120 Kan. 620 | Kan. | 1926
The opinion of the court was delivered by
This is a proceeding in mandamus to compel the bank commissioner to sell bonds pledged as evidence of good faith by certain member banks under the bank guaranty law for the payment of certain unpaid assessments levied by the bank commissioner against such banks, and, under the declaratory judgment act, for the interpretation of the provisions of the bank guaranty law as to the liability of banks once members of the guaranty fund, but which had voluntarily withdrawn therefrom, or had liquidated their affairs and ceased to do a banking business. The seventeen banks whose bonds, or money deposited in lieu thereof, are sought to be sold in this action, were made parties defendant and have filed returns and answers. The question now arises upon a motion by the plaintiff to strike out portions of the answers of the defendants, and upon a motion of plaintiff for judgment upon the pleadings, notwithstanding the answers and returns.
The legislature in 1909 (Laws 1909, ch. 61) enacted what is commonly known as the bank guaranty law. Its general design was to provide a fund arising from assessments upon banks, out of which should be paid to depositors in any failed member bank the amount of their deposits not paid by its assets. Membership in the scheme was voluntary and was accomplished only upon application to the
The law provided that when a bank which was a member of the scheme failed, the bank commissioner should take charge and proceed to liquidate the bank by one of his deputies, or a receiver appointed by him. On taking charge he at once issued to depositors entitled thereto certificates upon the bank depositors’ guaranty fund for the amount of their respective deposits, which certificates bore interest at the rate of six per cent per annum. No payments were made to the holders of these certificates from the bank depositors’ guaranty fund until the bank was finally liquidated, which ordinarily takes about two years. Each failed bank had creditors, other than depositors, who were not entitled to certificates on the guaranty fund, and in some instances certain creditors had preferred claims. The assets of the failed bank, as they were liquidated, after the paying of the expense of the liquidation, were distributed, first, to the payment of preferred claims; and second, to the payment, pro rata, of all creditors of the bank. The amount of such payments, made to depositors to whom certificates on the bank depositors’ guaranty fund had been issued, were credited upon such certificates, and the balance was then due and payable by the bank commissioner from the bank depositors’ guaranty fund. If such fund was insufficient, or became depleted below a sum named, the bank commissioner then, levied one or more assessments, not exceeding five
Passing upon plaintiff’s motion to strike, the answers of several of the defendants contain general allegations, in substance that the administration of the guaranty fund and the liquidation of failed member banks by the bank commissioner, or under his direction, had been inefficient, wasteful, and in some instances illegal, in that the liquidation of the failed member banks has been much more expensive than necessary; that the assets of such banks have been dissipated, sold for less than their value, and that certificates on the guaranty fund have been issued to persons not depositors as defined by the statute, and not entitled thereto; with the result, (1) that the assets of failed member banks have not paid as large a percentage upon the certificates on the bank depositors’ guaranty fund given to depositors of such banks as they should have paid; and (2) that there is a greater number and amount of certificates against the bank depositors’ guaranty fund than there should be; and it is averred that had the liquidation of failed member banks been properly handled, the expenses of such liquidation kept down, and the assets properly collected and disbursed, and had certificates on the guaranty fund been issued only to depositors rightfully entitled thereto, the assessments upon member banks provided by law for the purpose of the bank depositors’ guaranty fund would have been ample for that purpose, and there would have been no necessity of selling the bonds pledged of member banks. Since, under the plan outlined by statute, the bank depositors’ guaranty fund is liable only on certificates drawn thereon in favor of depositors lawfully entitled thereto, and only for the difference between the face of such certificates, with interest, as provided by statute, and the amount credited thereon from the assets of the failed member bank, it necessarily follows that a member bank has such an interest in the bank depositors’ guaranty fund that it may, in a proper case, inquire as to whether or not the liquidation of failed member banks has been conducted with waste, and whether certificates have been issued other than toe depositors lawfully entitled thereto. Passing upon a similar question, under the bank guaranty law of Nebraska, the supreme court of that state, in State v. Farmers State Bank, 103 Neb. 194, said:
“Each of such banks has an interest in the proper administration and distribution of the fund. If it appeal's that' by reason of an error or mistake of*625 law on the part of a public officer, the depositors’ guaranty fund is about to be depleted, any such bank may intervene to protect itself and all other banks contributing to the fund.”
