Leach v. Sanborn State Bank

• Court: Iowa Supreme Court
• Writing for the Court: STEVENS, J.
• Citation: Leach v. Sanborn State Bank, 210 Iowa 613, 231 N.W. 497 (Iowa 1930)
• Decision Date: 23 June 1930
• Docket Number: 40111
• Parties: ROBERT L. LEACH, State Superintendent of Banking, Plaintiff, v. SANBORN STATE BANK, Defendant. ROBERT L. LEACH, State Superintendent of Banking, Appellee, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND et al., Appellants

231 N.W. 497

210 Iowa 613

ROBERT L. LEACH, State Superintendent of Banking, Plaintiff, v. SANBORN STATE BANK, Defendant. ROBERT L. LEACH, State Superintendent of Banking, Appellee, v. FIDELITY & DEPOSIT COMPANY OF MARYLAND et al., Appellants

No. 40111

Supreme Court of Iowa, Des Moines

June 23, 1930

Appeal from O'Brien District Court.--B. F. BUTLER, Judge.

Application in re receivership of the Sanborn State Bank, by the Fidelity & Deposit Company of Maryland and the American Surety Company, for the allowance of interest on certain preferred claims. The court below denied the application, and the surety companies appeal.

Affirmed.

Stipp Perry, Bannister, Starzinger & Little and G. C. Murray, for appellants.

C. H Montzheimer, for appellee.

OPINION

STEVENS J.

I. The Sanborn State Bank was, on December 6, 1922, designated by the board of supervisors of O'Brien County as a depository of the public revenues of said county. The bank executed two bonds, for the purpose of securing the county treasurer and said county against loss on account of deposits to be made therein, said bonds being signed by the appellants, Fidelity & Deposit Company of Maryland and the American Surety Company, respectively, as sureties. On July 29, 1924, the said bank became insolvent, and its assets were taken over by the state superintendent of banking, as receiver. There were on deposit in the bank on that date public funds of O'Brien County in the sum of $ 20,852.34. On November 19, 1924, this sum, under the provisions of Section 12719 of the Code, 1924, as construed by this court in Buena Vista County v. Marathon Sav. Bank, 198 Iowa 692, 196 N.W. 729, was allowed by the district court of O'Brien County as a preferred claim in favor of the county. From this finding and classification by the court, the receiver appealed to this court, and on February 16, 1926, the appeal was dismissed. Leach v. Sanborn State Bank, 201 Iowa 1323, 207 N.W. 326. Thereafter, and on July 30, 1926, the appellants, Fidelity & Deposit Company and American Surety Company, paid the amount due the county in equal amounts, and received assignments thereof, together with all of the rights of the said county, for the respective amounts paid by them. On the same day, an order was entered in the district court of O'Brien County establishing their right of subrogation. On May 28, 1926, C. G. Schubert and other depositors filed a petition in the receivership, asking that the order of preference allowed in favor of the county be canceled and set aside, and that the said claim be established as the claim of a general depositor. The appellants herein intervened in that action. Upon final hearing, the order allowing preferential payment was upheld. On appeal to this court, the ruling of the district court was affirmed. Schubert v. Andrew, 205 Iowa 353, 218 N.W. 78.

The decision in the above case was filed February 14, 1928. On October 23, 1928, the application of appellants for the payment of the claim with interest at the legal rate was filed. After this application was filed, and on January 14, 1929, the receiver, complying with the order of the district court entered January 9th, paid to the clerk the sum of $ 10,426.17 for the use and benefit of the Fidelity & Deposit Company, and a like sum for the use and benefit of the American Surety Company, without interest.

It is stipulated in the record that the Sanborn State Bank is insolvent, and that not to exceed 30 per cent will be paid to general depositors. Appellants declined to accept payment of the principal,--to wit, the amount paid to the clerk of the district court, as above stated,--for the reason that interest at the legal rate on the claim from November 19, 1924, was demanded by them and refused by the receiver. This contention of appellants' is based upon the admitted fact that the assets of the bank in the possession of the receiver are more than sufficient to enable him to pay the full amount of appellants' claims, together with interest, after the expenses of the receivership have been paid.

