Opinion
No. 33928.
January 29, 1940.
1. BANKS AND BANKING.
A bank stockholders' liability is not a general asset of insolvent bank, but is special trust fund provided for benefit of all depositors and for them alone (Code 1930, sec. 3815).
2. STATUTES.
Special statutes governing operations of local governmental subdivision, or enacted for particular benefit of subdivision, are not displaced by general state-wide statutes, unless general statute, by express words or unmistakable implication, includes the local subdivision.
3. BANKS AND BANKING.
The special statute making bank stockholders liable for loss sustained by levee district depositing funds in bank created a special stockholders' liability in favor of levee district as against stockholders of levee depository bank, and not a liability in favor of all depositors (Laws 1908, chap. 97, sec. 3).
4. STIPULATIONS.
In proceeding involving distribution of funds in hands of receiver of bank in which funds of town and levee district were deposited, stipulation, that any preferences allowed town and district should be appointed pro rata in accordance with unsecured deposit balance due each, was insufficient to release any preference which district or town might have over the other, or to settle questions of (laws 1908, chap. 97, sec. 3; Code 1930, secs. 2914, 3815; Const. 1890, sec. 100).
5. LEVEES AND FLOOD CONTROL.
A levee board or town, if entitled to a preference in law over the other in respect to funds in hands of receiver of bank, could not release such preference in whole or in part in favor of the other (Const. 1890, sec. 100).
6. LEVEES AND FLOOD CONTROL.
Under constitutional provision that prohibition against remission of obligations of levee board or town did not prevent Legislature from providing for compromise of doubtful claims, "doubt" arises only upon unliquidated demands or upon doubtful facts and not on doubtful law (Const. 1890, sec. 100).
7. STIPULATIONS.
Decisions of questions of law must rest on judgment of court uninfluenced by admissions of parties or of counsel, but facts relative to particular case can be settled by agreement of parties thereto.
8. APPEAL AND ERROR.
Where facts before Supreme Court have not been developed sufficiently that Supreme Court can proceed to adjudication, duty of chancery court is to require full development of facts, and Supreme Court will remand that such may be done.
9. APPEAL AND ERROR.
The Supreme Court would not decide whether general statutory liquidator of insolvent bank could collect or sue for special stockholders' liability in favor of levee district, and whether district must show that it has resorted in its own name to enforce special stockholders' liability before it can participate in funds derived from stockholders under general statutes, but would remand case for further development of the facts, where record did not show whether district had taken any action against stockholders, and that district could not still collect from stockholders (Laws 1908, chap. 97, sec. 3; Code 1930, secs. 2914, 3815).
APPEAL from the chancery court of Leflore county; HON. R.E. JACKSON, Chancellor.
Brewer Sisson, of Clarksdale, for appellant, and cross-appellee, Board of Levee Commissioners for the Yazoo-Mississippi Delta.
The funds collected from various stockholders on account of their double liability should be paid over to the Board of Levee Commissioners for the Yazoo-Mississippi Delta.
Bd. of Levee Commissioners v. Powell, 109 Miss. 415, 69 So. 215.
It may be argued by the town that to uphold Section 3 of Chapter 97 of the Laws of 1908 would be to give an undue preference to the Levee Board. A similar argument was made in the case of Levee Board v. Powell, supra. The court answered by saying, "If it be said that the result of the present holding is to afford greater security for the levee funds for the state and county funds, we answer that the lawmakers gave us separate statutes for the state, county, and levee board, and with the wisdom of the law or the differences in the statute, as this court has time and again announced, we have nothing to do."
Unless it can be said that there is triple liability against the stockholders of the bank, it necessarily follows that the collection from the stockholders in the amount of $4129.39 must be paid over to the Levee Board. If these funds are not paid to the Levee Board, the statutory liability to the Levee Board of the stockholders making the payment to the receiver of the bank has not been satisfied.
If it should be held that the Levee Board is not entitled to funds collected from stockholders to exclusion of town of Itta Bena, then all funds collected from stockholders on account of their double liability should be paid over to the Levee Board and town in proportion to the amounts of their unpaid deposits.
Chap. 207, Laws of 1916; Sec. 3815, Code of 1930; Chap. 177, Laws of 1922; Sec. 2914, Code of 1930; Anderson v. Love, 169 Miss. 220, 153 So. 369.
The trial court was correct in holding that amounts claimed by special master and auditors "are not costs accrued in the liquidation of the First Savings Bank Trust Company."
Code of 1930, Secs. 443, 445.
O.L. Kimbrough, of Itta Bena, for appellant and cross-appellee, Town of Itta Bena.