But we do not regard an inquiry of that character appropriate in this proceeding. The allegations of the answers upon these matters are general in their terms rather than specific, and we do not regard it proper in this cause, upon such general allegations, to institute and conduct a minute inquiry into the manner in which each failed member bank has been liquidated, nor to undertake a detailed examination of each certificate heretofore issued by the bank commissioner on the bank depositors’ guaranty fund to ascertain whether or not the person to whom such certificate was issued was a depositor within the meaning of the law and lawfully entitled thereto. Such an inquiry is foreign to the real purpose of this proceeding, which seeks an interpretation of the statute as bearing upon the legal rights and liabilities of the parties. Hence the motion to strike will be sustained, but this ruling will not preclude any member bank, or group of member banks, from maintaining a proper action to investigate and have determined the matters here referred to.
The statute provided several methods by which a bank which had once become a member of the scheme might cease to be a member bank, either by action voluntary on its part, or by action of the bank commissioner for cause. Some of these statutory provisions have been amended from time to time. The specific provisions of the statute necessary to be considered in this connection, with the amendments thereto, are as follows:
“Sec. 5. A penalty of fifty per cent of the amount of said assessment shall be added to the assessment of any bank not remitting as aforesaid within thirty days after receipt of notice of such assessment from the bank commissioner, and if any bank, which shall have been assessed and notified as aforesaid, shall fail to remit the amount of said assessment as herein provided, a sufficient amount of its bonds (together with the unexpired coupons) shall be immediately sold by the bank commissioner at public sale and the proceeds used to pay said assessment. Any balance remaining from the proceeds of' such sale after the payment of such assessment shall remain to the credit of the bank in the depositors’ guaranty fund. The said balance, together with the remainder of the bonds (or cash in lieu thereof), shall be forfeited to the bank depositors’ guaranty fund if the bank does not, within sixty days from default in payment of such assessment, remit the full amount of such assessments and penalty to date, and restore the amount of its bonds, or money pledged, as evidence of good faith. Upon the bank’s failure to remit its assessments according to the terms of this act, the bank commissioner shall im*626 mediately examine such bank, and if it is found in his judgment to be insolvent, he shall take charge of and liquidate said bank according to law. If said bank be found solvent, the bank commissioner shall cancel its certificate as a guaranteed bank, and cause to be displayed in its banking rooms, in a conspicuous place, continuously for- six months, a card not smaller than twenty inches by thirty inches, and in large, plain type, reading as follows: ‘This bank has withdrawn from the bank depositors’ guaranty fund and the guaranty of its deposits will cease on and after -.’ The date on this card shall be a date six months after the first posting of such card.
“Any bank electing to withdraw from the bank depositors’ guaranty fund may do so by giving notice to the bank commissioner and displaying a card as aforesaid, and at the expiration of the six months as aforesaid may receive its bonds (provided always that said bank shall have paid assessments in full to date) when the affairs of all failed banks in liquidation at the expiration of said six months shall have been closed up and the bank shall have paid its assessments on account of same.’]. (Laws 1909, ch. 61, § 5; R. S. 9-205.)
“Sec. 9. A solvent guaranteed bank, upon retiring from business and liquidating its affairs, shall be entitled to receive back from the state treasurer [after all the depositors in such bank have been paid in full] its bonds or money pledged, after all depositors in such bank and all assessments on account of the guaranteed banks in liquidation have been paid in full, but not any part of any unused assessments that may be in the bank depositors’ guaranty fund; [provided, however, that should such bank be turning over its business to another bank, it shall not receive back its bonds, or money deposited in lieu thereof, until the bank receiving its business shall have deposited with the state treasurer bonds, or money in lieu thereof, according to the requirements of this act.]” (Laws 1909, ch. 61, § 9, as amended by Laws 1911, ch. 61, § 3; R. S. 9-209.)
