State ex rel. Spillman v. Citizens' State Bank of Royal
| Decision Date | 11 April 1929 |
| Docket Number | No. 26774.,26774. |
| Parties | STATE EX REL. SPILLMAN, ATTY. GEN., v. CITIZENS' STATE BANK OF ROYAL (PUNTENAY ET AL., INTERVENERS). |
| Court | Nebraska Supreme Court |
The provisions of section 7, art. 12, of the Constitution, are self-executing. No legislative act is necessary for their enforcement. The stockholders' liability thereby created is free from legislative interference.
The liability of stockholders created by section 7, art. 12, of the Constitution, is for the benefit of all creditors of the bank against all who are stockholders when the creditor's claim accrues. The Constitution gives no preference to any creditor or class of creditors. All are on an equal footing, limited by the constitutional provision that the stockholder is liable only to those creditors whose claims accrue while he is such stockholder.
Equitable subrogation was invented by equity courts for the purpose of doing full and complete justice between the parties.
Equitable subrogation will be applied by courts of equity in all cases demanded by the dictates of equity, good conscience and public policy. No inflexible rule for its application can be laid down, but it will be generally applied in that class of cases where one pays the debt of another in the performance of a legal duty imposed by contract or the rules of law.
Section 8033, Comp. St. 1922, Laws 1925, c. 30, § 12, construed, and held to give to depositors of a failed bank a lien only on the assets of the bank.
The constitutional double liability of stockholders of a state bank is not an asset of the bank, but is for the security of the bank's creditors.
The rule announced in the sixth paragraph of the syllabus of State v. Farmers' State Bank, 103 Neb. 194, 170 N. W. 901, is expressly disapproved.
Appeal from District Court, Antelope County; Chase and Stewart, Judges.
Receivership proceeding by the State, on the relation of O. S. Spillman, Attorney General, against the Citizens' State Bank of Royal, impleaded with C. B. Puntenay and others, wherein the American State Bank of Newcastle and others intervened. From a judgment distributing the fund arising from the enforcement of the constitutional double liability of stockholders, the interveners appeal, and C. B. Puntenay and others cross-appeal. Affirmed.Fred S. Berry, of Wayne, and Chas. H. Kelsey, of Norfolk, for Citizens' State Bank.
Webb Rice, of Norfolk, Ralph M. Kryger, of Neligh, Mapes, McDuffee & Mapes, of Norfolk, and Courtright, Sidner, Lee & Gunderson, of Fremont, for Puntenay & Beck.
C. M. Skiles and Perry, Van Pelt & Marti, all of Lincoln, for American State Bank & Guaranty Fund.
The problem for solution presented by this appeal is the proper distribution of a fund arising from the enforcement of the constitutional double liability of stockholders of an insolvent state bank.
Citizens' State Bank of Royal became insolvent, and in receivership proceedings its affairs have been wound up and its assets distributed. The claims of depositors have been paid from the depositors' guaranty fund. The assets of the bank were insufficient, by the amount of more than $19,000, to reimburse the guaranty fund. There are allowed and unpaid claims of general creditors in excess of $17,000. The receiver now has in his hands a fund arising from the enforcement of the double liability of stockholders, as provided by section 7, art. 12, of the Constitution of Nebraska. He filed a petition in the receivership proceedings, setting forth all the facts and praying for an order directing the proper distribution of the fund.
The department of trade and commerce of Nebraska and the guaranty fund commission of Nebraska (hereinafter referred to as the department and the commission, respectively) intervened and set up the facts relative to the payment of claims of depositors from the guaranty fund, and that the fund in the hands of the receiver was insufficient to fully reimburse the guaranty fund, and prayed that the court decree that the department, for the benefit of the guaranty fund, have a first lien and claim upon all funds in the hands of the receiver, realized from the collection of liability of stockholders of the bank, and that the general creditors have no right or interest therein.
American State Bank of Newcastle, Nebraska, also intervened, setting forth that it was a contributor to the guaranty fund, and joined in the prayer of the petition of the department and the commission. General creditors of the failed bank also intervened and set forth the facts of the allowance of their claims; that they were unpaid and in amounts exceeding the fund in the hands of the receiver, and praying that said fund be distributed pro rata among the general creditors, and that the department and the commission, representing the depositors' guaranty fund, be excluded from any participation in such distribution. No question is raised as to when any of the claims accrued.
All of the facts were stipulated. The trial court found and determined that the fund in the hands of the receiver was for the benefit of all the unpaid creditors of the bank; that the department and the commission, representing the depositors' guaranty fund, were, to the extent that the fund had not been reimbursed, subrogated to the rights of depositors and were entitled to share pro rata with the general creditors in the distribution of the fund. The department, the commission and the American State Bank have appealed, and the general creditors have filed a cross-appeal.
The fund, in question, in possession of the receiver is about $7,000, and is insufficient to either fully reimburse the guaranty fund or pay in full the allowed claims of general creditors. If either is entitled to a preference, then nothing remains for the other. The appellants base their claim to a preference on sections 8033 and 8035, Comp. St. 1922, and cross-appellants base their claim to preference on section 7, art. 12, of the Constitution.
The constitutional provision, so far as applicable to this case, is as follows: “Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors over and above the amount of stock by him held to an amount equal to his respective stock or shares so held, for all its liabilities accruing while he remains such stockholder,” etc. Const. art. 12, § 7.
Section 8033, Comp. St. 1922, section 12, c. 30, Laws 1925 (), so far as applicable, is as follows:
Section 8035, Comp. St. 1922, so far as applicable, is as follows: “To the extent of the amount paid from said guaranty fund to satisfy the claims of creditors, the department of trade and commerce for the use and benefit of said fund, shall be subrogated to all the right of the creditors thus paid, to participate in the assets of such bank and the same shall be enforced and collected by the receiver.”
[1] It has been judicially determined that section 7, art. 12, of the Constitution, is self-executing; that no act of the Legislature is necessary for the enforcement of its provisions, and that the liability thereby created is free from legislative interference.
In Bodie v. Pollock, 110 Neb. 844, 195 N. W. 457, it was held: “Sections 4 and 7, art. 12, of the Constitution, are self-executing when considered together, as they have been and should be; and, so considered, they form a complete constitutional rule to the effect that, while stockholders...
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