In re Liquidation of the Chinese Am. Bank
| Decision Date | 22 December 1943 |
| Docket Number | No. 2508.,2508. |
| Citation | 36 Haw. 571 |
| Parties | IN THE MATTER OF THE LIQUIDATION OF THE CHINESE AMERICAN BANK, AN INCORPORATED BANKING INSTITUTION. |
| Court | Hawaii Supreme Court |
OPINION TEXT STARTS HERE
APPEAL FROM CIRCUIT JUDGE FIRST CIRCUIT, HON. L. LE BARON, JUDGE.
Syllabus by the Court
Where money is deposited in a bank as a commercial or savings deposit, it constitutes a loan to the bank of the money deposited, subject to the undertaking by the bank to repay the same in money to the depositor, his assigns or legal representatives, upon demand conformably to the provisions of the contract of deposit in respect to time of repayment and amount.
In the event of refusal by a bank to comply with a demand for repayment of the deposit in whole or in part, a cause of action accrues in favor of the depositor for the sum demanded.
If before demand a bank indicates its unwillingness or inability to repay a depositor despite any demand that might be made, a demand by the depositor becomes unnecessary and the right of action accrues without the prerequisite of a demand.
A bank deposit is “money lent” to the bank within the meaning of that term as employed in Revised Laws of Hawaii 1935, section 7050. Upon demand by a depositor and refusal to pay, or action on the part of a bank evincing a waiver or dispensation of such demand, interest as an incident to such deposit accrues at the legal rate allowed by the statute until discharged by payment or merged in judgment.
Where surplus assets exist over and above the amount necessary to pay the claims of all depositors and creditors of an insolvent bank, and all the costs and expenses of liquidation, legal interest is allowable when applicable to the extent that such surplus may satisfy the same from the date that the liquidator took possession until payment, except where under the terms of the contract out of which the claim arose the due date was subsequent thereto, and in such cases from the latter date to the date of payment.
The “full amount of such claims” within the meaning of that term as employed in section 133 of the Hawaii Bank Act 1931, includes legal interest in the event of surplus assets unless legal interest on contractual interest constitutes compound interest.
Assuming the claims filed by depositors and general creditors are analogous to a pleading, it was unnecessary for the claimant to include therein a claim for legal interest to accrue in the event of surplus assets, and the failure to include claim for legal interest to accrue in the event of surplus assets would not legally constitute a waiver of such interest.
Under the evidence in the case there does not appear to have been a waiver in fact of legal interest to accrue in the event of a surplus. Where a creditor has not stipulated for interest and accepts payment of the principal of the indebtedness in full, he cannot subsequently recover interest thereon. The same result ensues where the claimant expressly waives interest and accepts the principal of his claim in full satisfaction of the same.
The prohibition of the statute does not apply where none of the contracts giving rise to unsecured claims against an insolvent bank by depositors or general creditors includes any provision for compound interest.
The first and primary rule applicable to simple interest is that it be computed solely upon principal.
Where an obligor expressly promises to pay interest at a predetermined rate upon a principal sum at a specified time, upon his default in payment and in the absence of agreement of the parties upon the subject, legal interest attaches if the obligation to pay contractual interest is within the statute allowing the same.
Legal interest upon legal interest constitutes compound interest.
The only priority accorded depositors under the Hawaii Bank Act of 1931 is that created by section 119 of the Act and is limited to the “amount due” as of the date when the treasurer went into possession. It does not apply to legal interest thereafter to accrue.
Upon a bill for instructions filed by the territorial treasurer pursuant to the provisions of Session Laws 1935, Act 170, section 1 (R. L. H. 1935, § 6610A), it is not within the province of circuit judges at chambers to render advisory opinions upon matters or questions, instructions relating to which were not requested or necessarily involved in those requested, or relating to matters or questions not arising out of the taking, holding and possession by the treasurer of the property or business of the insolvent bank.
J. R. Cades ( Smith, Wild, Beebe & Cades, W. Wight and P. A. Lee with him on the briefs) for E. R. Cameron and stockholders as a class.
J. L. Coke argued for certain stockholders but filed no briefs.
R. V. Lewis, Deputy Attorney General ( E. K. Kai, Attorney General, with her on the briefs) for Norman D. Godbold, Jr., Treasurer of the Territory and Liquidator of Chinese American Bank.
