Court Opinion

ID: 6568843
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:22:10.350455+00
Date Added: 2024-06-11T15:56:50.292007
License: Public Domain

ROSS, Circuit Judge
(dissenting).
It is contended on behalf of the appellants, among other things, that by reason of the laws of the state of Nevada, under which the insolvent bank was incorporated, the appellee was not entitled to any payment out of the funds in the hands of the receiver until all of the depositors of the bank, as well as all holders of exchange against it, were paid in full, which full payments, it is undisputed, have never been made; the record showing the unsecured creditors to have been paid but 50 per cent, of their allowed claims.
One of the provisions of the Constitution of Nevada in force at the time the insolvent bank was organized declared: “The Legislature shall pass no special act in any matter relating to corporate powers except for municipal purposes; but corporations may be formed under general laws, and all such laws may from time to time be altered or repealed.” Article 8, § 1.
The subsequent act of March 24, 1909 (St. 1909, p. 251), of its Legislature, provided, among other things, as follows:
“Sec. 3. The term ‘bank’ or ‘banking corporation,’ as used in this act, shall be construed to mean any incorporated banking institution which shall have been incorporated under the laws of this state, as they existed prior to the taking effect of this act, and to such banking institutions as shall hereafter become incorporated under the provisions of this act. The term ‘commercial bank’ shall be construed to mean any such banking institution as shall, in addition to the exercise of other powers, follow the practice of repaying deposits upon check, draft, or order, and of making commercial loans chiefly; the term ‘savings bank’ shall be construed to mean any such banking institutions as shall, in addition to the exercise of other powers, follow the practice of repaying deposits only upon the presentation of passbooks, and whose loans aré chiefly made on real estate security.”
*886“Sec. 48. The claims of depositors, for deposits, and claims of holders of exchange shall have priority over all other claims, except federal, state, county and municipal taxes, and subject to such taxes, shall at the time of closing of the bank be a first lien on all the assets of the banking corporation from which they are due and thus under receivership; upon proof thereof, they shall be paid immediately out of the available cash in the hands of the receiver. If the cash in the hands of the receiver, available for such purpose, be insufficient to pay the claims of the depositors, the court in which the receivership is pending, or a judge thereof, shall determine the amount required to supply the deficiency, and cause the same to be certified to the State Banking Board, which shall thereupon draw against the depositors’ guaranty fund in the amount required to supply such deficiency, and shall forthwith transmit the same to the receiver, to be applied on the said claims of depositors.”
“Sec. 59. The powers, privileges, duties and restrictions conferred and imposed upon any corporation or individual, existing and doing business under the laws of this state are hereby abridged, enlarged or modified as each particular case may require, to conform to the provisions of this act notwithstanding anything to the contrary in their respective articles of incorporation- or charters. The legality of investments heretofore made, or of transactions heretofore had, pursuant to any provisions of law in force when such investments were made or transactions had, shall not be affected by the provisions of this act, except as the same can be done gradually by the sale or redemption of the securities so invested in, in such manner as to prevent loss or embarrassment in the business of such corporation or individual, or unnecessary loss or injury to the borrowers of such security, subject always to the approval of the state banking board.”
“Sec. 61. Each section of this act, and every part of each section is hereby declared to be independent sections and parts of sections, and the holding of any section or part thereof to be void, or ineffective for any cause, shall not be. deemed to affect any other section or part thereof.”
The court below gave no effect to the foregoing provisions of the Nevada statutes, but in its opinion said, in effect, that but for the contract entered into July 13, 1912, *887between the appellee and the receiver, it would pursuant to its understanding of the decisions of the Supreme Court in the cases of Merrill v. National Bank of Jacksonville, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640, and Aldrich v. Chemical National Bank, 176 U.S. 618, 20 S.Ct. 498, 44 L.Ed. 611, make the following determination of the case: “The Washington-Alaska Bank owed the Dexter Horton National Bank on the 4th day of, January, 1911, the sum of $129,465.62. The 96 shares of Gold Bar Lumber Company stock, of uncertain value, held as a pledge, were sold by order of court in the state of Washington, and the proceeds of such sale on the 30th day of January, 1914, amounted to $99,954.95. The delay in realizing on this pledge was not the fault of the petitioner, and therefore it is necessary to ascertain what sum of money at 6 per cent, interest per annum on January 4, 1911, would amount to $99,954.95 on January 30, 1914. This sum is $84,-421.41. The petitioner would therefore be entitled to participate in dividends, the same .as other creditors; calculated on the sum of $45,044.21. ' Dividends of 16^5 per cent, each were declared January 9, April 8, and November 7, 1911, respectively, and were not paid to petitioner. Calculating interest thereon from the date declared to August 8, 1912, on which date the petitioner was paid the sum of $25,000, it is found that by the payment of the $25,000 the petitioner was overpaid to the extent of $833.75. Future dividends would be calculated on the sum of $45,044.-21, but from the first dividend or dividends declared the sum of $833.75 would be deducted.”
