Tagawa v. Karimoto

• Decision Date: 28 August 1958
• Docket Number: NO. 4023.,4023.
• Citation: 43 Haw. 1
• Parties: MITSUO TAGAWA, EITA SATO, KAICHI IKEDA, TOMITARO IIDA, DEPOSITOR-CREDITOR-CLAIMANTS OF THE SUMITOMO BANK OF HAWAII v. CLARENCE K. KARIMOTO, SUCCESSOR TRUSTEE FOR CREDITORS AND SHAREHOLDERS OF SUMITOMO BANK OF HAWAII IN DISSOLUTION, AND WILLIAM P. ROGERS, ATTORNEY GENERAL OF THE UNITED STATES AS SUCCESSOR TO THE ALIEN PROPERTY CUSTODIAN.
• Court: Hawaii Supreme Court

43 Haw. 1

MITSUO TAGAWA, EITA SATO, KAICHI IKEDA, TOMITARO IIDA, DEPOSITOR-CREDITOR-CLAIMANTS OF THE SUMITOMO BANK OF HAWAII

v.CLARENCE K. KARIMOTO, SUCCESSOR TRUSTEE FOR CREDITORS AND SHAREHOLDERS OF SUMITOMO BANK OF HAWAII IN DISSOLUTION, AND WILLIAM P. ROGERS, ATTORNEY GENERAL OF THE UNITED STATES AS SUCCESSOR TO THE ALIEN PROPERTY CUSTODIAN.

NO. 4023.

Supreme Court of the Territory of Hawai‘i.

Argued July 2, 1958.

Decided August 28, 1958.

APPEAL FROM CIRCUIT COURT FIRST CIRCUIT, HON. ALBERT M. FELIX, JUDGE.

Syllabus by the Court

When alien depositors whose accounts are subject to controls of the Trading with the Enemy Act but licensed at the inception of receivership although “blocked” during receivership held they were entitled to interest at the legal rate since their claims were mature and unconditional at the inception of receivership and there was a sufficient surplus after payment of all creditors' claims.

Matured and “unblocked” claims against a bank at the inception of receivership bear interest at the legal rate although they may be “blocked” (i.e. subject to freezing controls of the Trading with the Enemy Act) during the period of receivership.

When a bank is placed in receivership, it is immediately in default of its obligations and, accordingly, when there is a sufficient surplus remaining after payment of all claims, it must pay interest to its depositors and other creditors for the period from suspension of operations until payment of principal at the legal rate provided in section 191-1, Revised Laws of Hawaii 1955.

Depositors, subject to freezing controls of the Trading with the Enemy Act, cannot demand payment or transfer their assets on deposit with a bank unless licensed or otherwise authorized by the Secretary of the Treasury.

Depositors and creditors are entitled to compensation (not damages) for the delay in making reparation of their claims after the bank has closed its doors.

Where money is deposited in a bank, it constitutes a loan to the bank of the money deposited subject to the undertaking by the bank to repay the same in money to the depositor, his assigns or legal representatives, upon demand conformable to the contract of deposit in respect to time of repayment and amount. Such deposit constitutes “money lent” to the bank within the meaning of that term as employed in the Revised Laws of Hawaii 1955, section 191-1. Upon receivership, interest, as an incident to such deposit, accrues at the legal rate provided by statute until discharged by payment or merged in judgment.

The above rule is the same whether the liquidation is accomplished by the voluntary act of the debtor or by the act of creditors or by persons vested with statutory liquidation authority.

The obligation of the bank to its creditors upon receivership is “transferred to the fund” and interest is payable out of the earnings of the fund. In other words, claims against a closed bank are in rem.

When there is a surplus of assets after paying all indebtedness, the right to interest is not affected by the fact that creditors have previously accepted payment of the principal of their claims. There is no distinction whether such payments of principal are made in installments or in whole.

The waiver of a right implies knowledge of that right or, in this case, knowledge that funds sufficient to pay interest at the legal rate was available.

In receivership, solvency or insolvency of the bank can only be determined by hindsight after all proper and allowable claims of creditors have been ascertained.

In receivership, interest is not part of the claim for the purpose of ascertaining solvency of the bank.

Doctrine of collateral estoppel by judgment not applicable where prime issue before the court was not raised nor decided in the prior case or cases.

Irwin A. Seibel, Deputy Attorney General of the United States ( Dallas S. Townsend, Assistant Attorney General, Director, Office Alien Property; Louis B. Blissard, United States Attorney for the District of Hawaii; Charles R. Wichman, Assistant United States Attorney, Honolulu, T. H.; George B. Searls, Marbeth A. Miller,Attorneys, Department of Justice, Washington, D. C., with him on the briefs [Mr. Wichman not on reply brief]), for the Attorney General of the United States, defendants-appellants.

Shiro Kashiwa ( Genro Kashiwa with him on the brief) for plaintiffs-appellees.

RICE, C. J., STAINBACK, J., AND CIRCUIT JUDGE WIRTZ IN PLACE OF MARUMOTO, J., DISQUALIFIED.

OPINION OF THE COURT BY CIRCUIT JUDGE WIRTZ.

