State ex rel. Strain v. Wells

• Decision Date: 27 November 1923
• Docket Number: Case Number: 14354
• Citation: 98 Okla. 169,223 P. 694,1923 OK 1054
• Parties: STATE ex rel. STRAIN, Bank Commissioner, v. WELLS, District Judge, et al.
• Court: Oklahoma Supreme Court

1923 OK 1054

223 P. 694

98 Okla. 169

STATE ex rel. STRAIN, Bank Commissioner, v. WELLS, District Judge, et al.

Case Number: 14354

Supreme Court of Oklahoma

Decided: November 27, 1923

Syllabus

¶0 1. Banks and Banking -- Assets of Failed Bank--Status of Mortgaged Real Estate.

When the state bank commissioner takes over the assets of an insolvent state bank, and the assets of such bank include real property upon which there is a valid and subsisting mortgage lien duly recorded as provided by law, which mortgage and the notes secured thereby were executed by the holder of the legal title, and such legal title was thereafter conveyed to the bank, which bank became insolvent and was taken over by the bank commissioner, held, the bank commissioner took the property subject to all the prior rights of the holder of the notes and mortgage.

2. Same--Right of Mortgagee to Receiver.

Section 4979, Rev. Laws 1910, provides that a receiver may be appointed by the courts of the state, "in an action by a mortgagee for the foreclosure of his mortgage and sale of the mortgaged property, where it appears that the mortgaged property is in danger of being lost, removed or materially injured, or that the condition of the mortgage has not been performed, and that the property is probably insufficient to discharge the mortgage debt." And this section applies with equal force to the state bank commissioner who has taken the real property of an insolvent bank as to the bank, had the bank remained in a solvent condition, and an action by the mortgagee against the original mortgagor, and the state bank commissioner for the appointment of a receiver to collect rents, and from the proceeds to pay taxes, interest, and insurance for the protection of the mortgagee's interests, is not a suit against the state; the state having no pecuniary interest therein superior to the mortgagee.

Geo. F. Short, Atty. Gen., M. W. McKenzie, Asst. Atty. Gen., J. T. McIntosh, and Lon Morris, for complainant.

J. W. Brooks and Stevens & Cline, for respondents.

RUTH, C.

¶1 This is an original application for a writ of prohibition filed by complainants against the respondents by which it is sought to prevent the district court for the Sixteenth judicial district from appointing a receiver to take charge of and collect rents of a certain building in the city of Walters, Cotton county, Okla., a portion of which building has heretofore been occupied by the Oklahoma State Bank of Walters, Okla. The petition of the complainants alleges substantially as follows:

That one J. A. Wiley filed his petition in the above-named district court against J. A. Bonds and Eugenie Bonds, his wife, Joe Strain, successor in office to Roy Walcott as state bank commissioner of the state of Oklahoma, Oklahoma State Bank of Walters, Okla., a corporation organized under the laws of the state of Oklahoma, for profit, B. S. Coleman, Ida B. Coleman, his wife, R. Peoples, Libbie Gordon, W. L. Brooks, and Joe Strain, alleging that J. A. Bonds executed certain promissory notes aggregating $ 55,000 to B. S. Coleman, and as security for the payment thereof Bonds executed at the same time a certain mortgage on lands and the building thereon, as set out in the petition; that the mortgage was in the usual form with the usual defeasance clause, and provides:

"In case of default in any of the covenants hereof, the rents and profits of said premises are pledged to the holder hereof [the notes] as additional collateral security for the payment of the moneys herein mentioned, and the holder is entitled to the possession thereof by receiver or otherwise."

¶2 The petition further alleges the mortgage provides for payment of taxes, insurance, and interest, but that no insurance is being carried; that taxes and interest are in default; that the mortgage was assigned to Wiley; that defendants have taken possession of the premises, and are collecting rents, approximating $ 600 per month, and are paying no rent for the banking room used by them. Plaintiff further alleges that Joe Strain, bank commissioner of the state of Oklahoma, is denying the right of the plaintiff to foreclose his mortgage, on the pretense that the mortgaged property is assets of the bank, and that Joe Strain, bank commissioner, and W. L. Brooks, liquidating officer for such bank, are state officers; that the bank became insolvent and was taken over by the banking commissioner long after the execution of the notes and mortgage; that the act of the defendants abridges plaintiff's privileges and immunities as a citizen of the United States, in that it is in violation of the Constitution of the United States, by impairing the obligation of contracts, and deprives him of his property without due process of law under the Fourteenth Amendment to the Constitution of the United States, and under the Constitution of the state of Oklahoma. The plaintiff alleges the property will probably be insufficient to pay the principal, interest, taxes, and costs of foreclosure, and prays for the appointment of a receiver to take charge and possession of the premises; to control, rent, and collect rents; to make repairs and pay taxes and insurance: and for foreclosure in the manner authorized by law. Complainants, after setting forth plaintiff's petition in the district court in detail, alleged they appeared specifically and moved to dismiss "on the ground and for the reason that said petition and suit was in fact a suit against the state of Oklahoma," and the district court had no jurisdiction, as the plaintiff had never obtained permission of the state to sue.