The court, however, holding the contract to be valid and binding upon the parties to it, summarized their rights thus, and gave judgment accordingly: “The claim on January 5, 1911, was for the sum of $129,465.62, on which there was a payment of $25,000 August 6, 1912. The proceeds of the sale of the Gold Bar stock January 30, 1914, amounted to $99,954.95. There was therefore due the Dexter Horton Bank on that date the sum of $27,225.47. The petitioner asks for interest on this sum at 8 per cent, per annum from January 30, 1914. In my opinion the Washington courts have determined that the original contract was a contract under the laws of the state of Washington. Interest will be allowed at 6 per cent, per annum.”
*888In the case of Merrill v. National Bank of Jacksonville, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640 (adhered to in Aldrich v. Chemical National Bank, 176 U.S. 618, 636, 20 S.Ct. 498, 44 L.Ed. 611) the Supreme Court distinctly adjudged inapplicable to cases like the present one the rule governing cases arising under the bankruptcy laws, which the court declared proceeds upon the principle of election, permitting the creditor to prove his whole "debt by surrendering his security, or, in the event of his holding it, to prove only for any existing deficiency after extinction of the security, but that where, as in the present case, there is a secured creditor of an insolvent national bank, he “may prove and receive dividends upon the. face of his claim as it stood at the time of the declaration of insolvency, without crediting either his collaterals or collections made therefrom after such declaration, subject always to the proviso that dividends must cease when, from them and from col-laterals realized, the claim has been paid in full”-^the court further saying, near the end of its opinion: “Whatever Congress may be authorized to enact by reason of possessing the power to pass uniform laws on the subject of bankruptcies, it is very clear that it did not intend to impinge upon contracts existing between creditors and debtors, by anything prescribed in reference to the administration of the assets of insolvent national banks. Yet it is obvious that the bankruptcy rule converts what on its face gives the secured creditor an equal right with other creditors into a preference against him, and hence takes away a right which he already had. This a court of equity should never do, unless required by statute, at the time the indebtedness was created.”
There is here express recognition of what, it seems to me, would otherwise be very plain, that the rules governing courts of equity in the distribution of insolvent estates are never so applied as to violate any statutory provision regulating the rights of the parties. The court below was bound to take judicial notice of the statutes of Nevada, under which the insolvent bank was organized and which constituted its charter. Bank v. Francklyn, 120 U.S. 751, 7 S.Ct. 757, 30 L.Ed. 825; Lamar v. Micou, 114 U.S. 223, 5 S.Ct. 857, 29 L.Ed. 94; Owings v. Hull, 9 Pet. 607, 9 L.Ed. 246; Jesson v. Noyes, 245 F. 46, 157 C.C.A. *889342; Merchants Exchange Bank v. McGraw, 59 F. 972, 8 C.C.A. 420; Story’s Eq. Plead. (10th Ed.) § 20.
Equally clear is it, I think, that all parties dealing with this national bank, including, of course, the appellee Dexter Horton National Bank, were charged with notice that its very charter expressly declared that claims of its depositors for deposits, and claims of holders of exchange against it, shall “have priority over all other claims, except federal, state, county and municipal taxes, and subject to such taxes shall at the time of closing of the bank be a first lien on all the assets of the banking corporation from which they are due and thus under receivership.” In Chemical National Bank v. Armstrong, 59 F. 372, 8 C.C.A. 155, 28 L.R.A. 231 (referred to with approval by the Supreme Court in the cases of Merrill v. National Bank of Jacksonville and Aldrich v. Chemical National Bank, supra), Judge Taft, speaking for the court, said: “The suspension of the bank, and its seizure by the Comptroller and his appointee, the receiver, work, by operation of law, a transfer of the title to the assets of the bank from the bank to the Comptroller and receiver, in trust to reduce the assets to money, and apply them, as directed by the National Banking Act— first, to the redemption of the circulating notes of the bank; and, second, in ratable distribution to the creditors of the bank. Scott v. Armstrong, 146 U.S. 499, 13 S.Ct. 148 [36 L.Ed. 1059]; White v. Knox, 111 U.S. 784, 4 S.Ct. 686 [28 L.Ed. 603]. * * * It is true that under the Bankruptcy Act it was provided that a secured creditor, if he would prove for h-is full claim, must surrender his collateral, or else be content to prove for the difference between his full claim and the value of his collateral. Rev.St. § 5075. The bankruptcy law is not now in force, however, and it was expressly held in the case of Cook County Nat. Bank v. U. S., 107 U.S. 445, 2 S.Ct. 561 [27 L.Ed. 537], that the priorities and method of distribution under the bankrupt law had no application to the winding up of insolvent national banks. It was said that the National Banking Act contained within itself a complete system for distributing the assets and determining the priorities, and that a priority secured to the United States under the bankrupt law would not be enforced in their favor under the banking act.”
