Article Text
Text Decision Handed Complete Cutler In Bank By Judge
EDITOR'S of the widespread shown here and the state in throughout decision handed Monday by Judge in bank Rath. The News is printing the almost in Because of the establishes the of ownership bank and plan of bank Michigan reorganization, deciof importance in banking circles.
OPINION OF THE COURT LUDINGTON BANK, by every legal test was and about February 11th, solvent, operating institution, making publishing financial statements required law, solvency. had closed its doors. doing the usual and general business and meetlawful demand by percent cash payment. and accepting posits both checking and and meeting its obligations without stint and of distress. or about Feb. 11, 1933, clamation the governor, Ludington State was with all other Michigan for and moratorium or bank day. March 1933, Zook named and the bank under the conand supervision the state commissioner, and until July 1933, which time published and posted plan for protest filed, and to the circuit court review the plan of was made. Order Assessment June 1933, the state commissioner made an for assessment and collection 100 percent statutory stock which said order based upon cursory amination said bank, concludon April 1933. One of the bank examiners testified court that the examination made for the purpose the advisability feasibility of said bank its and was made to creditors or to determine solvency insolvency bank. From the loose, methods employed assets of said bank, disclosed the court led irresistibly that the stock without regard for the the but rather, to undervalue to better greater security and for the bank institution. June 23, 1933, pursuant to Zook, the Ludington State filed its claim the Mason against the estate William Rath, then process tion in court, collect said upon par value stock the Ludington State bank, owned by William Rath in his Questions For Decision died and by his the stock by specific bequest Jessie and Dolan under the only the unrestricted thereof her lifetime his who May 1932. order disalowing the probate the upon questions for decision the stock owned by and statutory against estate William Rath, on 1933? SECOND: Can levy and the 100 order the while said continues to usual being process of or by the legal rights said
Roman built than built today would much without judicial mination of Incident to these questions involved the the right to take over; and, the or the law. The question ownership of stock. SPECIFIC REQUESTS vest testator's death and are not pendent upon any order of distribution allotment the bate court. The this case the stock) was severed from the bulk of testator's property by the operaand was subject only liability the statute to make bution in case of failure assets to meet debts. In this case the record shows the debts were all paid. Transfer Held Not Conclusive The statute making stockholders individually liable the benefit of creditors "means the actual stockholders at the time the suspends." Transfer stock upon the books of the bank, is clusive, but only of The stock in question was the by BEQUESTS, passed, under will, at testadeath, by of law, to the life the wife, and vested absolutethe legatees under the will the death of the widow, upon Lucy Rath, which occurred May 23, 1932. On July 1932, the executor under the will, the stock question to the beneficiaries, proper signment the each certificate, which ment was on that date by Mr. Zook, the then cashier, later conservator, and again cashier of said bank. on August 1932, petition of executor, the judge probate Mason Michimade order authorizing and directing the executor to transfer the stock in question under the On 1933, the executor made an effort have the transfer said stock to legatees under the will recorded upon stock book the Ludington State bank. He took the certificates of stock question, together the written men endorsed upon certificate to Miller, assistant cashier of said bank, and made request for the Miller advised the executor that the Zook, had charge of the the bank and being temporarily absent from the bank the transfer could not made until his return. Consequently the transfer was never made the books of the bank. Legal Status Not Changed illegal and unauthorized the in said stock in the name of the estate at said bank held on Jan. 10, did not change the legal status the stock the ownership thereof. The fact that mained in the physical possesthe al. Title the stock passed to the legatees, both by of law under the will, and by proper written assignthey were not only titled to physical possession of same, but the fruits ship after the death of the widow, Lucy Rath, which took place May 23, and they could by proper action compel the made upon books of the bank. The presumes acceptance bequests. Because of the lack of tilla to the bequests could well the legal presumption above announced, however, ceptance upon alone there proof Thus to the have proof of evidenced made transfer of order Court: part physical with binding many that bequests gence the Bequests The of acceptance the upon bank cannot mined upon thought acquired June 1933, the Surely onerous bequest prior to that and the the time to order could the bank June against the William Rath Estate. The second question for cision whether not under the Michigan act, as amended by recent liability of stockholders has and can be enforced while the bank its present status. This bility imposed upon and penal. Prior to 1929 66, this statutory liability solely for the fit of depositors the bank by said 66, the accrues to all creditors bank. At the outset, might well to certain sections of our statute applicable the question involved for of bank every liable 100 percent to satisfy the obligations of said bank to the amount their stock at value thereof Such ability may be enforced by any bank the process of liquidation or by any receiver or other officer succeeding to the legal rights of said Liability Not Removed Section Act 32 of