Seaborn v. District Court , 55 Nev. 206 ( 1934 )

These combined proceedings in prohibition, initiated in this court on the petitions of Edward J. Seaborn, as superintendent of banks of Nevada, against the respondent court and judge thereof, may be said to be the culmination of bitter controversy between certain depositors and creditors of the so-called Wingfield banks who favor their liquidation by the superintendent of banks and those who favor their liquidation through receiverships. As between the contestants, I wish to make it plain that this court will not undertake to decide which is the best method of procedure. I also wish to make it plain that the question of whether or not it is wise or foolish, expedient or inexpedient, proper or improper, just or unjust to throw the Wingfield state banks into receivership are not matters about which the court may concern itself. The conflict of serious opinion does not suffice to bring these questions within the range of judicial cognizance.

I confess that prior to and upon the argument of these cases I was nearly convinced that as a matter of law the respondent court exceeded its jurisdiction in the appointment of a receiver or receivers in the Wingfield bank cases. In this connection, it is proper to state that I am entirely satisfied that prohibition is the proper remedy to test the question. McComb v. Dist. Ct.,36 Nev. 417, 136 P. 563; Walser v. Moran, 42 Nev. 118, 173 P. 1149, 180 P. 492; section 9255, N.C.L.

I entered upon the examination of the record and briefs with the preconceived notion that the banking act of 1933 brought the Wingfield bank cases within the well-established principle that, if a statute contains words negativing or expressly taking away the previous equitable jurisdiction, or even if, upon a fair and reasonable interpretation, the whole scope of the statute shows, by necessary intendment, a clear legislative intention to abrogate such jurisdiction, then the former jurisdiction of equity is thereby ended. 1 Pomeroy Equity Jurisp. (4th ed.) sec. 281. I also was aware of the well-settled rule that a court of equity which has obtained jurisdiction of a controversy on any ground or for any purpose will retain such jurisdiction for the purpose of administering complete relief and doing entire justice with respect to the subject matter, unless deprived of the right to do so by statute, but I find that the rule is not an inflexible one which a court of equity is bound to follow in every case that comes before it. 21 C.J. secs. 117, 134.

The petitioner herein bases his ground for prohibition solely upon the banking act of 1933, chapter 190, Stats. 1933, 292. In order to thoroughly understand the real ground upon which counsel for petitioner and myself differ, it will be necessary to review the statute. I note that the statute is entitled, in part, "An Act to provide a means of incorporating banks and trust companies; * * * to provide for the regulation and control of such business; * * * to incorporate herein the provisions of the general corporation law, as amended; to provide for thereorganization, incorporation of assets, and the liquidation of banks and trust companies in certain cases. * * *" (Italics mine.) I note that the act comprises eighty-nine sections, and in the last section declares that the act is an emergency measure. It is common knowledge that the act was the outgrowth of the colossal economic tragedy of the voluntary suspension of business by the Wingfield banks. I note that from section 1 to section 49, inclusive, the act is devoted to the means of incorporating banks and trust companies and the regulation and control of their business. I note that section 50 of the act provides that the governor shall appoint a bank examiner, who, from and after the passage and approval of the act and in the administration thereof, shall be known and designated as "Superintendent of Banks," at a fixed salary of $4,000 per year. I note that the section contains this clause: "Until his successor shall be named and appointed by the governor, the present bank examiner, who shall hereafter be known as `Superintendent of Banks,' shall continue in office at the salary hereinabove provided, with all the powers and duties herein conferred and imposed." Edward J. Seaborn was at the time bank examiner and is now superintendent of banks.

Section 53 of the act provides when and under what circumstances the superintendent of banks may take possession of the business and property of any bank or banks. The section contains this significant provision: "Upon taking possession, as aforesaid, the superintendent of banks shall retain such possession until such bank shall be placed in condition safely to resume business or its affairs be finally liquidated as herein provided, or until otherwiseordered by a court of competent jurisdiction." (Italics mine.)

Section 54 of the act provides, inter alia, as follows: "Upon taking possession of the property and business of such bank, the title to all assets of such bank shall immediately become fully vested in the superintendent of banks" — followed by specific directions as to his powers and duties in the premises.

So much of the act as is deemed applicable to the Wingfield bank cases is to be found in sections 68, 69, 70 and 75.

