State, ex rel. Sorensen v. Farmers State Bank of Polk
| Decision Date | 17 July 1931 |
| Docket Number | 27377 |
| Parties | STATE, EX REL. C. A. SORENSEN, ATTORNEY GENERAL, v. FARMERS STATE BANK OF POLK, APPELLANT: LEWIS S. LOOMER, INTERVENER, APPELLEE |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Polk county: HARRY D. LANDIS JUDGE. Affirmed.
AFFIRMED.
Syllabus by the Court.
Trust funds, traced by the beneficiary into the general mass of assets in control of the receiver of an insolvent state bank held payable in full out of such assets in preference to claims of general depositors. State v. Farmers' State Bank, 121 Neb. page ___, 237 N.W. 857, followed.
Appeal from District Court, Polk County; Landis, Judge.
Proceeding by the State, on the relation of C. A. Sorensen, Attorney General, to wind up the affairs of the Farmers' State Bank of Polk, in which Lewis S. Loomer intervened. Judgment for intervener, and the bank's receiver appeals.
Affirmed.
C. M. Skiles and I. D. Beynon, for appellant.
H. G. Wellensiek, contra.
In a proceeding to wind up the affairs of the Farmers State Bank, an insolvent banking corporation, Lewis S. Loomer intervened and presented a petition for the allowance of $ 3,350 as a preferred claim payable in full out of the general mass of assets in control of the receiver. The answer to the petition of intervener was a general denial. A trial of the issues resulted in a judgment granting intervener the relief prayed. The receiver appealed to the supreme court.
The decision is controlled by the opinion in State v. Farmers State Bank, ante, p. 532.
AFFIRMED.
DISSENT BY: EBERLY
To the application of the principle announced by this court in State v. Farmers State Bank, ante, p. 532, as controlling in the two companion cases of the same title, one wherein Freeman E. Runquist et al. are interveners, and one in which Lewis S. Loomer is intervener, we again respectfully dissent.
These are companion cases. The facts in the Runquist case are so interwoven with the case first referred to as to present identical questions of both law and fact. The Loomer case involves the same general considerations. But, in addition to general propositions common to the three cases, the Loomer case involves important matters peculiar to itself.
Each of these cases is concerned with the proper administration of our state bank act, and the true effect of the decisions announced by the majority of the court, to which we have heretofore dissented, as well as the decision in the instant case, may only be fairly measured by the express terms of banking legislation in the light of the public policy which that controlling enactment evidences and the course of events which have occurred both before and since its enactment. The statutory terms are alike peremptory to courts of equity as well as law. In this dissent we confine our comments in the main to the Loomer case.
Originally adopted by the legislature of 1909 (Laws 1909, ch. 10), "For the regulation, supervision and control of the business of banking" and providing penalties, the Nebraska state bank act marked a distinctive departure from what had theretofore been the established policy of the state. Though the original act has been the subject of numerous important amendments, from time to time, so far as involved in this case its fundamental public policy remains, essentially unchanged. This legislation was clearly the result of social and economic conditions and developments which furnished a legislative reason for the state's intervention in behalf of the depositor class.
It will be remembered that state banking institutions existing at the time of the original adoption of the act under consideration here, as elsewhere, had flourished and grown because of certain indispensable services they performed in the business world. These services involved the function of the deposit, the exchange, the loan, and to a limited degree the fiduciary or trust relation. This business was generally recognized as quasi-public in its nature, and that the public good was necessarily involved in its successful operation. Noble State Bank v. Haskell, 219 U.S. 104, 55 L.Ed. 112, 31 S.Ct. 186; Shallenberger v. First State Bank, 219 U.S. 114, 55 L.Ed. 117, 31 S.Ct. 189.
So, also, it was fully appreciated that the function of the deposit was then, and ever since has continued to be, first and preeminent in importance, because it prepares the basis for all other operations carried on by the modern bank. It is indeed a truism that banking institutions can prosper, and properly serve their communities, only when they possess the confidence of depositors, who on this basis entrust them with their funds, and which in turn empower the banks to supply the legitimate loan demands of their customers. While the ratio of bank capital to bank deposits necessarily varies in each institution, we know, speaking generally, the latter is two, four, six and even twenty fold the former.
