Case Name: Fulton, Supt of Banks, et al. v. Kabaker
Court: Ohio Court of Appeals
Jurisdiction: Ohio
Decision Date: 1934-12-10
Citations: 49 Ohio App. 213
Docket Number: 
Parties: Fulton, Supt of Banks, et al. v. Kabaker.
Judges: Hynes, P. J., and Levine, J., concur in judgment.
Reporter: Ohio Appellate Reports
Volume: 49
Pages: 213–220

Head Matter:
Fulton, Supt of Banks, et al. v. Kabaker.
(Decided December 10, 1934.)
Mr. John W. Bricker, attorney general, Mr. Charles F. Carr and Mr. Richard R. Hollington, for plaintiffs in error.
Mr. David L. Kabaker, for defendant in error.

Opinion:
Lieghley, J.
The parties occupied the reverse position in the trial court and will be thus referred to herein.
Plaintiff, David L. Kabaker, filed an action in the Municipal Court of Cleveland on the 9th day of January, 1934, against the above named defendants, alleging that on the 24th day of February, 1933, and for several years prior thereto, he maintained a commercial account with the trust company; that on said day he deposited for collection a draft in the sum of eighty dollars on an indemnity company of New York City; that on the 27th day of February, 1933, the trust company gave notice that withdrawals would be restricted to one per cent, and that all deposits thereafter received by it would be segregated and maintained in a separate, unrestricted segregated account; that said draft was paid on said day by the indemnity company; that when the trust company thereafter received said sum, "it failed and neglected to segregate this amount or to place it in a segregated account"; that he demanded this money from the trust company but payment was refused.
The defendant Superintendent of Banks filed an answer alleging that he is the duly qualified and acting Superintendent of Banks and that on the 15th day of June, 1933, he took possession of the business and property of The Guardian Trust Company as provided by law, and has its business and property in his possession; that he admits that the plaintiff was a depositor as alleged and deposited said draft as alleged; that on the 27th day of February, 1933, the bank gave notice of going on a restricted basis and admits that the plaintiff demanded said sum and was refused except as to twenty-one per cent thereof, leaving an impounded balance of $53.68.
Further answering this defendant alleged that the court had no jurisdiction of the subject matter involved, for the reason that he filed with the clerk of Court of Common Pleas of Cuyahoga county notice of his taking possession of the business and property of said trust company as required by Section 710-90, General Code, and as a result the assets and property of said trust company are now under the control of and in the constructive possession of said court for the purpose of liquidation under and by virtue of the provisions of the General Code of Ohio.
Thereafter the case came to trial. Counsel stated the facts as set out in the pleadings to the court as stated in the bill of exceptions, and thereupon the defendant moved the court to dismiss the. action for lack of jurisdiction. This motion was overruled and exception taken and the court thereupon proceeded to render judgment in favor of the plaintiff and against the defendant in the sum of $64.00. Error is prosecuted to this court to reverse said judgment.
It was undisputed in argument that plaintiff filed a claim as general creditor with the liquidator, which claim was allowed, and lie was thereafter paid the dividends of twenty-one (21%) per cent declared upon general creditor accounts. It also appeared in argument that plaintiff filed a claim for preference with the liquidator, which was rejected, and it seems that this action was predicated upon the rejection of this claim. That plaintiff seeks a preference is evidenced by the language of his petition in complaining that a demand for the full sum was refused, and segregation of the proceeds of the draft neglected and omitted.
It is contended by the superintendent that the Municipal Court • of Cleveland has no jurisdiction to entertain a suit for a judgment at the instance of a general creditor. If this judgment be regarded as, or claimed to be, grounded on a general claim, the court was without authority to render same for the reason that the claim was allowed as such prior to this action and plaintiff had accepted dividends thereon. Having presented his claim, and the same having been allowed, the plaintiff had no standing in court under the circumstances.
It is also contended that all actions for preference must be filed in the Common Pleas Court.
The question, therefore, presents itself at the outset of whether or not the Legislature has placed exclusive jurisdiction in the Common Pleas Court of administering and liquidating insolvent banks. This necessitates reference, briefly, to some of the sections of the so-called Banking Act.
Section 710-89, General Code, provides under what circumstances the Superintendent of Banks may take possession of a bank.
Section 710-89®, General Code, covers a situation in which the bank may resume business with the consent of the superintendent and with the approval of the Court of Common Pleas in the county in which such bank is located.
Section 710-90, General Code, directs the superin tendent upon taking possession of a bank to post notice on tbe door of each office of such bank, publish notice in a newspaper of general circulation in the county, and file with the clerk of the Court of Common Pleas of the county a notice that he has taken possession, which notice shall be specially entitled and be numbered and docketed as an original action.
Section 710-91, General Code, provides that the giving of such notice vests the property of the bank in the superintendent and "such posting shall also operate as a bar to any attachment, garnishment, execution or other legal proceedings against such bank, or its assets and property, or its liabilities;
Section 710-93, General Code, directs the superintendent as soon as practicable thereafter to make an inventory of the assets, etc., and file one copy in the office of the clerk of the Court of Common Pleas in which the proceedings are pending. Also, file a record of liabilities, and after the expiration of the three months notice to claimants next succeeding the date of the last publication of notice, a full list of claimants with said Clerk of Courts. Also file additional lists thereafter at regular intervals showing all claims presented not contained in prior lists.
