State ex rel. Richmond v. District Court of Second Judicial District Within And for Albany County

• Decision Date: 27 September 1932
• Docket Number: 1787
• Parties: STATE EX REL. RICHMOND v. DISTRICT COURT OF SECOND JUDICIAL DISTRICT WITHIN AND FOR ALBANY COUNTY, ET AL
• Court: Wyoming Supreme Court

14 P.2d 673

45 Wyo. 29

STATE EX REL. RICHMOND v. DISTRICT COURT OF SECOND JUDICIAL DISTRICT WITHIN AND FOR ALBANY COUNTY, ET AL

No. 1787

Supreme Court of Wyoming

September 27, 1932

ORIGINAL PROHIBITION PROCEEDING in the Supreme Court by the State on relation of B. W. Richmond, against the District Court of the Second Judicial District of Wyoming within and for the County of Albany, and V. J. Tidball, Judge of such District Court, and John A. Reed, State Examiner, in charge of liquidation of the First State Bank of Laramie, an insolvent banking corporation.

The cause was submitted by the plaintiff on the brief of Corthell, McCollough and Corthell, of Laramie, Wyoming.

The plaintiff and relator demurred to defendant's answer. A question of law is presented as to whether the state examiner of Wyoming in charge of the liquidation of an insolvent state bank, has the power or authority to borrow money from the Reconstruction Finance Corporation, and to execute notes representing the same, and to pledge, hypothecate or rediscount to such finance corporation the notes, securities and assets of the insolvent bank to secure such loan; also whether the courts of the State have jurisdiction to authorize such acts on the part of the examiner, it being admitted that the purpose of such loan is to procure funds to distribute as a dividend to creditors of the insolvent bank. A holding by the highest court in a state that the liquidating agent has such authority is necessary before such loan will be granted. The duties of a state examiner as a liquidating agent are defined by law. Art. V, Sec. 10-512, R S. 1931. Only three instances are enumerated wherein the court may act. (a) In the sale of bad or doubtful debts; (b) In the compounding of bad or doubtful debts; (c) In the sale of real estate and personal property of such bank. Unless the indefinite phrasing of the statute "do such other acts as are necessary to preserve its assets and business" be taken to authorize the proposed dealings with the Reconstruction Finance Corporation by the examiner as liquidating agent, then he is without authority to act on the proposed loan. Three things are necessary to confer jurisdiction upon a court to make an order: (1) Jurisdiction of the subject matter; (2) of the parties; (3) To make the particular order in question. Sawyer v. Ellis (Ariz.) 295 P. 323. Courts have dealt in generalities in treating of this subject. Yeargin v. Shull, (Okla.) 300 P. 303; National Surety Co. v. Bank, (Okla.) 177 P. 574; Kimbriel v. State ex rel. Wolcott, (Okla.) 233 P. 420; In re Lafayette Bank & Tr. Co., (N. C.) 153 S.E. 452; Jackson, et al. v. McIntosh, 12 F.2d 676; Mobley v. Marlin, (Ga.) 144 S.E. 747. The court authorizes dealing with the question as to the necessary things that may be done in order to preserve assets which is the question involved in this case. In this connection, the loan application requirements as to collateral, must be considered, which if carried out result in turning over the entire assets of the bank to the Reconstruction Finance Corporation, and the removal of control of the examiner as liquidating agent, thus rendering our statute of no effect. Browne v. Hammett, (S. C.) 131 S.E. 612, 614. A three year or more pledge of the assets is not a sale of them, nor does it amount to a liquidation of them by the state examiner. Andrew v. Rivers, (Ia.) 223 N.W. 102. A liquidating officer is bound by the terms of the statute. State v. Bank, (Nebr.) 207 N.W. 666; State Bank v. Ransom, (S. D.) 151 N.W. 1023; Isaac v. Marcus, (Mass.) 179 N.E. 488, 489; Surety Co. v. Bank, 177 P. 574. In re Broderick, 253 N.Y.S. 28, 30. The relation of the Reconstruction Finance Corporation to state banks has been considered in the case of Martin v. Bank, (Kans.) 8 P.2d 81. But that case did not involve authority to borrow money. In the instant case, it is admitted that where the directors are still in charge of the bank, and the examiner acting in an advisory capacity, the directors could proceed to do business, make loans, etc., pledge collaterals and function as a corporation, but such is not the case. Under our law the directors have been superseded by the examiner. It is respectfully submitted that the relator is entitled to a writ of prohibition, and that the alternative writ should be made permanent as prayed for.

