Case Name: UPHAM et al. v. BRAMWELL
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1922-07-29
Citations: 105 Or. 597
Docket Number: 
Parties: UPHAM et al. v. BRAMWELL.
Judges: Burnett, C. J., took no part in the consideration or decision of this case.
Reporter: Oregon Reports
Volume: 105
Pages: 597–629

Head Matter:
Argued July 8,
decrees affirmed July 29,
rehearing denied November 21, 1922.
UPHAM et al. v. BRAMWELL.
(209 Pac. 100; 210 Pac. 706.)
Banks and Banking — Savings Depositors have First Lien on Assets of Savings Department of Insolvent Bank and also Share Rat-ably in Other Assets.
1. Under Section 6220, Or. L., amended by Laws of 1921, page 596, in ease of insolvency of any bank with a savings department, the savings depositors have a first lien on assets of the savings department, and also share ratably with commercial depositors in the distribution of all other assets and resources of the bank.
Statutes — Subtitle, Adopted by Compiler, has No Legislative Force.
2. A subtitle adopted by the compiler as a reference aid to users of the Code has no legislative force, and merely expresses the compiler’s opinion.
Banks and Banking — Savings Depositor may Offset Deposit Against Debt.
3. The rule that a depositor of an insolvent bank may offset his deposit against his indebtedness to the bank applies to depositors in the savings department of an insolvent bank, where such depositors have no interest in the profits of the bank and are not liable for its losses.
Corporations — Office of Trust Fund. Doctrine Stated and Application Determined.
4. The principal office of the trust fund doctrine is to preserve the assets of a corporation as a fund for the payment of the corporate debts when such assets or some part thereof have been wrongfully diverted by the officers and agents of the corporation, and it does not apply where all the assets are within the control of the court and are being administered for creditors exclusive of stockholders.
Banks and Banking — Banking Act Provides Eules of Priority Among Creditors of Insolvent Banks.
5. Section 6220, Or. L., as amended by Laws of 1921, page 596, does not create a lien in favor of depositors in the sense that it gives a vested right or interest in assets, but provides rules of distribution and priority among creditors respecting the assets of insolvent banks.
Banks and Banking — Depositor has Eight of Setoff Against Insolvent Bank — Allowance of Depositor’s Claim Equivalent to Judgment.
6. The contention that depositor cannot set off his- deposit against his indebtedness to an insolvent bank because a depositor cannot sue the superintendent of banks or the bank, both being under the court’s supervision, and obtain a several judgment on his claim, a condition of counterclaim under Section 74, Or. L., is without merit, as, where the claim of a depositor is allowed by the superintendent of banks, with the court’s approval, such allowance is equivalent to judgment, and action upon a rejected claim is authorized by Section 6223.
Banks and Banking — To Entitle Plaintiff to Attorney Fees in Action Against Superintendent of Banks, Extent of Advantage to Depositors from Suit must be Shown.
7. In an action against the superintendent of banks on behalf of plaintiff and all other depositors, of an insolvent bank, in which plaintiff asked for $5,000 as eosts, disbursements, and counsel foes ,to be allowed out of the assets of the bank, before the court was authorized to allow the counsel fees it was necessary for plaintiff to introduce some evidence to establish the extent of the advantage, if any, accruing to the depositors as the result of -the services rendered, together with evidence of the reasonable value of such services.
3. On right to set off insolvent’s obligation upon a claim in the hands of his receiver, or assignee, or trustee for creditors, see notes in 47 Am. St. Eep. 142; 23 L. E. A. 313.
Banks and Banking — To Entitle Plaintiff 18 Costs and Attorney-Fees for Services Rendered Other Depositors of Insolvent Bank, Services must have Been Necessary.
8. In an action against the superintendent of banks by a depositor of an insolvent bank, brought on behalf of plaintiff for himself and other depositors, in which plaintiff asked costs, disbursements, and attorney fees to be allowed out of the assets, to authorize such allowance the services rendered must have been neeessary.
Banks and Banking — Where Litigation as to Distribution of Insolvent Bank’s Assets Unnecessary, No Attorney Fees Allowed in Suit Against Superintendent of Banks.
