In Re Interstate Trust & Banking Co.

176 So. 1, 188 La. 211, 1937 La. LEXIS 1253

• Court: Supreme Court of Louisiana
• Decided: June 21, 1937
• Docket: No. 34275.
• Status: Published

Opinions

ROGERS, Justice.

In the early part of the month of January, 1934, Jasper S. Brock, State Bank Commissioner, acting under the authority of Act No. 300 of 1910, took possession of the' Interstate Trust & Banking Company, of the city of New Orleans, for the purpose of liquidating its business and affairs. The Bank Commissioner appointed O. H. Pittman and Walter Cook Keenan as his special agents to take charge of the liquidation and he also approved and confirmed the appointment of Charles W. Hogan as liquidator. Shortly after taking charge of the bank, the Bank Commissioner and his assistants, in an effort to obtain funds for distribution to the 34,000 depositors of the defunct institution, applied to the Reconstruction Finance Corporation for a loan of several hundred thousand dollars. They obtained the loan, and its avails, together with the cash on hand, was sufficient to enable them to propose a distribution of 10 per cent, to every depositor. Accordingly, on June 23, 1934, the proposed distribution was presented to the court in the form of a provisional account, which was duly advertised as required by law. Claimants immediately began filing oppositions to the account, demanding to be paid by preference, either because of alleged paramount rank of their respective claims, or because of alleged privileges upon the assets of the defunct bank. A total of 98 oppositions was filed to the liquidators’ account. Two of these oppositions were dismissed on motion of the opponents, and one was not submitted for decision, under an agreement of counsel. The 95 oppositions presented for judicial determination amounted in the aggregate-to $1,301,864.80 and involved a variety of legal questions. The liquidators filed a plea in bar as a defense to 89 oppositions. The plea was overruled by the-trial judge, necessitating a trial of each-opposition upon its merits. Several months were required for taking and transcribing the testimony and several weeks, were required for completing the arguments. The trial judge rendered a judgment maintaining 6 of the oppositions and: dismissing the other 89. Accompanying the judgment was an exhaustive and able written opinion, in which the trial judge discussed each opposition specifically, reciting, first, the facts on which the claim-, for a lien or preference was based and assigning, secondly, his reasons for allowing or disallowing the claim. Sixty-three opponents appealed from the judgment dismissing their demands. The liquidators appealed from the judgment so far as it maintained the claims of 6 opponents. The liquidators also answered the appeals of the 63 unsuccessful opponents.

The first issue to the determined is the issue arising on the plea in bar filed by the liquidators. The plea is founded on the proposition that the opponents against whom it is urged failed ‘ to comply with the provisions of section 4 of Act No. 300 of 1910, prescribing a limit of time after the publication of notice for the filing of proofs of claims by creditors other than depositors.

On the trial of each opposition the liquidators proved that after placing the bank in formal liquidation on January 4, 1934, the Bank Commissioner caused to be published in a local newspaper once each week beginning January 25, 1934 and ending on April 26, 1934, a special notice directed to all persons (other than depositors) having claims against the defunct bank to file the same with the State Bank Commissioner, and make legal proof thereof, at No. 107 Camp street, New Orleans, not later than April 26, 1934. The liquidators also proved that the opponents against whom the plea is urged failed to file their claims with the State Bank Commissioner on or before the date specified in the published notice.

Section 4 of Act No. 300 of 1910 covers all claims against a banking corporation in liquidation — not only claims for deposits, but other claims as well. The section so far as it covers claims other than deposits provides: “That as soon as practicable after taking such possession of a corporation the State Examiner of State Banks shall cause to be published a notice to appear at least once per week for three months in such newspaper as he may select. This notice shall call upon all persons, other than depositors, who may have claims against the corporation to file the same with the State Bank Examiner" of State Banks and make legal proof as to the justice thereof, at a place and within a time not earlier than the last day of publication of such notice to be specified therein. If the said Examiner shall doubt the justice or validity of any such claim so filed, he may reject the same and serve notice of such rejection upon the claimant either by mail or personally. An affidavit of such notice shall be filed in the office of the State Examiner of State Banks and shall be prima facie evidence of such service. An action upon such claim may be brought only within six months after the date of such service.”" Then follows the provisions covering the claims of depositors.

