Steele v. Randall

• Decision Date: 04 April 1927
• Docket Number: No. 7423.,7423.
• Parties: STEELE, County Treasurer, v. RANDALL et al.
• Court: U.S. Court of Appeals — Eighth Circuit

19 F.2d 40 (1927)

STEELE, County Treasurer, v. RANDALL et al.

No. 7423.

Circuit Court of Appeals, Eighth Circuit.

April 4, 1927.

James E. Brittain and Fred S. Berry, both of Wayne, Neb., for appellant.

H. E. Siman, of Winside, Neb., for appellees.

Before STONE and VAN VALKENBURGH, Circuit Judges, and SYMES, District Judge.

STONE, Circuit Judge.

From a decree declaring void the lien of a state court judgment on real estate belonging to a suspended national bank and being administered by a receiver appointed by the Comptroller, this appeal is brought.

The bank was insolvent and went into the control of an examiner on May 5, 1923. Thereafter, appellant, a depositor therein, brought suit, in a state court, against the bank and its sureties on a bond given to secure the payment of this deposit and secured a judgment. Under the state law, such judgment was a lien on the real estate of the judgment debtor. Thereafter, a receiver was appointed. The receiver filed this bill to remove the cloud of such judgment and claimed lien upon the real estate owned by the bank. The case was heard on the amended bill and answer thereto. The trial court made a finding "that the judgment obtained by the respondent against the First National Bank of Carroll, Nebraska, was obtained subsequent to the insolvency of the First National Bank of Carroll, Nebraska, and if allowed to stand would constitute a preference and would prevent a ratable distribution of the assets of said bank among the creditors thereof," and decreed "that said judgment constitutes neither lien against nor cloud upon any real estate then owned by said First National Bank of Carroll, Nebraska, and that said defendant and his successor and all persons claiming under them or either of them be forever enjoined from asserting any such lien or cloud on account of said judgment." From that decree this appeal is brought.

There is no dispute of fact which rules this case. Upon May 5, 1923, the board of directors of the bank passed a resolution as follows:

"Resolved, that owing to the continual withdrawal of deposits and the inability to take care of the items presented, it is hereby resolved that the board of directors deem it advisable to turn the bank over to W. N. Hackney, national bank examiner, pending a reorganization or a consolidation of the bank's affairs."

Upon the same day, the examiner took charge and remained in charge until appointment of the receiver on August 13, 1923, and the receiver is yet in charge engaged in winding up the affairs of the bank. On May 17, 1923 (while the examiner was in charge), appellant filed suit in the state court to recover deposits it had in the bank. June 30, 1923, a default judgment was entered for the amount of the deposits. The state statute (Comp. Stat. Neb. 1922, § 8986) declares a lien on lands of a judgment debtor from the day of judgment entered.

The controlling question here is whether a lien based on the above judgment is prevented by section 5242 of the Revised Statutes (Comp. St. § 9834), which is as follows:

"All transfers of the notes, bonds, bills of exchange, or other evidences of debt owing to any national banking association, or of deposits to its credit; all assignments of mortgages, sureties on real estate, or of judgments or decrees in its favor; all deposits of money, bullion, or other valuable thing for its use, or for the use of any of its shareholders or creditors; and all payments of money to either, made after the commission of an act of insolvency, or in contemplation thereof, made with a view to prevent the application of its assets in the manner prescribed by this chapter, or with a view to the preference of one creditor to another, except in payment of its circulating notes, shall be utterly null and void; and no attachment, injunction or execution, shall be issued against such association or its property before final judgment in any suit, action, or proceeding, in any state, county, or municipal court."

It is properly conceded that, if this statute is applicable, this lien must fail. First National Bank v. California, 262 U. S. 366, 369, 370, 43 S. Ct. 602, 67 L. Ed. 1030; Van Reed v. People's National Bank, 198 U. S. 554, 25 S. Ct. 775, 49 L. Ed. 1161; Davis v. Elmira Sav. Bank, 161 U. S. 275, 16 S. Ct. 502, 40 L. Ed. 700; Pacific National Bank v. Mixter, 124 U. S. 721, 8 S. Ct. 718, 31 L. Ed. 567; Cook County National Bank v. United States, 107 U. S. 445, 448, 2 S. Ct. 561, 27 L. Ed. 537.

Appellant contends the statute is not applicable because this judgment was secured before the receiver was appointed. It is well to have in mind the exact situation. On May 5, 1923, a resolution of the directors of the bank declared "the inability to take care of the items presented." On that day, the examiner took charge and remained in charge until the receiver was appointed who found it necessary to and is liquidating the bank. Clearly, the bank was insolvent at and from the above date. The circumstance that the above resolution was expressed to be for the purpose of reorganization or consolidation is immaterial. Insolvency is a condition unaffected by intentions or hopes of the persons affected. When the bank could not meet its obligations as they became due, it was insolvent. Federal Reserve Bank v. Idaho Grimm Alfalfa Seed Growers' Association, 8 F.(2d) 922, 927 (C. C. A. 9th). At that time, appellant was an ordinary creditor of the bank. Thereafter, and while the examiner was in charge, appellant filed and promptly secured its judgment. The evident purpose of this move was to convert itself into a lien creditor and thereby secure an advantage and preference over other general creditors. There can be no criticism of appellant for attempting to better its situation. The question is whether the statute permits it thus to do so.

National banks are federal instrumentalities (First National Bank v. California, 262 U. S. 366, 368, 43 S. Ct. 602, 67 L. Ed. 1030; Assaria State Bank v. Dolley, 219 U. S. 121, 31 S. Ct. 189, 55 L. Ed. 123), and the federal statutes (R. S. §§ 5234-5236 Comp. St. §§ 9821-9823; 19 Stat. 63, as amended by 27 Stat. 345, and 29 Stat. 600 Comp. St. § 9827) have provided the method and machinery to wind up the affairs of insolvent national banks and have stated the rights of creditors in such distribution. The statute (R. S. § 5236) requires a "ratable" distribution among creditors who have properly established their claims. One of the necessities to secure such ratable distribution was to prevent any ordinary creditor from procuring preferential rights. This was sought to be accomplished through section 5242. Clearly, that section prevents such preference through the voluntary action of the bank or its officials. The question here is whether this statute, when construed in the light of the purposes to be accomplished, covers such preferences secured by the creditor without the aid or connivance of the bank or its officials.

Appellant places much reliance upon the fact that its judgment was secured before the receiver was appointed by the comptroller. We think this is unimportant. The inaccurate use of the term "receiver" in the statute has led appellant to an erroneous conclusion. This statutory "receiver" is not in any sense such an official as a receiver...