State of Kansas v. Hayes

• Decision Date: 18 November 1932
• Docket Number: No. 660.,660.
• Citation: 62 F.2d 597
• Parties: STATE OF KANSAS ex rel. BOYNTON, Atty. Gen., et al. v. HAYES et al.
• Court: U.S. Court of Appeals — Tenth Circuit

62 F.2d 597 (1932)

STATE OF KANSAS ex rel. BOYNTON, Atty. Gen., et al. v. HAYES et al.

No. 660.

Circuit Court of Appeals, Tenth Circuit.

November 18, 1932.

John G. Egan, Asst. Atty. Gen., and Ralph T. O'Neil, of Topeka, Kan. (Roland Boynton, Atty. Gen., Dunkin Kimble, Asst. Atty. Gen., and J. D. M. Hamilton and Barton E. Griffith, both of Topeka, Kan., on the brief), for appellants.

Frank G. Drenning, of Topeka, Kan. (Edw. Rooney, of Topeka, Kan., on the brief), for appellees.

Before LEWIS and McDERMOTT, Circuit Judges, and POLLOCK, District Judge.

POLLOCK, District Judge.

The facts in this case necessary to decision are these:

An involuntary petition in bankruptcy was filed by creditors of an incorporated institution of Kansas called the International Mortgage Trust Company of Topeka. At the time this proceeding was instituted, the trust company was in the hands of appellant Johnson as receiver, appointed under a statute of the state which authorizes the bank commissioner of the state to appoint receivers for banks or trust companies of the state which have failed. On the filing of the petition in involuntary bankruptcy, the Attorney General of the state, in the name of the state, and the receiver Johnson, coming in by way of intervention, filed his motion to dismiss the proceeding for want of jurisdiction. These motions, on a hearing, were denied, and the movants have appealed to this court.

The grounds on which the motions to dismiss are predicated are that the trust company, attempted to be proceeded against in involuntary bankruptcy, is by virtue of the laws of this state and in actual fact in operation a banking corporation within the intent and meaning of the National Bankruptcy Act as amended June 25, 1910; and, being a banking corporation, it is not within, but is expressly excepted from, those corporate bodies which may be thrown into involuntary bankruptcy. The National Bankruptcy Act as it stood before the amendment of 1910 read as follows:

"(b) Any natural person, except a wage-earner or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any corporation engaged principally in manufacturing, trading, printing, publishing mining, or mercantile pursuits owing debts to the amount of one thousand dollars or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this Act. Private bankers, but not national banks or banks incorporated under State or Territorial laws, may be adjudged involuntary bankrupts." Section 4b, 30 Stat. 547.

By the amendment of June 25, 1910, 11 USCA, section 22, paragraph (b), reads as follows: "(b) Any natural person, except a wage earner or a person engaged chiefly in farming or the tillage of the soil, any unincorporated company, and any moneyed, business, or commercial corporation, except a municipal, railroad, insurance, or banking corporation, owing debts to the amount of $1,000 or over, may be adjudged an involuntary bankrupt upon default or an impartial trial, and shall be subject to the provisions and entitled to the benefits of this title."

The question presented on this appeal is this: What is the true construction to be placed upon the term "banking corporation" within the intent and meaning of the lawmaking power when that term was employed in the amendment to the Bankruptcy Act of 1910, as it now stands? That is to say, as that term was employed by the lawmaking power, is the trust company involved in this proceeding a banking corporation? If so, it is not subject to the proceeding brought against it, and the same should have been dismissed on the motions made. If, on the other hand, as by the petitioning creditors in bankruptcy asserted, it is a mere moneyed corporation, and not a banking corporation, it is subject to the operation of the Bankruptcy Act, and must be so held.

A statute of the state, section 9 — 138, R. S. 1923, defines doing a banking business as follows: "Any individual, firm or corporation who shall receive money on deposit, whether on certificates or subject to check, or shall receive money for which it issues its check, draft, bill of exchange or other evidence of indebtedness for which it charges a fee, shall be considered as doing a banking business, and shall be amenable to all the provisions of this act: Provided, That promissory notes issued for money received on deposit shall be held to be certificates of deposit for the purposes of this act."

Now the act as amended does not mention banks as the act did prior to amendment, as shown by the above quotation. That a trust company organized under the laws of this state may and for many years has done a banking business cannot be denied. The ninth subdivision of section 17 — 2002, R. S. Kansas for 1923, provides as follows: "Ninth. To receive deposits of money from any bank, savings bank, trust company, or from any public officer or board subject to check, or from any person, company, corporation or association upon certificates of deposit, and may allow interest on such deposits; to buy and sell foreign or domestic exchange, gold, silver, foreign coin, or bullion."

A part of section 17 — 2002 provides as follows: "* * * And executors, administrators, guardians, trustees, assignees, receivers, and all officers of any court, are authorized to deposit all funds and property which may come into their hands with any company incorporated under this act, and all such funds so deposited shall be subject to check."

That many trust companies organized under the laws of this state have done a very large banking business by receiving public funds on deposit subject to check, and the moneys of savings banks, and other banks, for many years past, is a matter of common knowledge, as shown by the record in this case. The trust company involved in this case had on deposit on demand in March of this year, subject to check, moneys of the state, the city of Topeka, and Shawnee county, in amount $491,704.75; and in bank deposits, savings bank deposits, etc., a total of a very large amount, which was deposited on checking account. In short, the very great amount of the business transacted by the trust company in this case was of that nature transacted by banking corporations, and all this banking business was authorized by the laws under which the trust company was incorporated and was doing business. Section 17 — 2013 of the act makes provision for the business of the trust company to be done under the supervision of the bank commissioner of the state. Also the act of the state under which the trust company was created provides the same penalties for failure to make reports, for refusals to permit an examination by the bank commissioner's office, as is prescribed by law for banks of the state.

Again, the Legislature of the state in 1931, before this proceeding was instituted, declared trust companies of the state to be under the operation of the banking laws of the state, as follows: "17 — 2015. Other Provisions of Banking Law Applicable. The provisions of the banking law relating to the impairment of capital and insolvency and shareholders' liability and the duty of the bank commissioner in such cases shall also apply to trust companies; and such companies shall pay the same fee for examinations by the bank commissioner as are paid by banks." R. S. 17 — 2015; Laws 1931, c. 152, § 1; Feb. 14; Rev. St. Supp. 17...