Bank Com'rs v. Sec. Trust Co.

• Decision Date: 15 March 1901
• Citation: 49 A. 113,70 N.H. 536
• Parties: BANK COM'RS v. SECURITY TRUST CO.
• Court: New Hampshire Supreme Court

49 A. 113

70 N.H. 536

BANK COM'RS

v. SECURITY TRUST CO.

Supreme Court of New Hampshire. Hillsboro.

March 15, 1901.

Petition of the bank commissioner against the Security Trust Company for appointment of a receiver. Holders of notes of the company present claims against the estate. Case discharged.

Petition for the appointment of an assignee of the property and effects of the defendants, under section 15, c. 102, Pub. St. Some of the facts appear of record, and others were found by the commissioner appointed to allow claims. The defendants were incorporated by an act of the legislature. Laws 1889, c. 175. They carried on business in two departments, distinct from each other,— a trust and banking department and a savings department. An assignee was appointed October 9, 1896. He filed an inventory December 2, 1896, showing assets in the trust and banking department amounting to $744,260.77, of which $31,682.25 was cash on hand and on deposit; $19,892.71 of that on deposit being pledged to creditors.

John Hatch, for plaintiff. Edward H. Wason, for Lester F. Thurber, assignee. Charles J. Hamblett, for F. E. Anderson. Nathan P. Hunt and Taggart, Bingham & Drury, for Guaranty Sav. Bank and People's Fire Ins. Co. George B. French and Henry Heywood, for Mary A. Gray, Henry Heywood, and Francis L. Towne. George B. French and William B. Fellows, for New Hampshire Conference Seminary and Female College. George B. French, for Peterborough Sav. Bank, Margaret A. Johnston, Elizabeth A. Babcock, and Asa Jaquith. Elijah M. Topliff and Alfred T. Batchelder, for trustees of New Hampshire Trust Co. Taggart, Bingham & Drury, Charles H. Burns, and Henry B. Atherton, for David A. Gregg. Henry A. Cutter, pro se. J. W. Simonton, Henry B. Atherton, and Taggart, Bingham & Drury, for J. W. Simonton. Harry E. Loveren, for Eben L. Bartlett. Taggart, Bingham & Drury and Henry B. Atherton, for James Russell. F. W. Estabrook, George A. Rollins, and F. D. Hutchins, trustees, pro se. White Mountain Freezer Co., pro se. Alpheus Gay, pro se.

CHASE, J. 1. The commissioner allowed interest on claims to September 1, 1897. The allowance should be to October 9, 1896, the date of the appointment of the assignee. Bank Com'rs v. New Hampshire Trust Co., 69 N. H. 621, 44 Atl. 130.

2. The defendants sold notes, some of which were secured by mortgages of real estate, and guarantied the payment of the interest coupons attached to the notes at maturity, and of the principal within two years after maturity, and reserved the right to repurchase the notes at any time at their face value, with accrued interest added; or they simply guarantied the payment of the principal and interest. The holders of the notes have presented claims upon the guaranty, reserving their rights against the makers of the notes and their rights under the mortgages. If there has been a failure of the principal debtor to pay principal or interest, or both, as set forth in the contract of guaranty, no reason has been suggested or is perceived why the defendants are not liable to the full extent of their promise. The consideration paid by the purchaser to the defendants for the note included consideration for the defendants' promise, and rendered it binding upon them. The guaranty was an absolute promise to pay the debt if the principal debtor failed to make payment at maturity, or within the time specified. Being unconditional, no demand upon the principal debtor, or notice to the defendants of his default, was necessary to create liability. Beebe v. Dudley, 26 N. H. 249, 253, 59 Am. Dec. 341; Simons v. Steele, 36 N. H. 73; Bank v. Sinclair, 60 N. H. 100, 49 Am. Rep. 307; McDonald v. Fernald, 68 N. H. 171, 38 Atl. 729. Nor was the holder of the note obliged to bring and prosecute an action against the maker before attempting to assert his claim upon the guaranty. Brown v. Curtiss, 2 N. Y. 225; Bishop v. Eaton, 161 Mass. 496, 37 N. E. 665; Morrison v. Bank, 65 N. H. 253, 280, 20 Atl. 300, 9 L. R. A. 282. He was at liberty to institute proceedings against the maker, or against the defendants, or against both concurrently, as he saw fit. The maker's promise and the defendants' were, in this respect, independent of each other. If the holder obtained payment from the maker, it would discharge the liability of the defendants. If he obtained payment from the defendants, it would entitle them to be subrogated to his rights against the maker, including the title to any collaterals held as security for the fulfillment of the maker's promise. In re Babcock, 3 Story, 393, Fed. Cas. No. 696. The holders of the defendants' guaranties, in presenting claims upon them to the commissioner for allowance, were, therefore, not called upon to elect whether they would ultimately attempt to hold the makers of the notes, their reservation of the right to do so being immaterial. If they receive a dividend from the defendants, and also recover payment in full of the makers, they will hold so much of the excess as will reimburse the defendants for their payments, less proper allowances for costs and expenses, in trust for them or the assignee of their property.

