Lippitt v. Thames Loan & Trust Co.

• Decision Date: 28 April 1914
• Court: Connecticut Supreme Court
• Parties: LIPPITT et al., Bank com'rs, v. THAMES LOAN & TRUST CO.

90 A. 369

88 Conn. 185

LIPPITT et al., Bank com'rs,

v. THAMES LOAN & TRUST CO.

Supreme Court of Errors of Connecticut.

April 28, 1914.

Case Reserved from Superior Court, New London County; Gardiner Greene, Judge.

Proceeding by Norris S. Lippitt and others, Bank Commissioners, against the Thames Loan & Trust Company. Application by the receiver of the trust company for advice in the execution of his trust, brought to the superior court and reserved upon stipulated facts for the advice of the Supreme Court of Errors. Judgment advised as stated.

On April 16, 1913, Hon. William II. Williams, a judge of the superior court, made an order pursuant to G. S. § 3460, restraining the Thames Loan & Trust Company for a period of three months from paying out funds or deposits and from declaring and paying dividends on its deposits or capital stock. On June 27th the court appointed Hon. Charles F. Thayer, receiver of the company, and on July 3d he qualified. The Thames Company was chartered in Connecticut in 1869, and since 1903 has done in Norwich a general banking and trust company business, taking general and special deposits, and has also conducted a savings department in which it had three classes of savings depositors, called a savings department, a home department, and a school savings system. Its commercial deposits were evidenced by pass books and certificates of deposit; and its savings department deposits by passbooks. All of the business was conducted in the same rooms and by the same persons, and all moneys were paid in and out over the same counter and by the same clerks, and when paid in the moneys were mingled in the same till or drawer. Moneys received in the commercial department were entered in separate books, and, so far as the bookkeeping was concerned, kept separate from the savings deposits. Moneys received from the depositors in the three classes of the savings department were entered in separate books, and an account kept with each depositor. On April 16, 1913, the credit balance in the savings department was $589,536.59, and the company had set aside for the savings depositors assets aggregating $508,500.93. The balance, $81,035.66, was uninvested and in the general fund. The appraisal value of these is $399,225.43. The appraisal value of all other assets is $322,972.37. The total liabilities are $884, 185.38. The questions on which advice is asked, together with the special facts relating to them, are sufficiently stated in the opinion.

Charles F. Thayer and Charles V. James, both of Norwich, for receiver. Amos A. Browning and Virtume P. A. Quinn, both of Norwich, for Mary L. Avery and others, depositors in savings department. Thomas M. Shields, of Norwich, for Jacob Gordon and Irving L. Gardner. Lucius Brown, of Norwich, for William H. Doane, Emma A. Warner, Frances Tibbetts, and others. Joseph T. Fanning, of Norwich, for City of Norwich and others, depositors in savings department. Ralph Royall, of Norwich, for National Reserve Bank of New York City.

WHEELER, J. (after stating the facts as above). The application of the receiver, joined in by a number of the parties in interest, asks the advice of the court upon many questions arising in the course of the receivership. Those which we will discuss first concern the relation of the Thames Company to its various classes of depositors, and the relation of these classes of depositors to each other. Among the questions upon which our advice is sought are these: Axe the savings department depositors entitled to be paid out of the assets "set aside for savings depositors," and if these prove insufficient are they entitled as to the balance to share in the other assets? And is the said sum of $81,035.66 to be included in the investments set aside for savings depositors?

