Source: https://www.legalcrystal.com/case/93965/united-states-vs-oklahoma
Timestamp: 2019-04-25 14:25:51+00:00

Document:
1. The right to priority of payment provided for by Rev.Stats. § 3466, attaches when the conditions specified by the section come into existence, and it cannot be impaired or superseded by a state law. P. 261 U. S. 259 .
2. The State of Oklahoma acquires no lien on the assets of a state bank under § 303 of c. 6, Rev.Laws Okla.1910, before possession of the bank has been taken by the state bank commissioner. P. 261 U. S. 260 .
3. The word "insolvent," as used in Rev.Stats. § 3466, and the Bankruptcy Law, applies only where a debtor's property is insufficient to pay all his debts. P. 261 U. S. 260 .
4. But "insolvent," in the sense of the Oklahoma statute, supra, where it authorizes the bank commissioner, upon becoming satisfied of a bank's insolvency, to take possession and wind up its affairs, is a broader term, applicable where a bank is unable to pay depositors in the ordinary course of business, though its assets may exceed its debts. Id.
meaning of that section and does not otherwise satisfy its conditions, either as a voluntary assignment, as an attachment of assets of an absconding, concealed, or absent debtor or as an act of bankruptcy as defined by the Bankruptcy Act (§ 3a) or any law of the state. P. 261 U. S. 262 .
Upon motion to dismiss the bill in a suit instituted in this Court by the United States against the State of Oklahoma in which the plaintiff sought to establish a right of priority of payment out of the assets of a liquidating Oklahoma bank in which it had deposited moneys as guardian of individual Indians.
This is a suit commenced in this Court by the United States against the State of Oklahoma to establish priority in favor of the United States under § 3466 of the Revised Statutes, and to have a debt owing by the State Bank of Guthrie, Oklahoma, paid before any distribution of the assets of the bank.
The case was heard on the motion of the state to dismiss the complaint on the ground that the allegations thereof are not sufficient to constitute a cause of action.
force. On October 26, 1921, the sum so deposited and due the United States amounted to not less than $42,000, with interest. October 7, 1921, a state bank examiner made an examination of the bank and found that it was insolvent under the Oklahoma law, and unable to pay its debts and to continue as a going banking concern, and so reported to the bank commissioner, who, on October 26, 1921, adjudged the bank insolvent and took charge and possession of its assets, books, and records for the purposes specified in the state depositors' guaranty fund law. The assets of the bank so taken and now in the possession of the bank commissioner are in excess of the amount claimed by the United States, and the United States claims to be entitled to have its debt first satisfied in full out of such assets, before other creditors are paid anything. Demand for such prior payment was made by the United States and refused by the state.
The applicable provisions of the Oklahoma statutes are found in c. 6 of the Revised Laws of Oklahoma of 1910. A state banking board is created and given the supervision and management of depositors' guaranty fund, created by levying assessments against the capital stock of each bank and trust company.
"Whenever any bank or trust company organized or existing under the laws of this state shall voluntarily place itself in the hands of the bank commissioner, or whenever any judgment shall be rendered by a court of competent jurisdiction adjudging and decreeing that such bank or trust company is insolvent, or whenever its rights or franchises to conduct a banking business under the laws of this state shall have been adjudged to be forfeited, or whenever the bank commissioner shall become satisfied of the insolvency of any such bank or trust company, he may, after due examination of its affairs, take possession of said bank or trust company and its assets, and proceed to wind up its affairs and enforce the personal liability of the stockholders, officers and directors."
"In the event that the bank commissioner shall take possession of any bank or trust company which is subject to the provisions of this chapter, the depositors of said bank or trust company shall be paid in full, and, when the cash available or that can be made immediately available of said bank or trust company is not sufficient to discharge its obligations to depositors, the said banking board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in § 300, the amount necessary to make up the deficiency, and the state shall have, for the benefit of the depositors' guaranty fund, a first lien upon the assets of said bank or trust company, and all liabilities against the stockholders, officers, and directors of said bank or trust company and against all other persons, corporations, or firms. Such liabilities may be enforced by the state for the benefit of the depositors' guaranty fund."
