Citizens' Sav. & Trust Co. v. Rogers

• Decision Date: 07 December 1915
• Citation: 162 Wis. 216,155 N.W. 155
• Court: Wisconsin Supreme Court
• Parties: CITIZENS' SAVINGS & TRUST CO. ET AL. v. ROGERS ET AL.

162 Wis. 216

155 N.W. 155

CITIZENS' SAVINGS & TRUST CO. ET AL.

v.ROGERS ET AL.^a1

Supreme Court of Wisconsin.

Dec. 7, 1915.

Appeal from Circuit Court, Milwaukee County; F. C. Eschweiler, Judge.

Proceedings by the Commissioner of Banking in liquidating the affairs of the Citizens' Savings & Trust Company. Intervening petitions by Fred W. Rogers, trustee under a deed of trust, Julius J. Goetz, trustee in bankruptcy, and others, for an order directing the Commissioners to pay them rent for an office used by him in conducting the liquidation. Order granted, and the Commissioner and the bankrupt Trust Company appeal. Affirmed in part and in part modified.

The Pereles Block in the city of Milwaukee is a five-story building with a frontage of 60 feet on Market Square and a depth of 120 feet on Oneida street. The Markwells are the owners of the north 20 feet covered by said block. The remaining portion of the block was formerly owned by the N. Pereles & Sons Company. In November, 1892, the Markwells leased the portion of the block owned by them to the Pereles Company and James M. Pereles for the period of 99 years. In January, 1907, the Pereles Company leased to the Citizens' Trust Company the basement and first two stories of the easterly 40 feet of said block for a period of 20 years. On May 1, 1909, the Pereles Company conveyed the entire block by warranty deed to the Clark Realty Company, a corporation. On May 1, 1909, the Clark Realty Company issued a trust mortgage to the Citizens' Trust Company, to secure an issue of bonds amounting to $140,000. This mortgage is now in process of foreclosure. On October 2, 1913, the commissioner of banking took charge of the property and assets of the Citizens' Savings & Trust Company, for the purpose of conserving the rights of the creditors of that institution. On February 22, 1914, the First Trust Company was appointed receiver for the Clark Realty Company, and on April 3, 1914, Julius J. Goetz was appointed trustee in bankruptcy for such corporation. The trustee named in the trust mortgage having become insolvent, Fred W. Rogers was, by order of the court, substituted in its stead. On March 14, 1914, the bank commissioner and the insolvent filed a claim on open account against the Clark Realty Company in the bankruptcy court for $2,186.14. Goetz took possession of the Pereles Block, and retained the same until June 30, 1914, when he abandoned, or attempted to abandon, the possession of it to Rogers. Thereafter Rogers attempted to take possession of the mortgaged premises and to exercise the rights in reference to the same that might have been exercised by the Clark Realty Company had it remained solvent. In the proceeding brought to foreclose the mortgage, the appointment of a receiver was asked for to collect the rents and profits, but the application was denied on the ground that the trustee was already in possession, and that there was no necessity for the appointment of a receiver to protect the interests of the bondholders. On July 24, 1914, Rogers abandoned all claim under the mortgage to the portion of the block owned by the Markwells. While the deed to the Clark Realty Company and the mortgage from the Clark Realty Company covered the entire block, the grantors in the deed had no title or interest in the north 20 feet of it, except the 99-year lease referred to. After the banking commissioner took over the Citizens' Savings & Trust Company, he continued to occupy the portion of the block held under lease by that company, and to use the same for the purpose of carrying on the business of liquidation down to the time of the trial. The commissioner refused to pay any rent for the use of the part of the building occupied, either to Goetz, the trustee in bankruptcy for the Clark Realty Company, or to Rogers, the substituted trustee for the bondholders. The respondent Goetz applied to the court for an order requiring the commissioner of banking to pay to him, for the use and benefit of the creditors of the Clark Realty Company, rental from October 2, 1913, when the trust company became insolvent, to June 30, 1914, when he elected not to treat the building in question as an asset of any value for the general creditors whom he represented. It might be said that the position of the trustee was that the property was mortgaged for very much more than it was worth, and that the expenses of upkeep and looking after the building amounted to substantially as much as did the revenue derived therefrom.

