Court Opinion

ID: 3987414
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:43:33.864553+00
Date Added: 2024-06-11T13:52:25.485428
License: Public Domain

I concur in the result granting the writ. I, however, am of the opinion that we ought not now determine in whole or in part the scope or effect of the admitted trust between the petitioners and the bank. I think the trial court, before ordering and directing a distribution of dividends, was required to determine, as he was asked to do, the presented issues as to whether the petitioners and other claimants similarly situated by reason of the trust relation had preference rights or priorities, whether by lien or otherwise, over common creditors.
The pleadings in the case here presented, both as to the petition and the answer, are rather voluminous. Some of the allegations of the petition are admitted by the answer, some denied, and allegations of fact made upon which it is urged the writ should not issue. It is admitted that on February 10, 1931, the bank received, from the petitioner Child, $10,000 in pursuance of the "Trust Agreement" set forth in the prevailing opinion, by the terms of which the bank agreed to hold such fund in trust and to invest it in approved securities, preferably first mortgage liens, for the use and benefit of the cestuis que trustent named in the agreement. It is alleged that the bank then had, or represented to have, and as appeared by the books of the company at the time it closed its doors in August, 1931, had, "paid up capital and surplus" of $450,000; but that it in fact had no such or any capital or surplus when the bank closed its doors and was taken over by the bank commissioner. It also is alleged that when the bank closed its doors it had in trust moneys and properties in excess of *Page 488 
$900,000, consisting of notes and mortgages payable to the bank, constituting either first or secondary liens on real estate, which by an alleged process of self-dealing it allocated for the pretended benefit of persons interested in such trusts and trust moneys and transferred some of such notes and mortgages and moneys from the commercial department to the trust fund department, and from the trust fund department to the commercial department in such manner that the entire invested capital and surplus of the bank were exhausted. It further is alleged and not disputed that instead of investing the trust funds of the petitioners as by the trust agreement provided, the bank in May, 1931, as shown by its books, transferred to the trust account of petitioner Child a certain note and mortgage in the sum of $14,543, executed by one H. and payable to the bank, then in August, 1931, a day or two before the bank was taken over, it paid $10,000 to the trust fund of petitioner Child and reassigned, transferred, and set over to the bank the note and mortgage of H. as its property, and in lieu thereof, and as shown by the bank's books, transferred to its trust account a promissory note (unindorsed by it) in the sum of $60,000 executed by one F., due in December, 1935, secured by mortgage on real estate in Wyoming, and payable to the bank, to be allotted, partly to the petitioner Child and $50,000 thereof to other cestuis que trustent, and at the same time took moneys from its trust fund department, including $10,000 from the trust account of petitioner Child, and transferred them to its commercial fund, which moneys so transferred were used in payment of general or common creditors. And the bank commissioner now asserts that such $60,000 note and mortgage is held by him as trust property and as payment in full of the obligation of the trust fund of petitioner Child and other cestuis que trustent to whom the note and mortgage were allotted, and asks that he by direction and order of the court be required to assign, indorse, and set over such note and mortgage to such cestuis que trustent as full payment of their claims. The bank commissioner *Page 489 
asserts and the plaintiffs deny that such note and mortgage are sufficient to satisfy full payment of such demands and for which the note and mortgage were so allotted. Should it be shown that such note and mortgage were acquired by the bank, not with trust funds of the petitioners, but with funds or moneys from its commercial department, and the bank the day before closing its doors transferred the note and mortgage unindorsed and unassigned by it to its trust fund department and transferred moneys out of the trust fund department to its commercial department, the further question may well arise as to whether such note and mortgage, as against common creditors, may be held and applied on payment of trust fund obligations, and as to the legal status in the premises between common creditors and trust fund claimants.
It also is alleged and not disputed that claims of common creditors aggregated over $5,600,000, and that claims involving trust funds aggregated in excess of $900,000, and that the claimants of such trust funds claimed a preference over common creditors, and that over $479,000, admittedly preferred claims of Ogden City and of divers banks, were paid by the commissioner. When the commissioner petitioned the court to pay $412,000 of dividends to common creditors, the court, over objections of the plaintiffs and of others similarly situated, directed and ordered such dividends to be distributed and paid to common creditors, which was done. Thereafter a further petition was filed by the commissioner asking direction from the court as to the payment of additional dividends of 4 per cent to common creditors, amounting in the aggregate to over $226,000. To that, the plaintiffs herein and others similarly situated objected, on the ground, among others, that the court was required first to determine the status of the plaintiffs and their rights under the trust agreement, and the scope and effect thereof. In such respect, it was shown that an action wherein the plaintiffs herein, or some of them, were plaintiffs, and the bank and bank commissioner defendants, was pending, *Page 490 
whereby the plaintiffs sought an accounting with respect to the status of the trust fund and the rights of the petitioners under the trust agreement; and likewise it also was shown that an action brought by the bank commissioner also was pending, whereby it, in effect, was sought to require the plaintiffs and others similarly situated to set forth their claimed rights and have them determined. Among other things, it was claimed and urged by the petitioners herein and others similarly situated that by reason of their trust agreement and of section 981x, Laws Utah 1921, c. 24, they had a lien on the assets and properties of the bank, and that such liens should first be discharged out of such assets, before dividends properly could be paid to common creditors. But that was not the only claim of preference urged by the petitioners. They also urged that they were entitled to a perference because of conditions created and arising out of the trust relation and the wrongful dealings of the bank with respect thereto, and, more especially was it urged, that before distribution of dividends to common creditors be had, they were entitled to an accounting and a determination of the status and legal effect of their claims, and to a determination of whether they, as urged by the bank commissioner, were required to look alone to the $60,000 mortgage allotted to them, regardless of whether sufficient could be realized therefrom to pay in full the demands of the cestuis que trustent for whose benefit the bank on its books had transferred without indorsing or signing over the $60,000 note and mortgage.
