State Savings Bank v. Foster

Long, J. This petition was filed to compel the receiver of the People’s Savings Bank of Lansing to pay to the petitioner 12i per cent, dividend out of the moneys in his hands as such receiver. It appears that the petiti oner holds two certificates of deposit issued to it by the People’s Savings Bank, — one for $10,000, dated March 24, 1894; and one for $5,000, dated June 3, 1896. These certificates are in the usual form, each stating a deposit in the People’s Savings Bank by the petitioner of the amount of the certificate, payable to the order of the petitioner on the return of the certificate, properly indorsed, with interest if left — 269 — for three months; no interest after a year from date, or for fractional parts of a month. These certificates, upon the insolvency of the People’s Savings Bank, were duly proved as claims against it. An assessment having been ordered by the court upon the stockholders of the People’s Savings Bank to pay depositors, this petition was filed, and claim made by petitioner that it was a depositor, and entitled to be protected as such, and to have its dividend declared the same as the other depositors. The respondent, in answer to an order to show cause issued by the court below, after setting out the certificates of deposit in question, says, among other things: “The moneys represented by the said certificates of deposit were not deposited in the People’s Savings Bank by the petitioner at any time in the regular course of the business of said bank; nor were they ever deposited in the People’s Savings Bank. The said moneys represent a sum borrowed by the People’s Savings Bank of the State Savings Bank of Detroit, which sum was placed to the credit of the People’s Savings Bank upon the books of the State Savings Bank of Detroit, against which credit so appearing upon said books the People’s Savings Bank drew its checks or drafts as its business required.” Respondent further answers that he has declared no dividends as receiver of the People’s Savings Bank excepting out of funds coming to his hands from stockholders of said bank in discharge of their individual liability as stockholders; that, when he was appointed receiver of the bank, he found from an examination of its books and papers that said bank had borrowed from time to time of other banks and bankers, and that other banks and bankers, including the petitioner in this case, had loaned to the People’s Savings Bank, at its request, sums of money aggregating $96,.000 and more; that in his application to the court for an order permitting this respondent to enforce the additional or statutory liability of stockholders, and in ascertaining or determining the sum of money necessary to be raised from stockholders to pay depositors, none of the banks or bankers from whom said — 270 — People’s Savings Bank had so borrowed sums aggregating $96,000 or more were treated as depositors in said bank. Respondent further returns that the petitioner holds, another certificate of deposit, not mentioned in said petition, dated July 10, 1896, for $8,000; and that, all the moneys put to the credit of the People’s Savings Bank having been drawn against and exhausted, the People’s Savings Bank continued to draw checks and drafts upon said petitioner bank, creating in said bank an overdraft, which amounted July 10, 1896, to about $8,000-; and that to balance said overdraft, and to stand for it, and to take the place of the money borrowed and represented by it, said certificate of $8,000 was issued. Respondent therefore says that he is advised that the - provisions. of section 3208e5, 3 How. Stat., by which stockholders of every bank are liable individually for the benefit of the depositors in said bank to the amount of their stock at the par value thereof in addition to said stock, were intended to afford security to, and the word “depositors” therein means, the class of persons who, in the regular course of business, deposit or leave in a bank temporarily, and for a period determined at their option, money; that said section was not intended to protect, and the word “depositors” therein does not mean, persons from whom a bank, upon its own application, borrows money, whether loans so made are evidenced by notes, certificates of deposit, or otherwise. Respondent further says that he is advised that the certificates mentioned in said petition no more represent deposits in said People’s Savings Bank, within the meaning of the banking law of Michigan, than does the certificate of July 10, 1896; but that all of them represent money loaned by the petitioner to the People’s Savings Bank in the regular course of the-borrowing and lending of money. On the coming in of this answer, the court below dismissed the petition, with costs in favor of respondent. Petitioner appeals from this order. Section 3808e5 provides that— — 271 — "The stockholders of every bank shall be individually liable, equally and ratably, and not one for another, for the benefit of the depositors in said bank, to the amount of their stock at the par value thereof, in addition to the said stock. * * * Such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by any receiver or other officer succeeding to the legal rights of said bank.” Section 46, Act No. 205, Pub. Acts 1887. The above section forms part of the act entitled “An act to revise the laws authorizing the business of banking, and to establish a banking department for the supervision of such business.” The act provides for two kinds of banks, to wit, commercial banks and savings banks; and the powers of each are fixed by the act, and each may receive deposits. It was the evident intent of the legislature that only those persons who should become depositors in the bank should have any claims upon stockholders under section 46, which makes stockholders liable to “depositors in said bank.” The federal banking law now in force, which provides for banks of issue, makes stockholders liable for all engagements of the bank; and our own former banking laws, which provided for banks of issue, made stockholders liable for all such engagements; but it was only in case such banks were banks of issue that the stockholders were made so liable. Under the present banking system, the powers of banks are limited to the discounting of bills and notes, loaning money, and receiving deposits; and under this system the stockholders are liable only as provided in section 46 of the act,' — -that is, to the depositors. Can this petitioner be treated as a “depositor,” within the meaning of the act? We think there can be but one answer to this, under the facts appearing from the answer, which answer we must take as true. It must be conceded that a bank, as well as a private individual, may become a depositor in another bank. Elmira Savings Bank v. Davis, 73 Hun, 357. But from the answer in this case it appears that no part of the money represented by these — 272 — certificates ever went into the People’s Savings Bank. Under the arrangement, the petitioning bank took these two certificates of deposit with the understanding that the People’s Savings Bank might draw its drafts upon it to the amount represented by the certificates, and it would .honor the drafts, or it may have credited the People’s Savings Bank in account upon its books. The certificates were simply evidences of debt, and nothing more. It might as well have held the notes of the People’s Savings Bank; the transaction would have been no different. The relation of debtor and creditor exists between the bank and every depositor therein; but the legislative intent undoubtedly was to secure to depositors, as such, a right to call upon the stockholders to the amount of the stock held by each for the payment of deposits. It was not the intent of the legislature to compel the stockholders to meet the ordinary debts of the bank. Bolles, in his work on Banks and Their Depositors, says (section 1): “While it is difficult to make an accurate definition of a deposit which shall distinguish it from every other loan, yet there are many particulars by which it may be described. A very important part of the business of banking consists in receiving, keeping, and refunding the money of persons who are called ‘depositors.’ ‘Originally, a deposit,’ says Judge Learned, ‘was a thing delivered to a person for gratuitous safe-keeping, and it remained the property of the owner. The word, however, is now used to designate a certain kind of loan; for money deposited in the ordinary way becomes the property of the bank or banker, and the deposit is a debt.’ When we attempt to state what kind of loans are properly called ‘deposits,’ we find that to some extent the original meaning of the word colors its present meaning; for there is an idea in the mind that money on deposit is lying in the bank on hand, ready to meet the demand of the owner, and that it is kept there for convenience.” It is, however, evident in the present case that this money was borrowed to enable the People’s Savings Bank to keep an account at Detroit. Each actual depositor is concerned that no fictitious depositor shall participate in a — 273 — fund to be created by an assessment upon shareholders. It is stated, and not disputed, that an assessment of 70 per cent, has been required to pay depositors, without taking into account upwards of $96,000 of like claims as this now presented. It must be held, under the facts here shown, that the transaction between the petitioner and the People’s Savings Bank was a loan by the petitioner, and not a deposit in the People’s Savings Bank, within the meaning of the banking law. The order of the court below must be affirmed, with costs in favor of respondent. Grant, C. J., concurred with Long, J.