Upham v. Bramwell

• Court: Oregon Supreme Court
• Writing for the Court: McCOURT, J.
• Citation: Upham v. Bramwell, 105 Or. 597, 210 P. 706 (Or. 1922)
• Decision Date: 21 November 1922
• Parties: UPHAM v. BRAMWELL, SUPERINTENDENT OF BANKS. STEELHAMMER v. BRAMWELL, SUPERINTENDENT OF BANKS. DOXSIE v. BRAMWELL, SUPERINTENDENT OF BANKS.

210 P. 706

105 Or. 597

UPHAM v. BRAMWELL, SUPERINTENDENT OF BANKS. STEELHAMMER v. BRAMWELL, SUPERINTENDENT OF BANKS. DOXSIE v. BRAMWELL, SUPERINTENDENT OF BANKS.

Supreme Court of Oregon

November 21, 1922

In Banc.

Appeal from Circuit Court, Multnomah County; Robert Tucker, Judge.

On petition for rehearing. Petition overruled, and former opinion modified and extended.

For former opinion, see 209 P. 100.

John W. Kaste, of Portland, for appellant.

John P Kavanaugh, of Portland (Bowerman & Kavanaugh, of Portland, on brief), for respondent.

J. Le Roy Smith, H. A. Robertson, Elmer R. Lundberg, Homer St Goehler, and Herbert R. Dewart, all of Portland, and Frank G Dick, of The Dalles, amici curiæ.

McCOURT J.

J. Le Roy Smith and four other attorneys of this court, designating themselves amici curiæ, but who represent a number of the commercial depositors of the insolvent bank, have presented a petition requesting reconsideration of the decision of this court, holding that the savings depositors are preferred creditors in the distribution of the savings assets of the insolvent state bank, and share ratably with commercial depositors in the distribution of all other assets and resources of the bank. 209 P. 100.

As all of the commercial depositors have a direct and substantial interest in the subject-matter of the litigation, careful consideration has been given to their petition. They contend (a) That the title of the act regulating state banks (chap. 138, Laws 1907) contains more than one subject, and that the subject embraced in the act respecting preferences or liens in favor of savings depositors in case of insolvency was not expressed in the title; this they say invalidated the act, and the subsequent acts amending the same, or at least rendered void the matter not expressed in the title; (b) that the statute construed to favor savings depositors, as above stated, authorized the taking of the property of commercial depositors without due process of law, in violation of the Fifth and Fourteenth Amendments to the federal Constitution; and (c) that subdivisions (e) and (h) of section 6220, Or. L., are repugnant to each other, and that therefore, under the established rules of construction, the former must give way to the latter, with the result that all of the assets of the insolvent bank, including savings assets, must be distributed equitably and ratably among the depositors.

All of the details contained in the title of the act (chapter 138, Laws 1907) relate to the same subject, and together constitute but one general subject, viz. regulation of state banks. The provision of the acts amending that statute, granting to savings depositors a preference in the distribution of the assets of an insolvent state bank, are germane to the subject expressed in the title of the act. The act conforms to constitutional requirements.

A legislative enactment having a substantial basis for the classification made therein, which gives preference to one class of creditors over another in the distribution of the assets of an insolvent debtor, is not opposed to any provision of the federal Constitution. No irreconcilable repugnancy exists between subdivisions (e) and (h) of section 6220, Or. L.; hence a case is not presented for the application of the rule of interpretation of statutes to the effect that, where different parts of the same statute are antagonistic and irreconcilable, the former must give way, and the latter prevail.

The foregoing conclusions are so obvious that they do not require extended discussion or citation of precedents for their support. The petition for rehearing is therefore denied. Other matters treated in the brief of the above-named petitioners will be considered in discussing questions raised by the petition of defendant.

Defendant has filed a petition in which he points out that administration of the assets of the insolvent bank, in accordance with the conclusions expressed in our former opinion, brings up for decision a number of questions of vital administrative importance not touched upon in the opinion. Defendant requests an expression of the court upon those questions.

The first inquiry presented by defendant's petition concerns the right of set-off. It is suggested that a limitation (not recognized in the original opinion) is placed upon the exercise of the equitable right of set-off by subdivision (c) of section 6220, Or. L., which commands, among other things, that all of the assets of the savings department "* * * shall be held solely for the repayment of the depositors in said department, and shall not be * * * used to pay any other obligation or liability of the bank, until after the payment in full of all depositors of said savings department." Mr. Frank G. Dick, an attorney of The Dalles, as amicus curiæ, has filed a petition devoted to the proposition that the right of set-off of the mutual debts of depositors and the insolvent bank in suit applies without limitation or modification, as held in the well-considered case of Williams v. Johnson, 50 Mont. 7, 144 P. 768, Ann. Cas. 1916D, 595. We will consider together the above-mentioned suggestion of defendant and the opposing contention of Mr. Dick.

The authorities cited in our former opinion establish the general rule that in the liquidation of insolvent banks, a demand of the bank against a depositor is regarded as a valuable asset in the hands of the liquidating officer only in so far as it is not offset by the debt of the bank to the depositor. The rule is well stated in the case of Yardley v. Clothier, 51 F. 506, 2 C. C. A. 349, 17 L. R. A. 462. The court in that case said:

"The rule of set-off is well understood to be that in all cases of mutual credit only the balance that shall appear to be due upon an adjudication of the mutual accounts should be paid, and it is that balance only which is the debt and is recoverable; that mutual obligations for the payment of money cancel each other; and that the death or insolvency of either party will make no difference in the adjustment of their mutual accounts. This rule may be modified by exceptional circumstances, or by statute, but is generally applied as here stated. The allowance of set-off has been frequently objected to in the distribution of insolvents' assets and in the settlement of decedents' estates for the reason that it would create preferences among creditors, but the controlling weight of authority has established the doctrine that, in the absence of express statutory prohibition, a set-off of a debt owing to the defendant will be allowed if it was due when the creditor's rights attached, whether the debt sued on was due at the same time or matured subsequently."

The right of equitable set-off may be modified, restricted, or prohibited by statute (Yardley v. Clothier, supra; Lippitt v. Thames Loan & Trust Co., 88 Conn. 185, 195, 90 A. 369), and, in the absence of statute, may be denied in exceptional cases, as where its allowance in favor of a party would work an injustice to others having equal equities. Nashville Trust Co. v. Nashville Fourth Nat. Bank, 91 Tenn. 336, 18 S.W. 822, 15 L. R. A. 710.

The case of Williams v. Johnson, above referred to, involved a bank which was organized and incorporated under the statutes of Montana. The decision of the court in that case clearly establishes that, upon the insolvency of a state bank, which prior to insolvency had been conducting a savings department, mutual debts between the bank and the savings depositors are subject to the rules governing the right of set-off. But the Montana statute does not impose any special duty or restriction upon a bank in respect to savings deposits and assets, a fact not taken into account in our former opinion.

Section 6220, Or. L. enjoins upon a bank maintaining a savings department the duty to keep all savings deposits received by it and all securities in which the same are invested, separate and apart from all other moneys and funds of the bank. The investment of savings deposits is expressly restricted to specifically described securities of recognized financial soundness and readily convertible into money. The statute further imposes the strict obligation to hold all such investments, funds, and assets solely for the repayment of savings depositors, and expressly prohibits the use of the same to pay any other obligation or liability of the bank until after the payment in full of all savings depositors. It would be difficult to select more positive and definite terms for preserving the savings assets of a bank conducting a savings department exclusively for the repayment of savings depositors. The obligations of the depository bank, created by the statute, were carried into, and became a part of, every contract of deposit in the savings department, and attached to all of...