The liquidators contend that under section 4 of Act No. 300 of 1910, all claimants other than depositors were required to file and make legal proof of their claims on or before April 26, 1934, and that the claims of those opponents who failed to do so are barred by the statutory limitation. We think the contention is well founded and should prevail.

The trial judge properly held that the word “earlier” appearing in the statute was for the guidance of the Bank Commissioner and not for the guidance of the claimants. Under the statutory provision, the examiner (commissioner) is required to call upon claimants other than depositors to file and make legal proof of their claims at a place and within a time to be specified in the published notice. The word “earlier” means that the examiner (commissioner) in fixing the time within whiph claims must be filed and legal proof thereof made cannot fix a time earlier than the last day of publication. In this case the published notice called upon creditors, other than depositors, to file their claims and proofs not later than the last day of publication. The law requires that the notice must be published for at least once a week for three months. Therefore, in sped- fying the last day of publication as the expiration date of the period within which claims must be filed and proved, the Bank 'Commissioner gave to claimants, other than depositors, three full months within which to assert their rights.

The trial judge assigns as his reason for overruling the plea in bar, that the statutory provision relied on by- the liquidator does not say thaf claimants other than depositors shall file their claims with the Bank Commissioner; that it only provides that the commissioner shall publish á notice calling upon them to do so. That the contention of the liquidators requires the courts to pronounce a forfeiture which the Legislature has not created. That forfeitures are not favored and' should he declared only where no other decree is possible.

But what the liquidators are asking the court to do in this case is neither unusual nor unreasonable. Statutory provisions barring a claim not filed within a specified time against an estate in liquidation are numerous. The most familiar example of such a provision is the one contained in the National Bankruptcy Act, providing that claims shall not be proved against a bankrupt estate subsequent to six months after the adjudication. Section 57n, as amended by Act May 27, 1926, § 13 (11 U.S.C.A. § 93 (n). The time limit therein expressed effectively bars the subsequent filing of a proof of claim. Hutchinson v. Otis, 190 U.S. 552, 23 S.Ct. 778, 47 L.Ed. 1179; Gilbert’s Collier on Bankruptcy (3d Ed.) pp. 763, 764. There are also statutes of a number of the other states, dealing with the liquidation of banking institutions, which provide for the barring of claims after a specified time or within a time to be fixed by the Bank Commissioner or Superintendent of Banks. The reason for such statutory provisions is clearly expressed by the Missouri Court of Appeals in Bowersock Mills & Power Company v. Citizens’ Trust Company of Gorin, 298 S.W. 1049, 1051, in the following language, viz.:

“It is perfectly apparent that if there were no provisions for prompt and accurate ascertainment of the liabilities of an insolvent bank, and if there were no provisions for shortening the period of limitation for the presentation of claims and the filing of suits thereon, it manifestly would be impossible for the commissioner to wind up the administration of an estate until the general statutes of limitations had run, arid even then, under certain disabilities of claimants, it could not be wound up. Furthermore, if the assets could be allocated pro tanto to the claim of any particular creditor by a decree without first presenting the claim to the commissioner or considered by the court having primary jurisdiction over the estate to determine preferences and priorities, then the estate could be whittled away by successive actions to the prejudice of the rights of other creditors. The whole scheme as laid by the statutes is to compel the presentation of claims within a certain time so that all claims may be determined with .reference to the rights and equities of each and every creditor. The statutes undoubtedly are aimed at inaction and delay. The four months’ period for filing claims and the six months’ period for bringing suit certainly afford any claimant who desires to assert his rights in court sufficient opportunity and length of time in which to do so.”

