Cooper v. Manning

Suing upon a promissory note, the receivers of an insolvent state bank were met with an answer challenging their title to the note. This answer was held insufficient on demurrer. Final judgment and this appeal followed.

The sole point of error relied on is that the appellees are not liquidating receivers with title, but merely custodial receivers. And this is claimed because of the terms of the order or decree constituting the receivership, and particularly these:

"The court * * * finds that the defendant, The First Savings Bank and Trust Company of Albuquerque, New Mexico, a corporation, has suspended its ordinary business and is insolvent and is unable to and is not meeting the demands of its creditors in the usual course of business;

"Wherefore, it is ordered, adjudged and decreed that a receiver of The First Savings Bank and Trust Company of Albuquerque, New Mexico, a corporation, be appointed by this Court in accordance with the practice and usages of equity, with the usual powers and duties of receivers in equity."

It is not to be questioned that a prudent adherence to the statute would have suggested different decretal provisions. There should have been a finding that the bank, which had theretofore been taken over as being in an insolvent condition, could not "resume business or liquidate its business to the satisfaction of all of its creditors." Laws 1933, c. 32, § 1. The receivers should have been authorized "to take charge of such bank and wind up its affairs and the business thereof for the benefit of its depositors, creditors and stockholders." Id. The corporation should perhaps have been enjoined from "exercising any of its privileges or franchises," etc. Comp. St. 1929, § 32-174.

Nevertheless, when we once identify this as a statutory proceeding for winding up a banking corporation, as we did in Cooper v. Otero, 38 N.M. 164, 29 P.2d 341, the kind of receivership which must ensue and the powers which the receivers are to possess are matters so plainly indicated by the statute itself that the decree should not be subjected to fine analysis for inaccurate expression or inadvertent omission, the discovery of which could only subvert the statute, pervert the court's meaning, and result in confusion and perhaps in loss to the receivership and perhaps to those who have dealt with it.

We have no doubt that we should here take the court's finding of insolvency as the equivalent of the finding the statute contemplates. This is not to say that the corporation itself might not have objected to being kept out of its property and rights on that finding. So long as it acquiesces, however, we see no good reason for entertaining objection by others.

The decretal defect most strongly urged is the omission to enjoin the corporation from the exercise of its franchises. The serious character of this defect is said to be disclosed by Eagle Mining Improvement Co. v. Lund, 15 N.M. 696, 113 P. 840, State ex rel. Parsons Min. Co. v. McClure, 17 N.M. 694, 133 P. 1063, 47 L.R.A. (N.S.) 744, Ann. Cas. 1915B, 1110. And those decisions, with others of this court, draw heavily upon the valuable expositions by Vice Chancellor Stevenson in Gallagher v. Asphalt Co. of America, 65 N.J. Eq. 258, 55 A. 259; Id., 67 N.J. Eq. 441,58 A. 403, and in Pierce v. Old Dominion, etc., Co., 67 N.J. Eq. 399, 58 A. 319.

Those decisions were concerned with corporations other than banks. It is unnecessary here to reconsider them or to indicate any view as to the meaning or effect of such a decree as this in the case of an ordinary corporation.

Because banks are peculiarly affected with a public interest, the Legislature has set them apart from corporations in general. They are governed by their own laws. It is true that in liquidating a bank the "proceedings shall otherwise be governed by the provisions of the general incorporation laws for the winding up of insolvent corporations." Laws 1933, c. 32, § 1. "Otherwise" of course means when there appears no special provision for banks. We do not resort to the general provisions until we have exhausted the special, and we always keep in mind the peculiar nature of banks and banking under our laws. If we thus approach a decree containing the finding of insolvency, which, after all, is the jurisdictional fact, it seems impossible to give great importance or significance to the failure to follow the statutory direction to enjoin the corporation from exercising its franchises.

Banks, unlike or to a greater extent than other corporations, are always subject to the supervisory and visitorial powers of the state. If thought to be in an insolvent condition, it is the duty of the bank immediately to suspend business. It is to be put into possession of or to be taken over by the state bank examiner. Comp. St. 1929, §§ 13-416, 13-418. By operation of statute, not by any injunctive process, the corporation is ousted of the possession of "all its property and assets" (Comp. St. 1929, § 13-416) and of its power "to collect all debts, dues, claims and demands" (Id. § 13-421).

It may be 60 days later (Id. § 13-418) that the court first acquires cognizance or jurisdiction of the matter. The question then presented is a simple one. If the bank examiner's procedure has been regular, the court has but to determine whether the bank can "resume business or liquidate its business to the satisfaction of all of its creditors." If it cannot, liquidating receivers must be appointed upon whom the statute casts the title to the property and assets. Id. § 32-177; State v. First State Bank of Las Cruces, 22 N.M. 661, 167 P. 3, L.R.A. 1918A, 394; State v. People's State Bank Trust Co., 23 N.M. 282,168 P. 526.

Such being the law and the procedure, where is there room, after the adjudication of insolvency, for merely custodial receivers? The bank is insolvent; it must be wound up; that can be done only through receivers having liquidating powers.

What is the importance of the injunction here? It is not needed to inform the corporation that it must stop business. It had suspended long since, and been ousted of all of its important powers.

In short, insolvency is not only the jurisdictional fact; it is the determinative fact. Given insolvency, the consequences follow from the statute itself. For the court to refuse them would be illegal. We seek a legal interpretation of the decree. We attribute to the court an intent to do what the law requires. The failure to enjoin as the law directs we attribute to inadvertence.

This is not said in approval of the omission of the injunctive feature of the decree. It may well be included, if for no other reason, because the statute may be construed so to direct. We do not say that some more or less important consequences may not attend the omission. We decide only that, when the corporation is a bank, the omission is not fatal to the vesting of full liquidating powers in the receiver. Comp. St. 1929, § 32-175, which authorizes the appointment of receivers "at the time of ordering said injunction, or at any time afterwards," must have a liberal construction in the case of a bank. The whole scheme of those provisions peculiar to banks suggests that it is the determination of insolvency that calls for the appointment of receivers.

It is open to question whether our statutes even contemplate the injunction when the insolvent corporation is a bank. In the case of the ordinary corporation, "any creditor or stockholder may * * * apply to the district court for a writ of injunctionand the appointment of a receiver. * * *" Id. § 32-174. In the case of a bank, after the examiner shall have satisfied himself that the bank cannot resume business, the Attorney General, on being so advised, is to institute proceedings "for the purpose of having the State Bank Examiner appointed as receiver." Laws 1933, c. 32, § 1.

Such seems to have been the view of several state bank examiners, Attorneys General, and district courts. Our records disclose lack of any injunctive order in several similar proceedings which have reached this court, viz., State v. First State Bank of Las Cruces, and State v. People's State Bank Trust Co., supra, and State ex rel. v. Ryan (Attorney General v. Ryan), 27 N.M. 651, 204 P. 68. And in the two first mentioned we held, as above noted, that the title of the bank's property and assets vested in the receivers on their appointment.

However, we do not place the decision on the ground that the statute does not call for an injunction, but on the lesser ground that the failure to enjoin, even if the law contemplates it, cannot defeat the statutory purpose that the receivers shall have title to the bank's property and assets, to enable them to liquidate.

The judgment should accordingly be affirmed and the cause will be remanded. It is so ordered.

HUDSPETH and ZINN, JJ., concur.