In re Holland Banking Co.
| Decision Date | 15 March 1926 |
| Docket Number | Mo. 26541. |
| Citation | 281 S.W. 702 |
| Parties | In re HOLLAND BANKING CO. OF SPRINGFIELD STATE v. HEER STORES CO. et al. |
| Court | Missouri Supreme Court |
Appeal from Circuit Court, Greene County; Guy D. Kirby, Judge.
In the matter of the Holland Banking Company of Springfield, in process of liquidation. Claim of priority by the State, protested by the Heer Stores Company and others. From a judgment denying its right to priority, the State appeals. Affirmed.
Robert W. Otto, Atty. Gen., and Geo. W. Crowder, Asst. Atty. Gen., for the State.
Farrington, Curtis & Skinker, of Springfield, for respondents.
On January 15, 1924, the Holland Banking Company, a banking corporation organized under the laws of this state and doing business at the city of Springfield, became insolvent. Said bank had previously received four-eightieths of the funds in the custody of the state treasurer as a depository of the state. Such deposit was secured by collateral and other security. When the bank was closed by the commissioner of finance on said clay, the state had a balance in said bank of $1,035,-656.559. Demand for the full amount was made upon the bank by the state treasurer. The bank failed to pay the deposit because of its insolvency.
A large portion of the security held by the state consisted of notes secured by first deeds of trust upon Missouri lands and certain personal bonds. A portion of the collateral security, which could be disposed of without too great a sacrifice, was converted into money and applied to the indebtedness due the state. The personal bond or bonds were signed by persons who either failed when the bank was closed or were otherwise insolvent, and such bonds were worthless as security to the state. The remaining securities were of such doubtful value or their conversion into money entailed such a great loss that the state treasurer was unwilling to sacrifice the same, and undertook to establish a priority over the claims of other depositors and general creditors in the assets of the bank which had not been turned over to the state as collateral security for the state's deposit. To that end a claim for the balance of the deposit due to the state was filed with the commissioner of finance, and same was approved. Proceedings were thereafter instituted by the commissioner of finance in the circuit court of Greene county to determine the question of the alleged priority of the state's claim over the claim of general creditors. The circuit court denied the state's right to such priority, entered judgment on the pleadings accordingly, and the state has appealed to this court.
No point seems to be made because the state did not, at a great sacrifice, first exhaust all the collateral security in its hands. It necessarily results that if the state is entitled to priority in the general or unpledged assets of the bank over other depositors and general creditors, the collateral security not disposed of by the state and not applied upon the state's deposit will become part of the assets of the bank and available to the other creditors after the state's claim has been paid. The amount of the state's claim due from the bank when the claim of priority was denied by the circuit court was found to be $353,738.41.
It is the contention of the state, which is appellant here, that its claim is entitled to preference over the general creditors, under its common-law right as a sovereign to protect against loss its funds dedicated to the maintenance of the state government, and also that it is entitled to the same priority by virtue of the provisions of section 7212, R. S. 1919.
On the other hand, the position of respondents is that the common-law priority of the state no longer obtains since the Legislature enacted what is now section 7212, and that said section has no application where the state has deposited its funds in the banks of the state under the provisions of the state depository law, as set forth in article 2 of chapter 123 of the 1919 Statutes. Respondents contend that said article comprises a complete scheme within itself, affords the state full and complete means of protecting its deposits made under the authority of said statute, and indicates the purpose of the Legislature not to avail the state of the broad terms of section 7212, in so far as deposits under the state depository law are concerned.
Said section 7212, except for its proviso, is a rescript of section 3466, United States Revised Statutes (U. S. Comp. St. § 6372), using the words "state of Missouri" where the words "United States" appear in the federal statute. By the proviso referred to, our Legislature made certain exceptions, thereby narrowing and limiting the priority to which the state is entitled, and made its claims subject to the priority of claims of the federal government and claims of servants for wages and certain debts incurred in the last sickness of deceased debtors. Said section 7212 reads as follows:
"Whenever any person indebted to the state of Missouri is insolvent, or whenever the estate of any deceased debtor in the hands of the executors or administrators is insufficient to pay all the debts due from the deceased, the debts due to the state of Missouri shall be first satisfied, and the priority hereby established shall extend as well to cases in which a debtor not having sufficient property to pay all his debts makes a voluntary assignment thereof, or in which the estate and effects of an absconding, concealed or absent debtor are attached by process of law, as to cases in which an act of bankruptcy is committed: Provided, that nothing in this article contained shall be construed to interfere with the priority of the United States as secured by law, or the payment of the expenses of the last sickness, wages of servants, demands for medicine and medical attendance during the last sickness of the deceased, nor funeral expenses."
There could not be any successful contention that the state is not entitled to priority as to its claim upon all the assets of the bank under section 7212, unless, as respondents contend, the depository act is a separate and complete scheme in itself and the Legislature has thereby relinquished its right to such priority. Section 7212 clearly declares priority in favor of debts due to the state upon all the property of insolvent persons, which necessarily includes banks. The only claims over which the priority of the state does not extend under the statute, as above pointed out, are debts due to the `United States and to servants for wages, and to those due for the expenses for medicines and other expenses incurred in the last sickness and burial of deceased persons.
The constitutional requirement that state money be deposited in selected depositories with satisfactory security for the repayment thereof is found in section 15, art. 10, of the Constitution of 1875. This section need not be set out, since the same matter is covered by the statute. Our depository law is found in article 2, c. 123, R. S. 1919. It is provided by section 13375 that all money in the state treasury shall be deposited by the state treasurer in such banks as he may from time to time select, with the approval of the Governor and Attorney General, taking security satisfactory to the Governor and Attorney General for the safe-keeping and payment of such deposits when demanded by the state treasurer. Section 13376 provides for dividing the money of the state into 80 equal parts and solicitation of bids. Section 13377 provides for the payment to tile state by the depository of interest on daily balances. Section 13378 provides for receiving and opening bids and selecting depositories.
Section 13379 covers the amount and character of security to be exacted. That section is the one with which we are here principally concerned. Respondents have set out a history of our depository law in an appendix to their brief. No question of its accuracy is raised, and we will draw from it briefly, so far as it relates to said section.
In 1879 the General Assembly passed the first act to carry out the provisions of our Constitution. Laws 1879, p. 236. Section 5 of that act, with such changes as have been since made, is now section 13379. As first enacted, it provided that the Governor, Attorney General, and Treasurer should require of selected and approved banks or banking institutions, giving security for the safe-keeping and payment of deposits, bonds of the United States or of the state of Missouri, put up with the treasurer and kept by him, at least equal in amount. to the amount of deposits received by such depository from the state. Additional deposits of such securities could be required. The other provisions of the original act need not be recited. The word "amount" which we have put in italics was subsequently amended to read "value." Laws of 1889, p. 317.
In 1889 the General Assembly passed "An act to revise and amend chapter 164 of the Revised Statutes of 1879 relating to and entitled 'Of the State Treasury,'" The former statute included the depository law of 1879. The 1889 act was a complete revision, and did not amend any particular section of the 1879 statute. At page 316 (Laws of 1889) the provision for security of state deposits will be found. It was designated as section 7640. The old requirement that depositories should put up as security bonds of the United States or of the state of Missouri was retained. Section 7640 of the 1889 act gave the Governor, Attorney General and Treasurer the right to accept as security, "in their discretion," the registered funded bonds of any county in this state worth not less than par. The character of security was further changed in Laws of 1895, p. 276, by including bonds of any other city in this state having a population of not less than one hundred thousand. In Laws of 1909, p. 882, the words "one hundred" were changed to "ten," so that bonds of cities of this state of...
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