Upon insolvency of a corporation, a court of equity will, unless the rules of law, or statute law, forbid, place all creditors upon an equality. Certain priorities are generally recognized in the distribution of the avails of the insolvent estate. The expenses of administration are first paid, and all taxes have priority of payment. Frequently the order of payment of creditors is prescribed by statute in whole or in part. Our statute so prescribes in the case of a bank or trust company in the hands of a receiver. G. S. § 3482, provides: "The avails of the property of any bank or trust company in the hands of a receiver or receivers shall be appropriated ratably to the payment of: (1) The charges and expenses of settling its affairs; (2) the circulating notes, if any; (3) all deposits; (4) all sums which have been subscribed and paid in for its stock by the state or the school fund; (5) all other liabilities; and the surplus shall be distributed among the stockholders." This statute has been in force since 1837, long prior to the granting of the charter to the Thames Company. Under it all deposits of a trust company, whether in a savings or a commercial department, are to be treated alike and payable from the avails after payment of the charges and expenses of settling the receivership (including taxes) and of any outstanding circulating notes. Savings deposits and commercial deposits are referred to as deposits in the statutes in force at and prior to the granting of its charter to the Thames Company. Our statute in treating all depositors alike, whether savings or commercial, appears to have followed the general rule of the law. People v. Mechanics & T. S. Inst., 92 N. Y. 7; First Nat. Bank v. Armstrong (C. C.) 39 Fed. 231; Receivers of Corporations, Gluck & Becker (2d Ed.) 339, 340. Unless repealed or modified by the charter of the Thames Company or by subsequent statute, section 3482 provides the method of distribution of the avails of the company in the hands of the receiver.

The charter authorizes the company to accept and execute all trusts and receive money on commercial or savings deposits. Section 5 provides: "All the capital stock, property and estate of every kind belonging to said company shall be and stand charged with the fulfillment of said trusts, and the payment of said deposits, and said trusts and other funds, as the first, and prior lien thereon, in case of the failure of said corporation." In terms the section impresses a prior lien upon all the assets of the company for the payment of all trusts and deposits with it. The relation of debtor and creditor entered into between the depositors and the company was additionally protected by the preference accorded deposits in the assets. In the event of failure, their prior lien was to be satisfied ahead of the general liabilities of the company. G. S. § 3482, should be construed in connection with section 5 of the charter. Both effect the same purpose, to give all deposits and funds intrusted to it priority of payment over all general liabilities. The expenses of administration are in any event a first charge. So that only one class of creditors, holders of circulating notes, are placed by the statute ahead of depositors who, if the charter stood alone, might perhaps be held subordinate to depositors. As there is no contest in this case between holders of circulating notes and depositors, we need not determine which would be entitled to priority as against this company. Certain it is there is no suggestion in the charter that other parts of this statute are affected by the charter, so that claims against the estate must be marshaled in accordance with its terms. So far as concerns the questions submitted to us, there is no inconsistency between the charter and section 3482. Both may and should be given complete effect.

All classes of deposits in the distribution of the avails in the hands of the receiver would have shared ratably had not the distributions been affected by P. A. 1907, c. 85, § 1, which provides: "All banks and trust companies maintaining a savings department, or soliciting or receiving deposits as savings, shall invest all such deposits hereafter so received according to the requirements of the statute laws of this state concerning the investment of deposits in savings banks; and said investments shall be for the exclusive protection of the depositors in said savings department and shall not be liable for or used to pay any other obligation or liability of said bank or trust company until after the payment of all of the deposits in said savings department." Obviously this provision was intended to safeguard the savings department deposits of a bank or trust company by requiring: (1) That the investment of all such deposits shall be in the investments by law permitted deposits in savings banks; (2) that the investments of such deposits shall be for the exclusive protection of the depositors in the savings department; and (3) that these investments shall be used to pay the savings department deposits before they can be used to pay any other liability of the bank or trust company.

The purpose of the statute was to add to the protection of the savings department depositor, and not to diminish that which he already had. He had by the charter a prior lien upon all of the assets of the company. He had the right to share ratably in the avails in the hands of the receiver in a certain order. Neither privilege was taken from him by this statute. Another protectory privilege was added to these. If the investments in the savings department should not suffice to pay the savings department depositor in full, the unpaid balance of his deposit was placed on a parity with all other depositors, and entitled on distribution to share ratably in the order prescribed by section 3482. The certificate of deposit creates the relation of debtor and creditor between it and the Thames Company. It stood in precisely the position of other deposits in its right to share in the distribution of the avails.

It follows from what we have said that all depositors in the several savings departments are on a parity; that the said...