provides: this Act shall no way impair, lessen move statutory or tractual liabilities of any holder, officer director of such bank All transfers stock made by any stockholder after 1933, and prior to taking over such bank by the banking shall not relieve such transferer from his statutory and any transfer stock made after commisan act insolvency by the bank or in thereof with view to avoid the statutory liability be null and Act 95 of Immediate Effect Acts of 1933 amending Sections and of Act 32 of Public Acts 1933 missioner of state banking department, he shall have taken over the ment any bank the right and power, with the of the governor to ceed to wind its affairs continue the operation of under such and he may shall be and hereby to levy, enforce and collect the tory individual liability of The statute provides that this liability of may be enforced by bank any the process of or by any receiver or other ceeding the legal rights of said bank. true that when bank closes its doors and pends payment, been said the process of But bank has not closed its doors, has suspended payment, neither has receiver been over assets. In this matter are not dealing with national bank where under the the Comptroller Currency by the fedbut with bank organized and still existing under the of this state, by which such liquidation and insolvency is placed under the jurisdiction our courts. Rests Upon Solvency or not the stockholders liability has ripened and be enforced rests upon the solvency or insolvency of the bank. In Foster Rowe the question of such determination and the court appears have conceded that such termination by the court necessary to the levy of an The statute provides that such liabilmay be forced bank the proby any ceiver other officer succeedthe legal rights said bank. bank not In the nor hands the of the bank, but bank is still accepting and making ordinary banking business. that is operating under conservator appointed acting banking liability from this of would periodically while this bank and finalthe bank should fully pend payment through imposition provided by the 100 upon and the proposed this time. while bank would but would work never passing Public recognized could forced only after suspension of payment and upon Section of the Act reading part: case the commissioner shall wind the fairs of such bank any may appoint with the approval of the who governor, shall proceed close up such bank and enforce the statuliability of the as provided by law." Validity Not Question In view of said Section Six 32 of Public Acts of and no amendments thereto, court pass on the validity of it claimed that the banking commissioner is prounder Section of Act Public Acts of 1933, reading part: (state banking commissioner) shall be and hereby empowered to levy, enforce and collect liability of stockholdThis provision for enforcing liability of stockholders strue apply only cases where the bank has suspended payment. closed its doors and the process of liquidation through by and to force such order of such court; not, then, at least, such provision the act invalid the impairing the contract tween the stockholders, least those who became such prior 95 of Public Acts of 1933 becoming summarize is my thought that reiterated tutory power the given the right by the several sections the several statutes do one of three things after he shall have lawfully taken bank under Section Act 32 Laws 1933, viz: Act 32 Laws of 1933 By Section he may manage and operate, By Section he liquidate may under receivership and order Court, By Section he may reorganize,
Act 95 Laws 1933 Section amended to confer power, Section not amended and remains the same, Section amended to confer the same power. careful of the going sections coupled with phrase used liability THE OF OF 66 1929 (Sec. 11945 together with the Court's placed upon the foregoing Section requiring judicial the liability enforced then meet the creditors. Together with Section Act Laws 1933, which reads as follows: case the commissioner of the state banking decide up the any such bank may appoint receiver, the approval the governor, who shall proceed to bank and enforce the statutory liability the holders, AS BY LAW. (Section 48 above cited the provision of the law authorizing the Such receiver shall take books and, upon the order of court record competent jurisdiction, may sell compound all bad debts and, on like der, sell the and sonal property of such bank such terms as the Court shall and may necessary to the debts pay bank enforce the statutory liability of stockholdSection 15 of Act 32 Laws of in part: act shall in no way impair, lessen remove present statutory contractual liabilities any stockholder All to hold reasonable legislative intention that commissioner upon taking bank der the of Section of Act Laws of 1933 has the one of three edies: may manage and may liquidate under receivership and order of court, may reorganize, the bar he has elected to reorganize and has all times kept the bank open for business has the usual and general July to his order to Zook, the has been open and 100 percent reorganized institution withunsatisfied creditors solvent. Had elected to wind the affairs the bank under receivership Act Laws 1933, then upon proper petition and could have an order court izing the stockholder's liability and judicially determined the bank insolvent and clared necessity of such assessment to meet the obligacreditors and not otherJudicial Determination Plaintiff find its chief consolation Section 1933, said tion when read in conjunction with the other conflicting Act 32 Act 1933, especially Section Act 1933, as well as Section Act Laws 1929, Section 11945 1929, may not be strued to authorize statutory liability stockholders without judicial determination of and then only to meet the demand creditors. Section even harkens back to Section 48 above referred part: THE SECTION 48 OF ACT NUMBER OF THE THE OF YEAR OF 1929 AS AMENDED. This has been held require judicial of stockholdliability