State ex rel. Sorensen v. Nebraska State Bank of Bloomfield
| Decision Date | 24 February 1933 |
| Docket Number | No. 28606.,28606. |
| Citation | 124 Neb. 449,247 N.W. 31 |
| Parties | STATE EX REL. SORENSEN, ATTY. GEN., v. NEBRASKA STATE BANK OF BLOOMFIELD ET AL. |
| Court | Nebraska Supreme Court |
OPINION TEXT STARTS HERE
Syllabus by the Court.
1. Under the state Constitution (article 5, § 9), district courts have equity jurisdiction, and it may be exercised without legislative enactment.
2. In the exercise of its equity jurisdiction, the district court may supervise the administration of trusts.
3. The property and assets of a banking corporation, organized under the laws of this state, after it has ceased carrying on a banking business, are a trust fund for the payment of its debts. And where liquidation of an insolvent bank is conducted in a court of equity, pursuant to law, the proceeding is a judicial one.
4. In addition to a specific grant of equity jurisdiction to district courts, section 9, art. 5 of the state Constitution, provides that such courts shall have “such other jurisdiction as the legislature may provide.”
5. Under the Constitution, and statutory provisions enacted pursuant thereto, when, by decree of the district court, a bank is ordered to be liquidated, such decree shall place the assets of said bank in the hands of the appointed receiver, and liquidation shall thereafter be had under order of court in the manner provided by law.
6. In the course of such liquidation, an order of the court giving directions or instructions to a receiver in the performance of his trust will not be disturbed on review where no abuse of discretion is shown.
7. In the absence of statutory prohibitions, equitable remedies, when consistent with the fundamental principles of equity, should be so administered and employed as to give complete relief to each complaint, and sufficiently varied to answer every conceivable emergency.
8. The business of banking involves more than the creation of a private debtor and creditor relation, and embraces the establishment of a public instrumentality for the discharge of a public purpose for the promotion of public good.
9. The receipt of money by a bank, where the depositor can withdraw it when and in such sums as he pleases, although creating a debt, is, in a popular sense, the receipt of money for safe-keeping, which is the essence of the relation.
10. The imperative duty is imposed on courts of equity in administering the affairs of insolvent banks, to minimize as far as possible losses to the public and to the bank's creditors occasioned by its insolvency.
11. The court may authorize the receiver to borrow money from the Reconstruction Finance Corporation and to pledge the assets of his trust to secure the same, when it is made to appear that such action is for the best interests of the trust estate.
12. Such borrowing and pledging are not in violation of the rights of “claims of depositors, for deposits, not otherwise secured, and claims of holders of exchange” (Comp. St. 1929, § 8-1,102).
Appeal from District Court, Knox County; Stewart, Judge.
Proceedings by the State of Nebraska, on the relation of C. A. Sorensen, Attorney General, against the Nebraska State Bank of Bloomfield, wherein E. H. Luikart was appointed receiver of the defendant bank, and wherein the receiver made application for an order authorizing him to borrow money from the Reconstruction Finance Corporation and pledge the assets of the insolvent bank therefor, objected to by the Nebraska State Bank and by J. B. Gossard and others. From an order granting the application, the objectors appeal.
Order affirmed.
W. A. Meserve, of Creighton, and W. D. Funk, of Bloomfield, for appellants.
F. C. Radke and Barlow Nye, both of Lincoln, for appellee.
Heard before GOSS, C. J., and ROSE, DEAN, GOOD, EBERLY, DAY, and PAINE, JJ.
This is an appeal from an order of the district court for Knox county authorizing the receiver of the Nebraska State Bank of Bloomfield, Nebraska, to borrow money from the Reconstruction Finance Corporation, and for that purpose pledge assets of said bank in the manner and to the extent required by the terms of an act entitled “An act to provide emergency financing facilities for financial institutions, to aid in financing agriculture, commerce, and industry, and for other purposes,” adopted by the Congress of the United States on January 22, 1932. Reconstruction Finance Corporation Act of January 22, 1932. 47 U. S. St. at Large, ch. 8, p. 5 (15 USCA § 601 et seq.).
