21 P.2d 164 | Cal. Ct. App. | 1933
The Bank of Oakley is a commercial and savings bank organized and existing under the laws of the state of California. On December 19, 1930, the Superintendent of Banks took possession of the Bank of Oakley for the purpose of liquidating its affairs in accordance with the provisions of section 136 of the Bank Act of this state. (Deering's Gen. Laws, 1931, Act 652.) At that time the County of Contra Costa had on deposit with said bank the sum of $12,240.63 in the commercial department and the sum of $12,280.62 in the savings department. Each of these deposits was secured by the pledge of certain bonds in accordance with the provisions of the County and Municipal Deposit Act (Stats. 1927, p. 1388, as amended, Stats. 1931, p. 2223.) The County of Contra Costa presented and filed, in the form prescribed by law, claims covering both deposits. These claims were allowed and approved by the Superintendent of Banks as secured claims against the said commercial and savings departments, but the Treasurer of said county was notified by the said Superintendent of Banks that the said claims were allowed without right to participate in dividends declared until after the exhaustion of the security, and that thereafter dividends on said claims *205 would be paid only after the security was exhausted, and then only on the amount of the deficiency.
On May 15, 1931, after the claims of said county had been presented and allowed as aforesaid, a dividend of twenty-five per cent was declared and allowed upon all general claims against each of the commercial and savings departments of said bank, and on December 1, 1931, a dividend of twenty per cent on all general claims was declared against the commercial department of said bank and another dividend of fifteen per cent was declared upon all general claims against the said savings department.
The said superintendent refused to make payment of dividends to said county on its claims for said deposits until the said securities were exhausted; and then only on the deficient sum which remained after exhausting said securities. Upon being excluded from participating in said dividends the said county filed a petition asking for an order of the court directing the said superintendent to pay dividends upon the full amount of its secured claims in the same amounts paid to the general creditors. After a hearing upon an agreed statement of facts the court made and entered an order denying the petition, and rendered judgment thereon against the said county. From this order and judgment the said county has appealed.
[1] The question presented for decision on this appeal is what rule shall be applied by the Superintendent of Banks, in determining the dividends that shall be allowed creditors of the closed bank who are secured by pledged bonds. There are two rules by which the federal and state courts have been guided in the determination of this question. One of these rules is known as the "bankruptcy rule". Under this rule a creditor of a closed bank having a secured claim must first exhaust his security and credit the proceeds upon his claim, or credit the value of his security thereon and prove for the balance, or he may surrender his security and prove for the full amount of his debt. The other is called the "chancery" or "equity rule". This rule permits the creditor to prove for and receive dividends upon the full amount of his claim regardless of the collateral held by him and regardless of any sums received by him from the collateral after the transfer of the assets of the insolvent debtor, provided, however, such secured creditor shall not receive more than the full sum due him. *206
While this question has been passed upon by decisions in the federal courts and in many of the state courts, some of them adopting the bankruptcy rule and others the chancery rule, it has never been passed upon by the Supreme Court of this state. In the case of In re Farmers Merchants Bank, the Fourth Appellate District (63 Cal.App. Dec. 653 [292 P. 665]) held that the equity rule should apply. However, the Supreme Court granted a rehearing and in passing thereon the court held that the order from which the appeal was taken was not an appealable order, and so holding declined to pass upon the question whether or not the chancery rule or the bankruptcy rule should prevail in this state. (In re Farmers Merchants Bank,
We approve the following language used by the District Court of Appeal in its opinion in the case of In re Farmers MerchantsBank, supra: "It would therefore seem clear that in California a pledge is given and received as collateral security for the payment of the entire debt and not any divisible part or portion thereof. It is as much security for the first dollar of the obligation as it is the last dollar of the debt which may remain unpaid after the application of credits derived from other property of the debtor. We cannot see how the pledge holder can be compelled to treat the pledge as a security for a portion of his debt only in the absence of a statute which might be construed as a part of the contract, compelling him so to do. Also in the absence of any mandate of the law changing the general rule, we cannot see how the fact of the debtor being a bank, the affairs of which are being administered by the Superintendent of Banks can change the general rule. The rights and obligations of the parties to a pledge are fixed by the contract under the provisions of law, and the Bank Act being silent upon the subject, the rights and obligations of the parties must remain the same after the commissioner of banks entered the transaction as they were before that event."
It seems clear that the application of the bankruptcy rule would invade the vested rights of appellant which it acquired when the contracts for the deposits were executed, for by these contracts appellant was given the right to retain the pledged bonds and participate equally with the other creditors of the bank in the funds realized from the liquidation of its unpledged assets, and in the event that the said assets were insufficient to satisfy the debt then appellant had the right to resort to the pledged bonds to make up the deficiency.
This was so held in the case of Merrill v. National Bank ofJacksonville,
In Chemical Nat. Bank v. Armstrong, 59 Fed. 372 [28 L.R.A. 231], Judge Taft delivering the opinion said: "He [the creditor] had two securities for the payment of his debt, one of which he held in common with all the creditors, the other of which he had obtained by lawful contract from his debtor." In this same case Judge Taft also said, referring to Amory v. Francis,
[3] Respondent calls our attention to the County and Municipal Deposit Act (Stats. 1927, p. 1388) under which these deposits were made, which provides that ". . . in the event that any said bank or banks of deposit shall fail to pay such deposits, or any part thereof, on the demand of the treasurer then it shall be the duty of such treasurer to forthwith recover upon or convert said notes or bonds into money and to disburse the same according to law". *209
(Sec. 5.) Under the equity rule this provision can be of no avail to respondent, because that rule provides that the creditor holding collateral security shall receive dividends upon the full amount of his claim regardless of any sums received by him from the collateral after the transfer of the assets of the insolvent debtor. (Merrill v. National Bank of Jacksonville, supra;Aldrich v. Chemical National Bank,
[4] Respondent contends that under the provisions of sections
We are of the opinion that the equity or chancery rule should be applied in this case, and so concluding we consider it unnecessary to lengthen this opinion by the discussion of other matters raised by appellant.
The order and judgment thereon dismissing the order to show cause are reversed, with directions to the trial court to grant the petition of appellant and ordering respondent to pay it twenty-five per cent on each of its claims against the said departments of said bank, and twenty per cent additional on its claims against the commercial department thereof, and fifteen per cent additional upon its claims against the savings department of said bank.
Knight, Acting P.J., and Cashin, J., concurred.
A petition by respondent to have the cause heard in the Supreme Court, after judgment in the District Court of Appeal, was denied by the Supreme Court on June 13, 1933.
Langdon, J., dissented. *211