Three rules governing the payment of interest on claims against receivers would seem to be in force generally in the Federal and state courts: (a) That interest will not be allowed on the claims of creditors (Hinrichs v. Higley & Co., 199 Iowa 765, 202 N.W. 746), unless (b) the assets of the estate in the hands of such receiver are sufficient to pay all of the claims adjudicated against it, together with interest and costs of administration (Hinrichs v. Higley & Co., supra); (c) that, if the receiver has taken possession of property which is mortgaged or otherwise pledged to secure the payment of a particular debt with interest, and it is of sufficient value for that purpose, the claim will be so allowed and paid. The following authorities each refer to, or in terms sustain, one or more of the foregoing propositions. 1 Clark on Receivers (2d Ed.), Section 660; II Tardy's Smith on Receivers (2d Ed.), Section 598; Beach on Receivers, Section 480; State ex rel. McConnell v. Park Bank & Tr. Co., 151 Tenn. 195 (268 S.W. 638, 39 A. L. R. 449); Ohio Sav. Bank & Tr. Co. v. Willys Corp., 8 F.2d 463 (44 A. L. R. 1162); Hoover Steel Ball Co. v. Schaefer Ball Bear. Co., 90 N.J.Eq. 515 (107 A. 425); Cook v. Curtis, 125 Me. 114 (131 A. 204); Attorney General v. Supreme Council Am. L. of H., 206 Mass. 131 (92 N.E. 134); Northwest Lbr. Co. v. Scandinavian-American Bank, 132 Wash. 449 (231 P. 951); Moore v. Watauga & Y. R. Co., 173 N.C. 726 (92 S.E. 361); Great Northern R. Co. v. Oakley, 135 Wash. 279 (237 P. 990); People v. California Safe Dep. & Tr. Co., 34 Cal.App. 269 (167 P. 181); American Iron & S. Mfg. Co. v. Seaboard A. L. R., 233 U.S. 261 (58 L.Ed. 949, 34 S.Ct. 502); Thomas v. Western Car Co., 149 U.S. 95 (37 L.Ed. 663, 13 S.Ct. 824). The rule for which appellants contend,--that is, that, where the assets in the hands of the receiver are sufficient to pay both the principal and interest of preferred claims of the highest class, the receiver shall make distribution on that basis,--prevails in the Federal, and has support in some state, courts. II Tardy's Smith on Receivers (2d Ed.) 1678, 1679; American Iron & S. Mfg. Co. v. Seaboard A. L. R., supra; Central Tr. Co. v. Condon, 14 C.C.A. 314 (67 F. 84); Spring Coal Co. v. Keech, 152 C.C.A. 98 (239 F. 48); Pennsylvania Steel Co. v. New York City R. Co., 132 C.C.A. 518 (216 F. 458); Moore v. Watauga & Y. R. Co., supra. Other courts, however, have adopted a contrary rule. People v. American L. & Tr. Co., 172 N.Y. 371 (65 N.E. 200); Northwest Lbr. Co. v. Scandinavian-American Bank, supra.

We come now to determine which, if any, of the foregoing rules is applicable to, or decisive of, the question before us.

Section 12719 of the Code of 1927 (Section 3825-a, 1913 Supplement) provides as follows:

"When the property of any * * * corporation has been placed in the hands of a receiver for distribution, after the payment of all costs the following claims shall be entitled to priority of payment in the order named: * * * 2. Debts due or taxes assessed and levied for the benefit of the state, county, or other municipal corporation in this state. * * *"

Section 9239 of the Code of 1927 (Section 1877, Code, 1897) provides that the net assets of an insolvent bank "shall be ratably distributed among the creditors...