Court Opinion

ID: 3984626
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:40:53.822701+00
Date Added: 2024-06-11T07:44:10.001350
License: Public Domain

The ultimate question here presented is whether the surety on the supersedeas bond may charge, by virtue of its indemnity agreement with the principals (the Association and Bank Commissioner of Utah), the assets of the insolvent estate of the Intermountain Building  Loan Association before the creditors of that Association have been fully paid. If, as contended for by respondent, the Bank Commissioner had no authority in law to bind the assets of the insolvent corporation without giving the creditors notice and an opportunity to object, the above question must be answered in the negative.
I place my concurrence in the result mainly on the basis that the order of our District Court permitting the Bank Commissioner to procure a contract surety bond was issued without notice of the application for approval of the proposed supersedeas bond and the attendant indemnity agreement. The Commissioner had possession of the Arizona assets and the books of the company although enjoined by the Federal District Court for Arizona from taking them from the jurisdiction of that court. There is no showing that he could not have obtained a stay order sufficient to enable notice of his application for supersedeas bond to be given to the creditors, nor is there any showing that the probable custody of the temporary receiver, application for which was pending in the Federal Court at the time the injunction against removal by that court was made on April 10, 1934, would have endangered the assets.
Any agreement, expressed or implied, to indemnify the surety for loss in case the judgment of the Federal District Court for Arizona was sustained by the Circuit Court of Appeals of the Ninth Circuit, was, in effect, pledging the assets of the insolvent Association. The result is the same whether assets are actually put up as indemnity, or whether money is borrowed on pledged credit, or whether an agreement is entered into to pay any loss which may be recovered by the respondents in the Federal suit which ultimately will involve a payment out of assets or a prior charge against *Page 485 
them. The result, if the loss must ultimately be paid out of assets, will be to decrease the assets of the estate available to creditors. Section 7-2-12, R.S.U. 1933, as amended by Chapter 4, Session Laws, 1933, was meant to give the creditors a right to be heard on a matter when their assets were to be pledged or lien or charge prior to their claims fastened upon those assets. In an insolvent institution the assets belong to them, and the Commissioner is a trustee charged with the duty to preserve them. These are not ordinary expenses of administration approval of which may be obtained by the court without previous authority obtained. Before he charges the assets with a lien or claim under an asserted endeavor to preserve or obtain possession of those or other assets belonging to the insolvent institution, he must give them opportunity to be heard in his application seeking court approval. The authority of the Bank Commissioner under Section7-2-12, R.S.U. 1933, as amended is conditioned on such notice. I think Section 7-2-12 applies to building and loan associations as well as banks. The words "such institution" in Section 7-2-12, as amended by Chapter 4, Session Laws 1933, when traced through the 1933 revision, appears to refer to all institutions of which the Commissioner has jurisdiction and not withstanding of the title and the use of the word "bank" in connection with "directors" and "committee of depositors."
The view above expressed makes it unnecessary to discuss the question of the wisdom of obtaining the supersedeas bond instead of leaving the assets in Arizona under the control of the Federal Court for Arizona pending the appeal to determine where jurisdiction of the assets lay. And this view also disposes of the fear of applicants herein that a decision against its contentions will put the Commissioner, whose duty it is to preserve assets, in a position where, if he attempts honestly to do that very thing, he may act at his peril if it ultimately transpires that his judgment of the law and his action thereon after advice of legal counsel turns out to be wrong. If, after giving notice to creditors, *Page 486 
our District Court had granted his application made in good faith to enter into a contract for a surety bond and give indemnity, the creditors or any successor receivers would be foreclosed from objecting to the claim of the surety for losses required to be paid either by way of judgment obtained against it or by bona fide settlement of a claim against it where the principal was asked to defend or consent to the settlement but refused to do either. In such case any defense to a payment of the claim would be reduced to the question of the bona fide and reasonableness of the settlement.
In a hearing upon notice to creditors, if there was any objection, all of the matters bearing on the advisability of pursuing an appeal from the decree of the Federal Court for Arizona or of retaining assets by giving a supersedeas bond could have been thrashed out in the light of the charge that the contest involved only a competition between officers for possession and administration of the assets and that the Commissioner with knowledge or means of knowledge of the association had too long delayed in his endeavor to acquire possession of the Arizona assets, or in the light of a charge that his zeal to obtain them arose more from a desire to permit the Association to continue in business after he should have known of this incompetent management, than to protect creditors.
Since the Commissioner himself as principal on the bond could not, having acted without legal authority, obtain recoupment from the assets now being administered by the ancillary receiver under the aegis of our District Court, the appellant cannot ask recoupment for losses paid by it to the Arizona receiver caused by the administration of its principal.
Also what has been said above makes it unnecessary to touch on the question of whether a contract surety required to pay losses which it obliged itself to pay in event of a certain contingency can, in any event, recoup itself under the theory that it is a receiver's expense and, hence, a prior *Page 487 
charge on assets of the estate to be paid ahead of all creditors not in the same category.