attach and be enforced. Section is long and rambling hence quote excerpt therefrom. reads in part: "and to provide for the continuation and liquidation of the (meaning bank) This strue give the Commissioner election of remedy. Again it reads in part: stock shall be on five from the issuance thereof years and redeemed may thereupon become common capstructure said bank become such may part thereof as may be determined by and until such preferred stock shall be redeemed or shall be declared be part of the common bank, CONTINUE AS AN OF SAID BANK FOR THE OF THE INDILIABILITY OF HOLDERS WITHIN THE MEANING SECTION FORTY EIGHT OF ACT NUMBER SIX OF PUBLIC ACTS OF STATE OF MICHIGAN FOR THE YEAR NINETEEN HUNDRED TWENTY NINE AS be that the Thus may seen preferred stock made to main an obligation against bank be considered by the along with other liabilities the of purpose termining the individual liabilof stockholders, based insolvency MEANING OF SECTION
Section again reads in part: termination of insolvency of the may bank up to the right to enforce indi- where and vidual liability of where judicial discretion may be time he shall de- and where termine the advisability there- such may be had and not delegate judicial power This take to mean that the ministerial administrative elects ficers. reorganunder said Section and Drastic after operates for Departure time only to find that the Without such construction stitution yet he the statute here involved then determine the drastic departure from the winding the of the fundamentals up bank under Section Act government. makes bold Laws 1933, "WITHIN THE tempt supplant an of MEANING OF SECTION judicial discretion, by substitutand that his shall the arbitrary of at all times abide and be based officer uncertain insolvency and stockhold- for that of the cold upon liability of judiciary, old age dicial thereof experience, trained the science section of Act 32 1933, law, and guided by precedents within the meaning of Section reflecting the seasoned minds of and not able jurists covering the entire upon notion the period of our captious finding made the not been unmindful of and only of build- the exigency claimed to exist purpose upon more cause of the depression, and financial here urged as imperative need Otherwise section like other would read: statute will do violence 'WITHIN THE MEANING OF law. Its injectSECTION Had the entrance intended otherwise with the its presage but reasonable suppose fate. While favor progressive that section Act 32 accommodation the meet of 1933, and Section Act progressive need, Laws do not find here pressing nec11945, would have been amended essity justifying such rash and repealed Act Laws being often Government without constiferred to being is power withThis becomes right. Exercise of judicial when all is power granted of the are read the vested right and especially the and any repeated phrase 'WITHIN THE sumption that power by MEANING SECTION other usurpation. Neither used whenever stockholder's circumstance nor condibility mentioned. can change, alter destroy Cogent reason for such the agency constitutional struction found trust. inadequate the No imemergency, however, bank made this upon minent the grave, justify which such of the any one sought to be predicated and three of bility JudiPurpose Each must indeAll adduced this trial shows but weak of the bank made deputy bank three prior to examiner testified that he made the examination determine advisability reorganization and not to determine solvency insolvency of the bank. Among other things he as undesirable thousand dollar note with paid to date, payment of which was guaranteed by the of whose financial responsibility would total million dollars, fact known of the street. in bank assets, real estate owned by the bank except the bank proper, which he estimated about of its actual value. To thus nore thousand worth of real estate evaluation of bank its best property, probably did amount to active fraud but, could very properly fraud and would work positive legal fraud upon the in the event this assessment allowed Plaintiff claims that stockholder's failure to review the plan as vided Section of Act Laws 1933, shall be deemed consent such pass without the serious question of legislative power thus make tract relations and force waiver and limitation upon individual rights acquired to enactment. Executors by direct contract, much waiver, Estate. Mere statement the proposition seems denounceproper ment of its merits. And because, under my holding, the question did not belong to the estate of William Rath, ceased, at the time of this filing claim, hence, that question is FOR THE PURPOSE OF CASE, and under my tion the above as stated, THE ALITY THE LAW IS NOT INVOLVED AND BEING UNNECESSARY TO DECISION THIS CASE IS NOT PASSED UPON, leaves the support of the Constitution, the law. Destruction branch any one government blow directed sustaining root of the basic which has been the bulwark defense the stress storm and every citadel of strength in every crisis. Our unblemished security has the gales gathering strength from each distress, refute the claims of emergent necessity for the enactment law which has tendency undermine, weaken destroy the constitution do violence or the spirit and reason mandate. Hazardous calamity not only furnishes the crucial test, the greatest need of constitutional protection. Judicial of solvency by law may be delegated to or to the state banking commissioner. Courts not sanction the exercise judicial power by any man, men, body tion other than the ConstituJudiciary. Tolerance will be not done. Any based upon that result. From the record here made, tested by legal precedent, the Ludington State Bank was warrant authority or collect the 100 percent tory stock liability against the Estate of William Rath, ceased. claim will be denied and the matter certified to probate court action proper cordance with this opinion. HAL CUTLER. Circuit Judge, 19th Judicial Circuit 9th, 1934.