The fifth section of this act (15 USCA § 605) provides, in part, as follows:
“To aid in financing agriculture, commerce, and industry, * * * the corporation is authorized and empowered to make loans, upon such terms and conditions not inconsistent with this chapter as it may determine, to any bank, * * * organized under the laws of any State or of the United States, including loans secured by the assets of any bank * * * that is closed, or in process of liquidation to aid in the reorganization or liquidation of such banks, upon application of the receiver or liquidating agent of such bank and any receiver of any national bank is hereby authorized to contract for such loans and to pledge any assets of the bank for securing the same: Provided, That not more than $200,000,000 shall be used for the relief of banks * * * that are closed or in the process of liquidation.
All loans made under the foregoing provisions shall be fully and adequately secured. The corporation, under such conditions as it shall prescribe, may take over or provide for the administration and liquidation of any collateral accepted by it as security for such loans. Such loans may be made directly upon promissory notes or by way of discount or rediscount of obligations tendered for the purpose, or otherwise in such form and in such amount and at such interest or discount rates as the corporation may approve. * * *
Each such loan may be made for a period not exceeding three years, and the corporation may from time to time extend the time of payment of any such loan, through renewal, substitution of new obligations, or otherwise, but the time for such payment shall not be extended beyond five years from the date upon which such loan was made originally.”
It appears that the proceedings in the district court were had in a case entitled: State of Nebraska, ex rel. C. A. Sorensen, Attorney General, v. Nebraska State Bank, Bloomfield, Nebraska. In this proceeding there had been an adjudication of insolvency of the Bloomfield State Bank, and the appointment of E. H. Luikart as receiver therefor for the purpose of liquidation thereof had been made. In this cause E. H. Luikart, as receiver, on April 30, 1932, made application for an order authorizing him to borrow money from the Reconstruction Finance Corporation and pledge the assets of this insolvent bank therefor. The sufficiency of this application, as it now appears, is conceded. On May 3, 1932, the court entered an order fixing time and place of hearing of said application, and pursuant to this order notice thereof was duly given by publication and later approved by the district court. Thereafter the Nebraska State Bank, and ten others who were either directors of, stockholders in, depositor creditors,or general creditors of, this bank filed objections. A hearing thereon was had and evidence was introduced, in consideration of which the district court granted the application, from which order the objectors appeal.
The objectors do not now question the truth and sufficiency of facts to sustain the order appealed from, but rely solely on the alleged lack of power of the district court to authorize the proposed loan. It may be said that undisputed evidence in the record fairly establishes that this insolvent institution is located in an agricultural community in northeast Nebraska, and in addition the surrounding farm lands are rich and under ordinary conditions productive; that unusual conditions of the past two years, due to drouth, the presence of the grasshopper plague, current and prevailing prices for farm products, have made it impossible for the farmers and merchants residing in this town and vicinity to meet their financial obligations, and this is also true with special reference to the obligations which make up the assets of this institution; that farm lands in this vicinity are at present practically unsalable; that these conditions extend over eight counties adjoining Knox county, in which this insolvent institution is situated; that it would be to the best interests of the depositors, creditors and stockholders of said bank, and the community of Bloomfield in general, to defer the liquidation of the assets of said bank by extending time to its debtors and retaining the assets until new crops can be produced out of which such indebtedness may be paid; that this course would not only aid the receiver in the gradual liquidation of the insolvent bank, but would enable him to conserve its assets, and also secure for the bank's depositors the early return of the largest possible portion of their deposited funds, and thus assist and enable them to continue to carry on their usual and ordinary vocations of stock raising, stock feeding, and agriculture; that, therefore, the best interests of all concerned would be promoted by the requested authorization of the receiver to contract with the Reconstruction Finance Corporation for a loan of $50,000. Attached to this application are the forms of the proposed contract and a list of the assets proposed to be pledged.
On argument at the bar of this court, it was conceded that the best interests of the bank, its stockholders, its creditors, as well as the community in which it was situated, would be promoted by the authorization of the loan. However, on behalf of the objectors it was insisted: (1) That the trial court was wholly without power to authorize the receiver of a state bank to borrow money and pledge the assets of the insolvent institution therefor; (2) that under the terms of the Nebraska s...
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