Andrew v. Farmers' & Merchants' State Bank of Cascade

• Citation: 215 Iowa 1150,247 N.W. 797
• Decision Date: 04 April 1933
• Docket Number: No. 41981.,41981.
• Parties: ANDREW, SUPERINTENDENT OF BANKING, v. FARMERS' & MERCHANTS' STATE BANK OF CASCADE ET AL.
• Court: United States State Supreme Court of Iowa

215 Iowa 1150

247 N.W. 797

ANDREW, SUPERINTENDENT OF BANKING,

v.FARMERS' & MERCHANTS' STATE BANK OF CASCADE ET AL.

No. 41981.

Supreme Court of Iowa.

April 4, 1933.

Appeal from District Court, Dubuque County; P. J. Nelson, Judge.

This is a proceeding by the Merchants' National Bank of Cedar Rapids, Iowa, to establish a claim for the proceeds of a draft against L. A. Andrew, superintendent of banking of the state of Iowa, the receiver of the Farmers' & Merchants' State Bank of Cascade. The Farmers' & Merchants' State Bank was the drawer of the draft, and the Merchants' National Bank, the claimant, was the payee thereof. After a hearing in the district court, that tribunal established the claim as preferred over all other creditors, including depositors. From that ruling, the receiver appeals.

Affirmed.Edw. L. O'Connor, Atty. Gen., Lehan T. Ryan, Asst. Atty. Gen., and Geo. T. Lyon and John K. Chalmers, both of Dubuque, for appellant.

Parsons & Mills and Ben J. Gibson, all of Des Moines, for appellee.

KINDIG, Chief Justice.

The Farmers' & Merchants' State Bank of Cascade, an Iowa banking institution, became insolvent and went into the hands of a receiver on June 28, 1932. L. A. Andrew, the superintendent of banking of the state of Iowa, appellant, was duly appointed receiver of the defunct bank, as required by the Iowa statutes.

On June 28, 1932, according to the stipulation of the parties, shortly prior to the failure and closing of the bank, it issued and drew, in the ordinary course of business, a draft for $315.32, in payment of clearings, to the appellee, Merchants' National Bank of Cedar Rapids. This draft was drawn on the Central Republic Bank & Trust Company, of Chicago, Ill. Because of the insolvency proceedings against the Farmers' & Merchants' State Bank, the draft was not paid by the Central Republic Bank & Trust Company, of Chicago.

Consequently, on December 24, 1932, the appellee, Merchants' National Bank of Cedar Rapids, filed, in said receivership proceedings in the Dubuque district court a claim against the appellant, superintendent of banking, to cover the proceeds of the unpaid draft. As a part of such claim, the appellee, Merchants' National Bank, asked that its demand, when allowed, be preferred over all other claimants, including depositors.

A defense was interposed by the appellant, superintendent of banking, on the theory that in no event should the appellee's claim be preferred over depositors' claims. Trial was had on the issues thus joined, and the district court allowed the appellee's claim and preferred it over all other creditors' claims, including those held by depositors. From the judgment thus entered, the superintendent of banking appeals.

I. The cause was tried in the district court very largely on a stipulation of facts. Both the appellee and the appellant adopted the stipulation as setting forth the true facts.

According to the stipulation, the draft in question was issued under such facts and circumstances as to make section 9239-c1 of the 1931 Code applicable. That section provides: “Any draft drawn and issued by any bank or trust company prior to its failure or closing and given in payment of clearings and any money paid in the usual course of business to any bank, or trust company for the purchase of a draft for the bona fide transfer of funds shall be a preferred claim against the assets of the bank or trust company.”

Under the stipulation, as above indicated, the draft was delivered by the Farmers' & Merchants' State Bank to the appellee, Merchants' National Bank. So the Merchants' National Bank, as previously stated, is asking for a preference under section 9239-c1, above quoted. This it may do under the statute in question. It is not necessary under this statute that the draft be purchased for, payable to, and presented by, a third person. Such draft may be purchased by and made payable to the payee. After thus being purchased by the payee, the draft may be presented by him as a claim under the statute. Andrew, State Superintendent of Banking v. Farmers' State Bank of Grand River et al., 212 Iowa, 1375, 238 N. W. 425, 427. There it is said: “The fact that the draft in question named Jones as payee and not a third party is not material in the instant case.”

