Hoffman v. Unger
| Decision Date | 23 March 1943 |
| Docket Number | 9433. |
| Parties | HOFFMAN v. UNGER et al. |
| Court | West Virginia Supreme Court |
J. O. Henson, of Martinsburg, for appellants.
H D. Allen, of Berkeley Springs, for appellee.
Chas G. Peters and Mohler, Peters & Snyder, all of Charleston, for Metropolitan Life Ins. Co., amicus curiae.
Robinson & Stump and John S. Stump, Jr., all of Clarksburg, for John H. Hoffman, Receiver for the Circleville Bank, a corporation amicus curiae.
Harvey W. Harmer, Stathers, Stathers & Cantrall, and Mary Frances Brown, all of Clarksburg, for certain stockholders of Farmers Bank of Clarksburg, W.Va., amici curiae.
RILEY President.
John W. Hoffman, as receiver of The Bank of Morgan County, an insolvent state banking corporation of the State of West Virginia, instituted in the circuit court of said county a suit pursuant to Code, 31-8-32, for the purpose of liquidating said bank Joseph W. Unger and A. R. Dawson, stockholders who have paid in full their statutory liability as stockholders, appeal from the decree of the Circuit Court of Morgan County, which provided that $3,639.18, being the balance remaining after the payment of the principal indebtedness of the bank and costs and expenses of receivership, should be distributed by the receiver "to the depositors on claims proven in said bank".
Thus the sole question presented on this appeal is whether the balance remaining in the hands of the receiver of an insolvent bank, after the payment of the principal indebtedness of the bank and all costs and expenses of the receivership, shall be distributed by the receiver to the depositors who have proved their claims, or to the stockholders who have paid all or part of their stockholders' liability.
The Bank of Morgan County was declared to be an insolvent institution by the Commissioner of Banking on October 3, 1931, and a receiver therefor was appointed. The outstanding capital stock of the bank consisted of two hundred and fifty shares of stock of the par value of one hundred dollars each. At the time of the closing of said bank for liquidation, A. R. Dawson was the owner and holder of eight shares and Joseph W. Unger, the owner and holder of five shares. The bill alleges that "the former receivers of the bank *** have heretofore collected by suits and otherwise the statutory liability of the stockholders of said bank from whom collections could be made", and the decree complained of, as above noted, relates that Unger and Dawson "have paid their statutory liability in full". According to the bill all of the depositors of the bank have been paid "the principal of their respective deposits in full, but have been paid no interest thereon since the closing of said bank for liquidation".
At the outset it is appropriate to note the assessment of double liability which appellants, Dawson and Unger, paid was pursuant to a requirement of the Constitution of West Virginia, Article XI, Section 6, and Code, 31-4-16, to the effect that stockholders of any bank authorized by the laws of this State shall be personally liable to the creditors thereof over and above the amount of stock held by them respectively to an amount equal to their respective shares so held, for all liabilities of the bank "accruing while they are *** stockholders." Where it appears that the assets of an insolvent bank are insufficient to pay in full all of its creditors and depositors, payment of such double liability, without awaiting the administration of such bank's assets, is a requirement of Code, 31-8-32. See Bank of Marlinton v. King, 116 W.Va. 259, 180 S.E. 92; Lawhead v. Davis, 112 W.Va. 13, 163 S.E. 629; Tabler v. Higginbotham, 110 W.Va. 9, 156 S.E. 751. The statute last cited likewise provides that:
The rule that the appointment of a receiver of a closed bank by the banking commissioner will not destroy its corporate entity and its directors are not removed from office thereby, was pronounced in Gall, Receiver, v. Cowell, 118 W.Va. 263, 190 S.E. 130. We think it follows that in the instant case the appointment of a receiver did not eo instante effect a cessation of the stockholders' liability. The statute itself provides for the payment of costs and expenses of the receivership out of the assets of a closed banking institution; and while this Court has held that the liability of a stockholder of a defunct bank for a double assessment is secondary in character (see Tabler v. Higginbotham, supra; Pyles v. Carney, 85 W.Va. 159, 101 S.E. 174, 175; Finnell v. Bane, 93 W.Va. 697, 117 S.E. 549;) we think that the evident purposes for which the statute was enacted are indicative that the Legislature intended that whatever assets there were belonging to a bank at the time of its closing, plus the aggregate sums collected by the receiver as double liability assessments, should constitute the fund out of which the receiver would pay the depositors and creditors of the defunct institution. In Tabler v. Higginbotham, supra [110 W.Va. 9, 156 S.E. 753], the following language of the Court reflects such a conclusion:
Our next inquiry, therefore, is what are the debts of the defunct institution? Does the term include interest?