¶3 The question presented to this court by the application for the writ of prohibition is: Is this a suit against the state? If it is, there can be no question about the immunity of the state from suits without the state's consent, and the district court would be without jurisdiction. This question has been so definitely settled that citation of authorities is unnecessary. Nor will it serve any useful purpose to set forth the legal history of the creation of the state banking board or the duties of the bank commissioner under our statutes as the same have been set forth and ably discussed in opinions by this court. Commerce Trust Co. v. State, 59 Okla. 14, 157 P. 717: Ward v. Okla. State of Atoka, 51 Okla. 193, 151 P. 852; Lankford v. Schroeder, 47 Okla. 279, 147 P. 1049, L. R. A. 1915F, 623; Lankford, State Bank Commr., v. Okla. Eng. and Ptg. Co., 35 Okla. 404, 130 P. 278; Bailey v. State, 72 Okla. 203, 179 P. 615; State ex rel. Short v. Norman, 86 Okla. 36, 206 P. 522; First State Bank of Okla. City v. Lee, 65 Okla. 280, 166 P. 186, L. R. A. 1918B, 609; Briscoe v. Hamer et al., 50 Okla. 281, 150 P. 1101. The statutes of this state relating to the duties and powers of the bank commissioner necessary to be set forth herein, are as follows:

Section 4133, Comp. Stat. 1921. "Any bank doing business under this chapter may place its affairs and assets under the control of the bank commissioner by posting a notice on its front door as follows: "This bank is in the hands of the state bank commissioner.' The posting of such notice, or the taking possession of any bank by the bank commissioner, shall be sufficient to place all of its assets and property of whatever nature in the possession of the bank commissioner, and shall operate as a bar to any attachment proceedings."

¶4 Section 4150, Session Laws of 1923, c. 137, provides:

"A bank may purchase, hold and convey real estate for the following purposes:

"First: Such as shall be necessary for the convenient transaction of its business, including its furniture and fixtures, but which shall not exceed one-third of the paid-in capital, except upon the written approval of the bank commissioner countersigned by the banking board;

"Second: Such as shall be conveyed to it in satisfaction of debts previously contracted in the course of its business;

"Third: Such as it shall purchase at sale under judgment, decree, or mortgage foreclosure, under securities held by it; but a bank shall not bid at any such sale, a larger amount than enough to satisfy its debts and costs. Real estate shall be conveyed under the corporate seal of the bank and the hands of its president or vice-president and cashier. No real estate acquired in the cases contemplated in the second and third sub-sections above shall be held for a longer time than five years. It must be sold at a private or public sale within thirty days thereafter."

¶5 It appears from the complainant's bill that a fee-simple title to the lands and building thereon set forth in the bill of complaint as vested in W. A. Bonds on December 1, 1920, and on that date W. A. Bonds and Eugenie Bonds, his wife, executed the notes and mortgage referred to, and the holder of the notes and mortgage assigned the same to J. A. Wiley and others for a valuable consideration, and the bank was taken over by the bank commissioner on March 10, 1922, and upon investigation an unrecorded deed was found in the vaults of the bank, wherein W. A. Bonds and Eugenie Bonds had conveyed the legal title to the property to the bank, and upon the strength thereof the bank commissioner rests his claim to possession of the premises to the exclusion of the jurisdiction of the district court to appoint a receiver or entertain the plaintiff's action therein. All the parties hereto have signed a stipulation wherein it is agreed that W. A. Bonds, joined by his wife, executed the mortgage to Coleman, and the same was recorded on December 13, 1920, and the notes were left at the bank for sale; that J. A. Wiley had the abstract examined, and, upon receiving a favorable report, J. A. Wiley, Ida B. Coleman, Libbie Gordon, and R. Peoples purchased the notes, Wiley taking $ 20,000 worth of same; that all parties paid full face value for same in cash or its acceptable equivalent; that B. C. Coleman assigned these notes by indorsement "without recourse," and assigned the mortgage to...