137 P. 182 | Idaho | 1913
This is an appeal from an order made in the matter of the receivership of the Boise State Bank, Ltd., an insolvent bank and trust company. An affidavit was filed in the district court showing that the Boise State Bank was a banking corporation existing under the laws of the state, and at all times mentioned prior to December 19, 1911, was engaged in the banking business under the laws of the state; that on December 19, 1911, Y. W. Platt was the duly appointed, qualified and acting bank commissioner of the state of Idaho, and at that time took charge of the affairs of the bank and its books and assets to wind up its business and to collect all debts due and claims owing to said bank, and that on the same day the district court made an order that the receiver take over into his possession the books, records and assets
Pettengill filed an answer, and in the answer denies the deposit stated in the petition as having been made on November 10, 1910, and that said bank promised and agreed to repay the petitioner the sum named six months thereafter with interest at four per cent per annum until paid, except as further alleged; and also denies that on November 3, 1911, or at any other time there was due upon the certificate of deposit the sum of $14,144.14, or that the petitioner agreed with bank to extend the time of payment four months; and denies that the bank agreed to pay petitioner interest on said certificate and the money due thereon at the rate of eight per cent, except as further alleged; and also denies that the claim was allowed and approved for the sum of $14,144.14, with interest from November, 3, 1911, at eight per cent, but alleges the fact to be concerning the presentation of said claim as set forth hereafter. It is then alleged that on February 16, 1909, Blackman, the petitioner, made a deposit in the bank in the sum of $12,440.43, payable to the order of himself as set forth in a certificate of deposit received by him on that date on return of said certificate properly indorsed six months after date, with interest at five per cent per annum, or, if paid before maturity, with interest at four per cent per annum, said sum to draw no interest after maturity, and said sum to be not subject to check; that on September 1, 1909, Blackman surrendered the certificate and received in its place and stead a certificate of deposit bearing date September 1, 1909, certifying that Blackman had deposited in the Boise State Bank, Ltd., $12,777.34, being the said original deposit of $12,440.43, with interest at five per cent per annum from February 16th to September 1st, 1909, or $336.91 added thereto, payable to the order of Black-man on return of certificate properly indorsed six months after date, with interest at five, per cent per annum, or if paid
Upon this record the trial court issued an order: “That the said Ben Q. Pettengill, as special deputy bank commissioner of the state of Idaho, and as receiver in the matter of winding up the affairs of the Boise State Bank, Limited, an insolvent bank and trust company, do pay to the said "William H. Blackman the dividend of ten per cent heretofore declared by this court upon the claim filed by the said Blackman.” This is the order from which this appeal has been taken.
On March 6, 1905, the legislature of the state enacted House Bill No. 167 (Sess. Laws 1905, p. 175). In that act •provision was made for the appointement of a state bank commissioner, and sec. 39 relates to the involutary liquidation of bankrupt banks, and that the bank commissioner “shall proceed to administer the assets of the bank in accordance with law.” The entire procedure of payment of dividends is left to the order of the court bound by the requirements of law as generally applied and administered in such cases. There was no provision in the statute of any limitations of the procedure and there was no statutory direction or limitation whatever.
See. 47 of that act provides: “That in the event of insolvency or bankruptcy of any person, firm, copartnership or corporation maintaining, operating or conducting a bank or a banking department or doing business within the meaning of this act, depositors of such bank or banking department shall have a first and prior lien on all the assets of such bank or banking department, and in the distribution of such assets or the proceeds thereof, the same shall first be applied to satisfy the amount due such depositors.” This section also makes provision that “the depositors of any such bank or subordinate bank or banking department shall have a first and prior lien upon all the assets of such bank, or banking department where such deposit was made or credit extended, and in the distribution of such assets or the proceeds thereof, the same shall first be applied to satisfy the amount due such depositors.” Sec. 47 of the act of 1905 was
When the banking law of March 1, 1911 (Sess. Laws 1911, p. 386), was enacted, see. 66 was placed in the act, which provides: “No creditor or creditors of any individual banker or of individual members of any copartnership doing a banking business in this state shall be permitted to attach or seize under writ of attachment or execution or to hold liable for such individual indebtedness any of the assets of the bank until all the depositors and creditors of such bank have been fully paid.”
Under this provision counsel for respondent contend that the law of 1905 directs that the assets be administered in accordance with the law, and that the legislature has not changed that law up to the time covering the failure of the Boise State Bank, and that the bank’s certificates of deposits were surrendered from time to time as they fell due, and new ones issued, the last bearing date November 6, 1911, and that the certificates issued to Blackman continued in full force and effect as the original unsecured debt, and that the renewals of certificates of deposit and the giving of a mortgage to secure the indebtedness of the bank on the bank’s real property did not change and remove the effect of the first certificate. This court does not feel inclined to follow this rule, and during this opinion we will further discuss this question.