As to that, the trial court ruled that no objections to the commissioner declaring a dividend would be entertained; that such matters could be arrested only by injunction proceedings; and "that the question as to whether or not the dividends could be paid was for the Bank Commissioner and not for the court to determine"; and hence overruled all objections, and ordered the dividends paid to common creditors. I am of the opinion that under the statute, while the commissioner may declare and present to the court the *Page 491 
matter of paying dividends, yet, that it is within the province and duty of the court to hear the matter presented, and under all the circumstances made to appear, to approve or disapprove the payment of the dividends; and, if approved, to determine to whom they are required to be paid. Even the commissioner himself for his guidance sought the advice and direction of the court with respect to the claimed preferences arising out of the trust agreements, and a determination thereof.
I think the writ should issue restraining further action of the court and of the bank commissioner paying dividends to common creditors, until the status and legal effect of the trust and the rights of the petitioners and others similarly situated are not partly, but fully, determined. Such a proceeding long ago could have been brought on for hearing and speedily could have been determined. I also am of the opinion that the issues and controversy with respect thereto should first be heard and determined by the trial court. We should not make ourselves a court of nisi prius, and in the first instance hear and determine such issues and controversies. That duty and responsibility in the first instance rests on the trial court. Above all, we in an extraordinary proceeding such as here, though requested by the parties, should not assume the function of hearing and determining for the first time the issues and controversies in question. If we may determine a part of them, then we should determine the whole of them. If we may not determine the whole, we should not determine a part. If the granting or denial of the writ depended solely upon the question of whether the petitioners, by reason of the statute referred to, section 981x, Laws Utah 1921, c. 24, had a lien on the assets and properties of the bank, and their right of preference or priority over common creditors depended alone upon the statute, then I concede a construction and application of the statute would not only be proper, but necessary, in determining whether the writ should or should not be granted. But that admittedly here is not the case. Notwithstanding *Page 492 
the construction given the statute by the prevailing opinion, the writ, nevertheless, is granted, and the duty and responsibility cast upon the trial court (where in the first instance it belongs) to hear and determine the status and legal effect of the trust relation, and as to whether the petitioners and others similarly situated as cestuis que trustent have or have not rights of preference or priority over common creditors.
I thus withhold my concurrence in the conclusion reached in the prevailing opinion, that none of the petitioners or others similarly situated, by reason of the statute referred to, have a lien on the assets of the bank, nor, because of the statute, any preferred rights over common creditors. And as the writ is granted and the trial court required to determine the status and legal effect of the admitted trust relation and the rights of the cestuis que trustent in the premises before directing or ordering dividends to be paid common creditors, I think the construction and application of the statute referred to should not now be determined, especially as the meaning and application thereof and as it should be applied to the cause in hand may to some extent be influenced if not made dependent upon the facts as developed upon the hearing of the issues and findings of the trial court. Further, I think it an unwise precedent to declare the law on a part of the issues of a cause before the whole of the material issues is heard and disposed of, when the part as to which the law is declared does not dispose of the cause nor end the litigation. I therefore express no opinion as to the construction or application of the statute referred to.
I think the writ should issue unconditionally restraining the action of the court and of the commissioner from further proceeding to distribute or pay dividends to common creditors, until the alleged claimed rights of preference and priority of petitioners and others similarly situated are determined. If such rights are determined in their favor, they are entitled to payment of their claims before common creditors *Page 493 
are paid. If they have no such preference or priority, and are to be regarded with no greater rights than common creditors, then they, just as much as other creditors, are entitled to participate in whatever dividends may be declared and distributed. If, on the other hand, they may not be regarded even as common creditors, and are required to look alone to their pro rata share of the $60,000 note and mortgage for full payment of their claims, regardless of the value or sufficiency of such note and mortgage to satisfy their claims, and may not look to assets of the bank for any deficiency, then again for guidance of the commissioner and in the interest of all concerned it is equally important that such a determination be had before dividends are further distributed to common creditors.