Fed. Deposit Ins. Corp. v. Banking Comm'n (In re Farmers Bank of Lone Rock)
| Decision Date | 11 January 1946 |
| Citation | 21 N.W.2d 410,248 Wis. 269 |
| Parties | In re FARMERS BANK OF LONE ROCK. FEDERAL DEPOSIT INS. CORPORATION v. BANKING COMMISSION et al. |
| Court | Wisconsin Supreme Court |
OPINION TEXT STARTS HERE
Appeal from a portion of an order of the Circuit Court for Richard County; A. W. Kopp, Judge.
Reversed.
The order appealed from was made during the course of liquidation of the Farmers Bank of Lone Rock by the Banking Commission of Wisconsin as statutory receiver. The portion of the order appealed from directs payment to Reconstruction Finance Corporation, owner and holder of a Class A debenture, of the principal amount thereof in full, together with interest at the rate of 5% from August 1, 1942, to the date of payment and further directs payment to the holders of certain class B debentures in the principal amount thereof in full together with interest at the rate of 2 1/2% from August 1, 1941 to date of payment before the payment of interest to Federal Deposit Insurance Corporation as subrogee of the depositors on account of deferred payment of the principal of the deposits. From this order dated March 31, 1945 Federal Deposit Insurance Corporation appeals. The facts will be stated in the opinion. William Ryan, of Madison, and John H. Russell, of Chicago, Ill., for appellant.
Lee Walker and R. J. Thompson, both of Chicago, Ill., and Glenn D. Roberts, of Madison, for respondent Reconstruction Finance Corp.
Harry E. Carthew, of Lancaster, for ‘B’ Debenture Holders, except Joe Murray.
The facts in this case are not in dispute. The Farmers Bank of Lone Rock, Wiconsin, hereafter referred to as the ‘bank’, is a corporation existing under the laws of Wisconsin. Federal Deposit Insurance Corporation, an insurance corporation, hereafter referred to as ‘FDIC’ and Reconstruction Finance Corporation, hereafter referred to as ‘RFC’ are corporations organized and existing by virtue of Acts of Congress. The Banking Commission of Wisconsin, hereafter referred to as the ‘commission’, took possession of the bank for purposes of liquidation on October 2, 1942 and the affairs of the bank have since been substantially liquidated. The principal of all deposits and all claims of other creditors existing against the bank as of the time its assets were taken for liquidation have been paid, except principal and interest on the A and B debentures heretofore referred to and interest upon the payments made by FDIC and upon its claims of certain other creditors. All expenses of liquidation have been paid except current expenses and there remains in the hands of the banking commissioner cash in the amount of $27,147.85, and unliquidated assets in the amount of $6,946.20, or a total of $34,094.05. The bank was insured by FDIC up to the amount of $5,000 for each deposit. After the banking commission took possession, FDIC, pursuant to law, paid the insured depositors of the bank the full amount of their insured deposits as of the date of taking possession. The aggregate sum was $448,135.63. FDIC received from each depositor a combination receipt and assignment of claim and thereupon filed with the banking commission its claim against the assets of the bank for the total sum paid. The claim of FDIC was allowed by the banking commission and thereafter FDIC was fully repaid the amount of its outlay. On or about October 5, 1943 FDIC demanded the sum of $24,406.44 as interest at the legal rate of 6% on its general claim computed from the date of taking possession of the bank until repayment of this sum to FDIC. This demand was neither allowed nor rejected by the banking commission.
We now come to the competing claimants-the holders of the A and B debentures. On or about June 12, 1934 RFC purchased from the bank for $15,000 an instrument known as interest debenture A registered, hereafter referred to as the A debenture, and is now the owner and holder of this debenture. No part of the principal and no interest subsequent to August 1, 1942, has been paid. On or about February 1, 1935 the bank received a total of $10,500 from certain individuals in different amounts and the bank caused to be executed to each of these an instrument known as ‘income debenture class ‘B’-Interest Bearing', hereafter called ‘B debentures'. With one small exception, no part of the principal and no interest subsequent to August 1, 1941 has been paid.
The question is whether the A and B debentures are entitled to be paid the principal of their claims, or as the trial court determined, the principal with interest to the date of payment, before any interest is to be paid to FDIC as subrogee of depositors.
Since considerable argument is based upon provisions of the debentures themselves, it will be convenient to set out here the material portions of these instruments. The A debenture contains in clauses 11 and 12 the following provisions:
‘11. Subordination.-The obligations of the Bank evidenced by the Debentures shall be junior and subordinate to all obligations of the Bank to its depositors and all other creditors (except the owners or holders of indebtedness subordinated to the Debentures as to payment of principal and interest) in that no payment of principal of or interest on any of the Debentures shall be made if, after giving effect to such payment, the aggregate fair value of all assets of the Bank would be less than the aggregate of its liabilities, excluding, however, from such liabilities the Debentures, any indebtedness subordinated as aforesaid, surplus, undivided profits, and capital stock of any class.
The B debentures contain in clauses 9, 10 and 11 subordination clauses substantially like those in the A debenture, except that the B debentures are specifically subordinated to the A debenture, both as to principal and interest down to the date of payment of the A debenture.
The argument of appellant may thus be summarized: the depositors under the doctrine of In re Oconto County State Bank, 245 Wis. 245, 14 N.W.2d 3 and In re Oconto County State Bank, 241 Wis. 369, 6 N.W.2d 353,7 N.W.2d 602, are entitled to interest at the legal rate from the date of closing the bank. FDIC, by the terms of the assignment, exacted of each depositor, as well as by the provisions of the statutes, is subrogated to all of the rights of the depositors. The rights of the A and B debentures are specifically subordinated to those of the depositors and creditors. It is claimed to follow that the rights of FDIC to interest are superior to those of RFC or B debentures to interest, principal, or both.
In considering the various contentions made upon this appeal, we think that we must start with the well-established proposition that FDIC stands in the same position and is entitled to the same rights and privileges as the depositors whose claims it insured and paid. In re Oconto County State Bank, supra, and In re Oconto County State Bank, supra. See also In re Anchor State Bank, 234 Wis. 261, 291 N.W. 329. There is some argument in the briefs to the effect that because FDIC charges a premium for insuring deposits it is somehow relegated to a position inferior to that of the depositors whose subrogee it is. We are satisfied that this argument is not sound. Whatever differences there are between FDIC and ordinary subrogees arise from statutory provisions designed to protect the solvency of FDIC, and the notion that by accepting a premium in accordance with statutory provisions having this purpose, its standing in a court of equity is somehow diminished, is a wholly unjustified underestimate of the place of FDIC in the banking set-up. It follows from the foregoing that FDIC has all of the rights that the depositors would have had, had the principal of their claims been paid directly by the assets of the bank and not by FDIC.
As between FDIC and the stockholders of the bank, FDIC is clearly entitled to interest at the legal rate from the time of the closing of the bank to the time when repayment was made to it. In Re Oconto County State Bank, supra, and In re Oconto County State Bank, supra.
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