This court, long before the enactment of Section 2914 of the present code, repeatedly held that public moneys were trust funds; and since the enactment of the above statute has reiterated that such would be the case without the benefit of the statute. It is manifest to us that the two statutes, Section 3815 creating the stockholder liability, and Section 2914 declaring public funds on deposit in banks to be trust funds, must be construed together. By so doing both statutes are given full force and effect.
It is the intention of the writer of this brief as follows: (1) Neither the special master nor the auditors can claim any compensation against Parker, the receiver of the First Savings Bank Trust Company, because neither has a claim which has been approved and allowed by the court below. (2) The court below is without authority to allow and approve such claims and make them charges against the assets in the hands of said receiver. (3) There being insufficient funds in the hands of the receiver of said bank to pay in full the deposits of the Levee Board and the Town of Itta Bena, said Board and said town are preferred creditors to the exclusion of all other creditors of said bank and are entitled to distribution in proportion to their respective deposits of all assets in the hands of said receiver after the costs and expenses of liquidation of said insolvent bank have paid by him. (4) That no distinction exists insofar as said Levee Board and town are concerned between assets in the hands of said receiver which were derived from stockholders because of their stockholder liability and assets derived from other sources.
We submit that the action of the court below in making a distinction between assets derived from stockholder liability and assets derived from other sources should be reversed; that it should be held by this court that the Board of Levee Commissioners and the Town of Itta Bena have preference claims against all assets now in or hereafter to come into the hands of the receiver of the First Savings Bank Trust Company in proportion to their respective deposit balances, and this to the exclusion of the claims of all other creditors, said town and said Levee Board being the only depositors having deposit balances who are classified under Section 2914 of the Code; the court costs and the expenses of liquidation, of course, to be first paid. Alfred Stoner, of Greenwood, for appellants, Taylor, Powell Wilson, and Alfred Stoner.
We submit that prior to the time that a corporation is placed in the hands of a receiver or liquidating agent, it is one entity, but that after it is placed in the hands of a liquidator, it becomes a different entity. Hence, those debts and claims which arose against the corporation prior to the adjudication of insolvency are on a separate and distinct footing from those claims which arose during the course of the liquidation. If this were not so, then liquidation proceedings would become greatly embarrassed and it would most likely become absolutely impossible to liquidate corporations in an orderly manner, if at all. We submit also that persons are not expected to perform work for corporations in liquidation without compensation.
Code 1930, Sec. 445.
Are court costs, representing fees of special masters, which accrued against the assets of a banking corporation, which accrued during the course of its liquidation, preferred over the claims of depositors insofar as money realized from stockholders' double liability is concerned? Our court has held that the assets derived from stockholders' liability are on the same footing as other assets in general.
Anderson, State Bank Examiner, v. Baskin Wilbourn, 114 Miss. 81, 74 So. 682.
The law contemplates that all expenses of liquidation shall be paid out of the assets of failed banks.
R.C.L., title "Receivers," Sec. 116; Code 1930, Sec. 3817.
It is hardly necessary to argue that the fees of special masters and other officers of the court are a part of the expenses of liquidation.
Anderson v. Baskin Wilbourn, 114 Miss. 81.
We submit that under the law the double stock liability enures to the benefit of depositors and that the expenses of the liquidation is created for the benefit of the depositors. Certainly the trial of the law suit gave to the liquidation proceedings the benefit of a trial in court. The trial was a benefit to the depositors even though the receiver was not successful in the proceedings, for the reason that all doubt as to liability or lack of it was thereby put at rest, and the receivership could not have been concluded until the suit was finished.
Aside from the statute authorizing the appointment of the masters and authorizing the payment of compensation to them, courts have an inherent power to do that which is essential to the ends of justice.
R.C.L., title "Courts," Sec. 62; Schmelzel v. Ada County, 16 Idaho 32; 133 A.S.R. 89; 21 L.R.A. (N.S.) 199; Hale v. State, 55 Ohio St. 210, 48 N.E. 199; 60 A.S.R. 691.
It is our opinion, and we submit for the consideration of this court, that the Legislature could not constitutionally say that funds in the hands of the liquidator could not be made liable for the expenses arising during the course of the liquidation proceedings. We say this for the reason that to thus regulate would be in effect to deny to the liquidation proceedings equal rights with other litigants. All litigants are by the constitution entitled to the "equal protection of the laws." If litigants in other classes of cases are entitled to the assistance of special masters and auditors, then litigants in liquidation proceedings ought to be entitled to the same privileges. Now, if the Legislature should say that no part of the funds in the hands of the liquidator shall be liable for court costs or for the expenses of masters and auditors, then such assistance could not be had in liquidation matters. No master or auditor would be willing to do such a large amount of work without pay and hence it is that the effect of such legislation would deny to such liquidation proceedings the equal protection of the laws.