“Sec. 11. If at any regular or special examination of a guaranteed bank it shall be found to be violating or failing to comply with any [of the] provisions of this act, the bank commissioner shall notify the bank and require it within [the bank may be given] thirty days [in which] to comply with such provisions; [the provisions of this act] and if at the expiration of such [this] time compliance has not been had, [such provisions have not been complied with], the bank commissioner shall cancel its certificate of membership in the bank depositors’ guaranty fund as herein provided, and forfeit to said guaranty fund its bonds deposited with the state treasurer for the benefit thereof [of the bank depositors’ guaranty fund.] Such cancellation of membership and ■forfeiture of bonds shall not relieve such bank from the payment of assessments levied on account of banks that failed; nor that were in charge of the bank commissioner prior do the cancellation of such membership.” (Laws 1909, ch. 61, § 11, as amended by Laws 1923, ch. 72, § 3; R. S. 9-211.)
For brevity we shall hereafter refer to' these as sections 5, 9 and 11. Section 5 has not been amended; sections 9 and 11 have been. As here printed, they were originally enacted including the words in brackets, but omitting the words in italics. As amended, the words in brackets were omitted and the words in italics were used.
The questions in this case relate to the liability of member banks for assessments to replenish the bank depositors’ guaranty fund depleted by payments to holders of certificates on that fund'issued to depositors of banks in liquidation at the time the member, bank elected to withdraw from the fund, as provided in the latter part of section 5, or had liquidated its affairs, as provided in section 9, or had failed to pay its assessment and had been put out under the first part of section 5, and the rights of such banks to have their bonds pledged, or money in lieu thereof, returned to them.
It is contended on behalf of the plaintiff that when a bank once becomes a member bank, and other member banks have failed, by reason of which certificates on the bank depositors’ guaranty fund have been issued by the bank commissioner to depositors, all of the banks members of the guaranty fund at the time such bank failed are liable for whatever assessments may be necessary to replenish the bank depositors’ guaranty fund under the assessments provided in the statute until all of such certificates are paid in full, even though the bank has ceased to be a member bank and the amount required is in excess of the value of its bonds pledged, or money deposited in lieu thereof. In other words, it is the contention of plaintiff that certificates issued on the bank depositors’ guaranty fund must, at all events, be paid in full, and that there is no limitation upon the liability of member banks, even though they cease to be member banks, for the payment of assessments made as the statutes provide, until such certificates on the bank depositors’ guaranty fund have been paid in full. With this contention we cannot agree. There is nothing in the bank guaranty act which creates what we usually term a personal liability on member bánlcs. .Their liability is limited, first by the number of assessments that may be made in any calendar year, and the rate of such assessment, and the sum upon which it shall be computed; and, ■second, by the bonds pledged, or money deposited in lieu thereof, as evidence of good faith that they will, on their part, carry out the provisions of the act. If anything were needed other than an ex-
It may be observed that the sections of the statute quoted, generally speaking, provide two circumstances in which a member bank may voluntarily get out from under the provisions of the guaranty act: (1) When it voluntarily withdraws from the scheme, but continues in the banking business, in the manner provided by the latter portion of section 5; and (2) when it voluntarily liquidates its affairs and goes out of the banking business, as provided in section 9. The statute also provides two general conditions under which a bank shall be put out from under the provisions of the law: (1) When it refuses to pay its assessment, a penalty of fifty per cent is added and enough of .its bonds pledged sold to pay such assessment, and if it continues to refuse to pay, all of its bonds are forfeited to the bank depositors’ guaranty fund; the bank is then to be examined, and if found insolvent, to be liquidated, but if found solvent it is to be put out of the scheme as a member bank; and (2) under section 11, when, at any regular or special examination of the bank it is found to be violating the provisions of the bank guaranty act, its bonds are to be forfeited to the bank depositors’ guaranty fund and it is to be put out of the scheme as a. member bank.
