Wirtz v. Nestos

• Decision Date: 20 September 1924
• Citation: 200 N.W. 524,51 N.D. 603
• Parties: WIRTZ v. NESTOS, Governor, et al. (WATSON, Intervener).
• Court: North Dakota Supreme Court

51 N.D. 603

200 N.W. 524

WIRTZ

v.NESTOS, Governor, et al. (WATSON, Intervener).

Supreme Court of North Dakota.

Sept. 20, 1924.

Syllabus by the Court.

The Guaranty Fund Law of 1917 was enacted pursuant to the police power in the public interest and for the general welfare.

Under the pleadings and in the absence of a showing that the claims of the plaintiffs had been allowed by the state examiner, and that the facts pertaining thereto had been certified to the guaranty fund commission, as required by the Act of 1917, c. 126, it is held that no vested right or interest of the plaintiffs, as depositors in banks that closed after the Guaranty Act of 1917 went into effect, were disturbed by the Legislature when chapter 200, S. L. 1923, was enacted.

Although depositors, as plaintiffs contend, may, under the law of 1917, in some circumstances, have been entitled to payment in full out of the guaranty fund in the order in which banks closed, yet, since the state examiner, the plaintiff, and others similarly situated with him, had not taken the required steps to determine, liquidate, and certify claims to the guaranty fund commission, prior to the taking effect of the law of 1923, although the Security State Bank and the Havelock Bank closed in November, 1920, it was competent for the Legislature of 1923 to modify the plan of the original act, so as to authorize the guaranty fund commission, in its discretion, to prorate payments upon claims of depositors in the numerous banks that had closed when the Legislature convened, rather than to require payment in full to a few depositors, leaving the large majority to wait indefinitely.

Section 8175, C. L. 1913, does not authorize a suit against the guaranty fund commission or the state, for the reason that the situation presented in the record does not arise upon contract, express or implied.

The guaranty fund commission is but an agency created by the Legislature to execute a policy adopted by it in dealing with the problems arising out of the insolvency of banking corporations; the fund is created through compulsory assessments, and is used in the discharge of governmental functions; a suit against the commission, as to matters pertaining to the exercise of judgment by it, in acting upon claims against the guaranty fund, or as to the time and manner of paying such claims or dividends thereon, is, in effect, a suit against the state, since the state did not give consent in either the act of 1917 or of 1923 that it be sued, such suit cannot be maintained.

The assessment to create the guaranty fund is somewhat analogous to a special assessment, and must be referred to the sovereign power to levy a tax. The assessment is levied for a public purpose, and the fund is created through the exercise of the taxing power.

Whether the guaranty fund commission may use the fund temporarily to aid going banks or to salvage the assets of closed banks, for the benefit of the fund, is not involved or decided.

The commission, under the law of 1923, is required to determine whether claims presented are valid and legal claims against the guaranty fund; under that law the commission must exercise legal discretion and judgment in passing upon such claims; such discretion cannot be controlled or directed by the courts.

It is held that the rule that an official duty, not involving the exercise of discretion, may be enforced when performance thereof is arbitrarily refused, and the other branch of the same rule that, if a person will receive an injury, because an official is about to violate an official or legal duty, for which adequate compensation cannot be had at law, such conduct may be enjoined, have no application to the facts presented in the record. It is not held that depositors may in no case proceed against the guaranty fund commission or its officers. A depositor's constitutional rights of due process, equal protection of the law, and that the obligation of contracts shall not be impaired, are at all times open to vindication, if infringed by the commission, and he may doubtless have the relief to which a person in analogous cases may be entitled against fraudulent action or nonaction by the guaranty fund commission or its officers.

Bronson, C. J., dissenting.

Appeal from District Court, Burleigh County; Thomas H. Pugh, Judge.

Proceeding by A. J. Wirtz, in behalf of himself and all other depositors of the Security State Bank of New England, an insolvent banking corporation, against R. A. Nestos, Governor of the State of North Dakota, and others, constituting the Depositors' Guaranty Fund Commission, in which John Watson, a depositor in the Tolley State Bank of Tolley, an insolvent banking corporation, in behalf of himself and all other depositors thereof similarly situated, intervened. From an order sustaining a demurrer to the complaint, and overruling a demurrer to the answer, plaintiff appeals. Affirmed.