3. In case the claimant, besides the defendants' guaranty, held a mortgage or other collateral security given by the maker to secure payment of the note, should the value of the collateral be deducted from the sum due upon the guaranty, and the balance only be allowed against the defendants, or should the entire sum due upon the guaranty be allowed? A similar question, also raised in the case, is, should the value of collaterals given to claimants by the defendants to secure the payment of certificates of deposit issued by them be deducted from the amounts due upon the certificates in the allowance of the claims? The two questions have so many features in common that they may conveniently be considered together. The law on this subject was particularly reviewed in the opinions of the court in Merrill v. Bank, 173 U. S. 131, 19 Sup. Ct. 360, 43 L. Ed. 640. There appear to be two lines of decisions, one establishing what is known as the "bankruptcy rule," by which secured creditors are allowed to prove only the balance of their claims above the value of their securities; and the other establishing what is known as the "chancery rule," by which such creditors are allowed to prove their claims in full, without regard to their securities. In the case cited the supreme court of the United States, by a bare majority of the justices,—four dissenting,—adopted the latter rule for the allowance of claims against an insolvent national bank preparatory to a distribution of its assets. The majority opinion rests on the ground that this rule is supported by sounder reasoning than is the other, and by a preponderance in the weight of authorities; and, since the national banking act did not specially adopt the bankruptcy rule, was the rule intended to be applied in such cases. The minority opinions vigorously controvert each of these positions. In consequence of the division in the court, the value of the case as an authority consists in the ability and exhaustiveness of the discussion, rather than in the conclusion reached. From 1820 to the present time the supreme court of Massachusetts has followed the bankruptcy rule in the allowance of claims against the estates of deceased persons settled as Insolvent. Amory v. Francis, 16 Mass. 308; Hale v. Leatherbee, 175 Mass. 547, 549, 56 N. E. 562. The question was first considered in this state in 1822, in the case of Moses v. Ranlet, 2 N. H. 488, and the decision was in favor of the chancery rule. The case was an appeal from the decision of commissioners allowing the claim of a mortgagee of real estate against the estate of a deceased person in full, without regard to the mortgage. It was said in the opinion that "the death of the debtor cannot in itself change the principles of justice or the terms to the contract; and the statute does not profess to make any change, except to introduce an equal dividend among the creditors of such estate as belonged to the insolvent at his death"; and, further, in substance, that the bankruptcy rule changes the law in respect to pledges and mortgages, and that the making of such a change "belongs to the legislative, rather than the judiciary, department." Of Amory v. Francis it was said that it seemed to be opposed to the weight of authority. Upon the revision of the statute law of the state in 1842, the change suggested was made by the legislature. It was then enacted, in substance, that, if any creditor holds collateral security of less value than his debt, the commissioner shall estimate the value of the security, and allow the difference between it and the debt; and that if the creditor, being dissatisfied with the estimate, relinquishes his interest in the security, and delivers it to the administrator, it shall be sold by him under the direction of the judge, and the proceeds shall be paid to the creditor, and the difference between the sum so paid and the amount of the claim shall be inserted upon the list of claims. Rev. St. c. 162, §§ 10, 11. These provisions are still in force. Pub. St. c. 192, §§ 11, 12. In 1862 similar provisions were introduced into the statutes in relation to assignments for the benefit of creditors, and have been continued therein ever since. Laws 1862, c. 2594, §§ 8, 9 (Pub. St. c. 201, § 20). It thus appears that the bankruptcy rule has been adopted by special statutory provisions for the allowance of the claims of secured creditors against the estates of insolvents, both living and deceased. The questions now under consideration arise in a proceeding under the statutes relating to the winding up of the affairs of insolvent banks, loan and trust companies, and other similar institutions. These statutes provide that the court, upon application of the bank commissioners, may enjoin such an institution from transacting business, and may appoint an...