This is an appeal from a judgment by the circuit court, first circuit, Territory of Hawaii, entered on cross-motions for summary judgment, allowing compensatory interest on bank accounts which were owned by persons subject to the foreign funds freezing controls imposed by Executive Order No. 8389, as amended (6 Fed. Reg. 2897, June 17, 1941).

The facts are not in dispute.

This is a class action brought by plaintiffs-appellees on behalf of themselves and others who were residents of Hawaii and citizens of Japan during the period from December 7, 1941 to November 28, 1942, hereinafter sometimes referred to as the “interest period.” On and before December 7, 1941, they were depositors of the Sumitomo Bank of Hawaii, hereinafter referred to as “the Bank” or “Sumitomo,” a corporation organized under the laws of the Territory of Hawaii, engaged in general banking business in Honolulu. Plaintiffs-appellees sought to recover six percent interest on their accounts in the Bank while subject to the freezing controls imposed by Executive Order No. 8389, as amended, supra, during the interest period (Stip. Exhibit 1, Rec. Vol. I, pp. 69-87). Defendant-appellant, William P. Rogers, Attorney General of the United States, as successor to the Alien Property Custodian, is, by virtue of Vesting Order No. 1499 (8 Fed. Reg. 9244), the holder of 98.5 percent of the stock of the Bank. (By order dated February 20, 1958, William P. Rogers, the present Attorney General of the United States, was substituted as defendant-appellant in place of Herbert Brownell, Jr., former Attorney General of the United States and such on the date these proceedings were instituted).

Under the authority of section 5(b) of the Trading with the Enemy Act, 40 Stat. 411, as amended, 50 U.S.C. App. Sec. 1, et seq., hereafter referred to as “the Act,” the President of the United States issued, on April 10, 1940, Executive Order No. 8389 (5 Fed. Reg. 1400, April 12, 1940) prohibiting certain financial transactions, including “all payments by or to any banking institution within the United States” by a foreign national or involving property in which a foreign national has an interest, unless licensed or otherwise authorized by the Secretary of the Treasury (Stip. 3, Rec. Vol. I, pp. 69-87).

Executive Order No. 8389, as amended by Executive Order No. 8785 (6 Fed. Reg. 2897, June 17, 1941) and Executive Order No. 8832 (6 Fed. Reg. 3715, July 29, 1941), on July 26, 1941 extended the controls set forth in Executive Order No. 8389 to nationals of Japan, among others.

As citizens of Japan, plaintiffs-appellees were “foreign nationals” within Executive Order No. 8389, as amended (Stip. 50, Rec. Vol. I, pp. 69-87). Accordingly, their accounts in the Bank were blocked. In addition, the Bank was itself blocked, as 98.5 percent of its outstanding stock was owned by nationals of Japan (Stip. 1 and 4, Rec. Vol. I, pp. 69-87). However, the Secretary of the Treasury, by General License No. 66 (6 Fed. Reg. 3726, July 29, 1941), permitted the Bank to operate as a generally licensed national. He also issued General License No. 68 (6 Fed. Reg. 3726, July 29, 1941) whereby all nationals of Japan “residing only in the United States at all times on and since June 16, 1940,” were licensed as generally licensed nationals (Stip. 5a and 5b, and Stip. Exhibit 1 (b), Rec. Vol. I, pp. 69-87).

On December 7, 1941, the Secretary of the Treasury issued Public Circular No. 8 (6 Fed. Reg. 6304, December 9, 1941) which revoked all special and general licenses previously issued to Japanese nationals, including the afore-mentioned General License Nos. 66 and 68 (Stip. 8, Rec. Vol. I, pp. 69-87). On the same day, agents of Foreign Funds Control of the United States Treasury Department took physical custody of all of the cash and other assets of Sumitomo together with all of its books and records. Sumitomo ceased operations (Stip. 9, Rec. Vol. I, pp. 69-87).

Thereafter a series of general licenses were issued which permitted Japanese nationals who were residents of Hawaii to carry out certain transactions. Said general licenses permitted withdrawals for living expenses and other purposes.

On January 13, 1942, the Secretary of the Treasury authorized the Governor of Hawaii to liquidate Sumitomo. Pursuant to this authorization, and the authority of section 5(b) of the Act which had been delegated to him by the Secretary of the Treasury, the Governor made an order declaring Sumitomo to have been in liquidation since December 7, 1941, appointed a receiver, and ordered said liquidation to continue until completed (Stip. 14 to 17, inclusive; Stip. Exhibits 8 to 14, inclusive, Rec. Vol. I, pp. 69-87). The receiver immediately took custody of all assets of Sumitomo (Stip. 18, Rec. Vol. I, pp. 69-87), and proceeded with its liquidation under authority of General License H-11.

On April 16, 1942, the Foreign Funds Control, Office of the Governor of Hawaii, indicated that it would be satisfactory if the receiver followed a procedure whereby all claims against Sumitomo under $100 would be paid without regard to citizenship or blocked status of the claimant, and all claims of blocked nationals of $100 or more be paid into blocked accounts in domestic banks. (Stip. 20; Exhibits 16 and 17, Rec. Vol. I, pp. 69-87). Thereafter, on October 16, 1942, the Governor of Hawaii issued General License H-15, authorizing payment of the claims of creditors including accounts...