Referring now to secs, 65 and 66, chap. 124, Laws of 1911, pp. 405 and 406, sec. 65 provides:
“In the event of insolvency or bankruptcy of any person, firm, copartnership or corporation maintaining, operating or conducting a bank or trust company doing a banking business, or doing business within the meaning of this act, depositors of such bank or trust company shall have the first and prior lien on all assets of such bank or trust company,*317 and in the distribution of such assets or the proceeds thereof, the same shall first be applied to satisfy the amount due such depositors. ’ ’
Sec. 66 provides: “No creditor or creditors of any individual banker or of individual members of any copartnership doing a banking business in this state shall be permitted to attach or seize under writ of attachment or execution or to hold liable for such individual indebtedness any of the assets of the bank until all the depositors and creditors of such bank have been fully paid.”
By these two provisions above referred to, we have no doubt but that the legislature intended to give depositors a preference over all creditors and to place the depositors on an equal footing. The provisions are silent as to preferences among depositors, but class all depositors together; preferences or unequal advantages among depositors are not sanctioned, and the only conclusion is, and we think this court is fully justified in holding, that the statute places all depositors in a class, and that distribution of assets under the statute to depositors is to be made ratably, and that it was not intended by the legislature that one depositor should be given any advantage or benefit by reason of a security he may hold for a deposit, and thereby withdraw from the general assets a dividend on his accumulated claim the same as depositors who have no security, because the result would be an advantage over the general depositors, and he would receive more than his ratable share of the assets. (5 Cyc. 570.)
Blackman filed certificate of deposit No. 1271 and presented his claim against the above-named bank and Platt, state bank commissioner as receiver, upon said certificate of deposit No. 1271, claiming $14,144.14, the same being $13)483.60, with interest of $660.50 to November 3, 1911, at five per cent per annum, and claiming interest at eight per cent per annum on said sum of $14,144.14 from November 3, 1911, and claiming that said sum was secured. The trial court entered an order directing Pettengill, as deputy bank commissioner and receiver, to pay to the said Blackman the
It will thus be seen that the trial court classed Blackman as a depositor of the bank without any security, and thereby allowed him to remove and set aside $12,000 worth of property from the general assets, and allowed him to set up that same $12,000 as a part of his claim of $14,144.14 against the remaining assets of the bank, and Blackman was allowed to enforce his whole claim against the other assets, irrespective of the value of the special security acquired by the lien. This decree of the trial court is clearly erroneous and in violation of the provisions of chap. 124, secs. 65 and 66, Laws of 1911. These provisions above quoted state the same rule that the courts have universally followed, where there were no statutes governing, in determining that dividends should be declared out of the general assets after the secured creditors have withdrawn the amount of their security.
Chief Justice White, in his dissenting opinion in Merrill v. National Bank of Jacksonville, 173 U. S. 150, 19 Sup. Ct. 368, 43 L. ed. 647, in dealing with this question says:
“Thus a secured creditor who takes collaterals maturing on the same day with the debt owing to himself, which collaterals consist of negotiable notes, the makers of which and indorsers upon which are pecuniarily responsible, finds the collaterals promptly paid when deposited for collection, and if his debtor should become insolvent the day after payment, the creditor could only claim for the residue of the debt still unpaid. On the other hand, a creditor of the same debtor, the debt to whom matures at the same time as that owing the other creditor, and is secured by collaterals also due contemporaneously, has the collaterals protested for nonpayment, and when the debtor fails the collaterals have not been realized. While the first debtor who had received first-class collateral can collect dividends against the estate of his insolvent debtor only for the unpaid portion of the claim, losing a part of such residue by the inability of the estate to pay in full, the debtor who received poor collateral collects dividends out of the general assets on his whole*319 claim, and, if lie eventually realizes on his securities, may come out of the transaction without the loss of one cent. These illustrations, to my mind, adequately portray the inequality and injustice which must arise from the application of the rules of distribution now sanctioned by the court. ’ ’
This opinion of Justice White was concurred in by Justice Harlan and Justice McKenna. Judge Gray, a member of the court, also dissented, and says:
“I cannot avoid the conclusion that, under every act of Congress directing the ratable distribution among all creditors of the estate of an insolvent person or corporation, and making no special provision as to secured creditors, an individual creditor holding collateral security from the debtor on part of the estate in course of administration is not entitled to a dividend upon the whole of his debt without releasing the security or deducting its value; and that therefore the judgment of the circuit court of appeals should be reversed.”
This rule announced by Justice Gray, which is the correct rule where the conditions are such as he relates in his conclusion, is applicable to the facts in the present case, as Blackman is attempting to collect his entire full claim, and the security he has is withdrawn from the general assets of the bank, and Blackman is claiming a dividend on his entire claim, without reference to the security he holds, and he has made no effort to enforce the security he holds, which is a mortgage and could be foreclosed and the property sold and the amount that would be secured from the sale, less the expenses and costs, that Blackman would receive, could have been credited upon his entire claim, and thereby the general creditors would have been benefited to the extent of the credit of Blackman.