Section 68 of the act reads in part as follows: "SEC. 68. Whenever any bank shall have voluntarily suspended business or when the superintendent of banks shall have taken possession of the assets of any bank, depositors or creditors representing not less than fifteen per cent of the total amount of the outstanding indebtedness against said bank, exclusive of public deposits, may commence an action in the district court of Ormsby County or the county in which the bank is located, against the bank, setting forth the facts that such bank is insolvent, and is unable to pay its depositors and creditors in the usual course of business, or has suspended payment of its obligations, and has refused or neglected to pay its obligations for a period of at least thirty days prior to the filing of the complaint, or either of said causes. In any such action the bank and the superintendent of banks and the directors of such bank, and the depositors and creditors and stockholders, and each county and state political subdivision or state agency or officer having deposits in said bank, shall be made parties defendant."

A separate paragraph in the section provides, in substance, that every such action shall be governed by the provisions of the civil practice act.

Section 69 of the act provides, in part, as follows: "SEC. 69. At the time of the filing of said complaint, the court shall order the superintendent of banks, within such time as the court shall fix by said order, to file a full and complete inventory of the assets of such bank in his possession, together with his appraisal or opinion of the value of said assets, and of each item constituting the same, and also a full and complete report of all claims and demands against said bank, together with the names and amount due each creditor, depositor or claimant."

Section 70 of the act provides as follows: "SEC. 70. Upon the trial of any such action, the court shall find and determine the value of the assets of such bank, and, if the court shall find and determine that such bank is insolvent, the court shall, on the application of persons representing not less than five per cent (5%) of the total number of depositors or creditors who hold fifty per cent (50%) or more of the total outstanding indebtedness, exclusive of public deposits, direct that a corporation be formed with an authorized capital of common stock equivalent to the aggregate amount of the value of the assets of said bank as found by the court, and shall order said bank and the superintendent of banks to convey, assign, and set over all of the property, real and personal, all stocks, bonds and notes, actions and causes of actions, books and records, and all assets of every kind and character of said bank to said corporation so formed, in consideration of the issuance, fully paid and nonassessable, of the capital stock of said corporation."

Section 75 of the act provides, in part, as follows: "SEC. 75. At any time after the filing of the complaint, as in this act provided, persons representing not less than five per cent of the total number of depositors or creditors who hold fifty per cent or more of the outstanding indebtedness of the closed bank, exclusive of public deposits, may present to the court a plan or plans for the reopening of said closed bank, or for the reopening of said closed bank in connection with other closed banks. Such plan or plans for reopening of said bank or banks may be by consolidation of banks, or by the organization of a new bank in conjunction with other corporations qualified as borrowers from the reconstruction finance corporation or other federal loan agencies or associations, the purpose of which shall be to take over, and which will take over, all or any part of the assets of the closed bank or banks."

It may be assumed that the legislative power of a state is unlimited, except as may be restricted by the constitution and laws of the United States and the constitution of any particular state. State v. Rhodes, 3 Nev. 240. The statute in question is assailed upon constitutional grounds, but in the view taken it is not necessary to discuss that phase of the statute.

Counsel for the petitioner bases his argument for the issuance of the writs upon two general propositions: (1) That the legislature, by providing a plain, complete, and adequate method of statutory liquidation of insolvent banks, intended to divest courts of their ordinary chancery jurisdiction and prerogative to appoint receivers of state banks. (2) If the respondent court obtained jurisdiction of the Wingfield bank cases, it, by virtue of the banking act of 1933, was divested of its jurisdiction and power to appoint a receiver or receivers for those institutions.

I admitted at the outset of this opinion that the district courts specified in the statute (section 68), are without legal authority to deal with the property and assets of the Wingfield banks in the hands of the superintendent of banks for liquidation, unless the statute so directs. Upon mature consideration, I am of the opinion that the statute itself directs that, whenever any bank shown to have voluntarily suspended business or when the superintendent of banks shall have taken possession of the assets, depositors and creditors may commence an action in the district courts mentioned and make the bank, its directors, stockholders, the superintendent of banks, and others parties defendant. This is, to my mind, a legislative declaration that courts may deal with the affairs of insolvent banks in the hands of the superintendent of banks for liquidation. It will be observed that it is made a condition precedent to the commencement of the action that the complaint state the fact that the bank is insolvent, unable to pay its depositors, and unable to pay its obligations for a period of thirty days prior to the filing of the complaint. Having the authority to commence such action upon any ground or for any purpose, whether it be for liquidation, reorganization, incorporation of the assets, or for the reopening of closed banks, the court which first obtained jurisdiction had jurisdiction to administer complete relief and entire justice with respect to the subject matter of the action. Basing my opinion upon the provisions of the act itself, I conclude that the respondent court had jurisdiction to deal with the affairs of the insolvent (Wingfield) banks, in the hands of the superintendent of banks.