Charles Simon and Harvey Miller, both of New England, and Crawford & Burnett, of Dickinson, for appellant.

Divet, Holt, Frame & Thorp, of Fargo, for respondents.

Fisk, Murphy & Nash, of Minot, for interverner.

JOHNSON, J.

This is a proceeding in equity by the plaintiff in his own behalf and in behalf of all others similarly situated as depositors in banks that have become insolvent and have closed, against the depositors' guaranty fund commission, created pursuant to chapter 126, S. L. 1917, and chapter 200, S. L. 1923.

After alleging the membership of the guaranty fund commission and the insolvency and closing of the Security State Bank of New England on November 17, 1920, the plaintiff, in substance, alleges the following matters: That the guaranty fund commission was created to administer the Depositor's Guaranty Fund Law, with power to make rules and regulations, and with control of the fund collected for the purpose of paying depositors in insolvent banks; that, at the time when the Security State Bank of New England closed, the plaintiff had a depositin the bank of $8,059, and that he brings this action for himself and in behalf of all other depositors in that bank similarly situated, who have a common interest in the question and are too numerous to be brought in as parties plaintiff; that on the 17th of November, 1920, the said bank was declared insolvent, and a receiver was put in charge of its affairs, with the usual powers with respect to the managing of its assets; “that the plaintiff duly presented his claim as an unsecured depositor to the receiver of said bank for the amount of $8,059, the amount which he had on deposit at the time said bank was closed, which amount was duly allowed by said receiver as an unsecured deposit, and the same was certified to the depositors' guaranty fund commission for payment out of the funds collected by said commission, and then held for payment of said deposits by law;” that the commission refused and neglected to pay the amount of the deposit or to issue certificates of indebtedness against the depositors' guaranty fund in favor of the failed bank for the payment of the claim of this plaintiff and other depositors similarly situated, although the commission had sufficient funds on hand at that time to pay the same, and have, at all times since, had sufficient funds to pay the unsecured depositors in said bank; that there are approximately $200,000 of unsecured deposits in the bank “which have been duly allowed by the receiver and certified to the guaranty fund commission,” and that the commission has about $400,000 in the guaranty fund for the payment of unsecured depositors in the insolvent banks; “that the Security State Bank of New England, simultaneously with the Farmers' State Bank of Havelock were the first banks to be declared insolvent of the numerous banks now in the hands of receivers, and its unsecured depositors entitled to be paid in the order of the priority of such insolvency and entitled to be paid in full out of the funds now held by the guaranty fund commission for the payment of unsecured depositors in failed banks, and said claim of the plaintiff, together with the other depositors similarly situated, is prior and superior to the claims of all other unsecured depositors in the other insolvent banks now in the hands of receivers.”

Plaintiff further alleges that he has no other speedy and adequate remedy at law and prays for judgment as follows: (1) That the guaranty fund commission be ordered to pay to the receiver of the Security State Bank of New England the amount necessary to pay plaintiff's claim in full and also the claims of all other unsecured depositors similarly situated; (2) that, if the commission do not have sufficient funds on hand to pay all the unsecured depositors of the bank in full, it be directed to issue certificates of indebtedness in full against the guaranty fund, covering the claim of plaintiff and all other unsecured depositors similarly situated; (3) that the unsecured depositors of the Security State Bank of New England have a right prior and superior to the right of all other unsecured depositors in banks which became insolvent subsequent to the insolvency of the Security State Bank of New England; and (4) for such other relief as may seem just in the premises.

The answer is a voluminous document. It admits the membership of the guaranty fund commission as alleged in the complaint, except that since the 1st of July, 1923, the manager of the Bank of North Dakota displaced the state examiner as ex officio member It admits the corporate character of the Security State Bank of New England, and that it became insolvent, and was put in the hands of a receiver. The facts and matters alleged in the answer may be briefly stated as follows:

(1) That the guaranty fund commission is not subject to suit, especially as to matters of judgment or discretion in determining the liability of the guaranty fund.

(2) That the claims of plaintiff, and of all others similarly situated, were...