolute liability for the same. The relationship is not such that the State cannot be relieved from liability by showing that the funds are unavailable without any fault on the part of the State treasurer. To hold otherwise would make the relationship between the State and the receiver one of debtor and creditor. Since the receivership funds never became part of the general fund of the State, there is no duty upon the part of the defendants to make reimbursement to the receiver from the State’s general fund. The writ will accordingly be denied. Nelson Sharpe, C. J., and North, Wiest, and Bushnell, JJ., concurred with Edward M. Sharpe, J.