Bank Comm'r v. Mech.s Bank Of New Haven.

• Decision Date: 05 December 1945
• Citation: 45 A.2d 155,132 Conn. 404
• Court: Connecticut Supreme Court
• Parties: BASSETT, Bank Commissioner v. MECHANICS BANK OF NEW HAVEN.

132 Conn. 404

45 A.2d 155

BASSETT, Bank Commissioner

v.MECHANICS BANK OF NEW HAVEN.

Supreme Court of Errors of Connecticut.

Dec. 5, 1945.

Case Reserved from Superior Court, New Haven County; Mellitz, Judge.

In the matter of the receivership of the Mechanics Bank of New Haven. On the application of the Sponge Rubber Products Company to require George J. Bassett, Bank Commissioner, as successor receiver of the bank, to pay applicant $4,868 from the proceeds of the sale of collateral returned to the receiver by the Reconstruction Finance Corporation after satisfaction of the bank's indebtedness to such corporation, brought to the superior court and reserved thereby for the advice of the Supreme Court of Errors.

Application denied.

William F. Healey, of Derby, for applicant, Sponge Rubber products co.

A. Frederick Mignone, of New Haven (Vincent P. Dooley, of New Haven, on the brief), for City of New Haven.

Robert M. Dowling, Asst. Atty. Gen., and William L. Hadden, Atty. Gen., for bank commissioner, successor receiver of defendant.

Before MALTBIE, C. J., and BROWN, JENNINGS, ELLS, and DICKENSON, JJ.

MALTBIE, Chief Justice.

The defendant bank is in receivership and the controversy before us arises out of the application of the Sponge Rubber Products Company, hereafter called the plaintiff, a depositor, asking that it be paid from the proceeds of certain property in the hands of the receiver the difference between the amount of its deposit when the receivership began and the dividends it has received. On May 28, 1932, the plaintiff was indebted to the commercial department of the bank to the amount of $29,000, represented by five negotiable notes, all unsecured and none then due. On that day the bank borrowed a large sum from the Reconstruction Finance Corporation and pledged certain of its assets, including these notes, to secure the loan. The finance corporation, under the terms of the note representing the loan, had the right to collect any sums due on the collateral it received, or otherwise to convert it into money. The bank was closed by order of the bank commissioner and placed in receivership on June 8, 1932, and has been in receivership ever since. On that day the plaintiff had $8113.40 on deposit in its commercial department. As the loan by the finance corporation was not paid, it proceeded to realize upon the collateral it held. Before June 12, 1940, the plaintiff, under protest, paid to the corporation the full amount due on the notes, with a considerable sum in addition as interest. On November 1, 1944, the indebtedness of the bank to the finance corporation had been satisfied, and it turned back to the receiver a considerable amount of the collateral it held. The plaintiff has received $3245.36 in dividends upon its deposit. The plaintiff's claim is that the difference between the amount of its deposit in the bank when it went into receivership and the amount the plaintiff has received in dividends should be paid to it by the receiver out of the proceeds of the collateral returned to him by the corporation. There are several others who were depositors in the commercial department of the bank who are in the same situation as the plaintiff and who could advance a like claim.

As the plaintiff's deposit was in, and its debt was owing to, the commercial department of the bank, had the notes given by the plaintiff passed into the hands of the receiver, it would have been entitled to have its deposit set off against them and its debt thereby reduced. Lippitt v. Thames Loan & Trust Co., 88 Conn. 185, 194, 90 A. 369; Searle v. Crampton, 118 Conn. 42, 44, 170 A. 480.

There is a sharp difference in judicial opinion upon the question whether, having paid the amount due on the notes to the pledgee, the plaintiff should be granted the relief it asks. A number of cases bearing upon this question are gathered in a note in 139 A.L.R. 723, and counsel have cited a few additional authorities. The decision in Becker v. Seymour, 71 Minn. 394, 73 N.W. 1096, where the court, under similar facts, upheld the claim of the depositor, assumed that there was some equitable right on his part to have the other collateral in the hands of the pledgee applied to the loan before it sought to avail itself of his note; this decision was followed in Hall v. Burrell, 22 Colo.App. 278, 282, 124 P. 751; Merchants' Ice & Fuel Co. v. Holland Baking Co., 223 Mo.App. 93, 97, 8 S.W.2d 1030; Schaeffer v. Ruden, 61 S.D. 64, 246 N.W. 105; but, if there was any such equity present in those cases, there certainly was none in this case. The only other authorities cited to us which directly support the plaintiff's claim are In re Northwestern Trust Co., 339 Pa. 1, 4, 14 A.2d 96, and Ex parte Mechanics F. S. & L. Ass'n, 199...