Mothersead v. United States Fidelity & Guaranty Co.

• Decision Date: 28 October 1927
• Docket Number: No. 7400.,7400.
• Citation: 22 F.2d 644
• Parties: MOTHERSEAD, State Bank Com'r of Oklahoma, v. UNITED STATES FIDELITY & GUARANTY CO.
• Court: U.S. Court of Appeals — Eighth Circuit

22 F.2d 644 (1927)

MOTHERSEAD, State Bank Com'r of Oklahoma, v. UNITED STATES FIDELITY & GUARANTY CO.

No. 7400.

Circuit Court of Appeals, Eighth Circuit.

October 28, 1927.

M. W. McKenzie and Gentry Lee, both of Oklahoma City, Okl., for appellant.

C. B. Ames, of Oklahoma City, Okl. (Joseph A. McCullough, of Baltimore, Md., J. C. Monnet, Jr., of Oklahoma City, Okl., and Ames, Lowe & Cochran, of Oklahoma City, Okl., on the brief), for appellee.

Before BOOTH, Circuit Judge, and TRIEBER¹ and PHILLIPS, District Judges.

PHILLIPS, District Judge.

This is an appeal from a decree in favor of the United States Fidelity & Guaranty Company (hereinafter called the surety company) in a suit brought by it against O. B. Mothersead, bank commissioner of the state of Oklahoma (hereinafter called the bank commissioner). The suit involves the liquidation of a large number of insolvent banks in the state of Oklahoma. The material facts are not in dispute and are as follows:

The surety company had executed and delivered depository bonds as surety for such banks to secure deposits made therein by the United States, the state of Oklahoma, and certain counties and cities of the state of Oklahoma. When the banks failed, the surety company paid to the respective obligees in the bonds the amounts of their deposits.

In the agreed statement of facts, it was stipulated "that each one of the banks involved in this cause was at the time of its failure insolvent, in that it did not have sufficient property to pay all of its debts, in that the actual cash market value of its assets was insufficient to pay its debts, and in that the aggregate of its property was not at a fair valuation sufficient in amount to pay its debts."

For the purpose of convenience, the banks were classified as classes 1, 2, 3, and 4. Class 1 included banks in which there were deposits of state, county, or city funds secured by the bonds of the surety company. Class 2 included banks in which there were deposits of state, county, or city funds secured in part by the bonds of the surety company and in part by the pledge of securities. Class 3 included banks which the bank commissioner upon examination found to be insolvent, and upon his own initiative took charge of for the purpose of liquidating and winding up their affairs, and in which there were deposits belonging to the United States secured by the bonds of the surety company. Class 4 included banks which voluntarily placed themselves in the hands of the bank commissioner for liquidation, and in which there were deposits belonging to the United States secured by the bonds of the surety company.

The banks falling in class 4 may be divided further into subclasses A and B. The board of directors of each bank, in subclass A, held an informal meeting and, recognizing its insolvency, decided to request, and did request, the bank commissioner to take charge, and thereupon the bank commissioner took charge of each of such banks for the purpose of liquidating its assets and winding up its affairs. The board of directors of each bank, in subclass B, held an informal meeting, and, recognizing its insolvency, decided to place it in the hands of the bank commissioner.

Section 4133, Comp. Okl. St. 1921, in part, provides: "Any bank doing business under this chapter may place its affairs and assets under the control of the bank commissioner by posting a notice on its front door as follows: `This bank is in the hands of the state bank commissioner.'"

Pursuant to such decision of its board of directors and in compliance with the above statute, each of the banks in subclass B closed its doors and caused a notice signed by one of its officers to be posted thereon, which read as follows: "This bank is in the hands of the state bank commissioner." The bank commissioner was then notified of the action taken, and he thereupon took charge of each of such banks for the purpose of liquidating its assets and winding up its affairs.

Upon taking charge of each of the banks falling in classes 3 and 4, the bank commissioner entered an order, which, except as to date, name of assistant bank commissioner and name and location of bank, was substantially as follows:

"Order.

"In the Office of the State Bank Commissioner in and for the State of Oklahoma:

"In re Stuart State Bank of Stuart, Oklahoma.

"Now, on this 31st day of October, 1923, the attention of the bank commissioner of the state of Oklahoma is called to the condition of the Stuart Bank, of Stuart, Oklahoma.