The reason for the rule is also well expressed by the Court of Appeal of New York in the case of Societa Principessa Iolanda Margherita Disavoia (Fondata Dai Bonitesi) Inc., v. Broderick State Superintendent of Banks, 260 N.Y. 260, 183 N.E. 382, 383. There the court referred to the statute requiring the Superintendent of Banks to notify all creditors to present their claims within four months and also requiring him to accept or reject claims, with the right reserved to any claimant whose claim had been rejected to maintain an action thereon within six months thereafter. After referring to these statutory provisions, the court said:

“These sections provide a comprehensive and exclusive means for the ascertainment of all claims against a delinquent corporation which is in liquidation; for their acceptance or' rejection by the superintendent; for the institution of actions to determine the validity of rejected claims; for the ratable distribution of assets among general creditors. No actions or proceedings may be taken for the enforcement of claims not filed within the time prescribed; no suit upon a filed claim may be brought unless instituted within six months from the expiration of the time within which the superintendent must have accepted or rej ected the same; no suit upon an unfiled claim may ever be brought. Necessary is it that all claims be filed with the superintendent for the reason that until all such claims are made known to him, a ratable distribution of corporate assets among general creditors cannot be made. Necessary, also, are the provisions strictly limiting the time within which actions may be brought to enforce rejected claims; otherwise prompt distribution to depositors and other creditors of their ratable shares would prove impossible. Thus is provided a scheme whereby all the assets of a debtor are impounded, and held for proportionate distribution among general creditors; thus is prevented the unequal distribution, which otherwise would follow, if general creditors were permitted to recover accordingly as the liens acquired by them might have priority in time. No unfairness to creditors may result, for all must receive notice by publication of the proceedings, and a special class, such as depositors, an additional notice by mail; and all will have an opportunity to present and prove their claims for a proportionate interest in the fund.”

It is true that in the Federal Bankruptcy Act and in the various state statutes to which our attention has been directed it is provided in terms that a claim shall be barred if it is not filed within the prescribed period. But that only goes to show that Congress and the various state Legislatures, in order to insure the prompt and equitable distribution of a debtor’s estate, have not hestitated to forever bar a creditor who has not filed his claim within a reasonable time. And if the local statute in equivalent language evidences a like intention and accomplishes a like purpose, the court should not hesitate to effectuate the intention and purpose.

It is clear that the general purpose of Act No. 300 of 1910 is to provide a method for the prompt, economical, and equitable liquidation of banks and banking institutions. It is also clear that the provisions of section 4 of the statute constitute an important part of the comprehensive plan provided for such liquidation. And it is not difficult to conceive that the entire plan would be seriously impaired, if not destroyed, if persons other than depositors should be permitted to file their claims at any time their convenience or caprice might dictate.

Analyzing section 4 of Act 300 of 1910, we find that the published notice “shall call upon all persons, other than depositors” to file their claims “and make legal proof as to the justice thereof, at a place and within a time,” which, as we have shown, cannot expire earlier than the last day of publication of the required three months’ notice.

If it was the intention of the Legislature, and we think it was, that all claimants other than depositors should be required to file and prove their claims within a fixed period of time, then it inevitably follows that failure to comply with the requirement bars such claimants from subsequently asserting their claims. If this were not so, the publishing of the notice and the calling upon claimants for the presentation and proof of their claims are but idle ceremonies and are of' no legal or practical effect whatever.

There is, however, other language in the statute which plainly indicates that the date so fixed is final, and that failure to act within the delay forever bars the claimant. Thus, it is provided that “If the said Examiner [Commissioner] shall doubt the justice or validity of any such claim so filed, he may reject the same and serve notice of such rejection upon the claimant either by mail or personally.” Act No. 300 of 1910, § 4. Obviously, the words “so filed” refer to claims filed within the time and manner provided in the published notice. And the commissioner is expressly authorized to reject claims which are filed within the limit of time prescribed. There is nothing in the act which either expressly or' impliedly authorizes the commissioner to reject claims that are not timely filed. Hence, it would seem to follow logically that if unfiled claims are not barred, they may be presented at any subsequent time without any fear on the claimant’s part of their rejection by the commissioner.

Further in the same section, the statute provides the manner in which a claim shall be rejected, and it provides also that, “An action upon such claim may be brought only within six months after the date of such service.” Manifestly, this means that a suit upon a claim filed within the designated period and rejected in the specified manner can only be brought within six months from the date of the service of the notice of rejection, wheth er such service be given personally or by mail. There can be no doubt that under the language of the quoted statutory provision a claimant served with notice of rejection cannot sue after six months to establish the rejected claim. The statute, it should be observed, provides that the action “may be brought only within six months.” (Writer’s italics.) That provision means, if it means anything at all, that subsequent action is impossible.

