Anderson v. Baskin & Wilbourn

Stevens, J., delivered the opinion of the court. (After stating the facts as above). The only question for decision is whether the liquidator, in administering upon and winding up the estate of an insolvent banking establishment under the supervision of the chancery court should ditribute the assets pro rata to depositors and general creditors, or should he give priority to the guaranteed depositors. The answer to this question is determined by the provisions of the Bank Guaranty Act. The issue here raised is occasioned by different interpretions of the act itself. The statute we are now called upon to construe is lengthy, and is divided into 69 sections. About the only sections which shed any light upon this controversy are sections 23, 24, 36, 38, 59, and 60. By sections 23 and 24 a fund is created from assessments levied upon all state banks to guarantee all deposits not otherwise secured, or, to state differently, to indemnify simple or primary depositors. Section 38 defines the beneficiaries of the guaranty fund. Sections 36 and 60 provide for the distribution of the assets and the procedure for liquidating the bank’s affairs. By — 95 — section 59 double liability is imposed upon the stockholders in favor of depositors. A reading of this statute will show that depositors who are not otherwise secured are made safe in their deposits in two ways: First, by section 59 the stockholders are individually liable “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.” Secondly, by section 38 “all deposits not otherwise secured shall be guaranteed by this act.” Under the procedure outlined by sections 36 and 60 tbe bank examiner, on finding a bank to be insolvent, is charged with the duty of taking charge of the institution and of winding up its affairs. In so doing the act provides that he shall issue to each depositor a certificate, evidencing the depositor’s claim, bearing six per cent, interest per annum, and that in the insolvency proceedings dividends shall be declared upon these interest-bearing certificates. He is further charged with the duty of causing “notice to be given by advertisement in such newspaper as he may direct weekly, once a week for six consecutive weeks, calling on all persons who may have claims, but not 'including deposits shown by the books of the bank which shall prima facie be a proven claim against the bank, against such corporation, to present the same to the bank examiner and make legal proof thereof, at a place and within a time to be specified in this notice, not less than ninety days from the date of the first publication of the notice. ’ ’ Also, ‘ ‘ shall mail a similar notice to all persons whose names appear as creditors upon the books of the corporation.” He is charged with the duty of auditing, allowing, or rejecting the claims of each and every “claimant or depositor.” One sentence in section sixty declares that: — 96 — ‘ ‘ Claims presented and allowed after the expiration of the time fixed in the notice to creditors shall he entitled to share in the distribution only to the extent of.the assets in the hands of the bank examiner at the time claims are filed, without allowance for previous distribution. ’ ’ He is required to make in duplicate “a full and complete list of the claims,” and his “inventory and list of claims shall be open at all reasonable times to inspection.” The act then expressly provides: “At any time after the expiration of the date fixed for the presentation of claims, the bank examiner may, out of the funds remaining in his hands after the payment of expenses declare and pay one or more dividends to creditors, and as soon as practicable thereafter, he shall declare and pay a final dividend. . . .Objections to any claims or deposits . . . may be made by any party interested. . . .• Whenever the bank examiner shall have paid to each and every depositor and creditor of such corporation whose claim or claims as such creditor or depositor shall have been duly proven and allowed, the full amount of such claims, . . . the bank examiner shall call a meeting of the stockholders.” etc. We have underscored words indicating that simple creditors are to be paid along with depositors. At the stockholders’ meeting called by the examiner an agent or agents are to be selected to wind up the affairs of the corporation, and provision is made that if there are dividends or unclaimed deposits remaining unpaid in the hands of the examiner for six months after the order for final distribution, the same shall be deposited in one or more of the state depositories to the credit of the bank examiner “in trust for the several depositors in and creditors of the liquidated bank.” Any interest earned by the money held by him in trust may be applied toward defraying the expense incurred in distributing unclaimed deposits or dividends “to the — 97 — depositors and creditors entitled to receive the same.” We quote so freely from the act itself for the purpose of directing attention to the fact that the legislature used the word “creditor's” advisedly. There would rarely be occasion for taking charge of any bank which is not insolvent. The main purpose accomplished by the guaranty feature is to indemnify simple depositors against loss brought about by insolvency. If then, the contention of appellant is sound, it would follow that in most instances the assets of insolvent banks would be consumed in first paying the guaranteed depositors, and the general creditors would get nothing. We .do not believe the legislature intended to produce such a result. The act expressly declares that the guaranty provided does not apply to bills rediscounted, to bills payable, to money borrowed from its correspondents or others, or to deposits bearing a greater rate of interest than four per cent, per annum. The construction insisted upon by appellant would result practically in outlawing these large and honest obligations of the bank. If a bank in failing circumstances borrows large amounts from its correspondent to