Referring now to the forced putting out of the scheme and the-voluntary withdrawal, under section 5, this difference is noted: When the bank is forced out of the scheme and is still a solvent,, going bank, its bonds pledged are forfeited to the bank depositors’’ guaranty fund and it has no further liability under the act, and this-is true without regard to the condition of the bank depositors’ guar
Turning now to the more specific questions before us. The defendant, the Osage County Bank, became a member bank August 11, 1909, and pledged bonds of the value of $2,000 as its evidence of good faith. On February 13, 1924, acting under the latter part of section 5 of the act, it elected to withdraw and displayed the card fixing the date of August 27, 1924, when its deposits would cease to be guaranteed. During the time it was a member bank it paid all of the assessments made upon it for the benefit of the bank depositors’ guaranty fund. At the time it ceased to be a member there were in the hands of depositors of failed member banks certificates on the bank depositors’ guaranty fund, less dividends already paid on same from the assets of such failed member banks, in the sum of $4,388,225. The bank depositors’ guaranty fund was depleted by the payments on certificates so previously issued, and on November 10, 1924, the bank commissioner made an assessment, upon all member banks, including the Osage County Bank, of one-twentieth of one per cent upon their average guaranteed deposits, amounting to $168.33 on the Osage County Bank. A similar assessment was made on November 24,1924. Neither of these assessments was paid by the Osage County Bank. In this proceeding the plaintiff seeks to
This defendant contends that the proceeding outlined in the first part of section 5 is not appropriate for the sale of its bonds, and this contention is correct. It is not contemplated by the statute that the bonds of a bank which voluntarily withdrew should be forfeited in toto for the nonpayment of an assessment, and that the bank should then, if found to be solvent, be put out from under the operation of the law by the bank commissioner. It is out from under the law by its own act, and its bonds pledged are liable only to the extent necessary to pay assessments to the bank depositors’ guaranty fund, because of the depletion of such fund, and to pay certificates issued to depositors of failed member banks in liquidation at the time it withdrew. The bonds should be sold as any other property pledged for a specific purpose, and only so much of them as is necessary to pay the assessments made. If, because of the denomination of the bonds, it is not possible to sell exactly enough to pay the two assessments of $168.33 each, enough should be sold to pay such assessments, and any surplus should remain with the pledged fund until necessary, if it should- become necessary, to pay other assessments to replenish the bank depositors’ guaranty fund because of the payment of certificates to depositors of failed member banks in liquidation at the time this bank withdrew from the operation of the law. What is said with reference to the Osage County Bank applies also
The situation of the defendant, the Wichita State Bank, is a little different. Plaintiff alleges that it voluntarily withdrew from the fund, and other facts placing it substantially in the same class as the Osage County Bank, but this defendant denies that-it withdrew from the fund, and alleges that it was put out from under the operation of. the law by action of the bank commissioner in accordance with the provisions of the first part of section 5. So far as the relief. sought in this case, is concerned, we do not regard it material which way the bank went out from under the operation of the law, for it is alleged and admitted that since that time assessments to replenish the bank depositors’ guaranty fund to enable it to pay certificates drawn thereon to depositors of failed member banks then in liquidation is more than sufficient to consume the bonds it had deposited with the state treasurer. Hence, as to this bank, the order will be that all of its bonds pledged as an evidence of good faith be sold and the proceeds applied upon the assessments shown by the pleadings to have been made against this bank, and the bank be thereby relieved from further liability under the law. The plaintiff alleges that the bonds pledged of this bank'are not sufficient to pay its proper share of the sum necessary to replenish the bank depositors’ guaranty fund by reason of certificates issued thereon to depositors of failed member banks in liquidation at the time this bank withdrew, or was put out of operation under the act, and that the bank should be held liable for the balance of such assessments now made, and which may be necessary to be made, in order to pay such certificate holders in full. With this contention we cannot agree. There is no personal liability upon the bank. Its liability was limited by assessments made while it was a member and by its bonds which it pledged as an evidence of good faith, and when that lia
The State Saving and Mercantile Bank of Wichita became a member bank August 2(3, 1909, and pledged bonds of the value of $7,500 as its evidence of good faith. On June 12, 1922, it liquidated its affairs by paying its depositors and creditors in full and surrendered its authority to do a banking business. It did not turn its business over to any other bank. On that date there were outstanding certificates on the bank depositors’ guaranty fund which had been issued to depositors of failed member banks then in liquidation, less dividends then paid from the assets of such bank, in the sum of $1,151,539.56. Regular and special assessments were made by the bank commissioner upon the average guaranteed deposits of member banks November 29, 1922; January 15, 1923; January 15, 1924; November 10 and November 25, 1924, which on this bank amounted to $719.93 each, amounting to $3,599.65, to reimburse the bank depositors’ guaranty fund to enable it to pay the balance due upon such certificates. By this action plaintiff seeks to require the present bank commissioner to declare forfeited and sell the bonds pledged of this bank and apply the proceeds to the payment of such assessments. This defendant contends that it is entitled to have its bonds returned to it under the provisions of R. S. 9-209, as that section of the law now stands, and in support of that contention cites the case of Mississippi Banking Department et al. v. Adams, 137 Miss. 127, where the court had before it for construction section 40 of the bank guaranty law of Mississippi, which is identical with our present statute, R. S. 9-209. It was there said:
“This section is perfectly plain and unambiguous, and practically construes itself. It says that a guaranteed bank upon retiring from business shall be entitled to receive from the state treasurer its bonds after all its depositors have been paid in full, and after it has paid all assessments on account of the guaranteed banks in liquidation. It has to pay nothing more than the assessments that have been made against it under this banking law. It is not liable for any fund under this act until an assessment has been made against it.”