If the statute should be interpreted as meaning that claimants other than depositors are not required to file their claims within the designated period, the six months’ period provided for the filing of suits on rejected claims could be suspended indefinitely by any claimant desiring to do so. A claimant could achieve that • result by merely withholding the filing of his claim. Even if a claim were filed after the designated period, the claimant could contend justifiably that as to him the six months’ period for filing suit is inapplicable, since the commissioner is powerless to reject belated claims. Such an interpretation would serve to encourage inaction and delay on the part of claimants. It would mean that the estate could be whittled away by successive suits to the prejudice of the other creditors. And it might make it impossible for the liquidators to complete the liquidation until the general statutes of limitation had run.

The intention of the Legislature to prohibit the filing of claims after the period designated in the published notice is further shown by the provisions in the same section of the statute, requiring the commissioner in like manner' to publish a notice calling up depositors to present their claims for adjustment not later than six months after his taking possession of the corporation, and further providing: “That failure to respond to such notice shall not operate so as to deprive any depositor of the right to share equitably and rata-bly in the distribution of the assets of the corporation in due course of liquidation.” We do not think the Legislature would have embodied that proviso in the statute, if it had not believed that his failure to respond to the published notice might debar a depositor from subsequently asserting his claim.

The fact that the proviso is applicable only to depositors and not to claimants-other than depositors is plainly indicative of the legislative intention that the claims of all creditors of a defunct banking institution, save depositors, failing. to respond to the published notice should be barred.

Moreover, in order that the administration of the insolvent estate may not be unduly prolonged, the statute further provides for the disposition of all unclaimed and unnoticed balances on deposits and for the discharge of the commissioner and his special agent from any further liability therefor.

This litigation forcibly illustrates the necessity and wisdom for requiring the timely presentation of claims against a' defunct banking corporation. The loan from the Reconstruction" Finance Corporation was sought and obtained by the liquidators for the purpose of distributing its avails among the depositors, many of whom are persons of limited means, ill-fitted to bear the loss caused by the bank’s collapse. All save two of the claimants were recognized as depositors and placed on the account for their distributive shares of the fund. The filing of their oppositions based on contentions of which he had no previous intimation was wholly unexpected by the Bank Commissioner. The total amount claimed by the opponents is largely in excess of the amount obtained for distribution among the depositors. The effect of their oppositions was to impede, if not defeat, the purpose for which the loan from the Reconstruction Finance Corporation was obtained. Although unsuccessful, nevertheless, they have delayed the distribution of the fund for many months. If, on the other hand, they had been successful, the result would be the distribution of the entire fund among some 90 creditors instead of among some 34,000 depositors of the defunct bank. Thus the purpose for which the loan was obtained has been obstructed, and a situation presented which would not have arisen if the opponents had filed their claims for preference with the Bank Commissioner on or before April 26, 1934.

The entire course of opponents’ action is at variance with the dominant purpose of Act No. 300 of 1910, which seeks to prpvide an expeditious and economical method of liquidating a defunct .banking institution. No opportunity was given by opponents to the Bank Commissioner to examine and determine the validity of their claims before subjecting this insolvent estate to a lengthy and costly litigation.

No unfairness will result to the opponents from maintaining the plea in bar. All the opponents received notice by publication to file their claims. The three 'months’ period allowed for filing claims and the six months’ period allowed for instituting suits afforded them ample time and opportunity to judicially assert their rights, if they so desired.

The trial judge maintained five oppositions as exhibiting preferential claims under Act No. 63 of 1926, viz.: St. Tammany Parish School District No. 2 for $2,562.50; Police Jury of the parish of Jefferson for $8,645.23; Water District No. 1 of the parish of St. Bernard for $551.25; Police Jury of St. Bernard parish for $202.50; and Bayou Terre-Aux-Bouefs Drainage District for the parish of St. Bernard for $5,747.52. These oppositions were maintained on the authority of the decision of this court in the case of In re Liquidation of Hibernia Bank & Trust Company (Jones County, Intervener), 181 La. 335, 159 So. 576, although the trial judge was not in accord with that decision. Subsequently the Jones County decision was overruled by the decision of this court in the case of In re Hibernia Bank & Trust Company (Pan American Life Insurance Company, Intervener), 185 La. 448, 169 So. 464.