9. Where at the time a suit was filed against the superintendent of banks he had not declared a dividend or paid the creditors any of the funds of the bank, but merely declared that he intended to distribute the funds in a certain way, in view of Section 6223, Or. L., requiring that the superintendent of banks should proceed to liquidate the affairs of the insolvent bank under order of court, and it not appearing that expensive litigation was neeessary to secure a correct order of distribution, plaintiff was not entitled to costs, disbursements and attorney’s fees.
ON PETITION FOB REHEARING.
Statutes — Title of Act Regulating State Banks Held to Contain but One Subject.
10. All of the details contained in the title of Laws of 1907, page 262, relate to the same subject, and together constitute but one general subject, which is the regulation of state banks.
Banks and Banking — Constitutional Law — Act Granting Savings Depositors a Preference in the Distribution of Assets of Insolvent Bank not a Denial of Due Process.
11. Laws of 1907, page 262, and amendments thereto, giving to savings depositors a preference in the distribution of the assets of an insolvent state bank, does not authorize the taking of the property of commercial depositors without due process of law, in violation of Constitution of United States Amendments 5 and 14.
Banks and Banking — No Repugnancy Between Subdivisions of Act Giving Depositors a Prior Claim in Case of Insolvency or Liquidation.
12. No irreconcilable repugnancy exists between Section 6220, subdivision (e), Or. L., providing that, in case of insolvency or liquidation of a state bank, the savings depositors shall have an exclusive prior lien upon the assets of the savings department, and subdivision (h), providing that, in case of insolvency or liquidation of a state bank, the depositors shall have a prior lien on all the assets of the bank.
Banks and Banking — Commercial Depositor cannot Set Off His Deposit Against His Debt to the Savings Department.
13. Under Section 6220, Or. L., providing that all of the assets of the savings department shall be held solely for the repayment of the savings depositors, and shall not be used to pay any other obligation or liability of the bank until after such depositors are paid, a commercial depositor cannot set off his deposit against his debt to the savings department, but a savings deposit may be offset by debt to the savings department or to the commercial department, and a commercial deposit may be offset by a debt to the commercial department.
Banks and Banking — Savings Assets Chargeable With Expenses of Liquidating Insolvent Bank.
14. Under Section 6220, Or. L., providing that the assets of the savings department shall be held solely for the repayment of the savings depositors, the savings assets are chargeable with a just and equitable part of the expenses of liquidating the insolvent bank.
Banks and Banking — Savings Depositors shall Share Ratably With Other Depositors General Assets Where Savings Assets are Insufficient.
15. Under Section 6220, Or. L., providing that, in case of insolvency or liquidation, the savings depositors shall have a prior lien upon the savings assets of the bank, the savings depositors have the right, where the savings assets are insufficient to pay the savings depositors in full, to share ratably with the other depositors in the general assets upon the basis of their unpaid balances after distribution of savings assets.
Banks and Banking — Court Without Power to Allow Attorney’s Fees to Depositor Suing to Establish Claim to Assets of Insolvent Bank.
16. A eourt which is administering the funds of an insolvent bank is without power to allow costs and attorney’s fees payable out of the fund for services performed by a depositor in establishing, in suit against the superintendent of banks, that he and all other depositors of his class are entitled to participate in the distribution of that fund.
From Multnomah: Bobert Tucker, Judge.
In Banc.
Decrees Affirmed.
For appellant there was a brief over the name of Messrs. Bowerman & Kavanaugh, with an oral argument by Mr. John P. Kavanaugh.
For respondent there was a brief and oral argument by Mr. John W. Kaste.

Opinion:
McCOUBT, J.
On February 16, 1922, the State Bank of Portland, Oregon, a state bank, was insolvent, and upon that date was, by its officers and directors, placed in the possession of the defendant, as superintendent of banks, to administer its affairs and liquidate its assets in conformity with the statutes governing' the liquidation of insolvent state banks. Prior to its insolvency the bank conducted a commercial banking business and also maintained a savings department established in the manner prescribed by statute.