Consequently, in the case at bar, the appellee bank could, if it acted in good faith, receive, in the due course of business, the draft payable to itself in payment of clearings, and, after the drawer's failure, present the instrument to the receiver for a preference under section 9239-c1, above mentioned. In the stipulation before referred to, the parties agree that the appellee bank is entitled to a preference for the amount of the draft. The parties disagree, however, concerning the nature of that preference.

At this juncture the appellant, superintendent of banking, claims that the appellee bank's preference is no higher than, or different from that to which the depositors are entitled under section 9239 of the 1931 Code. That section provides: “The superintendent of banking may apply to the district court for that district in which said bank is located, or a judge thereof, for the appointment of said superintendent as receiver for such bank [the insolvent bank], and its affairs shall thereafter be under the direction of the court, and the assets thereof after the payment of the expenses of liquidation and distribution shall be ratably distributed among the creditors thereof, giving preference in payment to depositors.”

By way of answer to that contention, the appellee bank argues, on the other hand, that section 9239 is a distribution statute, and that section 9239-c1 is a preference statute, giving it a preference against the assets of the drawer bank, including those funds which are to be distributed to depositors under the first-named statute. This controversy is provoked by a question raised by this court in Andrew v. Turin Savings Bank et al., 243 N. W. 152. A preference of the kind claimed by the appellee bank was allowed in Andrew, State Superintendent of Banking, v. Farmers' State Bank of Grand River et al. (212 Iowa, 1375, 238 N. W. 425, 426), supra. When stating the facts, this court there said that the district court allowed the claim under the draft “as preferred, and ordered the receiver to pay the said applicant his claim of $700 before he paid anything to the depositors or general creditors.” (Italics are ours.) After reciting what the district court did, this court affirmed the judgment. It is true that there was no special discussion in Andrew, etc., v. Farmers' State Bank (212 Iowa, 1375, 238 N. W. 425), supra, of the point now being considered in the case at bar, but we there indicated that the statute under consideration provides for a preferred claim against the receiver of an insolvent bank.

Considerable discussion appears in Andrew, etc., v. Farmers' State Bank, supra, concerning the history of the legislation indicating that the preference for the draft of the kind in question is to be against all the assets, including those to be distributed to depositors. An excerpt is here quoted from Andrew, etc., v. Farmers' State Bank (212 Iowa, 1375) supra, reading on page 1378, 238 N. W. 425, 426: “It is apparent that prior to the enactment of chapter 30, the instant claimant's status would have been that of a general creditor and the relation of debtor and creditor would have existed between the claimant and the bank. The decisions of this court prior to the enactment of said chapter 30 are sufficient to establish the foregoing statement of legal principle. Danbury State Bank v. Leach, 201 Iowa, 321, 207 N. W. 336;Leach v. Citizens' State Bank of Arthur, 202 Iowa, 879, 211 N. W. 526;Leach v. Iowa State Savings Bank, 204 Iowa, 497, 212 N. W. 748, 215 N. W. 728. These and similar decisions undoubtedly caused the Legislature to enact chapter 30, Acts of the 43d Gen. Assem. [now section 9239-c1 of the 1931 Code], in an attempt to remedy the apparent injustice of such a rule, and to recognize that a draft drawn and issued under the conditions named therein constitutes a preferred claim against the receiver of an insolvent bank.” (Italics are ours.)

[1] Some of the cases cited in the quotation decide that the money paid in the purchase of a draft does not create a trust to be enforced in a receivership proceeding; and others declare that the purchase of said draft does not give rise to a preference. There is a manifest distinction between a claim for a trust in a bank receivership proceeding and a claim therein for a preference. Under the trust theory, the relationship of debtor and creditor does not exist. While attempting to enforce a trust in a receivership proceeding, the claimant, in effect, “is endeavoring to obtain from the receiver the trust property owned” by him. Andrew, Superintendent of Banking of State of Iowa, v. State Bank of New Hampton et al., 205 Iowa, 1064, 217 N. W. 250;In re...