The trial judge also maintained the opposition of Carroll, McCall, Plough & Carroll for $650 as an operating expense entitled to a preference, the claim being for legal services rendered during the period the defunct banking institution was operating on a restricted basis.

The opponents vigorously assert that the decision in the Jones County Case is correct and that the decision in the Pan American Life Insurance Company Case is incorrect. Per contra, the liquidators just as vigorously assert that the former decision is wrong and that the latter decision is right.

It is not necessary to analyze the arguments submitted in support of those opposing views. They are in the main founded on the opinions rendered by this court in the two cases themselves. An examination of the opinions in those cases will disclose the nature of the respective contentions and the arguments upon which they were submitted and determined. In the Pan American Life Insurance Company Case this court quoted with approval the reasons assigned in writing by the trial judge in this case for his disagreement with the opinion rendered by this court in the Jones County Case. Hence, the decision in the Pan American Life Insurance Company Case might well be considered as the settled law of this case. In any event, that decision is the latest expression of this court as to the nature and extent of the privilege created by Act No. 63 of 1926 and no good reason has been shown by the opponents for departing from the decision. On the contrary, further consideration of the disputed question has satisfied us that the decision in the Pan American Life Insurance Company Case is sound and that it should be adhered to as reflecting the true meaning and purpose of the provisions of Act No. 63 of 1926.

No purpose would be served in discussing the claim of Carroll, McCall, Plough & Carroll. Opponents failed to file their claim with the Bank Commissioner and their failure to do so bars recovery on the claim.

The other five oppositions allowed by the trial judge on the authority of the Jones County Case must be rejected, not only because they were not timely filed with the Bank Commissioner, but also because the Jones County Case was subsequently overruled by the Pan American Life Insurance Company Case.

The defense that "no proof of the claim-was filed with the Bank Commissioner is not urged against the following claimants, viz.: William H. Hickerson, Jr., and Hugo Ornstein; William H. Hicker-son, Jr.; N. V. Nederlandsche Kolonial Hendelvereening; Rouwenhorst Mulder & Co.; Hattiesburg Grocery Company; and State Agricultural Credit Corporation.

William H. Hickerson, Jr., and Hugo Ornstein filed a joint opposition to the liquidators’ account, asking that they be recognized as preferred creditors for the sum of $4,783. Hickerson, under the trade-name of Hickerson Importing Company, is a coffee importer, in New Orleans. Ornstein is a coffee exporter, in Brazil. Hickerson agreed to purchase from Ornstein 500 bags of coffee for $4,-783. On December 13, 1932, Hickerson wrote a letter to the Interstate Bank, requesting the bank to open a letter of credit in favor of Ornstein for $4,783 to cover a ninety-day sight draft to be drawn by Ornstein, which draft was to represent the purchase price of the coffee. The next day the bank opened its irrevocable letter- of credit, whereby it promised Ornstein to accept a draft or drafts for any sum or sums not exceeding' a total of $4,783 at ninety-day sight, provided the draft or drafts were accompanied by commercial invoices, consular invoices and complete sets of clean negotiable on Board Ocean bills of lading, evidencing shipment of 500 bags of coffee. The letter of credit provided that the draft or drafts would be payable at the National City Bank of New York, if the draft or drafts were negotiated or presented on or before December 17, 1932. Attached to the letter of credit was a letter of engagement signed by Hickerson in the name- of the Hickerson Importing Company, in which he agreed to provide the bank at least one, day previous to the maturity of any draft drawn pursuant to the letter of credit, sufficient funds with which to meet the draft, together with 1 per cent, commission, and to insure at the risk of the Hickerson Importing Company for the bank’s benefit all the merchandise purchased or shipped pursuant to the letter of credit. Hickerson also agreed that title to all the merchandise purchased by me'ans of the letter of credit and in payment for which fhe draft or drafts were to be drawn, should be and remain in the bank until payment of any an-d all liability which the bank assumed by accepting the 'draft or drafts drawn by Ornstein against the bank. On January 3, 1933, Hicker-son ori' a trust receipt withdrew from the banks the documents representing the coffee. The trust receipt provided that title to the coffee should remain in the bank, the possession of Hickerson being merely that of trustee for the bank, which was to receive the avails thereof. Hicker-son sold the coffee and deposited the proceeds of the sale in his general checking account in the Interstate Bank. On February 2, 1933, Hickerson drew his check for $4,804.85 against his deposit and delivered the check to the Interstate Bank, together with a letter setting forth that the check was for the specific purpose of retiring drafts drawn by Ornstein. The $4,804.85 called for by the check represented $4,783, amount of - draft, $23.92, banker’s commission, .02 check tax and $2.09, rebate for prepayment.

