Martin v. Citizens' Bank

• Decision Date: 22 February 1932
• Docket Number: 30774.
• Citation: 134 Kan. 650,8 P.2d 81
• Parties: MARTIN v. CITZENS' BANK et al.
• Court: Kansas Supreme Court

8 P.2d 81

134 Kan. 650

MARTIN v. CITZENS' BANK et al.

No. 30774.

Supreme Court of Kansas

February 22, 1932

Syllabus by the Court.

Directors with consent of bank commissioner in charge of bank, may borrow money for business purposes and pledge bank's assets as collateral (Rev. St. Supp. 1931, 9--130).

When by order of its board of directors, a state bank suspends business, and the bank commissioner, or his special deputy takes charge, and a receiver for the bank has not been appointed, the board of directors of the bank, with the consent of the bank commissioner, has authority to borrow money for its business purposes and to pledge, as collateral to secure the sum borrowed, the bonds or other assets of the bank.

Appeal from Disrict Court, Reno County; J. G. Somers, Judge.

Action by Nicholas Martin against the Citizens' Bank and others. From the judgment, plaintiff appeals.

Nicholas Martin, of San Diego, Cal., pro se.

A Lewis Oswald, of Hutchinson, for appellee.

Roland Boynton, Atty. Gen., for Bank Commissioner.

HARVEY J.

This is a proceeding for a declaratory judgment. From the record it appears that the plaintiff, Nicholas Martin, is the owner of 100 shares of the capital stock of the Citizens' Bank of Hutchinson, a banking corporation organized under the laws of this state, having a capital stock of $200,000 and a surplus of $100,000; that on January 25, 1932, by order of its board of directors, the bank suspended business, and so notified the state bank commissioner, who placed a deputy bank commissioner in charge of the business of the bank for the purpose of protecting the rights of all parties concerned. No receiver has been appointed, and the directors of the bank are taking steps toward the liquidation of its affairs. The board of directors of the bank has made application to the United States Reconstruction Finance Corporation for a loan of a sum not exceeding $200,000, which, if made, requires a pledge as collateral for the loan of bonds or other negotiable paper of the bank. The state bank commissioner has given his consent for the directors of the bank to make the loan.

A real controversy has developed as to the right of the board of directors of the bank to make such a loan and to so pledge its assets as collateral. Plaintiff contends, in substance, that the bank commissioner, having taken charge of the bank by his deputy, is now in full charge of the business of the bank, and that the bank, as a corporation, or its board of directors acting for it, no longer has power to borrow money, or to pledge, as collateral for money borrowed, any of the assets of the bank; while, on the other hand, the bank and its board of directors contend that, no receiver having been appointed, the normal powers of the corporation and its directors have not been annulled, their activities being only supervised by the bank commissioner, and that they have all the power they ever had to borrow money and pledge as collateral for such loan the assets of the bank, the only difference being that the specific loan should have the direct approval of the bank commissioner, and, since such approval has been given, there is no lack of authority on their part to make such loan.

The trial court found that the defendant bank, acting through its duly constituted board of...