Oskaloosa Sav. Bank v. Mahaska County State Bank

• Decision Date: 15 May 1928
• Docket Number: 38898
• Citation: 219 N.W. 530,205 Iowa 1351
• Parties: OSKALOOSA SAVINGS BANK, Appellant, v. MAHASKA COUNTY STATE BANK, Appellee
• Court: Iowa Supreme Court

219 N.W. 530

205 Iowa 1351

OSKALOOSA SAVINGS BANK, Appellant, v. MAHASKA COUNTY STATE BANK, Appellee

No. 38898

Supreme Court of Iowa, Des Moines

May 15, 1928

Appeal from Mahaska District Court.--D. W. HAMILTON, Judge.

Action in equity for an accounting, growing out of the taking over of plaintiff bank by defendant bank on January 19, 1922.

Affirmed.

Clark Byers & Brunk and J. G. Patterson, for appellant.

Devitt & Eichhorn and Preston & Preston, for appellee.

ALBERT J. STEVENS, C. J., and FAVILLE, DE GRAFF, and MORLING, JJ concur.

OPINION

ALBERT, J.

Before the taking of evidence in this case, defendant moved the court to first try and determine the issue as to whether plaintiff was entitled to an accounting, and to determine separately that question and the question of jurisdiction. This motion was sustained, and, as no question is raised as to the correctness of this ruling, we assume that the case was tried on this theory. The controlling question, therefore, is whether or not, under the showing made, plaintiff was entitled to have an accounting.

Plaintiff bank had the experience of many banks in this state during the period of deflation. Deposits decreased, much of the paper held by the bank became worthless, the reserve became too low to continue business, and it had borrowed all the money it could.

In December, 1921, the directors had guaranteed $ 35,000 of paper in the bank. Before the date of transfer, January 19, 1922, withdrawals were very rapid, and at that time the excess loans amounted to $ 107,000. The plaintiff bank had solicited defendant bank to take it over, and this had been refused. The bank was in such a condition at the close of business on Saturday, January 17, 1922, that it was apparent to all parties concerned that it was insolvent, and could not continue business. The state banking department had investigated it on several occasions, and so advised. Efforts were made to have the other banks in the city take it over, but all refused. On Sunday, January 18, 1922, a conference was had among all the bankers in the city of Oskaloosa. The other banks in the city finally advanced the proposition that they would pay $ 20,000 (afterwards raised to $ 24,100) as a bonus to the defendant bank, if it would take over plaintiff bank. At that time, representatives of all of the banks in the city went over the paper of the plaintiff bank, and they uniformly agreed that of this paper about $ 130,000 was bad, $ 40,000 was doubtful, and $ 84,000 was slow. An assessment of 100 per cent was to be made on the stock of plaintiff bank, and turned in as part of the property to be taken over by the Mahaska County State Bank. The Mahaska County State Bank finally accepted this proposition, and an agreement was made between the plaintiff bank and defendant bank, by proper resolution of the directors of both banks, a part of which reads as follows:

"Resolved that the directors of the Oskaloosa Savings Bank of Oskaloosa, Iowa, are hereby authorized to sell the assets of the bank upon such terms and conditions as they may see fit. * * * Now, therefore, be it resolved: That the entire assets of the Oskaloosa Savings Bank be sold, assigned and transferred to the Mahaska County State Bank of Oskaloosa, Iowa, upon the agreements and for the consideration following:

"sad assets shall be guaranteed by this bank in its corporate capacity to the full extent necessary to cover all the liabilities to be assumed by the Mahaska County State Bank of Oskaloosa, Iowa. The Mahaska County State Bank shall accept and receive said assets and shall assume the payment of all liabilities on account of demand deposits, savings deposits, time deposits, rediscounts and bills payable of this bank (Oskaloosa Savings Bank) as shown by its books and records at the time of the transfer."