The draft drawn against and accepted by the bank under its letter of credit was payable April 7, 1933. Opponent Hicker-son contends that he is a preferred creditor to the extent of $4783, the amount of the draft, by virtue of a trust relationship and equitable lien, or, in the alternative, that Act No. 63 of. 1926 gives him a privilege on all the general assets of the bank to secure the amount of the draft. Orn,-stein contends that he is entitled to the preferential payment of the .$4,783, or, in the alternative, he is entitled .to a lien under the provisions of Act No. 63 of 1926. There is no dispute in fact between the opponents, who seek a joint judgment in their favor.

The trial judge rejected the contention of opponents that they were entitled tó a preference by virtue of a trust'relationship or equitable lien on the authority of Young v. Teutonia Bank & Trust Company, 134 La. 879, 64 So. 806 and Daugherty v. Canal Bank & Trust Company, 180 La. 1003, 158 So. 366, both of which hold in effect that equitable liens do not exist under the laws of this state.

Opponents’ contention, in order to bring their claims under the provisions of Act No. 63 of 1926, is that when the check for $4,804.85 was given the bank by Hickerson on February 2, 1933, it was for the purpose of having the bank collect from itself and to remit to the holder of the draft. The trial judge held that opponents could not successfully invoke the provisions of Act No. 63 of 1926 for the following reasons which we quote from his written opinion, viz.:

“In the first place, the check given the bank by opponent Hickerson was, as I see it, given the bank to pay the liability Hickerson incurred when he signed the Letter of Engagement, under which the letter of credit was opened. Hickerson, in effect, found that he was unable to buy the coffee from Ornstein on his own credit, but was able to buy it against bank credit, so he applied to the bank requesting it to open credit in favor of the foreign exporter, so that the latter would be assured of acceptance of his drafts when presented for acceptance, with bills of lading attached, and be assured also of payment by the drawee upon maturity. This credit was established by Hickerson applying therefor and signing the Letter of Engagement. He merely complied with his requirements in the letter of engagement in paying, the bank the money represented by his check. In no sense was he placing the bank in funds to meet the draft. Those funds were not to be held separate, or in any traceable form for the purpose of meeting the maturing draft that had theretofore been accepted by the bank. Hickerson was doing no more than paying the bank the obligation he incurred when it opened the irrevocable letter of credit and accepted the draft drawn thereon and payable ninety days later. The Bank’s liability to the holder of the draft was absolute; and consequently it would have been compelled to pay the draft irrespective of whether or not Hickerson ever paid it the amount thereof. I am aware that it may be argued that Hickerson’s obligation under the Letter of Engagement was merely to place the bank in funds one day prior to the maturity of the draft, and he actually made the payment on February 2, 1933, though the draft did not mature until April 7th. The fact of prepayment is unimportant. The .important fact is that the delivery of the check was intended upon its clearance to be payment and was therefore not intended to be a collection and remittance or delivery item. Hickerson was satisfying his liability to the bank by the delivery and clearance of the check.

“In support of this same contention, I should point out that under the application to withdraw the shipping - invoices and consular .documents, and under the trust receipt itself, the title to the 500 bags of coffee was in the Bank, and Hick-erson when he sold the coffee was doing nothing more than selling the Bank’s property and obligating himself at the same time .to deliver the proceeds to the bank upon the completion of the sales. The Bank never intended to be unprotected in its dealings with Hickerson. It intended to have at all times either title to the coffee or the proceeds of its sale. For that reason, also, I fail to see how opponents can invoke Act No. 63 of 1926, when one who withdraws a document, title to which is in the Bank on a trust receipt, and sells that document and then delivers the proceeds to the Bank by check or other means.

