Case Name: LUSTIG v. INTERMOUNTAIN BUILDING & LOAN ASS'N et al.
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1942-03-23
Citations: 101 Utah 478
Docket Number: No. 6369
Parties: LUSTIG v. INTERMOUNTAIN BUILDING & LOAN ASS’N et al.
Judges: MOFFAT, C. J., and LARSON, J., concur.
Reporter: Utah Reports
Volume: 101
Pages: 478–487

Head Matter:
LUSTIG v. INTERMOUNTAIN BUILDING & LOAN ASS’N et al.
No. 6369.
Decided March 23, 1942.
(122 P. 2d 707.)
See 9 Am. Jur., 176; 12 C. J. S., Building & Loan Associations,, sec. 115.
M. C. Faux and Ingebretsen, Ray Rawlins & Christensen, all of Salt Lake City, for appellant.
Ralph T. Stewart, Joseph D. Hurd, and Edwin B. Cannon, all of Salt Lake City, for respondents.

Opinion:
PRATT, Justice.
In the interest of brevity, we shall refer to the United States Fidelity and Guaranty Company as the Claimant, the Intermountain Building and Loan Association as the Association, the Bank Commissioner of the State of Utah as the Commissioner, James L. White as the Ancillary Receiver, the receiver appointed by the Federal District Court of Arizona as the Primary Receiver, and the district courts involved as the Arizona Federal District Court and the Utah State District Court.
Claimant seeks an order from the Third Judicial District Court of this state (the Utah State District Court under the above designations) directing the Ancillary Receiver of the assets of the Association to recognize and pay its claim for certain money expended in settlement of a suit against claimant by the Primary Receiver of Arizona, who was appointed by the United States District Court for the District of Arizona (the Arizona Federal District Court in the above designations). Claimant's theory is that the expenditure is an expense of liquidation. The background of the claim in detail may be found in Intermountain Building & Loan Ass'n v. Gallegos, 9 Cir., 78 F. 2d 972.
Briefly, it is founded upon the following facts: Creditors of the Association filed suit in the Arizona Federal District Court seeking the appointment of a receiver. The Association was a Utah corporation which originally had its principal place of business in Utah, but which moved to Arizona. After taking possession of the assets of the Association in Arizona, the Commissioner petitioned the Arizona Federal District Court for permission to intervene in that suit, claiming that he as Utah State Bank Commissioner had the exclusive right to the possession of those assets and to liquidate the Association. That court decided against him, and enjoined his taking of any of the Arizona assets out of that state. The Commissioner appealed, and in order to retain the assets then in his possession, filed a supersedeas bond upon which the Commissioner and the Association, as a Utah corporation, appeared as principals, and Claimant appeared as surety. The principals of the bond agreed to indemnify the surety against any loss upon the bond.
To obtain the bond, the Commissioner filed a petition before the Utah State District Court asking that court to take jurisdiction of the liquidation and also a petition to grant him authority to obtain and file the bond. Both petitions were granted, the latter without any notice or a hearing thereon.
While said matter was in the courts, the Commissioner expended certain sums of money from the assets in Arizona as well as from the assets in Utah. Commissioner's appeal of the federal case was lost; and the Primary Receiver brought suit against the Claimant in the Arizona Federal District Court to recover on the bond the amount of those expenditures. That suit was settled by the Claimant, after notice to the Commissioner, but without his consent. The amount of that settlement plus attorney's fees in obtaining it is the claim which Claimant sought to have the Utah State-District Court allow, and is the subject of this appeal. The-Ancillary Receiver was appointed by the latter court after the Commissioner had surrendered the Arizona assets to the Primary Receiver. The Commissioner surrendered the Utah assets of the Association to the Ancillary Receiver. The latter refuses to recognize Claimant's claim.
We are of the opinion that this claim is not properly chargeable as an expense of liquidation. It is the duty of the Commissioner to preserve the assets and business of the bank to be liquidated, and to liquidate the affairs thereof. Section 7-2-12, R. S. U. 1933, as amended in 1933, c. 4. He is authorized to collect all debts due and claims belonging to the bank; and upon the order of the court'may sell or compound all bad or doubtful debts. On like order he may sell all real estate and personal property. He may borrow money and issue evidence of indebted^ ness therefor, and to secure the repayment therof, may mortgage, pledge, transfer in trust, or hypothecate any or all of the bank property, real or personal or mixed. These duties may all be performed for the purpose of facilitating liquidation, protecting or preserving assets, expiditing the making of distributions to depositors or other creditors, or for the purpose of reopening, reorganizing, or merging said institution with another. We have expressed these duties almost as they are set out in section 7-2-12 above as amended. They are, for practical purposes, self-explanatory. The expenses necessary to accomplish these objects are, upon approval by the court, payable out of the assets, as expenses of liquidation, section 7-2-14, R. S. U. 1933. The allowance or disallowance of the expenses is not a matter of difference of opinion between the Commissioner and the court as to what should have been done; but is a question of whether or not the expenses were reasonably necessary, incurred in good faith, and whether the Commissioner regularly pursued his authority. In re State Bank of Millard County, 84 Utah 147, 30 P. 2d 211.
Does the expenditure herein sought to be charged as an expense fall within those requirements?
We must presume that whichever officer liquidates the Association — the Commissioner or the Primary Receiver— he will liquidate it according to law. We must recognize as well that assets within the jurisdiction of Arizona are subject to the Arizona laws, and that state is not required to surrender those assets to the Bank Commissioner of Utah. Under such circumstances one cannot escape the conclusion that the furnishing of the supersedeas bond was not a step toward preserving the association assets, nor a step toward facilitating ultimate liquidation. It amounts merely to a conflict between officials as to which should liquidate the association, either official being legally -capable of a proper liquidation. In the eyes of the law a decision either way would neither advance nor retard the ultimate liquidation of the association.
The fact that the Commissioner first sought a court order before obtaining and filing the bond does not change the picture. Liquidation by the Bank Commissioner of this •state, in this state, is not a court receivership. The Commissioner's jurisdiction of the Utah assets is statutory, and the court is only interested to the extent authorized by the statute. Whether the approval of the expense item occurs before or after actual expenditure of the money is immaterial so far as determining whether or not the item is an expense properly chargeable against the assets of the association according to statute.
We find no error in the lower court's decision. It is affirmed. Costs to respondent.
We invite attention to the recent case of Fischer v. American United Life Insurance Co., 62 S. Ct. 380, 86 L. Ed._, decided January 5, 1942.
MOFFAT, C. J., and LARSON, J., concur.
McDONOUGH, J., concurs in the result.