Defendant has converted a part of the assets of the insolvent bank into cash; about one half of the sum in the hands of defendant was realized from the assets of the savings department and the remaining half from other assets of the bank. Defendant was about to declare, distribute and pay a dividend to each of the depositors of the bank whose claim had been proved and allowed, when these suits were brought by creditors, each having deposits in the bank, two of them in the savings department, for the purpose of securing from the Circuit Court directions to defendant in the distribution of the assets of the bank. Each suit was instituted in behalf of the respective plaintiff named therein and all other depositors of the bank similarly situated.
In liquidating the affairs of the bank and distributing its assets, the defendant proposed to allow depositors who were also indebted to the bank, each to offset his deposit against his debt due to the bank, and defendant, in declaring, distributing and paying dividends, proposed to pay to the savings depositors of the bank ratably only such moneys as had been realized from the liquidation of the assets of the savings department of the bank, and to pay to the commercial depositors of the bank ratably all moneys realized from the liquidation of all other assets and resources of the bank.
In the suit of C. R. Upham v. Frank C. Bramwell, the plaintiff is a depositor, but it does not appear whether in jhe commercial or savings department of the bank; plaintiff seeks to enjoin the defendant from allowing offsets of any kind to depositors who are debtors of the insolvent bank and to require the defendant to collect the full amount of all debts due the bank from depositors, and then permit such debtor depositors to file their claims for the full amount of their deposits. The defendant interposed a demurrer to the complaint, which was sustained. Plaintiff refused to plead further, and a decree was entered dismissing the suit. Plaintiff appeals.
In the case of Grace Doxsie v. Frank C. Bramwell, plaintiff is a depositor in the savings department; plaintiff claims that the savings depositors of the insolvent bank have a first lien on all of the assets of the bank for the satisfaction of their claims, and that such saving's depositors are entitled to be paid in full out of the proceeds realized from the liquidation of said assets before any other creditors of the bank, including commercial depositors, shall receive any dividend upon their claims. The Circuit Court sustained a demurrer to the complaint in this suit, and upon refusal of the plaintiff to plead further, entered a decree dismissing the suit. Plaintiff appeals.
In the suit of Mary Steelhammer v. Frank C. Bramwell, the plaintiff presented the contention that all the savings depositors of the bank are entitled to have all of the assets of the savings department when liquidated, less the cost of such liquidation, applied exclusively upon and in payment of their respective claims, and are also further entitled from time to time, as dividends are declared, to share pro rata with the other depositors of the bank in the funds realized from the liquidation of the other assets and resources of the bank, until their respective claims, as such depositors, have been fully paid, or the assets exhausted. Defendant demurred to the complaint in this suit. The demurrer was overruled, and a decree entered in accordance with the prayer of plaintiff's complaint. Defendant has appealed from that decree.
These appeals for convenience were heard together, and for like reasons will be disposed of in one opinion.
The questions presented are affected by Section 6220, Or. L., as amended by Chapter 317, Laws of 1921. That section contains eight subdivisions, (a) to (h) inclusive. At the head of each subsection is a title, placed there by the compilers of the 1920 Codes, and not found in the section as enacted by the legislature, Chapter 171, Laws of 1911; Chapter 285, Laws of 1915, Section 11, subdivision (a), sets forth the procedure to be pursued by a state bank for establishing a savings department. Subdivision (b) requires the issuance to savings depositors of pass books containing the rules and regulations governing such deposits. Subdivision (c) is as follows:
"(c) Books and Accounts to be Kept Separate; Securities.- — Any bank combining any of the business of a commercial bank, trust company and savings bank shall keep separate books or accounts for each department, and shall keep all moneys received as such savings deposits, and the funds and securities in which the same are invested, at all times segregated from and unmingled with the other moneys and funds of the bank, and all bonds, warrants, notes, mortgages, deeds and other securities of every nature of such savings department shall be marked, stamped or labeled 'savings department' or some similar words. All funds, investments and other assets of the savings department shall he held solely for the repayment of the depositors in said department and shall not be liable for, pledged as security for, or used to pay any other obligation or liability of the bank until after the payment in full of all depositors of said savings department
Subdivision (d) describes the securities in which savings deposits may be invested, provided the reserve required by Section 6209, Or. L., shall be maintained. Subdivision (e) permits the requirement that depositors before withdrawing savings deposits, shall give notice of from thirty days to six months, depending upon the amount to be withdrawn, and further provides:
"In the case of the insolvency or liquidation of any bank which shall establish or .maintain a savings department, under the terms of this section, the savings depositors shall have an exclusive prior lien upon all the assets, including cash, of such savings department, [and lien upon all the assets, including cash, of such savings department,] and which shall first be paid, and the remainder, after they have been paid in full, shall be applied to the payment of the claims of the other creditors of said bank." Note: The matter in brackets is repetition.
