Dorman, Banking Com'R v. Dell

• Decision Date: 27 September 1932
• Citation: 245 Ky. 34
• Parties: Dorman, Banking Commissioner, et al. v. Dell et al.
• Court: United States State Supreme Court — District of Kentucky

245 Ky. 34

Dorman, Banking Commissioner, et al. v. Dell et al.

Court of Appeals of Kentucky.

Decided June 24, 1932.

As Extended on Denial of Rehearing September 27, 1932.

1. Constitutional Law. — Statute permitting three-fourths of depositors,

with banking commissioner's approval, to reorganize insolvent banks, held not to impair contract rights of depositors not agreeing to reorganization (Acts 1932, c. 19).

Acts 1932, c. 19, does not impair contract rights of depositors not agreeing to reorganization plan, since depositors have no absolute right to continue liquidation when that course becomes unnecessary to secure their rights.

2. Banks and Banking. — Banking commissioner, in approving or disapproving plan for reorganization of insolvent bank, must act for protection of all depositors (Acts 1932, c. 19).

3. Banks and Banking. — If acts of banking commissioner in passing on plan for reorganization of insolvent bank are unsatisfactory to any one concerned, circuit court is empowered to review them (Acts 1932, c. 19; Ky. Stats., sec. 615a-17).

4. Banks and Banking. — Plan for reorganization of insolvent bank approved by banking commissioner and circuit court may be reviewed in Court of Appeals at instance of any party aggrieved (Acts 1932, c. 19; Ky. Stats., sec. 165a-17).

5. Banks and Banking; Constitutional Law. — Statute directing banking commissioner, under certain circumstances, to suspend liquidation of insolvent bank for reasonable time to permit reorganization by depositors, held valid and not to deny due process (Acts 1932 c. 19; Constitution U.S. Amend. 14).

Acts 1932, c. 19, did not deny due process of law under Const. U.S. Amend. 14, by compelling banking commissioner to grant a reasonable time to the depositors to work out reorganization plan, since the commissioner is the statutory trustee of an express trust for the benefit of creditors whose interests are paramount, and doubtless the commissioner of his own volition could act as the statue directs, and, therefore, there was no reason why such action might not be made mandatory.

6. Constitutional law. — No one may attack validity of statute, unless some right of his is infringed.

7. Constitutional law. — While officer may question validity of statute to extent it imposes duty on him, when statute is valid as to officer, he cannot raise question as to its incidence as against rights of some other person.

8. Banks and banking. — State may control conduct of its agents, such as banking commissioner, in administering state agency.

9. Constitutional law. — Courts, in absence of abuse of power, exercise no control over discretion of executive and administrative officers.

10. Equity. — Power of equity court will be interposed to correct abuse of discretion of executive and administrative officers.

11. Equity. — Power of equity will be interposed to enforce statute for benefit of those entitled to relief.

12. Banks and banking. — Act of banking commissioner in revoking order of suspension of liquidation of insolvent bank which order had been in effect but twenty days held improper and arbitrary; time not being reasonable under circumstances (Acts 1932, c. 19).

Act of banking commissioner was improper and arbitrary, since he was under duty by directions of Acts 1932, c. 19, to suspend liquidation of insolvent bank to permit reorganization by depositors, and circumstances disclosed that total deposits in closed bank amounted to more than $1,600,000, and depositors owning $1,176,518.09 thereof had signed reorganization agreement, and therefore lacked but $56,616.99 of representing 75 per cent. of the total amount of deposits in bank, exclusive of depositors with credits of less than $25 each, required by Acts of 1932, c. 19, in order to permit reorganization, and that the large number of depositors and the large amount involved required considerable time to carry out the reorganization plan.

13. Banks and banking. — Circuit court's order setting aside banking commissioner's act of revocation of order of suspension of liquidation of insolvent bank pending reorganization arrangement by depositors held proper and within court's power (Acts 1932, c. 19; Ky. Stats., sec. 165 a-17).

Appeal from Daviess Circuit Court.

SANDIDGE & SANDIDGE, for appellants.

CARY, MILLER & KIRK, R.M. HOLLAND, and R.H. SLACK, for appellees.

OPINION OF THE COURT BY JUDGE WILLIS.

Affirming.

The Central Trust Company, of Owensboro, Ky., suspended on January 2, 1932, and placed its assets in the hands of the banking commissioner. The General Assembly at its last session adopted an act known as House Bill No. 84, which provided:

"That whenever any bank or trust company or combined bank and trust company organized under the laws of this Commonwealth shall for any reason be suspended or closed, or is now suspended or closed, if not less than twenty-five of the depositors therein, with deposits in excess of twenty-five dollars each, shall notify the `Banking Commissioner' of the Commonwealth of Kentucky in writing, that they desire to attempt to reorganize, or otherwise reopen or consolidate such bank or trust company, or combined bank and trust company with some other banking institution, a reasonable time, shall be given by the `Banking Commissioner' of the Commonwealth of Kentucky, during which, liquidation of such institution shall not proceed except in such matters as may in the opinion of the Banking Commissioner be necessary for the preservation of the assets of said institution; and thereupon the depositors shall proceed without delay with the perfection of a plan and articles of agreement, outlining in general the proposed plan, of consolidation or reopening, which proposed plan must be signed by deposit creditors representing seventy-five per cent. of the amount of all deposits in such bank or trust company or combined Bank and Trust Company; exclusive of deposits of less than twenty-five dollars each." Chapter 19, Acts 1932, section 165a-64, Ky. Stats., 1932 Supp.

Pursuant to the provisions of the act, a group of depositors of the Central Trust Company originated a plan for reorganization and obtained from the banking commissioner an expression of approval of the objects outlined. On April 26, 1932, the banking commissioner directed his deputy to suspend further liquidation except in matters essential to conserve assets, in order to permit the reorganization committee of the depositors to proceed with the plan of reorganization. The order fixed no duration for the suspension, but it was necessarily intended to continue for a reasonable time in order to comply with the statute. On May 16, 1932, the order of suspension was revoked, having been in effect but 20 days. A proceeding was pending in the Daviess circuit court entitled "In the Matter of R.L. McFarland, Special Banking Commissioner, in Charge of the Affairs of the Central Trust Company, of Owensboro." In that proceeding an application had been made by the banking commissioner for authority to make an assessment upon the stockholders of the trust company under the statute imposing double liability. Objections to the motion were filed by several stockholders, and the issue was pending for hearing.

A number of the depositors of the trust company, who were trying to effect a reorganization, intervened for the purpose of procuring an order of court setting aside the act of the banking commissioner by which he had revoked the order of suspension granted pursuant to the statute. It was represented by the depositors that progress had been made, and facts were stated tending to show that more time was necessary. The total deposits in the closed bank amounted to more than $1,600,000, and depositors owning $1,176,518.09 thereof had signed the reorganization agreement. The amount lacked but $56,616.99 of representing 75 per cent. of the total amount of deposits in the Central Trust Company, exclusive of depositors with credits of less than $25 each. The circuit court entered an order setting aside the act of revocation made by the commissioner, and extended the time until July 15, 1932. It is from this order that the appeal is prosecuted.

Passing all other questions, we proceed at once to consider the validity of the act of the Legislature and the propriety of the action of the court. The appellant takes the position that House Bill No. 84 is unconstitutional; that the discretion of the banking commissioner may not be controlled by the court; and that the intervening petition constituted a collateral attack upon an official act of the banking commissioner.

1. It is argued that the act violates several sections of the State Constitution and the Fourteenth Amendment to the Federal Constitution, in that the obligation of a contract is impaired and due process of law is denied. The appellant does not complain that any constitutional...