It is obvious that it was, and still is, of utmost importance that the depositors in the state banks of this state should have satisfactory assurance that at the appointed time of repayment their deposited funds would be forthcoming and their ultimate safety at all times be unquestioned. This indeed is the only possible basis that there could be certainty that, during recurring seasons of financial stress and uncertainty, crippling withdrawals would not be made, disastrous alike to customer and bank.
To accomplish these important purposes the act of 1909 provided in part: "The claims of depositors, for deposits, and the claims of holders of exchange, shall have priority over all other claims, except * * * and * * * shall at the time of the closing of a bank be a first lien on all the assets of the banking corporation from which they are due and thus under receivership, * * * and, upon proof thereof, they shall be paid immediately out of the available cash in the hands of the receiver." Laws 1909, ch. 10, sec. 52.
This act also created a guaranty fund, as an additional measure of safety for the depositors and holders of exchange, and to whose right of "first lien" this guaranty fund, upon payment by it of such claims, succeeded by virtue of statutory subrogation.
It is important, however, to note that this statute imposes no additional duties or responsibilities on either the depositors or holders of exchange. The depositor still had no voice in the selection of the officers and agents of the institution that carried his deposit. Its business transactions and business policies were not submitted to him for either information or approval. He possessed no powers of visitation or inspection or examination. He still was confined to doing business on the outside of the bank counter, and all transactions of his bank, save with himself, remained, as before, to him a sealed book.
In view of the relation of its depositors to the business involved, as well as the preponderating contributions necessarily required of the depositor class as a prerequisite to its successful and effective prosecution, the situation suggests that the basic principle on which the bank act is framed is clearly analogous to, if not wholly identical with, that which our artisans', laborers', mechanics', and materialmen's lien acts exemplify, and should receive the same favorable construction. At the very least, fairness would indicate that "It is presumed, as well on the ground of good faith as on the ground that the legislature would not do a vain thing, that it intends its acts and every part of them to be valid and capable of being carried into effect." 2 Lewis' Sutherland, Statutory Construction, sec. 497. Therefore in the enforcement of this act no presumption can be followed or indulged in which necessitates on the part of, or exacts from, the depositor that which the act by its terms does not afford him power to have.
So the state in its sovereign power has written the terms of this statute in the contracts of the depositors with its banks. Its faith stands pledged for the honest enforcement thereof, as fairly understood by common men when they become a party to its terms, and in honest reliance thereon part with the products of their toil; and no condition can justly be imposed to the prejudice of their rights but such as are contemplated by the law, or provided for therein.
And it cannot be gainsaid that bank customers, other than depositors and holders of exchange, employing its services, and securing the benefits of its functions, likewise well understood the situation and the mandate of the law--the preferences the law awarded the depositors. Their engagements with the institution were entered into with full knowledge that in the event of insolvency the assets of the bank would be first for the liquidation of demands other than their own. This is the fundamental basis of the entire business as carried on since the passage of this law by state banks. "Equity follows the law." The fundamental basis involved must be respected, complied with, and conformed to by equity when its powers are invoked to settle and adjust the complicated transactions of bank customers when insolvency has intervened.
These conclusions are in harmony with all our decisions, until the last. DEAN, J., in delivering the opinion of this court in Abie State Bank v. Weaver, 119 Neb. 153, 227 N.W 922, affirmed in 282 U.S. 765, says in part: "The paramount object, and clearly the legislative intention in the creation of the depositors' bank guaranty...
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State ex rel. Sorensen v. Farmers' State Bank of Polk, 27377.
...121 Neb. 547237 N.W. 862STATE EX REL. SORENSEN, ATTY. GEN.,v.FARMERS' STATE BANK OF POLK (LOOMER, INTERVENER).No. 27377.Supreme Court of Nebraska.July 17, Syllabus by the Court. Trust funds, traced by the beneficiary into the general mass of assets in control of the receiver of an insolvent......