Kidder v. Hall

• Decision Date: 09 May 1923
• Docket Number: (No. 3866.)
• Citation: Kidder v. Hall, 251 S.W. 497, 113 Tex. 49 (Tex. 1923)
• Parties: KIDDER v. HALL, Commissioner of Insurance and Banking, et al.
• Court: Texas Supreme Court

Page 497

251 S.W. 497

KIDDER v. HALL, Commissioner of Insurance and Banking, et al.

(No. 3866.)

Supreme Court of Texas.

May 9, 1923.

Original mandamus proceeding by W. O. Kidder against Ed Hall, Commissioner of Insurance and Banking, and others. Petition dismissed.

Croom, Goldstein & Croom, of El Paso, for relator.

W. A. Keeling, Atty. Gen., and Walace Hawkins and John W. Goodwin, Asst. Attys. Gen., for respondents.

CURETON, C. J.

This is an original action for mandamus against the Commissioner of Insurance and Banking and the State Banking Board, to compel the former (a) to allow a claim against the Farmers' & Merchants' State Bank of Ranger, an insolvent state bank, (b) to classify the claim as a noninterest-bearing and unsecured deposit, and (c) to require the State Banking Board to pay the claim thus allowed and classified out of the Depositors' Guaranty Fund provided for by the banking laws of the state.

On October 24, 1921, E. A. Estes purchased, in the usual way, from the Farmers' & Merchants' State Bank of Ranger, while it was still open and transacting business, a draft or banker's check, drawn by the cashier on the National Reserve Bank of Kansas City, Mo., for $2,200. Estes was not a depositor of the bank, and had never been, and the draft when purchased was paid for, not by a check on the bank itself, but in cash. Payment of the draft was refused by the Kansas City Bank, for the reason that, after its issuance, and before presentation, the Ranger bank had failed and been taken over by the Commissioner of Banking. Proof of claim based upon this draft was presented to the Commissioner, who refused to allow it, either as a general or secured deposit claim. We therefore are not concerned with, nor will this opinion pass upon, the jurisdictional or any other question presented by a claim approved as against the bank, but rejected as against the guaranty fund.

We have concluded that the mandamus cannot issue against the Commissioner of Banking in this case for three reasons: (1) Because we have no jurisdiction to compel the Commissioner to allow the claim against the insolvent bank; (2) because the relator has a plain, adequate, and effective remedy at law; and (3) because the facts do not show that the claim is based upon or represents a noninterest-bearing and unsecured deposit, payable out of the guaranty fund.

We will first discuss the question of jurisdiction.

Revised Statutes, art. 464, requires the presentation of all claims against an insolvent bank to the Commissioner, makes it his duty to reject those "the justice and validity of which" are doubted by him, and authorizes an "action" on the rejected claims.

The statute does not in express terms provide that the action authorized must be brought in the district court of the county where the bank had its domicile, but we believe this to be the proper construction, in view of the effect which must be given to other articles of the statute relative to liquidation proceedings. It is likewise clear that the purpose of the various articles touching the control and disposition of the insolvent estate is to place it in custodia legis, and therefore in effect to designate the court administering the estate as the one in which contested actions must be brought.

We will consider some of the statutes on which these conclusions are based.

One of the articles requiring action by the district court particularly names the district court of the county of the bank's domicile (R. S. art. 458), while others merely name the "district court," or "court," or the "district court of the district" where the bank was located (R. S. arts. 467, 469, 471, 472, 473, 475, 478, 482). These articles were all a part of section 9, c. 15, Acts 2d Sp. Sess. 1909, and, construed in the light of their context, and manifest purpose of the Legislature, all refer to the same court — that is, to the district court of the county where the bank was located. Or, if we should say that the effect of the statutes was to fix jurisdiction in the district court of the district in which the bank is located, without naming the county, then the general venue statutes localize and fix that venue in the district court of the county where the bank had its domicile, since all the orders required of the court are either against the bank or affect its property and rights. Revised Statutes, art. 1830.

We will now discuss the effect of these statutes on the question of the venue of the action authorized by article 464.

In the compounding of debts, sale and disposition of all personal and real property of the insolvent bank, in the payment of expenses and dividends, and in the disposition of the residue of the estate after the settlement of all debts, the Commissioner must have an order of the district court, or of the judge of that court. Revised Statutes, art. 458, 467, 469, 478, 475. Unproved or unclaimed deposits or assets not disposed of in the course of liquidation remain subject ultimately and finally to the disposition of the district court or judge. Revised Statutes, arts. 472, 480, 482. When a claim has been approved by the Commissioner, it may be contested by interested parties only in the district court. Revised Statutes, art. 471. Articles 460 and 466, while not referring to court orders, do indicate a purpose to localize the liquidation proceedings.

