Court Opinion

ID: 9885848
Source: CourtListenerOpinion
Date Created: 2023-10-06 15:13:58.009296+00
Date Added: 2024-06-11T07:49:17.655413
License: Public Domain

On Motion for Rehearing.
The appellee presents the ease of Cheney v. Scharmann, 145 App. Div. 456, 129 N. Y. Supp. p. 994, decided by one of the Supreme Courts of New York, as in conflict with the ruling announced by this court in construing our banking law, as to the power of the commissioner to make and maintain an assessment against the stockholders of a state bank while the bank is in the process of administration and liquidation. The similarity of the New York statute, with the construction of the New York court upon the same, makes the opposition of the two rulings clear cut; but the settled construction of the United States Supreme Court, noted in our main opinion, according to our view, is so much more compatible with a wise public policy as to the administrative features of the law, operating upon a bank in the settlement of its affairs in the hands of the government, that this court has not the slightest hesitancy in refusing to follow the New York court, thereby adopting the principles of the federal Supreme Court as to the meaning, policy, and purpose of the law. If the law is a borrowed law upon the main features affecting the issue involved, the argument in reality should be ended; the construction of the Supreme Court of the United States is a part of the law. As to the power of our banking commissioner, in comparison with the power of the federal Comptroller in charge of a national bank, authorizing him to enforce the additional liability of a stockholder, when necessary to pay the debts of the corporation, the law is identical, and also embraced in a section of our banking act containing other provisions upon other matters, in substance the same as the federal act; and we believe it is indisputable that this act was borrowed from the federal law.
[7] It is also clear that, as to the'immedi*1112ate provisions under consideration, the New York act, with some additional features, is the same as the federal law upon cognate subjects; hence an interpretation of the New York law by the New York court, in this instance subsequent to the passage of our act, should be very controlling as to the policy of the law, and as to the wisdom of its interpretation, before a Texas court could, or should, even consider overruling the interpretation by the courts of the country from which the act was borrowed; and when, as it appears to us, that such a construction is inimical to an expeditious administration, obstructing the settlement of the affairs of a bank in the hands of the government, and which would subordinate the interests of the creditors of the bank to the interests of the stockholders, it is with an unhesitating conviction that such an interpretation, enunciating such a policy is refused by us. It is the stockholders’ bank which has become delinquent, and with reference to which the law makes it a part of his contract to pay the debts by his increased liability when the default occurs; and then to say that the necessity to pay is to be a litigated question, when the bank is in default, and that the courts and juries of the country are to find this necessity by balancing the reliable assets and the proper liabilities of the institution, for the purpose of finding the deficit, a.nd thence determining the criterion of the liability of the stockholders and the amount of the assessment, is to our minds a construction retarding the very purpose of an expeditious administration and settlement of a bank’s' affairs, and adds uncertainty to insolvency, and which by delay extends the avenue of escape and evasion. The appellee asserts, however, that the liability feature of our statute imposes a secondary liability, while the federal statute burdens the stockholder with a primary liability, and this asserted difference distinguishes the rights of the stockholders when called upon to pay. We do not deem the solution of this question in the slightest as any material aid whatever in the construction of the law as to the finality of the assessments made by the commissioner. We will say, however, that under the nation-al bank act, when a bank refuses to pay its circulating notes, or when, on account of a violation of the law by its directors, a national bank shall have been dissolved and its franchise forfeited, or when a creditor is the holder of an unsatisfied judgment against the bank, or whenever the Comptroller is satisfied of the insolvency of an association, a receiver may be appointed by the Comptroller, and such receiver, under the directions of the Comptroller, may, if necessary to pay the debts of such association, enforce the personal liability of the stockholders. The technical and legal liability of the stockholders, of a national bank for the debts of the bank is to the Comptroller for the benefit of the creditors.
“Creditors must seek their remedy through the Comptroller in the mode prescribed by the statute; they cannot proceed directly in their own names against the stockholders or debtors of the bank. The receiver is the statutory assignee of the association, and is the proper party to institute all suits.” Kennedy v. Gibson, 75 U. S. (8 Wall.) 506, 19 L. Ed. 479.
Of course, there may be a suit in equity instituted by the creditors against the stockholders of a national bank when there is a voluntary liquidation of the bank’s business by its directors, under another provision of the national banking'law. In that character of litigation we assume that a creditor who brings a suit against the stockholders of a national bank does so because the bank refuses to pay its debts; and, as a practical question, the enforcement of the liability would never arise unless occasioned by default; and, as a further practical question, when a national bank is in the hands of a receiver — involuntary liquidation — such a condition would generally arise on account of the bank having failed or refused to pay its debts. This attempted distinction of primary and secondary liability only tends to eonfuse. Secondary to what? If you say it is secondary, in the sense that the commissioner has to await his collection and realization of the assets of the bank, and their application to the debts to determine the deficit, and then determine the .amount owing by the stockholders, such would be intolerable. If you say it is secondary in the sense that the necessity for the enforcement of the liability is required to be first litigated by the balancing of good assets with the debts of the bánk, the language of the Supreme Court of the United States, in the case of Kennedy v. Gibson, cited in the main opinion, is, to us, so unanswerable, as that repetition is unnecessary. We assume that the default of the bank in the payment of its debts has occurred; otherwise the petitioner in this injunction suit would have alleged that no default had occurred.
The case of Alsop v. Conway, 188 Fed. 575, 110 C. C. A. 373, decided by the Circuit Court of Appehls of the Sixth Circuit, is of no assistance to the appellee in this matter. That court did hold, construing the Kentucky statute, that:
“Although it is alleged in the bill that the entire liability is necessaryto be enforced in order to enable payment in full to creditors, every stockholder is at liberty to contest this allegation.”
However, the immediate provision under consideration here giving the commissioner of banking of this state the power to enfbrce liability of the stockholders is evidently not in the Kentucky statute, as none was adverted to. by the court in its consideration of that cause; and we presume that the absence of-such a provision occasioned the following language of the circuit .judge in that case:
“We have not overlooked the settled course of decisions that actions for the recovery of the full statutory liability under the national banking act must be had at law. Casey v. Galli, 94 *1113U. S. 673, 24 L. Ed. 168; U. S. v. Knox, 102 U. S. 422, 26 L. Ed. 216. But suits for collection under the national banking act differ from the proceedings before us in two important respects: First, that under the national banking act the question whether the assessments shall be for 100 per cent, or less than the full statutory liability rests entirely in the discretion of the Comptroller; * * * and, second, the administration and distribution of the funds collected is not had in the suit for their collection, but is carried on by the Comptroller independent of judicial proceedings.”
Under our law, as well as under the federal law, upon the settlement of the affairs of a state bank, after all collections have been made and an excess exists, the amount un-expended, after the payment of expenses, reverts to the stockholders.
The motion for rehearing is in all things overruled.