State v. Wibaux County Bank of Wibaux

• Decision Date: 16 July 1929
• Docket Number: 6293.
• Citation: 281 P. 341,85 Mont. 532
• Parties: STATE ex rel. v. WIBAUX COUNTY BANK OF WIBAUX. RANKIN In re MULLENDORE. MULLENDORE v. ÆTNA CASUALTY & SURETY CO. et al.
• Court: Montana Supreme Court

281 P. 341

85 Mont. 532

STATE ex rel. RANKIN v. WIBAUX COUNTY BANK OF WIBAUX.

In re MULLENDORE.

MULLENDORE v. ÆTNA CASUALTY & SURETY CO. et al.

No. 6293.

Supreme Court of Montana

July 16, 1929

As Amended October 18, 1929.

Appeal from District Court, Wibaux County; Frank P. Leiper, Judge.

Proceedings by the State, on the relation of Wellington D. Rankin against the Wibaux County Bank of Wibaux, in which Henry Mullendore was appointed as receiver to liquidate the affairs of the bank. On the petition of the receiver, opposed by the Ætna Casualty & Surety Company and the American Surety Company of New York, an order was made directing payment of a dividend on all claims filed and allowed against the bank and the surety companies appeal. Affirmed.

Loud & Leavitt, of Miles City, for respondent.

FORD J.

This is an appeal by Ætna Casualty & Surety Company and American Surety Company of New York from an order made on the 21st day of October, 1927, directing the receiver of the Wibaux County Bank to pay a dividend out of the stockholders' liability fund on all claims filed and approved against the defunct bank.

Henry Mullendore was appointed receiver of the insolvent bank in a proceeding brought by the Attorney General of the state against the Wibaux County Bank, and has since his appointment been liquidating affairs of the bank under the supervision and direction of the court.

The American Surety Company presented to the receiver a preferred claim against the bank in the sum of approximately $30,000 basing its claim of preference on the fact that it became subrogated to the rights of the United States, under section 3466, U.S. Revised Statutes (31 USCA § 191). The claim was allowed by the receiver and later approved by the court as a common claim, and the claim of preference disallowed. It also filed a preferred claim for the sum of approximately $4,500, which was duly allowed. The Ætna Casualty & Surety Company had a preferred claim of $6,500, based upon a judgment against the receiver.

Thereafter the receiver presented a petition to the court setting forth the claims against the bank, both common and preferred; that he had collected on account of the liability of stockholders a sufficient sum in amount to pay a dividend of 5 per cent. on all claims filed and allowed, and prayed an order requiring all persons interested to appear before the court and show cause why distribution should not be made. Upon this petition an order was made fixing the date for hearing, and requiring all persons interested to appear and show cause why the prayer of the petition should not be granted. It was further ordered that a copy be served on American Surety Company and Ætna Casualty & Surety Company, in the same manner as a summons in a civil action. Before the time for the hearing, the surety companies named filed a petition for the removal of the cause into the United States District Court, accompanied by the requisite bond. They likewise filed separate returns and answers to the order to show cause, asserting, in substance, that they were preferred creditors of the bank, and that they have a lien upon, and were entitled to, priority of payment out of the general and unpledged assets in the possession of the receiver, and as such preferred creditors they were entitled to preference in payment over other general creditors out of the moneys realized from the enforcement of stockholders' liability. The court ignored the petition for removal, and, after hearing, made the order complained of directing the payment of dividends substantially as prayed for.

Thereafter the American Surety Company filed the removal proceedings in the United States District Court with its bill of complaint setting forth the removal proceedings, the action of the court in disregarding such removal proceedings, and prayed for a decree enjoining the receiver from complying with the order directing the distribution of the bank assets. An order to show cause was issued, and, upon the hearing, an injunction was granted. From the decree, the receiver appealed to the Circuit Court of Appeals where the decree was reversed. Mullendore v. American Surety Co., 27 F. (2d) 572. Application for a writ of certiorari to the United States Circuit Court was denied by the Supreme Court. American Surety Co. v. Mullendore, 278 U.S. 653, 49 S.Ct. 178, 73 L.Ed. ---. Upon request of the surety companies, proceedings here were stayed pending determination of that appeal.