Subdivision (f) authorizes the payment of interest on savings deposits and directs that such interest be paid out of the commercial 'department, if the earnings on savings deposits are insufficient to pay the same; also authorizes at any dividend period the transfer of the net accumulated and collected earnings of the savings department to the profits account of the bank. Subdivision (g) prescribes a penalty for each failure to observe the requirement of the statute that the accounts and funds of the savings department shall be kept separate and identified. Subdivision (h) reads:
' ' (h) Savings Deposits Have First Lien on Assets. In the event of the insolvency or bankruptcy of any state bank doing business within the meaning of this act, depositors of such bank shall have a first and prior lien on all the assets of such bank; and in the distribution of such assets or the proceeds thereof, the same shall be first applied to satisfy the amount due such, depositors after the payment of expenses of liquidation of any such hank; provided, however, that this section shall not apply to assets pledged as collateral security for money borrowed."
The parties are agreed that the statute requires that the assets of the savings department shall be applied exclusively to the payment of the claims of the savings depositors, until such claims are paid in full, or such assets are exhausted, but they differ as to the construction of subdivision (h) of the section.
Plaintiff Doxsie contends that the provisions of Section 6220, Or. L., as amended by Chapter 317, Laws of 1921, including subdivision (h), relate exclusively to savings banks and savings departments of state banks and the depositors therein; that such is the purport of the statute, it is said, is clearly shown by the subject mátter of the section, together with the title placed upon subdivision (h) by the compilers of the Codes (Olson, 1920). Plaintiff Steelhammér contends that the subdivision embraces all depositors of state banks, and entitles savings depositors, after the savings assets are exhausted, to share ratably with other depositors in the distribution of all other assets and resources of the bank. Defendant insists that subdivision (h), above set out, refers to the commercial depositors of a state bank, and excludes savings depositors from the benefit of its provisions; that it grants to commercial depositors of an insolvent state bank, in the distribution of all the assets of the bank other than assets of the savings department, a preference over all other creditors, including savings depositors. In support of this contention, defendant refers to the first statute of this state regulating banks and banking, Chapter 138, Laws of 1907, Section 38 of which, it is claimed, accorded commercial depositors the preference, mentioned; defendant asserts that the substance of the original section, grant ing and intending- to grant that preference, was reenacted in all subsequent amendments.
Leaving out of consideration the title given it in the Code, the plain import of the language of subdivision (h), above set out, authorizes distribution of the assets of an insolvent bank in conformity to the contentions of the plaintiff Steelhammer, that is, that the savings assets shall be applied exclusively to the satisfaction of the savings depositors, and until their claims are paid in full savings depositors shall share ratably with commercial depositors in the distribution of all other assets and resources of the bank.
The first statute passed in this state concerning the organization and creation of state banks, and reg - ulating the business of banking, was enacted in 1907: Chapter 138, pp. 262-275, Laws of 1907. That act provided the requirements for engaging in the banking business, defined the terms "bank, "banker" and "doing a banking business"; authorized the establishment of savings-banks and hanks having both commercial and savings departments, and required that where a bank had both a commercial and savings departments, that all of the capital, assets, funds, properties and investments of one department should be kept distinct from all other capital, assets, funds, properties and investments of the company: Sections 7, 8 and 9, Laws of 1907, pp. 263, 264.
Section 38 of that act provided:
"In the event of the insolvency or bankruptcy of any person, firm 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 hank or banking department, aud in the distribution of such assets or the proceeds thereof, the same shall first be applied to satisfy the amount due such depositors; ."
The language and phraseology of the foregoing section was carried into all subsequent amendments of the section, with the important omission in all such amendments of the words we have italicized in the quotation.