"And thereupon, after considering the recommendations of E. E. Wilson, a duly appointed assistant bank commissioner, who has examined the affairs of said bank, and being familiar with the condition of said bank, I am satisfied that said Stuart State Bank is insolvent for the following reasons, to wit:

"First. That the actual cash market value of its assets is insufficient to pay its liabilities.

"Second. That said bank is unable to meet the demands of its creditors in the usual and customary manner.

"Third. That said bank has failed to make good its reserve as required by law.

"And I am of the opinion that said bank should be closed and its books, records and assets taken charge of by me as bank commissioner of the state of Oklahoma, as provided by law.

"It is therefore considered, ordered, and adjudged by me, as bank commissioner of the state of Oklahoma, that the Stuart State Bank, of Stuart, Oklahoma, be and the same is hereby adjudged to be an insolvent institution, and it is further ordered that the said bank be closed forthwith; and I hereby take charge of all the books, records, and assets of every kind and character belonging to said bank; and I further direct and order that E. E. Wilson, a duly appointed and acting assistant bank commissioner, shall immediately take charge of said bank; that he shall forthwith post a notice on the front door of said bank, which notice shall be as follows:

"`October 21, 1923 (Date).

"`This bank is in the hands of the state bank commissioner.

"`O. B. Mothersead "Bank Commissioner.'"

The decree of the trial court directed the bank commissioner to allow the claims of the surety company, based upon its right of subrogation to the claims of the state and various counties and cities of the state whose deposits were secured by the bonds of the surety company and which were paid by the surety company, and to pay dividends thereon ratably with unsecured depositors.

Counsel for the bank commissioner contend that, under the laws of Oklahoma, the assets of an insolvent bank must be converted into cash and distributed as follows: First, in the payment of the claims of unsecured depositors; and, second, pro rata to the secured depositors and other general creditors, after unsecured depositors are paid in full.

The provisions of the Oklahoma statutes upon which counsel rely are:

"Commissioner to Wind up Affairs of Banks, When. Whenever any bank or trust company organized or existing under the laws of this state shall voluntarily place itself in the hands of the bank commissioner, or whenever any judgment shall be rendered by a court of competent jurisdiction, adjudging and decreeing that such bank or trust company is insolvent, or whenever its rights or franchises to conduct a banking business under the laws of this state shall have been adjudged to be forfeited, or whenever the bank commissioner shall become satisfied of the insolvency of any bank or trust company, he may, after due examination of its affairs, take possession of said bank or trust company and its assets, and proceed to wind up its affairs and enforce the personal liability of the stockholders, officers and directors." Section 4165, Comp. Okl. St. 1921; section 302, R. L. Okl. 1910.

"Same — Depositors to be Paid, How. In the event that the bank commissioner shall take possession of any bank or trust company which is subject to the provisions of this chapter, the depositors of said bank or trust company shall be paid in full, and when the cash available or that can be made immediately available of said bank or trust company is not sufficient to discharge its obligations to depositors, the said banking board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in Section 300, the amount necessary to make up the deficiency; and the State shall have, for the benefit of the depositors' guaranty fund, a first lien upon the assets of said bank or trust company, and all liabilities against the stockholders, officers and directors of said bank or trust company and against all other persons, corporations or firms. Such liabilities may be enforced by the State for the benefit of the depositors' guaranty fund." Section 4166, Comp. Okl. St. 1921; section 303 R. L. Okl. 1910.

"Assets Collected, etc. The bank commissioner shall take possession of the books, records and assets of every description of such bank or trust company, collect debts, dues and claims belonging to it, and upon order of the district court, or judge thereof, may sell or compound all bad or doubtful debts, and on like order may sell all the real or personal property of such bank or trust company upon such terms as the court or judge thereof may direct, and may, if necessary, pay the debts of such bank or trust company, and enforce the liabilities of the stockholders, officers and directors: Provided, however, that bad or doubtful debts as used in this section shall not include the liability of stockholders, officers or directors." Section 4167, Comp. Okl. St. 1921; section 304, R. L. Okl. 1910.

"Deposits Not Protected by Guaranty Fund. No deposit in a state bank, otherwise secured, shall be protected by, or paid out of, the depositors' guaranty fund created under the laws of the state of Oklahoma, nor included in the computation of average daily deposits as a basis for assessments. * * *" Section 4175, Comp. Okl. St. 1921; Sess. L. 1913, p. 31, § 9.

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