Blackman v. Pettengill
| Decision Date | 03 December 1913 |
| Citation | 137 P. 182,25 Idaho 307 |
| Parties | WILLIAM H. BLACKMAN, Respondent, v. BEN Q. PETTENGILL, Receiver, Appellant |
| Court | Idaho Supreme Court |
STATE BANK-RECEIVER-FAILURE OF BANK-PAYMENT OF DIVIDENDS.
1. Under sec. 3005, Rev. Codes, the entire procedure of the payment of dividends by the receiver of an insolvent bank is left to the order of the court, bound by the requirements of law as generally applied and administered in such cases.
2. Sec 5900, Rev. Codes, relating to proceedings in insolvency should be read with the provisions of secs. 65 and 66 of the banking act of 1911 (Sess. Laws 1911, pp. 405, 406), in considering the status of a secured depositor of an insolvent bank, as compared with unsecured depositors.
3. Under secs. 65 and 66 of the banking act of 1911 (Sess. Laws 1911, pp. 405, 406), a preference is given to depositors of an insolvent bank over all other creditors, and such depositors are to be classed on an equal footing. Under this statute distribution of assets to depositors must be made ratably, and no depositor can be given any advantage by reason of collateral or other security which he may hold from the bank for his deposit.
4. Held, that the receiver of the Boise State Bank, Limited, an insolvent bank and trust company, has no authority to pay a dividend under an order declared by the district court upon a claim filed by B., a depositor holding real estate security valued at about $12,000, and B. cannot collect dividends on the full amount of his deposit, $14,144.14, and the receiver should treat said real estate as not embraced in the general assets; B. should not be allowed to enforce his claim against the other assets, irrespective of the value of the specific security, when it is shown that B. is prosecuting the foreclosure of a mortgage given him by the bank upon said real property to secure his deposit, and the receiver is contesting the validity of the mortgage, until that matter is determined; if the receiver is successful in that action then B. should be entitled to receive the dividends that are paid to the other depositors; on the other hand, in case B is successful in the foreclosure suit his claim should be held by the receiver without payment of dividends, and the net proceeds of such foreclosure proceedings should be applied on his claim against the bank. If there is a deficiency, B. should receive the same dividends on such deficiency that have been and will be paid to other depositors.
APPEAL from the District Court of the Third Judicial District for Ada County. Hon. Carl A. Davis, Judge.
An action to determine the authority of the trial court to make an order in the matter of the receivership of the Boise State Bank, Limited. Reversed.
Judgment reversed. Costs awarded to appellant.
Martin & Cameron, for Appellant.
The assets of an insolvent bank are distributed in the same order as assets of other insolvent estates, except such preferences as may be prescribed. (5 Cyc. 571.)
The laws of Idaho prefer depositors over all other creditors, but provide for no preference among depositors of insolvent banks. (Laws 1911, c. 124, secs. 65, 66; Rev. Codes, 2990; Laws 1905, p. 175, sec. 47.)
The doctrine contended for by respondent would tend to operate for inequality and discrimination between secured creditors, in favor of one holding collateral securities, not susceptible of prompt realization. (Dissenting opinion of Chief Justice White in Merrill v. Jacksonville Nat. Bank, 173 U.S. 131, 19 S.Ct. 360, 43 L.Ed. 640.)
"The bankrupt law endeavors to enforce an equal distribution, whilst it respects the rights of those who have previously, by grant or otherwise, acquired some security or preferable right." (Societe Generale de Paris v. Geen, L. R. 8 App. Cas. 606, 620.)
That a secured depositor cannot be allowed to disregard the value of his security and prove for the whole debt, where the bankrupt statutes prohibit preferences and command a ratable distribution, has been the universal rule applied in bankruptcy in England and in this country from the beginning.