“However, even though I were wrong in the analysis I have here made of the transaction, and the reasons I have advanced for believing that the delivery of the check by Hickerson to the Bank was payment of his obligations under the Letter of Engagement, his application to withdraw documents on trust receipt, and under the- trust receipt, I would still refuse to grant him or Ornstein a lien and privilege under Act No. 63 of 1926. I would refuse because in prepaying to the Bank .the amount due it under the Letter of Engagement, that is, in paying it on February 2, 1933, instead of one day prior to the maturity of the draft, that is on April 6, 1933, he received a discount or rebate for that prepayment. This discount or rebate is nothing more than prepaid interest. The only reason the Bank would have given him this rebate for his prepaying his obligation under the Letter of Engagement, was because the bank thereby secured the right to use .the money so obtained by it by means of his aforesaid check. This payment of interest, in my opinion, created undoubtedly the relationship of debtor and creditor. It was paid solely and only for the use of the money. Title to the money, therefore, passed to the Bank, and Hickerson, as well as Ornstein, became nothing but a mere ordinary creditor of the Bank entitled to no preference or lien whatsoever.”

We think the reasons assigned by the trial judge are sound and that the joint opposition filed by William H. Hicker-son, Jr., and Hugo Ornstein was properly rejected.

The opposition of William H. Hicker-son, Jr., involves a claim for preferential payment in the sum of $2,408. The facts and legal principles involved are the same as those involved in the joint opposition: of Flickerson and Ornstein. The trial judge dismissed Hickerson’s opposition for the same reasons he dismissed the joint opposition of Hickerson and Orn-stein. We find no error in the judgment.

The oppositions of N. V. Nederlandshe Koloniale Handelvereening and Rouwenhorst Mulder & Co. also grow out of coffee transactions which were handled on letters of credit issued by the Interstate Bank. The opponents and the liquidators entered into a lengthy stipulation of facts in each case, which are incorporated in the opinion of the trial judge. We do not find it necessary to-reproduce them here. As found by the trial judge, these oppositions to all intents and purposes present the same questions which are presented in the opposition of Hickerson and Ornstein, except that in the present oppositions Zander & Co., Inc., which delivered its checks to the Interstate Bank in payment for the coffee, is not asking for a preference or a lien under Act No. 63 of 1926, but it is the holders of the drafts which are doing so. Further, the checks of Zander & Co., Inc., were not drawn on the Interstate Bank, but on the Whitney National Bank, of New Orleans, in which the drawer had a checking account with sufficient-funds to take care of the checks without necessarily using the proceeds of the sale of the coffee, nor were the checks when given to the Interstate Bank accompanied by letters of instructions similar to the one which accompanied the check that Hickerson delivered to the bank.

The record discloses that the Interstate Bank was not requested nor’ directed to hold the proceeds of the checks of Zander & Co., Inc., in cash, or to earmark or set them aside from any of its assets or from the assets of its customers. The proceeds of the checks, when received, were immediately commingled with the funds of the bank and were credited on an account captioned “Customers’ Liability under Letters of Credit,” which account served for and embraced liability under numerous letters of credit, including those sued on by the opponents, and the cash account of the bank received a corresponding debit.

The trial judge found that the points of difference which we have hereinabove enumerated were not sufficient to lead him to any other conclusion than the one at which he arrived in considering the Hickerson-Ornstein opposition. “As a matter of fact,” says the trial judge in disposing of each opposition, “that conclusion is even strengthened in this case by the fact that the one who delivered the check is not asking for a preference or lien under Act No. 63 of 1926 in this opposition.”

Opponents cite two New York cases, viz., Shawmut Corporation v. Bobrick Sales Corporation, 260 N.Y. 499, 184 N.E. 68, and Barclays Bank v. Bank of United States, 236 App.Div. 150, 258 N.Y.S. 317, affirmed in 261 N.Y. 688, 185 N.E. 793. They also cite one Louisiana case, viz., In re Canal Bank & Trust Company’s Liquidation (Intervention of Wilcox), 178 La. 575, 152 So. 297. But none of the cited cases is authority for recognizing the preference sought by the opponents.