W. Y. Char ( Ray J. O'Brien with him on the briefs) for savings and commercial depositors as a class.
This is a bill for instructions brought by the treasurer of the Territory of Hawaii pursuant to the provisions of section 116 of the Hawaii Bank Act of 1931, as amended by Session Laws 1935, Act 170, section 2 (R. L. H. 1935, § 6619), and of section 1 of the Session Laws of 1935, Act 170 (R. L. H. 1935, § 6610A), amendatory of said Bank Act. Instructions were thereby requested of the judge of the circuit court of the first circuit, presiding at chambers, upon matters and questions arising out of the liquidation of the Chinese American Bank, an insolvent domestic incorporated banking institution.
Out of the pleadings of the respective parties, the proceedings had before the circuit judge, the decree and the specifications of error assigned are posed for our determination the following questions:
1. Where a surplus exists over and above the amount necessary to pay the claims of all the depositors and creditors of an insolvent bank and all the costs and expenses of liquidation, may such surplus be applied by the liquidator to the payment of interest at the legal rate upon the respective amounts of such claims, and if so, for what period?
2. Assuming that general unsecured depositors and general unsecured creditors are entitled to such interest as a matter of substantive law, can they be granted such interest in this proceeding without having filed any claim therefor as provided by the Hawaii Bank Act of 1931, sections 116–130, as amended; section 131 as amended by Special Session 1933–4, Act 48, section 13; sections 132–135; and Special Session 1933–4, Act 48, section 12, Session Laws 1935, Act 170, section 2 (R. L. H. 1935, §§ 6619–39), and having pursued their remedy as therein set forth, or, in other words, does or does not the Bank Act provide an exclusive procedure for the liquidation of banks which would include the filing, allowance, refusal, trial and payment of claims?
3. Do the provisions of section 118 of the Hawaii Bank Act of 1931 (R. L. H. 1935, § 6621), prohibiting the payment of interest on unsecured interest–bearing deposits during the liquidation of an insolvent bank, apply to the case at bar?
4. Does section 130 of the Hawaii Bank Act of 1931 (R. L. H. 1935, § 6634), prohibiting the paying out of the assets of an insolvent bank except upon an itemized, verified claim in the form prescribed by the treasurer, apply to the case at bar?
5. Has there been a waiver in fact of any claim for interest?
6. Does interest at the legal rate upon contractual interest included in the claim of an unsecured depositor, computed under the terms of the deposit up to the time that the treasurer went into possession of the business and assets of the insolvent bank for the purpose of liquidation, constitute compound interest?
7. Are unsecured depositors entitled to priority over general unsecured creditors in the interest adjudged by the circuit judge to be due such depositors and creditors?
8. Upon a bill for instructions filed by the territorial treasurer pursuant to the provisions of Session Laws 1935, Act 170, section 1 (R. L. H. 1935, § 6610A), is it within the province of circuit judges at chambers to render advisory opinions upon matters or questions, instructions relating to which were not requested or necessarily involved in those requested, or relating to matters or questions not arising out of the taking, holding and possession by the treasurer of the property or business of the insolvent bank?
These questions will be discussed singly or in groups as convenience dictates. The numbers used refer to the respective numbers of the questions posed.
1. To appreciate the legal effect upon the respective relations existing between a bank and its general depositors, both commercial and savings, and between the bank and its general creditors, affected by the liquidation of an insolvent bank pursuant to the provisions of the Hawaii Bank Act of 1931, as amended, an analysis of the normal legal incidents of these relations before insolvency supervenes and liquidation ensues may be helpful.
The legal incidents of these relations depend primarily upon the terms and conditions of the respective contracts creating them.1 The terms of the contracts of deposit involved herein are not disclosed except that they were unsecured. All general deposits, however, whether commercial or savings, create the relation of debtor and creditor.2 Strictly speaking, the term “deposit” is a misnomer. Where money is deposited in a bank as a commercial or savings deposit, it constitutes a loan3 to the bank of the money deposited, subject to the undertaking by the bank to repay the same in money to the depositor, his assigns or legal representatives, upon demand conformably to the provisions of the contract of deposit in respect...
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