avert insolvency proceedings, these generous lenders and benefactors of the bank, in event of a crash, could receive no dividends until the depositors are paid in full. Even a judgment against the bank would avail nothing until the depositors are satisfied. It is a matter of common knowledge that a going banking establishment owes many legitimate obligations other than its liabiliay to simple depositors. The point contended for would violate thp time-honored principle of equity that if two creditors, one secured and the other unsecured, proceed against a certain fund or property of the joint debtor' insufficient in value to pay both claims, and the secured creditor has a lien on other and different property of the common debtor, the unsecured creditor may generally compel the other first to exhaust his security. We do not say that the legislature might not provide that the depositors should " — 98 — first be paid' out of tbe bank’s assets, or that tbe state guaranty fund should first pay the depositors and then be given a first lien upon the bank’s assets. Our view is that the legislature has not so provided, and did not so intend to provide. The only authority in support of appellant’s contention is certain language employed in the latter part of seition 34 and the decision of the Oklahoma supreme court in Lankford v. Oklahoma Engraving Co., 35 Okl. 404, 130 Pac. 278, and Lankford v. Schroeder, 147 Pac. 1049. L. R. A. 1915F, 623. There appears some difference between the Oklahoma and the Mississippi statutes. The opinion in the Oklahoma court in the first-named ease says: “Section 323, Comp. Laws 1909, provides that the state - shall have, for the benefit of the depositors’ guaranty fund, a first lien upon the assets of any defunct bank or trust company, and all liabilities against the stockholders, officers, or directors thereof, and against all other persons, corporations, or firms; and that such liabilities may be enforced by the state for the benefit of the depositors’ guaranty fund. The effect of this statute is to make the state a preferred creditor until any deficiency in the guaranty fund, created by the payment therefrom of the depositors of an insolvent bank, is made up. After that, any remaining assets of the bank become available for the purpose of being prorated and distributed among the general creditors of the bank.” The Oklahoma plan is for the depositor to be paid in ’cash out of the state guaranty • fund or to have issuel interest-bearing treasurer’s certificates, and after the depositors are paid, the state officials take over the assets of the bank for the purpose of restoring to the treasury the money advanced in paying depositors or of liquidating the treasurer’s certificates. Under the Mississippi plan the officers in charge of the bank must first realize upon the assets of the bank and exhaust the — 99 — double liability . of the stockholders, and after he “shall have paid all funds so collected in dividends to the creditors, he shall- certify all balances due on guaranteed deposits (if any exists) to the board of bank examiners, who shall then upon his approval of such certificates, draw checks upon the state treasury, to be countersigned by the auditor of state, payable out of the bank depositors’ guaranty fund in favor of each depositor for the balance due On such proof of claim.” By this plan the “balance due” is certified to and paid out of the guaranty fund, and the amount of this balance is not attempted to be ascertained, and cannot be ascertained until the assets of the bank have been realized upon and all creditors paid pro rata as far as the assets go. This is a simple but thoroughly equitable plan. By this plan the depositors are safe. They first have a right to share in the common assets'. They are next given the right to proceed against the stockholders for the double liability provided by the statute, and -then, if they are not made whole, any balance due is guaranteed by the state fund if there is any delay, their certificates are bearing interest at six per cent., the lawful rate. They ultimately get every dime of their deposits, with legal interest. There is then a difference in the Oklahoma and the Mississippi statutes, and a difference in the procedure outlined. The fact that the chancery court is given jurisdiction to administer the insolvent estate and to allow or disallow claims of all creditors manifests a legislative intent to distribute as far as it will go the assets of the bank amongst all beneficiaries; first to do exact justice by and between all creditors. If it then develops that the depositors are .not paid in full, they are given relief. against the shareholders of the bank and the right to participate in the guaranty fund. This is consistent with the idea that the guaranty fund is security only. There is one sentence ’in the latter part of section ’34 that would appear to support appellants’ contention. — 100 — This, however, is a general statement, and if construed as giving the guaranteed depositor priority, it would be in direct conflict with other more specific language of the act, detailing the manner of liquidating the bank, paying creditors, and certifying the “balance due” to the state officials. There would be little use in making the stockholders liable to depositors, and there would be little meaning in this provision of the statute, if the construction contended for by appellant is to prevail. This construction in its practical operation would simply mean that the state would first pay the depositors and then claim a first lien upon the assets of the bank. In doing this the state would certainly have no right of action against the stockholders. Section 59 does not undertake to make the stockholders liable to the state. The provisions of the statute whereby depositors receive interest-bearing certificates would mean little if the depositors have a right forthwith to demand and receive payment out of the guaranty fund. Such is not the scheme outlined by the statute itself. Affirmed.