Courts and text writers alike state that, as a general rule, interest on a claim against an insolvent bank is calculated only to the date of suspension of the bank and a receiver's taking charge of its assets, unless there are surplus assets after paying in full the claims of depositors and creditors. Michie, Banks and Banking, Vol. 3, Section 219; Clark on Receivers, 2nd Ed., Section 660; Graver, Liquidation of Financial Institutions, Section 811; Fletcher Cyc. Corporations, Permanent Ed., Vol. 16, 1942, Revised Vol. Section 7937; 7 Am. Jur., Subject Banks Section 744; Reichert v. Metropolitan Trust Co., 293 Mich. 76, 291 N.W. 228; People ex rel. Barrett v. Farmers State Bank of Irvington, 371 Ill. 222, 20 N.E.2d 502; Gormley v. Eison, 189 Ga. 259, 5 S.E.2d 643, 647. The Georgia court, in Gormley v. Eison, supra, expressly declared that the general rule was applicable "on all claims, whether they are interest bearing or not", while in Greva v. Rainey, 2 Cal.2d 338, 41 P.2d 328, 330, the Supreme Court of California observed that: "Those cases declared that the statement that interest will not be computed from the date of insolvency became the general rule, not because the claims were considered to have lost their interest-bearing quality, but because in the great majority of cases the assets were insufficient to pay both the principal and the interest which would otherwise become due." It is stated in 3 Zollman, Banks & Banking, Perm.Ed., § 1781, that "where a bank is so badly insolvent that the entire superadded liability of the stockholders when collected is insufficient to pay the principal of its debts, no question can arise whether its creditors are to receive interest, any computation of such interest would be a useless effort".
It was decided in this jurisdiction, in an early case (Parkersburg National Bank v. Als, 5 W.Va. 50), that a "bank is not chargeable with interest on sums deposited to the credit of customers to be drawn against by check, until payment be demanded, unless upon special contract". In the instant case demand for payment would have been a useless gesture on the part of depositors for the appointment of the receiver presupposed the lack of sufficient funds to pay in full all creditors of the bank. "The insolvency of the bank, or a suspension of payment, dispenses with the necessity of demand, and all deposits become due and payable forthwith". Michie, Banks and Banking, Vol. 5, pp. 684, 684; Zollman, Banks & Banking, Permanent Ed., Vol. 5, § 3429.
It does not appear affirmatively here that the existing surplus arises solely through payment of the double assessments. May then interest be paid to depositors out of such surplus? An affirmative answer finds ample and sound precedent. Richmond v. Irons, 1887, 121 U.S. 27, 7 S.Ct. 788 805, 30 L.Ed. 864, is a leading case, but the critique thereof by appellants' counsel is that the problem therein considered and determined arose under the National Banking Act, 12 U.S.C.A. § 21 et seq., under which "the liability of the shareholder is for the contracts, debts, and engagements of the bank ***; of course, not in excess of the maximum liability as fixed by the statute". However, in People ex rel. Barrett v. Farmers State Bank of Irvington, supra, the Supreme Court of Illinois was confronted with a construction of Article XI, Section 6, Constitution of Illinois, because of the claim of stockholders that the trial court had erred in directing a liquidating receiver to pay interest from the date of his appointment on all adjudicated claims. That section of...
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