Bramwell v. United States Fidelity & Guaranty Co.

• Decision Date: 30 June 1924
• Docket Number: 4208.
• Citation: 299 F. 705
• Parties: BRAMWELL, Superintendent of Banks, v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: U.S. Court of Appeals — Ninth Circuit

299 F. 705

BRAMWELL, Superintendent of Banks, v. UNITED STATES FIDELITY & GUARANTY CO.

No. 4208.

United States Court of Appeals, Ninth Circuit.

June 30, 1924

The superintendent of the Klamath Indian reservation had on deposit with the First State & Savings Bank of Klamath Falls Or., $96,000, which had come into his possession as such superintendent; the same being individual Indian moneys and tribal funds of the agency. The bank, with the appellee herein as surety, executed to the United States a bond to secure the payment of said deposits. On January 28, 1922, the bank had become insolvent, and by resolution of its board of directors its assets were turned over to the superintendent of banks of the state of Oregon, who took possession for liquidation. The appellee, as the surety on the bond, paid to the superintendent of the Indian reservation a sum of money equal to the amount so deposited by him, and the latter executed an instrument assigning all claim and interest of the United States to the appellee. The appellee filed its claim for reimbursement with the superintendent of banks of the state of Oregon. The claim was rejected as a preference claim, but was allowed as an unpreferred claim against the assets of the bank. The appellee thereupon brought its suit in the court below to enforce its claim of preference. A trial on the pleadings and the evidence resulted in a decree in favor of the appellee, declaring it entitled to the payment of $96,932.30, with interest, out of the assets of the bank in preference to unsecured and unpreferred creditors and depositors.

Bowerman & Kavanaugh, of Portland, Or., and H. C. Merryman, of Klamath Falls, Or., for appellant.

Dey Hampson & Nelson, and George L. Buland, all of Portland, Or for appellee.

Before GILBERT, ROSS, and RUDKIN, Circuit Judges.

GILBERT Circuit Judge (after stating the facts as above).

The appellant contends that the court below erroneously ruled that the deposit of the moneys by the superintendent created a debt due to the United States from the bank, and erred in deciding that the bank was insolvent within the meaning of section 3466 of the Revised Statutes (Comp. St. Sec. 6372), and that it was error to decree to the appellee priority in the payment of its claim over unsecured and unpreferred creditors and depositors.

Notwithstanding that the money on deposit with the bank stood in the name of the Indian agent and was held for the use and benefit of the Indians as their property, there can be no question but that it represented a debt due from the bank to the United States. This is recognized in the terms of the bond which was given to secure its payment, and it is the generally accepted doctrine as to all moneys held by officers of the United States in trust for the use and benefit of the Indians. The United States, under its treaty with the Klamath Indians, was the guardian of the Indians on the reservation. United States v. Humason (C.C.) 8 Fed. 71; United States v. Fidelity Trust Co., 121 F. 766, 58 C.C.A. 42; United States v. Comet Oil & Gas Co. (C.C.) 187 F. 674; United States v. Gray, 201 F. 291, 119 C.C.A. 529; Watson v. United States (C.C.A.) 263 F. 700; Central Nat. Bank of Tulsa v. United States (C.C.A.) 283 F. 368; United States v. State of Oklahoma, 261 U.S. 253, 43 Sup.Ct. 295, 67 L.Ed. 638.

Section 3466 of the Revised Statutes (Comp. St. Sec. 6372) provides as follows:

'Whenever any person indebted to the United States is insolvent, * * * the debts due to the United States shall be first satisfied; and the priority hereby established shall extend as well to cases in which a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed, or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed.'

In Conard v. Atlantic Insurance Co., 1 Pet. 386, 7 L.Ed. 189, it was said:

'A mere inability of the debtor to pay all his debts, is not an insolvency within the statute; but it must be manifested, in one of the three modes pointed out in the explanatory clause * * * referred to.'

And in Beaston v. Farmers' Bank of Delaware, 12 Pet. 102, 9 L.Ed. 1017, the court said:

'No evidence can be received of the insolvency of the debtor, until he has been divested of his property in one of the modes stated in the section.' In United States v. Oklahoma, 261 U.S. 253, 43 Sup.Ct. 295, 67 L.Ed. 638, the court held that the meaning of the word 'insolvent,' used in the act, and of the insolvency therein referred to, is limited by the language to 'cases where a debtor, not having sufficient property to pay all his debts, makes a voluntary assignment. ' Said the court:

'Mere inability of the debtor to pay all his debts in ordinary course of business is not insolvency within the meaning of the act, but it must be manifested in one of the modes pointed out in the latter part of the statute which defines or explains the meaning of insolvency referred to in the earlier part.'

In brief, the statute, as construed by the decisions of the Supreme Court, means this: That debts due the United States shall be first satisfied in cases where the debtor is insolvent and has not sufficient property to pay all his debts and in addition thereto either makes a voluntary assignment of his property or commits an act of bankruptcy, or his property is attached as that of an absconding or concealing debtor. As applied to the present case, the question whether the debt here involved was payable first to the United States out of the assets of the bank depends upon whether or not the bank made a voluntary assignment of its property or committed an act of bankruptcy. What was done by the bank was this: On January 28, 1922, the directors adopted a resolution that the superintendent of banks for Oregon be given full control of the affairs of the bank. It is stipulated that on that date the total value of the assets of the bank was less than the amount of its indebtedness. The superintendent of banks took possession of the property and business of the bank pursuant to the laws of the state of Oregon, and he continued in possession for the purpose of liquidation and administration of the bank's assets.

The appellant relies upon the Oklahoma case above cited. There the court held, first, that the bank in that case was not insolvent within the meaning of section 3466; and, second, that the complaint did not allege the commission of an act of bankruptcy. The court found that under the Oklahoma Banking Law insolvency arises whenever a bank is unable to pay all its debts and continue as a going banking concern, whereas, under section 3466, a bank is insolvent if it has not sufficient property to pay all its debts. In considering whether or not the Oklahoma bank had committed an act of bankruptcy under the National Bankruptcy Law (Comp. St. Secs. 9585-9656), the court said:

'In this case it is not alleged that the Oklahoma state bank voluntarily placed itself in the hands of the bank commissioner under section 302, or that it made a voluntary assignment of its property; but it is alleged that the bank commissioner adjudged it insolvent and took charge and possession of its

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