This same rule is also considered by the house of lords in the case of Societe Generole de Paris v. Geen, L. R. 8 App. Cas., p. 606: “Under ordinary circumstances each creditor is at liberty to pursue at his discretion the remedies which the law gives him; but when insolvency intervenes, and the debtor is unable to pay his debts, the position of all parties
Justice Story, in 1845, in Re City Bank of New Orleans, 3 How. (U. S.) 292, 11 L. ed. 603, in discussing the same question involved in this case, on p. 315 of 3 How. says: “If they have a pledge or mortgage therefor, they may apply to the court to have the same sold, and the proceeds thereof applied toward the payment of their debts pro tanto and to prove for the residue.”
In the case of Merrill v. Nat. Bank, supra, Justice White calls attention to the change that has taken place in Great Britain with reference to the distribution of the assets of an insolvent estate: “ ‘The same rule shall prevail and be observed as to the respective rights of secured and unsecured creditors, and as to debts and liabilities provable .... as may be in force for the time being under the laws of bankruptcy with respect to the estates of persons adjudged bankrupt.’ So that now, in Great Britain, in all proceedings involving the distribution of an insolvent fund, a secured creditor can only prove for the balance which may remain after deduction of the proceeds or value of collateral security.”
Several of the courts, in considering the method of distribution where the creditor holds collateral for his claim, hold that he can sell his collateral or take into account its value and prove for the residue. (5 Cyc., p. 571; Wurtz v. Hart, 13 Iowa, 515; Security Invest. Co. v. Richmond Nat. Bank, 58 Kan. 414, 49 Pac. 521; Rogers v. Citizens’ Nat. Bank, 93 Md. 613, 49 Atl. 843; Merchants’ Nat. Bank v. Eastern R. R. Co., 124 Mass. 518; Vanderveer v. Conover, 16 N. J. L. 487; Searle v. Brumback, 2 Ohio Dec. 653; Win-ton v. Eldridge, 3 Head (Tenn.), 361; In re Frasch, 5 Wash. 344, 31 Pac. 755, 32 Pac. 771.)
In connection with the rule announced by the authorities cited above, and sees. 65 and 66 of chap. 124, Laws of 1911, sec. 5900, Rev. Codes, which is a part of Title 12 of Proceedings in Insolvency, provides as follows:
“When a creditor has a mortgage or pledge of real or personal property of the debtor, or a lien thereon, for securing the payment of a debt owing to him from the debtor, he must be admitted as a creditor only for the balance of the debt, after deducting the value of such property, to be ascertained by agreement between him and the assignee, or by a sale thereof, to be made in such manner as the court or judge may direct; or the creditor may release or convey his claim to the assignee, upon such property, and be admitted to prove his whole debt. If the value of the property exceeds the sum for which it is so held as security, the assignee may release to the creditor the debtor’s right of redemption thereon on receiving such excess; or he may sell the property subject to the claim of the creditor thereon, and in either ease the assignee and creditor respectively must execute all deeds and writings necessary or proper to consummate the transaction. If the property is not sold or released, and delivered up, the creditor must not be allowed to prove any part of his debt.”
Under this latter section when read with the subsequent act, chap. 124, Laws of 1911, we think there can be no question whatever but that the plaintiff in this case was not permitted to receive the dividend ordered to be paid by the district court.
Counsel for respondent has cited a number of cases to the effect that the rule never has been otherwise than a rule peculiar to bankruptcy and utterly rejected as being a part of the English common law. Those cases perhaps state the correct rule governing the facts under the common law and in equity, but the legislature of this state has refused to
It follows from this opinion that the trial court erred in allowing Blackman’s claim against other assets and not against security; the mortgage was in Blackman’s possession and still is held by Blackman, as against an asset of the ■bank, and his claim is against the general assets, and he had not taken steps to foreclose the same at the time the bank closed, or thereafter, or before he filed the elaim. There was not a ratable distribution of the assets of the bank. He was not entitled to a dividend of ten per cent the same as other depositors who held no security.
The record in this case shows that a dividend of ten per cent upon all of the approved claims has been declared and ordered paid by the court in the above-entitled matter, but that the receiver and special deputy commissioner, Ben. Q. Pettengill, declines and refuses to pay and has not paid to the petitioner any sum whatever, and this action was brought for the purpose of securing a judgment requiring the commissioner to pay said dividend. Blackman should be required to proceed and foreclose his mortgage and have the mortgaged property sold as provided by law, and apply the net proceeds of such sale, after paying the court costs of
The judgment is reversed, and the trial court is directed to enter judgment in accordance with this opinion. Costs awarded to appellant.