The decisions in the state courts are generally construing some local statutes, but those which hold, under their state laws as they stood at the time of the decision, for the rule that where a creditor holds collateral for his claim, he can sell his collateral or take into account its value and prove for the residue are the following: Wurtz v. Hart, 13 Iowa 515; Security Investment Co. v. Richmond Nat. Bk., 58 Kan. 414, 49 P. 521; American Nat. Bk. v. Branch, 57 Kan. 27, 45 P. 88; Burnham v. Citizens' Bk., 55 Kan. 545, 40 P. 912; Citizens' Bk. v. State, 8 Kan. App. 468, 54 P. 510; Rogers v. Citizens' Nat. Bk., 93 Md. 613, 49 A. 843; National Union Bk. v. National Mech. Bk., 80 Md. 371, 45 Am. St. 350, 30 A. 913, 27 L. R. A. 476; Third Nat. Bk. v. Lanahan, 66 Md. 461, 7 A. 615; Merchants' Nat. Bk. v. Eastern R. Co., 124 Mass. 518; Farnum v. Boutelle, 13 Met. (Mass.) 159; Armory v. Francis, 16 Mass. 308; Vandeveer v. Conover, 16 N.J.L. 487; Whittaker v. Amwell Nat. Bk., 52 N.J. Eq. 400, 29 A. 203; Bell v. Fleming, 12 N.J. Eq. 13; Searle v. Brumback, 2 Ohio Dec. (Reprint) 653; Winton v. Eldridge, 3 Head (Tenn.), 361; Fields v. Wheatley, 1 Sneed (Tenn.), 351; First Nat. Bk. v. Williamson (Tenn.), 35 S.W. 573; In re Frasch, 5 Wash. 344, 31 P. 755, 32 P. 771.
Wyman & Wyman, for Respondent.
The rule contended for by appellant never has been otherwise than a rule peculiar to bankruptcy and utterly rejected as being a part of the English common law. (Kellock's Case, L. R. Ch. App. 769.)
The bankruptcy rule was first announced in America in Armory v. Francis, 16 Mass. 308 (1820), but was promptly repudiated by Mr. Justice Woodbury (afterward of the supreme court of the United States) in delivering the opinion of the court in Moses v. Ranlet, 2 N.H. 488, who rejected the rule as being contrary both to reason and authority.
The chancery or equity rule was the common law, administered in the chancery courts of England since the time whereof the memory of man runneth not to the contrary. It found early support in the adjudicated cases in this country and is now supported by the great weight of authority.
So far as we know, no text-writer sustains any other doctrine than that for which we contend. (Jones, Collateral Securities, sec. 587; Zane, Banks and Banking, sec. 331; Tiffany, Banks and Banking, p. 420; Morse, Banks and Banking, sec. 629; Bishop, Insolvent Debtors, 3d ed., p. 503; Allen v. Danielson, 15 R. I. 480, 8 A. 705; Chemical Nat. Bank v. Armstrong, 59 F. 372, 86 C. C. A. 155, 28 L. R. A. 231, 65 F. 573, 13 C. C. A. 47, 28 L. R. A. 231.)
STEWART, J. Sullivan, J., concurs. Ailshie, C. J., sat at the hearing but did not participate in the consideration or decision of the case.
This is an appeal from an order made in the matter of the receivership of the Boise State Bank, Ltd., an insolvent bank and trust company. An affidavit was filed in the district court showing that the Boise State Bank was a banking corporation existing under the laws of the state, and at all times mentioned prior to December 19, 1911, was engaged in the banking business under the laws of the state; that on December 19, 1911, V. W. Platt was the duly appointed, qualified and acting bank commissioner of the state of Idaho, and at that time took charge of the affairs of the bank and its books and assets to wind up its business and to collect all debts due and claims owing to said bank, and that on the same day the district court made an order that the receiver take over into his possession the books, records and assets of the bank and proceed to collect all debts, dues and claims and to wind up the affairs of the bank, and that said receiver duly qualified and performed his duty until discharged by the court February 7, 1913. On said date Ben Q. Pettengill was duly appointed special deputy state bank commissioner, with authority as receiver of the Boise State Bank for the purpose of winding up the affairs of the bank under the jurisdiction of the court; and on the same day V. W. Platt requested that he be discharged as liquidating officer and receiver of the bank, and upon the petition duly filed of A. E. Reed the duly appointed, qualified and acting state bank commissioner of the state, Platt's resignation as such officer was accepted February 10, 1913, and Ben Q. Pettengill was duly appointed special deputy state bank commissioner of Idaho, with authority as receiver of the said bank to take possession of the books, records and assets of the bank, and on the 8th day of February he qualified as such receiver. It...
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