Hoffman v. Unger, 9433.

• Court: Supreme Court of West Virginia
• Writing for the Court: RILEY, President
• Citation: 24 S.E.2d 911
• Parties: HOFFMAN. v. UNGER et al.
• Docket Number: No. 9433.,9433.
• Decision Date: 23 March 1943

24 S.E.2d 911

HOFFMAN.
v.
UNGER et al.

No. 9433.

Supreme Court of Appeals of West Virginia.

March 23, 1943.

Syllabus by the Court.

Where there are funds remaining in the hands of a receiver of an insolvent bank, after payment of the principal indebtedness of the bank and all costs and expenses of the receivership, such surplus funds are properly distributable to depositors of the bank as interest on the principal indebtedness before stockholders who have paid their double liability assessment pursuant to West Virginia Constitution, Article XI, Section 6, are entitled thereto under Code, 31-8-32.

Appeal from Circuit Court, Morgan County.

Suit by John H. Hoffman, as receiver of the Bank of Morgan County, an insolvent state banking corporation, for purpose of liquidating the bank, against Joseph W. Unger and others. From decree directing distribution of funds, Joseph W. Unger and another appeal.

Affirmed.

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,

[24 S.E.2d 912]

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 * * * stock holders." 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. Higgin-botham, 110 W.Va. 9, 156 S.E. 751. The statute last cited likewise provides that: "If the assets of any such institution or other corporation, including any sums collected from * * * the stockholders, shall more than suffice to pay all of the creditors of such institution or other corporation who have presented and proved, or caused to be allowed, their several demands, the surplus shall be disbursed as follows: First, in the case of a banking institution, to the stockholders, who have paid in any sums upon their extraordinary liability as stockholders, pro rata up to the respective amounts paid by each of them. Second, if anything shall remain thereafter it shall be paid to the stockholders of the institution or other corporation, in proportion to the number of shares owned by them respectively."

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

[24 S.E.2d 913]

the Court reflects such a conclusion: "It follows that, if the assets, other than the double liability sums collected, are sufficient to pay the debts, there could be little harm done to the stockholders by 'forthwith' payment of their statutory liability. * * * The other assets of the bank are first to be applied to the debts."

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 Zoll-man, 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...