Counsel for the surety companies first contend that, by reason of the filing of their petition for removal to the United States District Court, the lower court was without jurisdiction to make and enter the order of October 21, 1927. With this contention we cannot agree.

The right of removal is purely statutory, and the case must come within the statute. Ph nix Ins. Co. v. Pechner, 95 U.S. 183, 24 L.Ed. 427; Great Northern Ry. Co. v. Alexander, 246 U.S. 276, 38 S.Ct. 237, 62 L.Ed. 713; Kentucky v. Powers, 201 U.S. 1, 26 S.Ct. 387, 50 L.Ed. 633, 5 Ann. Cas. 692. The court was not ousted of jurisdiction if the removal proceedings were not authorized (Ph nix Ins. Co. v. Pechner, supra; Johnson v. Wells Fargo & Co. [C. C.] 91 F. 1), and it was not bound to surrender its jurisdiction on the petition for removal unless a case was made which on the face of the record showed petitioners had a right to the transfer (Yulee v. Vose, 99 U.S. 545, 25 L.Ed. 355). As was said by the Supreme Court of the United States in the case of Stone v. South Carolina, 117 U.S. 430, 6 S.Ct. 799, 800, 29 L.Ed. 962: "His petition for removal when filed becomes a part of the record in the cause. It should state facts which, when taken in connection with such as already appear, entitle him to the transfer. If he fails in this, he has not, in law, shown to the court that it cannot 'proceed further with the suit.' Having once acquired jurisdiction, the court may proceed until it has been judicially informed that its power over the cause has been suspended." If the cause was not removable, or if a prima facie case was not shown by the record, then the lower court properly ignored the removal proceedings, and was acting within its authority in making the order complained of.

It only remains to consider whether on the facts disclosed it appeared that the proceedings were removed from the state court by the filing of the petition of the surety companies, and about that little need be said. Whether the United States court had jurisdiction of the proceedings was for the determination of that court, and, having passed upon the question adversely to the contention of counsel and determined that the cause was not removable (Mullendore v. American Surety Co., supra), we will not sit in review on the judgment of that court. Its determination of the question is final and conclusive.

It is next contended that the order for the distribution of the moneys collected on account of the liability of the stockholders is contrary to law. It is urged that the surety companies are entitled to have such funds disbursed to them to apply upon their preferred claims to the exclusion of the general claims.

Our statute relating to the liability of stockholders (section 6036, Rev. Codes 1921, as amended by chapter 9, Laws of 1923), in so far as applicable, provides: "The stockholders of every bank shall be severally and individually liable, equally and ratably, and not one for the other, for all contracts, debts, and engagements of such corporation, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. * * * The receiver is authorized and empowered to receive and receipt for any and all amounts due and collected from stockholders, and shall from time to time, under order of the court, distribute the amounts so collected without diminution to the creditors of the bank in this section enumerated."

While this act does not provide that the moneys thus collected shall be ratably distributed to all creditors, we think the equitable rule that "equality is equity" applies.

This act, as section 4012, Revised Codes of 1907 (in a slightly different form), was construed by this court in the case of Barth v. Pock, 51 Mont. 418, 155 P. 282, 285, where Mr. Justice Holloway, speaking for the court, said: "The liability is several and individual, created by statute in favor of all who are creditors at the date of the bank's failure. Under this statute, the fund collected from an assessment upon the stock is held in trust for a ratable distribution among all the creditors." And "the statutory double liability of a stockholder is peculiar to the law governing banking corporations-including therein trust companies. The creditor of a trading corporation must look to the corporation's assets for the discharge of his claim, but in a sense, the creditor of a banking corporation has double security. He may look to all the assets of the bank in the first instance, and, if they are not sufficient, he may then call upon the stockholders to contribute a fund which may equal the par value of the entire authorized capital. * * * It is a reserve, trust fund created for the benefit of creditors, and under our statute must be distributed ratably to all of them." The court read nothing into the statute, but announced a well-recognized equitable rule always applicable to the administration of insolvent estates-that "equity is equality."

Mr Pomeroy, in his work on Equity Jurisprudence, says: "Whenever several persons are all entitled to participate in a common fund, or are all creditors of a common debtor, equity will award a distribution of the fund, or a satisfaction of the claims, in accordance with the maxim, Equality is...