It may be conceded that this section is open to the interpretation given it by the supreme court of Mississippi when interpreted as a part of the original bank guaranty law of that state without the same having been amended. But in view of the amendment made to section 9 of the original act in this state, that construction is not tenable. Section 9 of the original act provided, in substance, that a
The act of 1911 (Laws 1911, ch. 61), which amended section 9 of the original bank guaranty law, also amended other material
The statute is hardly contractual in its nature, anyway. It was originally enacted, and the successive changes from time to time have been made in it, under and by virtue of the police power of the state. (Noble State Bank v. Haskell, 219 U. S. 104; Assaria State Bank v. Dolley, 219 U. S. 121; Spokane & Eastern T. Co. v. Hart, 127 Wash. 541; Wirtz v. Nestos, 200 N. W. 524 [N. D.].) The obligations are imposed as statutory obligations rather than contractual obligations. Even certificates issued by the bank commissioner to depositors on the bank depositors’ guaranty fund are not negotiable instruments in the sense that term is used in the negotiable instruments act, but simply evidence statutory rights and obligations. (State v. Home State Bank of Dunning, 201 N. W. 971 [Neb.]; State, ex rel. Davis, v. Kilgore State Bank, 112 Neb. 856; Kidder v. Hall, 113 Tex. 49.)
Had plaintiff immediately on the passage of this act of 1911 liquidated its affairs, paid its creditors and any assessments previously made from the guaranty fund, surrendered its certificate of authority to do business as a bank without turning its business over to a bank
It is argued that a member bank pays assessments to the bank depositors’ guaranty fund, not to depositors of failed member banks. This is correct. But, under the statute no payments are made from the bank depositors’ guaranty fund to holders of certificates drawn^ thereon in favor of depositors of a failed member bank until such bank has been liquidated, which, experience has shown, averages about two years. Hence, when there is a failed member bank in process of liquidation, to the depositors of which certificates have been issued on the bank depositors’ guaranty fund, there is a contingent liability upon that fund. It is- argued that when a bank voluntarily liquidates and ceases to do a banking business it no longer has deposits protected by the guaranty law and there is no consideration for its future liability to the bank depositors’ guaranty fund, and Citizens’ Nat. Bank of Broken Arrow v. State, 76 Okla. 94, is cited. Without examining it carefully, we assume that decision correctly interpreted the Oklahoma statute, but it is not controlling
What is said concerning the State Savings and Mercantile Bank applies to the defendants the Southwest State Bank of Wichita, the Fort Scott State Bank, the Peoples State Bank of Medicine Lodge, the Farmers State and Savings Bank of Lawrence, and the Fidelity State Bank of Wichita, except as to the amount of bonds pledged, the assessments made, and conditions at the times they respectively liquidated. As to each of them, the defendant bank commissioner should sell sufficient of the bonds pledged to pay assessments made on account of banks in liquidation at the time they respectively liquidated and ceased to do business. The Seneca State and Savings Bank is in the same situation except that it pledged money in lieu of bonds. There can be no purpose in selling money, hence the bank commissioner should charge the assessments made on this bank to its money pledged.
Judgment will be entered for plaintiff in accordance with this opinion. Since the real purpose of this proceeding is to have the statutes interpreted, a writ will not issue at this time.