The act of 1907 was made more specific and comprehensive by an amendment affecting most of its provisions enacted by the legislature: Chap. 171, Laws of 1911, pp. 225-256. Section 33 of the amendatory act amended Section 38 of the statute of 1907. As amended, the section contained two subdivisions, (a) and (b). Subdivision (a) consisted entirely of new matter not found in the section or act amended and embraced all the provisions now found in subdivisions (a) to (g), inclusive, of Section 6220, Or. L., as amended by Chapter 317, Laws of 1921, except the additional securities in which savings assets may be invested, specified in subsequent amendments. Subdivision (b) of the section referred to the matter contained in the section amended and was enacted in the identical language now found in subdivision (h), Section 6220, Or. L., as amended by Chapter 317, Laws of 1921, except that the title, which now introduces the subdivision, was absent.
The section was thereafter amended: Chap. 285, Laws of 1915; Chap. 317, Laws of 1921. But in each instance the only change made in the section specified additional securities in which funds of the savings department of a state bank might be invested.
In the amendment of 1915 the section was divided, as now, into eight subdivisions, designated (a) to (h). Subdivision (h) was identical with subdivision (b) of the amendment of 1911. In the 1920 codification of statutes by Judge Conrad P. Olson, the sec tion is designated 6220, Or. L. The compiler of the Code appended a title to each of the subdivisions of the section and placed upon subdivision (h), above mentioned, the title: "Savings Deposits Have First Lien on Assets." When the section was amended by Chapter 317, Laws of 1921, the title of the subdivision was copied into the amendment, but the title of the amendment expressly stated that the section was amended "by specifying additional securities in which savings deposits may be invested."
Nothing appears in the foregoing review of the legislation under consideration to aid the contention of plaintiff Doxsie that the subhead to subdivision (h) confines its provisions to savings depositors. The subtitle was adopted by the compiler as a reference aid to users of the Code. It has no legislative force, and at most merely expresses the individual opinion entertained by the compiler of the Code as to the reach of the provision.
The preference right given to depositors by Section 38, Chapter 138, Laws of 1907, was apparently limited to the assets of the department in which, the deposit was made. That limitation, if it was in fact present in the act, was removed by the 1911 amendment, which omitted all matter calculated to create a distinction between depositors or to classify or prefer them in respect to the distribution of the general assets of an insolvent bank. The statute evinces a purpose to furnish greater security to savings depositors than to other depositors and to favor savings depositors over commercial depositors in the event of insolvency, to the extent of the savings assets.
The construction contended for by defendant would require the savings depositors to look to the assets of the savings department for the satisfaction of their claims, subordinating them to the commercial depositors as to. the remaining assets and resources of the bank. Thereby the commercial depositors in many, if not most, cases would realize a larger percentage of their several claims than would the savings depositors, thus defeating the manifest design of the law to favor savings depositors and safeguard their deposits. In a preceding part of that section of the statute it is declared that savings depositors shall have an exclusive prior lien upon all the assets, including cash, of the savings department, from which their claims shall first be paid. This language implies that savings depositors have other claims on the assets of an insolvent bank. What was implied in the precéding provision is expressed and defined in subdivision (h). There all depositors, including savings depositors, are authorized to share ratably in the distribution of all the assets and resources of the bank not set apart by the statute solely for the repayment of savings depositors.
The construction we place upon the statute is in harmony with the construction of analogous statutes by courts of last resort of other states: Lippitt v. Thames Loan & Trust Co., 88 Conn. 185. (90 Atl. 369); Peters v. Union Trust Co., 131 Mich. 322 (91 N. W. 273); State v. Savings Bank, 127 Iowa, 198 (103 N. W. 97); Tabor v. Mullin, 37 Colo. 399 (86 Pac. 1007).
A statute of Connecticut, Section 3482, provides that in case of the insolvency of a bank, the assets shall be appropriated after the payment of the charges and expenses of settling its affairs and retiring its circulatory notes, to payment of the claims of depositors who shall have priority over all other creditors. Another statute provides that the investments of savings deposits in banks receiving deposits as savings "shall be for the exclusive protection of the depositors in said savings department and shall not be liable for or used to pay any other obligation or liability of said bank until after the payment of all of the deposits in said savings department."