Blades v. Hood, 203 N.C. 56, 164 S.E. 828; Re Cashmere State Bank (Wash.), 13 P.2d 892.
Pollard Hamner, of Greenwood, for appellee.
The receiver has no partisan interest as to the claimants of the funds in his hands, but desires the direction of the court as to their disposition. Inasmuch as all parties, except general depositors, were represented by counsel on the hearing below, the chancellor requested counsel for the receiver to present the legal status of the general depositors and their claims to the funds, all of which would be lost to them if the preference claims of the Levee Board, the Town of Itta Bena, the master and auditors should be allowed in full.
The receiver concedes that the funds of the Levee Board and the Town of Itta Bena are public funds and are entitled to preference payment out of the "general assets" of the bank by virtue of Section 2914, Code of 1930, but submits that that section itself fixes definitely the assets to which the preference in favor of public funds will apply. It will be noted that this section is separable into two parts, the first one defining public funds; the second one providing what shall happen when the bank failed and the banking examiner has taken possession, and it is this latter portion of the section to which we direct the court's special attention. "Whenever any corporation, doing a banking business, of whose property and banking business the banking examiner has taken possession as provided by law, it shall be the duty of such banking examiner, or his agent in charge, out of the first money coming into his hands, to immediately pay to the tax collector, or other officer having the custody of such funds the full amount thereof as far as possible."
In the face of the double liability statute the question immediately arises as to what disposition the law makes of double liability funds collected. Section 3815 specifically says that this liability shall be "for the benefit of the depositors" without reference to any beneficiary. We submit, therefore, that these two statutes are not contradictory in any sense and should be construed together to cover two different and wholly separate groups of funds made available by the two statutes to two wholly separate groups of beneficiaries.
This court has not construed the above statutes on this point, but we find a line of cases involving receiverships where a sharp distinction is drawn between "general assets" passing into the hands of a receiver of a closed bank and funds collectible under stockholders' double liability statutes. These cases are cited only to establish this distinction. It is uniformly held that a receiver cannot recover unless authorized by statute to do so, and the reason assigned is that the stockholders' liability is not an asset of the closed bank.
Minneapolis Baseball Co. v. City Bank, 38 L.R.A. 415; 1 Cook, Stock and Stockholders, Sec. 218; Walsh, Trustee, v. Shanklin, 31 L.R.A. (N.S.) 365; McLaughlin v. Kimball, 77 Am. St. Rep. 908; Runner, Assignee, v. Dwiggins, 36 L.R.A. 645; Sioux City Stock Yards Co. v. Fribourg, 96 N.W. 747; Carlton v. Mayer, 47 L.R.A. 617.
The receiver of the First Savings Bank Trust Company of Itta Bena has on hand for distribution about $1500, which was derived from the general assets of the bank, and about $4100, which arose from collections on judgments for stockholders' liability. At the time the bank closed its doors and went into liquidation it was a depository for the Yazoo-Mississippi Levee District, and security had been given, but the securities have been exhausted and there remains due to the Levee District $17,662.90, not including interest. The bank had on deposit the funds of the Town of Itta Bena, not secured, and there remains due the Town $16,132.23.
The questions which have been presented are: (1) How are these funds to be distributed, and (2) the priority vel non of certain costs and expenses incurred during the course of the liquidation. Were it not for the difficulties presented by Chapter 97, Laws 1908, we would readily say that the small sum on hand, derived from the general assets, are to be paid to the Levee Board and to the Town in the proportion of the respective balances due them. This would be so ordered under the terms of Section 2914, Code 1930, which gives to deposits by levee boards and towns the character of trust funds, and requires their preferential payment out of the general assets of the bank. And we would readily say that the fund derived from the stockholders' liability is to be distributed to all depositions of the bank, without preference among them, in proportion to the amounts remaining due them respectively, including the balances due to the levee board and the town, after debiting them with all amounts paid them out of the general assets, and after the levee district has exhausted such securities as had been deposited with it by or for the bank. Board of Levee Com'rs v. Powell, 109 Miss. 415, 69 So. 215.