From a consideration of all the articles named, it is quite apparent that every feature of the distribution of the estate of an insolvent bank is within the jurisdiction of the district court (or judge thereof) of the county in which the bank was located when it transacted business. Article 464, which authorizes an action on rejected claims, does not specify the court in which the action is to be brought; but the fact that this article is a part of section 9, c. 15, Acts of 1909, above referred to, is strongly suggestive, if not conclusive, that the action contemplated is to be in the district court named in the other portions of the section — that is, the district court of the county of the bank's domicile. Again, it is clear from articles 471 and 469 that, where objections are made to claims allowed by the Commissioner, the contest must be in the district court, regardless of the amount involved. It is entirely consistent with the general purposes of the act to say that contests for the establishment of rejected claims must likewise be brought in that court. We know of no reason why the Legislature should have permitted contests of approved claims in one court, and have prescribed another court for actions to establish rejected claims.

Power to hear contests of all allowed claims could only be conferred upon the district court, by reason of that court having been given jurisdiction of the entire subject-matter of the liquidation and the custody of the property involved. In addition, decisions from other states support the view that the property is in custodia legis.

The liquidation sections of the banking acts of New York, Alabama, Mississippi, Oregon, and Wisconsin do not materially differ from our own laws. Birdseye's Consolidated Laws of New York, vol. 1, pp. 509 to 526; General Acts of Alabama 1911, pp. 60 to 67; Hemingway's Annotated Code Miss. § 3623, pp. 1861-1864; Olson's Oregon Laws (1920) § 6223; Wisconsin Statutes (Official 1913) § 2022.

The New York courts hold that the Superintendent of Banks is in effect a statutory receiver and arm of the court in administering the estate of an insolvent bank. In re Union Bank of Brooklyn, 96 Misc. Rep. 299, 161 N. Y. Supp. 29, 36; In re Union Bank of Brooklyn, 204 N. Y. 313, 316, 97 N. E. 737; Van Tuyl v. Scharmann, 208 N. Y. 62 101 N. E. 779, 782; In re Bank of Cuba in New York, 198 App. Div. 733, 191 N. Y. Supp. 88; In re Carnegie Trust Co., 161 App. Div. 280, 146 N. Y. Supp. 809; Richards v. Robin, 178 App. Div. 535, 165 N. Y. Supp. 780.

In Alabama he is an agent or receiver of the court administering the insolvent estate. Walker v. Mutual Alliance Trust Co., 196 Ala. 154, 71 South. 697, 698; Walker v. McCrary Co., 197 Ala. 638, 73 South. 342; Montgomery Bank & Trust Co. v. Walker, 181 Ala. 368, 61 South. 951.

In Mississippi the property of an insolvent bank in the hands of the Bank Examiners, who correspond in authority to our Commissioner, is in the hands of a receiver, and in custodia legis. Anderson v. Owen, 112 Miss. 476, 73 South. 286.

In Oregon the property of an insolvent bank is referred to as being administered by the court, and suits on rejected claims are brought with the permission of the court. Steelhammer v. Bramwell, Supt. of Banks (Or.) 209 Pac. 100, 106; Upham v. Bramwell (Or.) 210 Pac. 706, 709.

In Wisconsin the trial court has general supervisory control over the liquidation proceedings, with authority, in the absence of a statute, and upon proper showing, to grant permission to file a claim after the expiration of the time originally fixed by the Commissioner. Wisconsin Trust Co. v. Cousins, 172 Wis. 486, 179 N. W. 801, 806.

The necessary effect of all the foregoing cases is that the property of the insolvent bank is in custodia legis. Under assignment statutes somewhat similar to our banking laws, the insolvent estate is in custodia legis. Hanchett v. Waterbury, 115 Ill. 220, 32 N. E. 194, 196; In re Mann, 32 Minn. 60, 19 N. W. 347.

Since the property of the insolvent bank is in custodia legis, the fact that article 464 authorizes an action in general terms, without specifying the court, necessarily refers to an action in the court having custody of the estate. Citizens' Savings Bank v. Ingham, 98 Mich. 173, 57 N. W. 121.

We conclude that the district court of the county where the bank was located is the court in which all actions for the establishment of rejected claims against the insolvent bank must be brought, regardless of contractual venue or jurisdictional amount; such actions to be either by intervention in the liquidation proceedings...