The respondent Rogers petitioned the court for an order directing the commissioner to pay him the rent accruing from and after June 30, 1914. The Markwells united with him in this position, claiming to be entitled to a portion of the rents accruing on the outstanding leases. Rogers and the Markwells agreed between themselves upon the division which should be made of such rents. The court made the orders prayed for, and the bankrupt trust company and the bank commissioner appeal therefrom to this court.

Flanders, Bottum, Fawsett & Bottum, of Milwaukee, for appellants.

Glicksman, Gold & Corrigan, of Milwaukee (George B. Luhman, of Milwaukee, of counsel), and Lawrence A. Olwell, of Milwaukee, for respondents.

BARNES, J. (after stating the facts as above).

The appellant insists that the court erred in holding that the commissioner of banking or the trust company was liable for rent to Goetz or Rogers or the Markwells, and, as subsidiary to this, in deciding: (1) That the leasehold estate of the trust company became the property of the bank commissioner; (2) that the commissioner occupied the premises under the lease; (3) that Goetz had authority to deliver the possession of the leased premises to Rogers; (4) that Rogers succeeded to the rights of the trustee in bankruptcy; (5) that Rogers ever had been in possession of the premises; (6) that the right to offset indebtedness due from the Clark Realty Company to the trust company against the rent claimed did not exist; and (7) that $2,500 per year was a reasonable and fair rental for the premises occupied by the commissioner.

The commissioner of banking took possession of the property and assets of the Citizens' Savings & Trust Company pursuant to the provisions of section 2022, Stats. Among other things, subdivision 1 of that section authorizes the commissioner, whenever it shall appear that any bank is conducting its business in an unsafe or unauthorized manner, or that its capital is impaired, or that it is unsafe or inexpedient for it to continue business, to forthwith take possession of the property and business of such bank and retain such possession until the corporation shall resume business or its affairs be finally liquidated. Subdivision 2 requires the commissioner to give notice of the fact that he has taken possession of the assets of the bank. Subdivision 3 provides that upon taking possession of the assets and business of the bank, the commissioner is authorized to collect moneys due to such bank, and to do such other things as are necessary to conserve its assets and business, and that he shall proceed to liquidate the affairs thereof in the manner provided. It is made the duty of the commissioner to collect debts due and claims belonging to the bank, and upon the order of the circuit court to sell or compound all bad or doubtful debts, and on like order to sell all real estate and personal property of such bank on such terms as the court shall direct. The commissioner is also authorized, when it is necessary to pay the debts of the corporation, to enforce the individual liability of stockholders. Subdivision 4 provides that the commissioner may appoint one or more special deputy commissioners as agents to assist him in the duties of liquidation and distribution. And a special deputy so appointed is authorized to perform such duties connected with the liquidation and distribution as the commissioner may deem proper. The commissioner is also authorized to employ such counsel and procure such expert assistants as may be necessary in the liquidation and distribution of the assets of the bank, and may retain such of the officers or employés of the bank as he may deem necessary. Subdivision 5 provides for a notice to creditors, and makes it the duty of the commissioner to object to the allowance of any claim which he deems to be unjust. Subdivision 6 requires the commissioner to take an inventory of the assets of the bank, and to file the same as therein directed, together with a list of all claims presented against the bank. Subdivision 7 provides that compensation of the special deputy commissioners, counsel, and other employés and assistants, and all expenses of supervision and liquidation, shall be fixed by the commissioner, subject to the approval of the circuit court for the county in which the bank is located, on a notice to the bank, and shall, upon the certificate of the commissioner, be paid out of the funds of such bank in the hands of the commissioner. Subdivision 8 deals with the payment of dividends. The other subdivisions of this section are not material to a consideration of the questions raised on this appeal.

[1] It appears pretty clearly to be the intent and purpose of the statutory provisions referred to, to vest the title and right of possession to the assets and property of an insolvent bank in the banking commissioner for the benefit, primarily at least, of creditors, when a situation arises which warrants the commissioner in taking action under the law and he does act under it. The commissioner is authorized to take possession of the bank assets and to collect all indebtedness due it. If recourse to a suit became necessary, it would be his duty to bring it, and, we think, to bring it in his representative capacity. The statute (subdivision 7) recognizes the fact that expenses must be incurred in connection with the winding up of the affairs of an insolvent bank, and so provides that...