The case was submitted by defendants on the brief of J. A. Greenwood, Attorney, General; Richard J. Jackson, Deputy Attorney General; George W. Ferguson, Assistant Attorney General, and R. Dwight Wallace, all of Cheyenne, Wyoming.

The primary question in this case is as to the power of the examiner as liquidating agent to borrow money and pledge the assets of an insolvent bank as security therefor. The purpose of the proposed loan is to avoid a forced liquidation of the assets in the belief that they will return to their true value with improved conditions. The liquidation of state banks is dealt with in Article V, Chapter 10, R. S. 1931. Section 10-512 authorizes the examiner to do such other acts as are necessary to preserve the assets and business. The liquidating agent takes the place of a receiver, and equity courts have long exercised full control over receiverships. The statute sets out certain specific acts that must be done by the examiner, and also lists acts, which may be done only under court order. If the statute be given the literal and narrow interpretation advanced by relator, it will prejudice the rights of creditors and cause them serious loss. The whole reason for making application for the loan lies in the necessity for deferring liquidation of the assets pledged until some future date that they may be disposed of as something near their face value. The Missouri statute contains a clause quite similar to ours, authorizing all expenditures as in his judgment are necessary to conserve its assets and business. Under that statute it was held that the finance commissioner had authority to pledge notes as security received by him from a defunct bank in lieu of notes formerly held as collateral without order of court. U. S. Bank of St. Louis v. Pritchard, 20 S.W.2d 939. If the rule is applicable in this state, the writ prayed for should be denied. State v. True, 26 Wyo. 314. No limitation is placed upon the court's jurisdiction by the statute relied on by plaintiff, but the restriction is that the examiner may not do certain things without an order of court. We think the correct construction of the statute is that the examiner stands in place of and instead of a receiver, and has the same powers, duties and authority, and subject to the same restrictions. Sec. 10-520, R. S. 1931. As to the power of the court to authorize a receiver to borrow money, we cite Tardy's Smith on Receivers, page 202; also Surety Co. v. Pixton, 60 Utah 289; Jackson v. Chemical Bank, (Ala.) 112 So. 105, 7 C. J. 735; Williams v. Owensboro Bank, (Ky.) 156 S.W. 899; Funk & Son v. Young, (Ark.) 210 S.W. 143; In re Union Bank of Brooklyn, 161 N.Y.S. 29. The power to authorize loans from the Reconstruction Finance Corporation is referred to in at least four unreported cases, one from Iowa involving a superintendent of banks, Riches v. Hadlock, et al., (Utah) decided April 30, 1932; L. S. Blades, Jr. v. Gurney P. Hood, Commissioner of Banks, et al., decided June 15th, 1932, by the North Carolina Supreme Court, unreported. The Supreme Court of Washington on August 17, 1932, (unreported) sustained the authority under a broad and reasonable interpretation of the statute giving the liquidating agent power to do all things necessary to preserve the assets and business of an insolvent bank subject to the general rule that the court has control and supervision of the acts of such agent. We believe the order should be granted, moreover, the examiner as liquidating agent, replace the receiver previously provided for, and he exercises substantially the same powers. It is submitted that the alternative writ heretofore entered, should be dissolved.

RINER, Justice. KIMBALL, C. J., and BLUME, J., concur.

OPINION

RINER, Justice.

This is an original proceeding commenced in this court by the plaintiff, seeking the issuance of a writ of prohibition commanding the District Court of the Second Judicial District of Wyoming, within and for the County of Albany, and V. J. Tidball, Judge thereof, to refrain from granting an order authorizing and directing John A. Reed, State Examiner, in charge of liquidation of First State Bank of Laramie, an insolvent corporation, to apply for, and said Examiner to desist from further steps to procure, a loan in the sum of not to exceed $ 150,000 from the Reconstruction Finance Corporation, the funds derived from such loan to be distributed to depositors and creditors of the insolvent bank. Upon presentation of the petition, an alternative writ was issued and the defendants filed their answer to which plaintiff has demurred on the ground that it was insufficient in law on its face to constitute a defense in favor of the defendants, as against plaintiff's petition. Upon the issues thus raised, the cause has been submitted for determination.

The allegations of plaintiff's petition, summarized, are to the following effect: After stating generally that the defendants are proceeding and are about to proceed in excess of their lawful jurisdiction in the matter hereinafter more particularly described and, after setting out in paragraph number "I" the official character of the personal defendants and that the First State Bank of Laramie is and was, during the times mentioned in the petition, a Wyoming corporation engaged in the business of banking, it is alleged in paragraph "II" that the State Examiner, on account of the insolvency of the bank, on April 27, 1932,...