In Lippitt v. Thames Loan & Trust Co., supra, a case relating to an insolvent bank, the court said of the provision above quoted:
' ' Obviously this provision was intended to safeguard the savings department deposits of a bank or trust company by requiring: (1) That the investment of all such deposits shall be in the investments by law permitted deposits in savings-banks; (2) That the investments of such deposits shall be for the exclusive protection of the depositors in the savings department; and (3) that these investments shall be used to pay the savings department deposits before they can be used to pay any other liability of the bank or trust company. The purpose of the statute was to add to the protection of the savings department depositor and not to diminish that which he already had. He had, by the charter, a prior lien upon all of the assets of the company. He had the right to share ratably in the avails in the hands of the receiver in a certain order. Neither privilege was taken from him by this statute. Another protectory privilege was added to these. If the investments in the savings department should not suffice to pay the savings department depositor in full, the unpaid balance of his deposit was placed on a parity with all other deposits, and entitled, on distribution, to share ratably in the order prescribed by § 3482. ' '
A statute of Michigan provides in substance that any bank combining the business of a savings bank and a commercial bank shall keep separate books of each kind of business, and that all investments of the savings department shall be kept entirely separate and apart from the other business of the bank, and that "the investments made with the funds de posited by savings depositors shall be held solely for the payment of the depositors of said funds."
The court in the case of Peters v. Union Trust Co., supra, held that investments made of funds deposited with the savings department should be held solely for the benefit of the depositors of savings funds, "and that, as to the excess of savings deposits over and' above these securities, the depositors should share with the commercial creditors."
The statute of Iowa provides that upon the insolvency of a bank, the auditor may by proper proceedings procure the appointment of a "receiver for such bank and its affairs shall be wound up under the direction of the court, and the assets thereof ratably distributed among the creditors thereof giving preference in payment to depositors."
In the case of State v. Savings Bank, supra, the court affirmed the decision of the district court, "that under the statute the depositors in the insolvent bank are preferred creditors, who, after payment of costs and expenses, are entitled to be first paid in full from the assets in the hands of the receiver, exclusive of the sum or amount realized from the statutory assessment upon the stockholders, and that the proceeds of such assessment be ratably distributed to all creditors, including depositors."
The right of defendant to allow a depositor to set off his deposit against his indebtedness to the bank is supported by the great weight of authority: 3 R. C. L. 647; 14 R. C. L. 655; 14A C. J. 1034; 1 Michie Banks & Banking, 634, 635; 1 Morse on Banks and Banking (3 ed.), 553; Re Assignment of Hamilton, 26 Or. 579 (38 Pac. 1088); Scott v. Armstrong, 146 U. S. 449 (36 L. Ed. 1059, 13 Sup. Ct. Rep. 148, see, also, Rose's U. S. Notes); Yardley v. Clothier, 51 Fed. 506 (17 L. R. A. 462, 2 C. C. A. 349); Van Wagoner v. Patterson Gas & Light Co., 23 N. J. Law, 283; State v. Brobston, 94 Ga. 95 (47 Am. St. Rep. 138, 21 S. E. 146); Citizens' Bank v. Kretschmar, 91 Miss. 608 (44 South. 930); Williams v. Johnson, 50 Mont. 7 (144 Pac. 768, Ann. Cas. 1916D, 595, and note); Williams v. Burgess, 74 W. Va. 623 (82 S. E. 507, Ann. Cas. 1917C, 1185, and note); Merrill v. Cape Ann. Granite Co., 161 Mass. 212 (36 N. E. 797, 23 L. R. A. 313 and note).
In the case of Re Assignment of Hamilton, supra, involving an insolvent bank, for which a receiver had been appointed, Mr. Justice Moore, speaking for the court, said:
"The rule appears to be well settled that an an equitable interest in an insolvent debtor's estate is vested in a receiver by his appointment, and that he takes the assets of the debtor as a trust fund for the equal benefit of all the creditors of the estate. The receiver can acquire no greater interest than the debtor had in the estate, and hence choses in_ action pass to the receiver subject to the equitable right of setoff existing at the time of his appointment."