Section 3815, Code 1930, provides that "the stockholders of every bank shall be individually liable, actually and ratably, and not for one another, for the benefit of the depositors in said bank to the amount of their stock at the par value thereof, in addition to said stock . . .," and the section further provides that such liability may be enforced by the officer in charge of the liquidation. This stockholders' liability is not a general asset of an insolvent bank, but is a special trust fund provided for the benefit of all the depositors, and for them alone. 1 Cook on Corporations (7th Ed.), Sec. 218; Sioux City Stock Yards Co. v. Fribourg, 121 Iowa, 230, 96 N.W. 747; Colton v. Mayer, 90 Md. 711, 45 A. 874, 47 L.R.A. 617, 78 Am. St. Rep. 456.
As already indicated, the difficulty is brought about by Chapter 97, Laws 1908, which was a special act for the establishment of depositories for the said Levee District, and which, after requiring that all such depositories shall put up security as mentioned in the Act, provides in Section 3 as follows: "Said bond or bonds to be conditioned according to the law fixing the penalty and conditions for the bond of the treasurer of said Levee Board, and in addition to the above mentioned security the stockholders of all banks qualifying as depositories under this Act are hereby made liable for any loss sustained on account of the failure of such depository to faithfully discharge its duties as depository, and to pay over all amounts deposited with it upon demand, each stockholder being so liable for an amount equal to the par value of his stock in such bank. In the event any bondsman or stockholder reimburses said Board of Commissioners for any loss occasioned by a failure of a depository to faithfully discharge its duties as such, he is hereby subrogated to the rights of said Board of Commissioners against the other bondsmen and stockholders in such depository as before prescribed. It is further provided that the creating of this additional security and the acceptance of the collateral hereinbefore mentioned shall not be construed as waiving any rights, benefits, or privileges conferred by law upon the commission in the matter of recovering public monies or trust funds from banks in which they may be deposited. When the said board shall have selected a bank as its depository it shall be the duty of the secretary thereof to, within ten days thereafter, notify said bank of its selection, and the estimated maximum amount of money which will be on deposit at any time therein, in order that said bank may know the amount of security to be filed."
The rule is that when a particular local governmental subdivision is operating under a special statute or statutes, governing its operations, or enacted for its particular benefit, such special statutes are not displaced by general state-wide statutes, unless the general statute, by express words, or unmistakable implication, includes the local subdivision. See the numerous cases gathered in the notes, 59 C.J., pp. 1056-1058.
The quoted section of the special statute creates as against the stockholders of a levee depository bank a special and particular stockholders' liability in favor of the levee district, not one in favor of all depositors as does the general statute, Section 3815, Code 1930; and, in consequence, the question at once arises, as to which we do not, and, for the reasons later stated, cannot now decide, whether the general statutory liquidator of an insolvent bank has any authority to collect, or sue for, the levee stockholders' liability, and whether before the levee district can participate in funds derived from stockholders under the general statutes, the district must show that it has, under the special statute, and in its own name resorted to the stockholders, and the result of that resort.
There is nothing in this record to show whether the levee district has ever taken any action on its part against the stockholders. For all that appears, except by mere inference, which is not a necessary inference, the levee district by action in due and proper time, could have collected from the stockholders every dollar of the balance due the district. There is nothing to show that the district may not yet do so, since no statute of limitations would run against the district on such a demand.
These and other questions that this special statute introduces into the problem have been supposed to be silenced by a stipulation in the agreed statement of facts as follows: "It is agreed that if preferences are allowed to said Town of Itta Bena and said Levee Board, the aggregate amount so allowed shall be apportioned pro rata in accordance with the unsecured deposit balances now due each."
The trouble about this stipulation is that if the levee district is entitled to a preference over the town or vice versa, neither of them can release that preference in whole or in part in favor of the other. Such a release or diminishment of what is due to one under the law cannot be made in favor of the other because of the prohibition found in Section 100, Const. 1890, and such a stipulation is not within the exception in that section permitting the compromise of doubtful claims, for such a doubt arises only upon unliquidated demands or upon doubtful facts, not on what, for the want of a better term, may be denominated doubtful law.
The facts relative to a particular case may be settled by the agreement of the parties thereto; for none but they have any interest in the results that flow from the particular decision on the special facts. But decisions of questions of law must rest upon the judgment of the court uninfluenced by the admissions of parties or of counsel. Jones v. Madison County, 72 Miss. 777, 793, 18 So. 87.
It is apparent from what has already been said that the facts as now before us have not been covered or developed sufficiently that the court may proceed to an adjudication. In such a case, the duty of a chancery court is to require a full development of the facts, and of this court to remand that it may be done. All this was fully discussed in Moore v. Sykes' Estate, 167 Miss. 212, 149 So. 789.
In view of the remand, we pretermit entirely any discussion of the question of costs, fees, and the like, deeming it more appropriate that those questions shall await a more complete development of the facts of the case.
Reversed and remanded.