Lewis v. United States, 92 U. S. 618 ), invokes jurisdiction of this Court on the ground that, when the bank and its assets were taken over by the state through its bank commissioner, the state acquired title to the same, and is therefore the proper party to be sued. State v. Cockrell, 27 Okl. 630; Lankford v. Platte Iron Works Co., 235 U. S. 461 ; American Water Co. v. Lankford, 235 U. S. 496 ; Farish v. State Banking Board, 235 U. S. 498 . No objection to jurisdiction is made by the state, and the state does not deny that the United States is entitled to priority on account of money deposited by it as guardian of the Indians to the same extent as in the case of any other deposit. The state's contentions are that § 3466, properly construed, does not give the United States priority, that the state has a lien on the bank's assets, and that the priority rights (if any) of the United States are subject thereto, and that, priority rights under the act do not apply where a sovereign state has a lien against its debtor.
property to pay all his debts shall make a voluntary assignment," etc. Mere inability of the debtor to pay all his debts in ordinary course of business is not insolvency within the meaning of the act, but it must be manifested in one of the modes pointed out in the latter part of the statute which defines or explains the meaning of insolvency referred to in the earlier part. United States v. State Bank of North Carolina, 6 Pet. 29, 31 U. S. 35 ; United States v. Fisher, 2 Cranch 358, 6 U. S. 390 ; United States v. Hooe, 3 Cranch 73, 7 U. S. 90 ; Prince v. Bartlett, 8 Cranch 431, 12 U. S. 433 ; Conard v. Atlantic Insurance Co., 1 Pet. 386, 26 U. S. 439 ; Brent v. Bank of Washington, 10 Pet. 596, 35 U. S. 611 ; Field v. United States, 9 Pet. 182, 34 U. S. 201 . Where the debtor is divested of his property in one of the modes specified in the act, the person who becomes divested with the title is made trustee for the United States, and bound first to pay its debt out of the debtor's property. Beaston v. Farmers' Bank of Delaware, 12 Pet. 102, 37 U. S. 133 -135. The priority given the United States cannot be impaired or superseded by state law. If priority in favor of the United States attaches at all, it takes effect immediately upon the taking over of the bank. The state has no lien on the assets of the bank before the taking of such possession by the bank commissioner.
"A person shall be deemed insolvent within the provisions of this Act whenever the aggregate of his property, exclusive of any property which he may have conveyed, transferred, concealed or removed, or permitted to be concealed or removed, with intent to defraud, hinder, or delay his creditors shall not, at a fair valuation, be sufficient in amount to pay his debts."
"Independent of statute, it may generally be said that insolvency, when applied to a person, firm, or corporation engaged in trade, means inability to pay debts as they become due in the usual course of business. The definition is one generally accepted by both the state and federal courts."
Oklahoma Moline Plow Co. v. Smith, 41 Okl. 498, 503.
The allegations of the complaint do not show the debtor to be insolvent within the meaning of § 3466 or of the Bankruptcy Act.
It remains to be considered whether an act of bankruptcy was committed. In order to give the priority specified in § 3466, there must be a case of an insolvent debtor who makes a voluntary assignment of his property, or a case in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, or a case in which an act of bankruptcy is committed. In this case, it is not alleged that the Oklahoma state bank voluntarily placed itself in the hands of the bank commissioner under § 302, or that it made a voluntary assignment of its property, but it is alleged that the bank commissioner adjudged it insolvent and took charge and possession of its assets. No action on the part of the bank was necessary, and none is alleged. And it is plain that the case is not within the absconding, concealed, or absent debtor clause.
within the meaning of these federal laws. He is not a receiver or trustee put in charge because of any such insolvency. He acts as an arm or instrumentality of the state in the exercise of its police powers to effect the purpose of the law for the protection of depositors. It would defeat the purpose of that law to require that the bank must be insolvent within the meaning defined in § 3466 or in the Bankruptcy Law before the benefit of the state law can be made available to depositors. A primary purpose of his possession is the prompt payment of depositors by the use of the state guaranty fund to the extent necessary, and the case is to be distinguished from that defined in the Bankruptcy Act, and the commissioner is not a receiver or trustee within its meaning. The Legislation of Oklahoma, so far as banks are concerned, does not define acts of bankruptcy or deal with bankrupt or insolvent banks otherwise than by the state law herein referred to.
As insolvency within the meaning of § 3466 was not necessary for the taking of possession by the bank commissioner and is not shown to exist, and as no act of bankruptcy as defined by applicable federal legislation on the subject of bankruptcies or as defined by any law of Oklahoma is shown to have been committed, and as the debtor bank was not divested of its assets in one of the modes specified in § 3466, the case is not within that section.
The state's motion to dismiss the complaint is granted.

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