It is further provided that said inventory and record of liabilities shall be permanent records of such liquidation. Also he shall file a detailed report of its liquidation at the time of the order for final distribution with said Clerk of Courts.
Section 710-95, General Code, empowers the Superintendent upon such terms as such court may by order approve, to sell or compromise bad or doubtful assets and debts and compromise claims against such bank, etc.
Section 710-96, General Code, deals with the disposition of monies collected in process of liquidation, but only when approved by an order of the Court of Common Pleas or judge thereof.
Section 710-98a, General Code, covers the matter of preferences and provides that snch shall not be allowed by the Superintendent of Banks or approved by the court unless duly verified, fully disclosing all facts upon which said claims are based, which claims must be filed with the superintendent within three months after the last publication of notice required by Section 710-90, General Code, or be forever barred.
These sections with the other sections of the act disclose a clear, unequivocal intention to place in the hands of the Court of Common Pleas sole and exclusive power and jurisdiction over the administration and liquidation of the assets of insolvent banks. Its language and provisions disclose a studied design and purpose to clothe the Court of Common Pleas with special authority to supervise and give judicial approval to the necessary and enumerated essential steps in the progress and process of liquidation.
The wisdom of centralizing authority in the superintendent and one specially designated court is not open to criticism. Such authority scattered or distributed would impede rather than expedite and result in conflict.
It is our opinion that all claims for preference must be prosecuted in the first instance in the Common Pleas Court. Such actions are usually chancery proceedings. The rejected preferred claims are a part of the required permanent record of the liquidation. Litigation of the rights of the claimants is readily available to each under these circumstances. This plan restricts and limits the determination of priorities, the marshaling of liens, the allowance or rejection of preferences and all other matters incidental to a complete and exhaustive liquidation in the hands of the one tribunal chosen and authorized by the Legislature to exercise exclusive dominion with the Superintendent of Banks.
The duties imposed upon the Superintendent of Banks are very much, the same as those imposed upon the Superintendent of Building and Loans. The Supreme Court of Ohio has decided that under the laws. of Ohio the Superintendent of Building and Loans is constituted a trustee for the benefit of the association, its depositors, shareholders and creditors. In effect such superintendent is by said decision clothed with the attributes of a statutory receiver. And such liquidation proceedings has -been denominated chancery in character and cognizable by a court of equity. Warner, Supt. of Bldg. & Loan Associations, v. Mutual Building & Investment Co., 128 Ohio St., 37, reported in "Bar Association Report" May 7, 1934.
Several authorities were cited by counsel establishing the rule that where the statutes of a state vest jurisdiction in a special court, that court exercises such jurisdiction to the exclusion of all other federal and local state courts. In re Bologh, 185 F., 825, in which the District Court of the United States for the Southern District of New York had under consideration statutes similar to those existing in Ohio, the opinion contains the following language:
"The superintendent of banks, in taking charge of a banking institution, does so by virtue of his authority as such superintendent under the statute, and not as a result of any proceeding in court. His authority is somewhat analogous to that of a receiver of a national bank appointed by the Comptroller of the Currency. Section 19 of the banking law, however, provides that his administration in certain respects shall be subject to the action of the Supreme Court of the State of New York.
"By these and other general provisions in the banking law, it appears that, although the superintendent of banks, in taking possession of the assets of a banking institution, acts by virtue of the authority conferred upon him by law, and, in taking such posses sion, is not acting strictly as an officer of a court, nevertheless his general administration of the trust is subject to the supervision and control of the state Supreme Court in most respects.
"It does not seem to me to be necessary or proper for this court to pass upon these questions of priority, because I think that the determination of these questions is vested by law in the Supreme Court of the state of New York. The provision in section 19 of the banking law that the dividends to be declared by the superintendent of banks are 'to be paid to such persons and in such amounts, and upon such notice, as may be directed by the Supreme Court in .the judicial district in which the principal office of such corporation or individual banker is located', in my opinion, confers upon the New York Supreme Court the sole power of determining what creditors of the trust company are entitled to preference, and what amounts shall be paid to them as dividends."
The court referred to the case of Davis v. Elmira Savings Bank, 161 U. S., 275, 40 L. Ed., 700, 16 S. Ct., 502, saying:
" The general principle'upon which the decision in Davis v. Elmira Savings Bank is based, namely, that the law under which the affairs of an insolvent corporation are being liquidated governs the procedure, and that the court established by those laws to supervise the liquidation has the exclusive supervision of such liquidation, seems to me to apply to this case."
Particularly relying upon the specific provisions of the Banking Act above referred to, the clear apparent intention of the Legislature to be gathered from the whole act, and the cases above cited, we have reached the conclusion that the liquidation of The Guardian Trust Company is exclusively within the power and jurisdiction of the Common Pleas Court of this county and that the Municipal Court has no jurisdiction to maintain an action for preference against the superintendent.
For these reasons the judgment will be reversed as contrary to law and final judgment rendered for plaintiff in error with exceptions.
Judgment reversed.
Hynes, P. J., and Levine, J., concur in judgment.