Plaintiff Upham claims that insolvent savings banks are excepted from the rules established by the foregoing authorities for the allowance of offsets against insolvent estates: Osborn v. Byrne, 43 Conn. 155 (21 Am. Rep. 641); Lippitt v. Thames Loan & Trust Co., supra; Stockton v. Mechanics' Bank, 32 N. J. Eq. 63; Bachrach v. Allen (Mass.), 131 N. E. 857. In all of these cases the savings bank was conducted by the depositors upon the mutual plan or by a corporation acting' as their agent or trustee. In each instance the depositors all had a common interest in the invested savings funds and each was entitled to his proportionate share of the profits. In the case of the defunct bank, tbe affairs of wbicb defendant is administering, the relation of debtor and creditor existed between tbe savings depositors and tbe bank. Savings depositors bad no interest in the profits of tbe bank and were not liable for its losses, and tbe rules relating to tbe setoff of mutual demands upon insolvency apply: Williams v. Johnson, 50 Mont. 7 (Ann. Cas. 1916D, 595, 144 Pac. 768).
Plaintiff Upham further contends that the recognition by this court of tbe trust fund doctrine as to tbe assets of an insolvent corporation that has ceased to do business, and tbe provisions of tbe statute purporting to give to savings depositors an "exclusive prior lien" upon tbe savings assets and to all depositors a "first and priorvlien" upon tbe assets of tbe corporation, prevent tbe operation-in this state of tbe rules governing offsets. Here all of tbe assets of tbe corporation are within tbe control of tbe Circuit Court and are being administered as a trust fund for tbe benefit of tbe creditors, exclusive of stockholders; no suggestion is made of diverted or concealed assets that should be covered into tbe fund. Tbe trust fund doctrine alluded to has no application in such a case. Its principal office is to preserve tbe assets of a corporation as a fund for tbe payment of tbe corporate debts, when such assets or some part thereof have been wrongfully diverted by tbe officers and agents of tbe corporation.
Tbe statute does not create a lien in favor of depositors in tbe sense that it gives a vested right or interest in such assets, but rather provides rules-of distribution and priority among creditors respecting the assets of insolvent banks: Sixpenny Savings Bank v. Stuyvesant Bank, 22 Fed. Cas. 264 (No. 12,919). The rules governing setoff apply to preferred creditors as well as those not preferred: In re Ex celsior Mfg. Co. Assignment, 164 Mo. 316, 329 (64 S.W. 133).
That a depositor cannot sne the defendant or the defunct bank, both being under the supervision of the court, and obtain a several judgment upon his claim (Section 74, Or. L.), is urged by plaintiff Upham as a further reason why the rules of setoff do not apply to the defunct bank. There is no merit in the contention. Where the claim of such a depositor is allowed by defendant, with the approval of the court, such allowance is equivalent to judgment: Rockwell v. Portland Sav. Bank, 31 Or. 431 (50 Pac. 566); Baker v. Williams Banking Co., 42 Or. 213 (70 Pac. 711). Action upon a rejected claim is authorized by statute: Section 6223, Or. L. In any event, a depositor who possesses a valid claim against an insolvent bank, which claim has been rejected, has the right to commence an action for the recovery of judgment upon his claim, subject to the formality of obtaining an order from the court permitting him to institute the action.
Plaintiff Steelhammer prosecutes a cross appeal because of the failure of the Circuit Court to award plaintiff a reasonable counsel fee for instituting and prosecuting her suit. Plaintiff alleged in her complaint that there were over 7,500 savings depositors of the bank, representing a total of more than $1,000,000 in savings deposits; that it was impossible for all savings depositors to join in the suit, but that the decree to be obtained therein would inure to their special benefit and such depositors would receive the full amount of their respective claims, whereas if the defendant carried out his declared intention to confine the claims of savings depositors to savings assets until the commercial depositors were paid in full from the other assets of the bank, savings depositors would receive not to exceed 75 per cent of their respective claims. Plaintiff prayed for the sum of $5,000 as costs, disbursements and counsel fees, to be-allowed out of the assets of the savings department of the bank. Before the court was authorized to allow the counsel fees prayed for, it was necessary for plaintiff to introduce some evidence to establish the extent of the advantage, if any, accruing to savings depositors as the result of the services rendered, together with evidence of the reasonable value of such services. The record does not show that any such evidence was introduced or any offer made to introduce the same. This court, however, has power, in a proper case, to remand the cause to the Circuit Court for the purpose of taking such proceedings as are necessary to enable that court to determine a claim to an allowance of costs and counsel fees out of the fund.