*890The cases above cited clearly recognize the controlling force of statutory law prescribing how the distribution of the assets of an insolvent corporation, organized under and by virtue of its provisions, shall be made, regardless of whether the insolvent bank be a national or a state bank. I am, of course, aware of the distinction that exists between the laws of a state which merely regulate corporations in their manner of doing business within it and the laws of the same state which become a part of the charter of a corporation which has been incorporated under its laws. That the latter will follow such corporation when it engages in business outside of the state of its incorporation I do not understand to be questioned. But it is contended, and by. the majority of this court in effect held, that the purpose of the above-mentioned act of the state of Nevada of March 24, 1909, was merely to regulate the banking business carried on in that state, and to provide for the distribution of the assets of insolvent banks within Nevada only. If so, I readily concede that that statute has nothing to do with this case.
A number of cases are cited where state courts have refused to give effect to charter provisions of foreign corporations doing business within their state, some upon the ground that they conflict with the rights of local creditors, or with the laws or public policy of the state within which it was sought to enforce such charter provisions, and some because of the construction that the true intent of the particular legislation in question was that it should not become a part of the charter of the corporation organized under its laws, but apply only to its business within the state. An apt illustration of the latter is the case of Mutual Life Ins. Co. of New York v. Cohen, 179 U.S. 262, 21 S.Ct. 106, 45 L.Ed. 181. That company was organized under the laws of New York, which'State enacted a statute providing that — “No life insurance company doing business in the state of New York shall have power to declare forfeited or lapsed any policy hereafter issued or renewed by reason of nonpayment of any annual premium or interest, or any portion thereof, except as hereinafter provided.”
The insurance policy there involved contained a stipulation that it should not be binding until the first premium had been paid and the policy delivered, both of which acts *891were done in the state of Montana; the contract thereupon becoming a Montana contract, and governed by its laws. In Montana, there being no statutory provision to the contrary, the failure to pay the annual premium worked, in accordance with the terms of the policy, a forfeiture of all claims against the company. The court held that the provision of the New York statute quoted had no application to a policy issued by the company in another state, saying: “The New York statute does not purport to change any insurance company charter. On the contrary, its obvious purpose is only to reach business transacted within the state. Proceeding on the accepted principle that a state may determine the conditions, the meaning and limitations of contracts executed within its borders, the language of the statute reaches contracts made within the state. * * * It is not doubted that a contract by an insurance company of New York, executed elsewhere, may by its terms incorporate the law of New York, and make its provisions controlling upon both the insured and the insurer. And it is urged that, although there is nothing in the policy to indicate this, the language of the application has that effect. It recites that it is ‘subject to the charter of such company and the laws of said state,’ and the contract refers to the application, and declares that it is issued ‘in consideration of the application for this policy and of the truth of the several statements made therein.’ While the contract is based upon the application, yet the latter is only a preliminary instrument, a proposal on the part of the insured, and a stipulation that it shall be controlled by the charter and the laws of the state is not tantamount to a stipulation that the policy issued thereon shall also in like manner be controlled. That such language was incorporated into the application is not strange. Its meaning is clear, and is that no local statute as to the effect of statements or representations or any other matter in the application should in these respects override the provisions of the charter and the laws of New York. In other words, if by the charter or the laws of New York any statement in an application is to be taken as a warranty, no local statute declaring that all statements in an application are to be taken as simply representations shall override the terms of the charter and the New York law. But that is very different from a provision *892that the contract issued upon such application should also be in all its respects controlled by the laws of New York.”
It will be observed that there is not in the Nevada statute here involved, as there was in that of New York involved in the case just cited, a reference to the place where the incorporation shall be doing business, but the positive declaration that the term “bank” or “banking corporation,” used in the Nevada statute, shall be construed to mean any incorporated banking institution which shall have been incorporated under the laws of that state as they existed prior to the taking effect of the act of March 1909, and of such banking institutions as should thereafter become incorporated thereunder, with the further express declaration, contained in section 61, that — “Each section of this act, and every part of each section, is hereby declared to be independent sections and parts of sections.”
As is well said by counsel for the appellant, depositors are practically certain to be, holders of exchange are very likely to be, residents of the jurisdiction where a bank does business. Correspondent banks are in many instances, as in that at bar, concerns in foreign jurisdictions. “What principle of public policy requires that such resident depositors and holders of exchange shall not be paid out of insolvent estates before such foreign correspondent banks are paid therefrom?” asks counsel. I know of none, nor do I know of any principle of the common law which forbids it; and it is not claimed that there is any statute in force in Alaska to the contrary.
It does not seem to mé that the Nevada statute can be properly so construed as to limit its provisions to such business as is done by the banks or banking institutions, therein referred to, within the state of Nevada, but that the provision in question was an alteration of the laws under which the appellant bank was incorporated; that is to say, an alteration of its charter, which was expressly authorized by article 8, § 1, of the Constitution of Nevada.
In my opinion the judgment should be reversed, with directions to the court below to dismiss the petition, at the petitioner’s cost.