The second point raised by counsel for the petitioner is the only controversial question in the case. He earnestly insists that, if it be conceded that the court obtained jurisdiction of the Wingfield bank cases, it could not legally divest the title of the property and assets of said banks in the superintendent of banks and transfer the title and order the superintendent of banks to transfer and deliver up possession of the same to a person of the court's own creation — a receiver.

I have given cautious consideration to prior enactments in this state and of other states, and have scrutinized with care all of the authorities cited by counsel, but I do not find any which deal with an enactment such as must control the disposition of these cases. The differences in the various statutes from other jurisdictions as compared with that of ours may readily be accounted for. It is common knowledge that on November 1, 1932, the Wingfield banks voluntarily suspended business, with around $26,000,000 of deposits, representing as many as seventeen thousand depositors. As anxious as the legislature may have been and as diligently as they tried to enact a measure to fit the local situation, they could not do so without the enactment of a general law for the incorporation of banks containing special features relative to the banking situation which confronted them. The result was the enactment of the banking act of 1933, which opens the door of the courts to aid in the reorganization, incorporation of assets, and the reopening of closed banks (Wingfield banks). It is apparent that these purposes could not be made legal and effectual without the aid of the courts. The superintendent of banks in charge is nothing more than an administrative officer. These new features distinguish the statute from those to be found in other jurisdictions. The dual purposes of the enactment are confusing, when we come to analyze the intent and scope of the jurisdiction conferred upon the courts. The actions authorized to be commenced by depositors and creditors against insolvent banks virtually amount to the abdication of the power and duties of the superintendent of banks. Counsel urges that any order, judgment, or decree of the court to take from the superintendent of banks his title and possession to the property is illegal and void.

This contention is based primarily upon the proposition that the entire import of the enactment is to avoid the economic injustice of liquidating insolvent banks through receiverships, and, the legislature having provided a plain, complete, and adequate method for the liquidation of insolvent banks by and through the superintendent of banks, the respondent court exceeded its jurisdiction in appointing a receiver or receivers in the Wingfield bank cases. The statute itself is a sufficient answer to this proposition. It will be observed that by section 68, 50 percent of the depositors or creditors of an insolvent bank may bring an action in the court specified therein upon any ground or for any purpose, making the bank, the superintendent of banks, and other parties defendant. Looking to the complaints in the several Wingfield bank cases, the court certainly obtained jurisdiction. This being so, under the well-settled rule it could retain jurisdiction for the purpose of administering complete relief and doing entire justice with respect to the subject matter. 21 C.J. 134. But, say counsel, the order of appointment is without jurisdiction because the statute vests the title and possession of the property and assets of insolvent banks in the superintendent of banks; wherefore, the orders of appointment were without jurisdiction. If the respondent court erred in the appointment of a receiver or receivers, it was error within the jurisdiction and not reviewable in prohibition. In a prohibition proceeding, the sufficiency of the complaint in the respondent court will not be passed upon. 50 C.J. 708. Only for the purpose of determining the question of the court's jurisdiction can the sufficiency of a pleading in the proceeding below be considered. Ewing v. Harries,68 Utah, 452, 250 P. 1049; 50 C.J. 708, note. The only inquiry permitted in this proceeding is whether the respondent court, having jurisdiction, exceeded its legitimate powers in the appointment of a receiver or receivers in the Wingfield bank cases. The statute having conferred jurisdiction upon the court, with full power and authority over the property, assets, and affairs of the Wingfield banks, it may not be said that as a matter of law the court was without jurisdiction or exceeded its legitimate powers in the appointment of a receiver or receivers. The fact that 50 percent of the depositors or creditors of said banks may commence an action against the superintendent of banks is of itself sufficient to refute the contention of counsel that the jurisdiction of the superintendent of banks to liquidate the property and assets of insolvent banks was intended to be exclusive.

I concur in the order.

COLEMAN, J., having disqualified himself, the governor designated Hon. E.P. CARVILLE, Judge of the Fourth Judicial District Court, to sit in his place and stead.