"When a fund is brought into court through the service of an attorney, or where his services have added to or preserved or increased the amount being administered, the court of primary jurisdiction may properly allow a reasonable compensation for his services to be paid from the fund." Ford v. Gilbert, 44 Or. 259, 262 (75 Pac. 138).
The court denied the claim for counsel fees, and observed:
"They [the attorneys] did not recover a fund for the common benefit of the creditors, or add to the assets now being administered by the court."
In order to authorize an allowance for counsel fees and costs out of a fund, the services rendered must have been necessary: 15 C. J. 105; 7 R. C. L. 786.
In 15 C. J. 105, it is stated;
"Nevertheless to authorize the allowance the services rendered must have been necessary; also all the • parties must have a common interest in the property or fund involved, and the costs incurred must have been for the profit of all having such interest."
To sustain the claim made for the allowance of counsel fees and costs from the fund in the hands of defendant,' plaintiff cites numerous cases, among them the following: Trustee v. Greenough, 105 U. S. 527 (26 L. Ed. 1157, see, also, Rose's U. S. Notes); Central R. R. Co. v. Pettus, 113 U. S. 122 (28 L. Ed. 915, 5 Sup. Ct. Rep. 387); Harrison v. Perea, 168 U. S. 311 (42 L. Ed. 478, 118 Sup. Ct. Rep. 129).
In all of the cases cited by plaintiff, the party seeking an allowance of counsel fees and costs, had at his own expense either recovered and brought in the court a fund or property that otherwise would have been lost to the creditors or had instituted and prosecuted proper proceedings to save a trust fund already in court from destruction and to restore it to the purposes of the trust, none of which conditions are present in the instant case.
When the suit was commenced, the defendant had not declared any dividend or distributed or paid to creditors any of the funds of the defunct bank; defendant had merely declared that he intended to distribute the funds in a certain way. The court had given no decision and had expressed no opinion concerning the matter. The statute requires that the superintendent of banks shall proceed to liquidate the affairs of an insolvent bank under the order and direction of the Circuit Court in and for the judicial district in and for which the office of such bank was located, and that he—
"may, out of the funds remaining in his hands after the payment of expenses, declare one or more divi dends, and after the expiration of one year from the first publication of notice to creditors, he may declare a final dividend, — such dividends to be paid to such persons and in such amounts and upon such notice as may be directed by the circuit court # * ." Section 6223, Or. L.
The court had not made, and had not been requested to make, any order concerning the dividends to be declared, distributed and paid to depositors from the assets in the hands of the defendant. It is not to be assumed that the court, either upon its own motion or upon the suggestion of defendant, would have authorized a distribution of the assets contrary to the requirements of the statute. The court promptly ordered distribution of the assets in accordance with plaintiff's contention, when application was made to it.
No controversy taking the form of litigation existed between savings depositors and other depositors of the bank. Plaintiff might have filed a petition in the suit brought by the defendant upon taking possession of the bank and thereby readily and in a summary manner secured an order upon the defendant, directing him to distribute the assets as plaintiff claimed they should be distributed and as the statute requires: Wilde v. Oregon Trust & Savings Bank, 59 Or. 551, 553 (117 Pac. 807); Hafer v. Medford C. L. R. Co., 60 Or. 351, 358 (117 Pac. 1122, 119 Pac. 337).
It does not appear that expensive litigation was necessary to secure a correct order of distribution, and of course nothing was added to the funds and assets which were being administered under the direction of the court. We do not think this case comes within the rule established by the cited cases.
Rehearing denied and former opinion modified November 21, 1922.
(210 Pac. 706.)
Mr. John W. Kaste, for the petition.
Messrs. Bowerman & Kavanaugh, for respondent and appellant Frank C. Bramwell.
Mr. J. Leroy Smith, Mr. H. A. Robertson, Mr. Elmer R. Lundburg, Mr. Homer St. Goehler, Mr. Herbert R. Dewart and Mr. Frank G. Dick, Amici Curiae.
The decree of the Circuit Court in each of the cases is affirmed. ' Affirmed.
Burnett, C. J., took no part in the consideration or decision of this case.