The resolutions of the Mahaska County State Bank in part read as follows:

"Whereas certain negotiations have been conducted for the purchase by this bank of the assets of the Oskaloosa Savings Bank of Oskaloosa, Iowa, for the sale of which authority therein has been given by its stockholders under the terms of the resolution duly and regularly adopted. Now, therefore, be it resolved: That the entire assets of the said Oskaloosa Savings Bank of Oskaloosa, Iowa, be purchased by this bank upon the terms and for the consideration following:" (Here follow the same specifications as above set out in the resolution of the Oskaloosa Savings Bank.)

It then acknowledges the receipt of the assets of said bank by the Mahaska County State Bank, by whose officers and directors the same have been received and were held for the purpose of incorporating the same in the general assets of the Mahaska County State Bank.

Pursuant to these resolutions, the possession of all of the property of the Oskaloosa Savings Bank was taken by the defendant. Under the resolutions of the Oskaloosa Savings Bank, R. M. Boyer, cashier, was designated as the officer to make proper and necessary indorsements on and transfer of all of the assets of the plaintiff bank. These included the real estate, furniture, and fixtures of the bank, which were agreed to be properly transferred to the Mahaska County State Bank. The agreement also contained the following:

"In the event of any disagreement between or among the parties to this contract or of those interested in this contract or acquiring any benefits therefrom, with reference to the contents therein or from any controversy accruing out of the sale or the consummation thereof, and in any such question the superintendent of banking of the state of Iowa shall be the sole and final judge of any controversy and all parties hereto and all others interested herein or acquiring any benefits therefrom shall be bound by this decision."

This agreement bears date January 19, 1922, and was properly signed by the respective officers of the banks. In pursuance thereof, the Mahaska County State Bank took possession of all of the assets and property of the Oskaloosa Savings Bank on the last named date.

While these negotiations were pending, R. K. Davis, president of the Oskaloosa Savings Bank, in substance insisted that, if there should be a surplus over and above the amount necessary to pay the indebtedness of the Oskaloosa Savings Bank and a reasonable charge to the Mahaska County State Bank for handling this business, such surplus should be returned to the Oskaloosa Savings Bank. This matter seems to have been quite fully discussed, and was rejected. One C. A. Williams, a director of the Mahaska County State Bank, said to Davis, with reference thereto:

"If that is the way you feel about it, the deal is off. I am not going to be a party to take over this bank and having any man say that undue advantage has been taken of anyone."

W. O. Reed, the bank examiner, then dictated a formal notice of the closing of the Oskaloosa Savings Bank. This matter seems to have been adjusted; and the contract above referred to, made between these parties, omitted any reference to this question of salvage. There is no question, under the record, that the Oskaloosa Savings Bank was utterly insolvent at the time in question, and for some time prior thereto.

The Mahaska County State Bank proceeded to liquidate these assets as rapidly as possible, and to pay the indebtedness to the Oskaloosa Savings Bank. Davis subsequently complained that he should have some salvage, and thereafter employed attorneys, and took the matter up with the attorney-general and the defendant bank.

In April, 1923, the Mahaska County State Bank, through its proper officers, adopted a resolution, the material part of which is as follows:

"Whereas the banking department of the state of Iowa desires that the rights and status of the Mahaska County State Bank and the Oskaloosa Savings Bank be finally fixed as between the said parties with reference to the taking over of the assets and business of the Oskaloosa Savings Bank by the Mahaska County State Bank, as of date of January 19, 1922, and whereas it is the desire of said banks to comply with the wishes of the banking department: therefore be it resolved by the board of directors of the Mahaska County State Bank: That all property in the hands of the Mahaska County State Bank as of the date of January 1, 1925, derived from the property turned over to the Mahaska County State Bank in connection with the taking over of said Oskaloosa Savings Bank above the amount necessary to pay the depositors and all bills payable and expenses and a reasonable charge for the closing up of the business of the Oskaloosa Savings Bank shall be turned over to the officers of the Oskaloosa Savings Bank if there is any such surplus on said date. In arriving at the amount of the assets of the Oskaloosa Savings Bank, the commissioner of banking shall fix what shall be considered as assets and the letter of the commissioner of banking submitted herewith shall embody what shall be set up as assets. * * * The superintendent of banking shall determine what is the amount of the charges to be allowed to the Mahaska County State Bank by way of compensation and expenses in...