Opponents suggest that to allow them a privilege under Act No. 63 of 1926 would not necessarily require a repudiation of the decision of this court in the Pan American Life Insurance Company Case. However, they contend that the facts of their case bring them within the doctrine announced in the Jones County Case. They say that if the Jones County Case was correctly decided, which they insist it was, they are just as much entitled to the protection of the statute as was Jones County in that case. They urge that the trial judge was wrong in not so holding. They insist that the decision in the Pan American Life Insurance Company Case is not sound, and that the decision in the Jones County Case is sound. They argue the Jones County Case and not the Pan American Life Insurance Company Case should be followed. Those two decisions as published in the official reports speak for themselves. It suffices for us to say that we affirm the doctrine of the Pan American Life Insurance Company Case as the later and better doctrine. Under that decision, opponents’ contention is untenable, conceding that the facts involved in their oppositions are the same as were the facts involved in the Jones County Case.

The Hattiesburg Grocery Company, a corporation of Hattiesburg, Miss., on May 1, 1928, issued bonds in the sum of $70,000, with coupons attached, payable at the office of the Interstate Trust & Banking Company, New Orleans, La. The bonds were secured by deed of trust or mortgage on certain property in HaU tiesburg. The indenture with which the bonds were identified provided that the Interstate Bank was to be the corporate trustee and that Percy H. Stiges was to be the individual trustee.

Under the indenture the Hattiesburg Grocery Company agreed that commencing May 1, 1929, and monthly thereafter it would deposit with the corporate trustee a certain percentage of the principal of the debt, and that commencing on November 1, 1929, and monthly thereafter it would deposit with the corporate trustee a certain percentage of the amount necessary to meet the interest. payments on the debt. The indenture permitted the sale of any of the mortgaged property and the release of the mortgage thereon, upon the substitution therefor of cash and notes, which upon their delivery to the trustees became subject to the mortgage created by the indenture. The agreement provided that the Hattiesburg Grocery Company was to pay the normal federal income tax to the extent of 2 per cent, of the total interest paid by company to the bondholders.

Between May 1, 1932, and March 1, 1933, the sum of $5,013.57 came into the bank’s possession by means of checks sent to it by the mortgagor in compliance with the provisions of the indenture .obligating the mortgagor to make monthly deposits with the bank for the purpose of meeting principal and interest maturities. From December, 1931, up to December 12, 1932, the sum of $1,512.01 came into the bank’s possession as proceeds from the sale of mortgaged property. There also came into the bank’s possession $117.89 as the un-expended residue of the 2 per cent, of the total interest sent to the bank by the grocery company for the purpose of paying the normal federal income tax. The moneys remitted by the Hattiesburg Grocery Company to the Interstate Bank which were in the bank’s possession at the time it went into liquidation were carried on the books of the bank as follows, viz.: Sinking Fund Account (regular monthly payments) $5,013.57; Special Sinking Fund (proceeds from sale of mortgaged property), $1,512.01; Income Tax (2 per cent.) of the interest due November 1 to May 1 of each year, $117.89, or a total of $6,643.47.

The Hattiesburg Grocery Company, Percy H. Stiges, individual trustee, and the Louisiana Savings Bank & Trust Company, substitute corporate trustee, filed an opposition to the liquidators’ account, claiming a lien and privilege under Act No. 63 of 1926 on the general assets of the defunct Interstate Bank to secure the payment of the aforesaid $6,643.47.

Opponents contend that the Interstate Bank was merely the paying agent and not the depositary of the Hattiesburg Grocery Company and they rely for recovery on the doctrine announced in the case of In re Liquidation of Hibernia Bank & Trust Company (Jones County, Intervener), 181 La. 335, 159 So. 576. Opponents concede that the Jones County Case was overruled by the later case of In re Hibernia Bank & Trust Company (Pan American Life Insurance Company, Intervener), 185 La. 448, 169 So. 464. But opponents insist that the Jones County Case was correctly decided and should be reinstated as the jurisprudence of this state on the interpretation of Act No. 63 of 1926, and that the Pan American Life Insurance Company Case was incorrectly decided and should itself be overruled. We cannot accede to opponents’ demand. We adhere to the decision in the Pan American Life Insurance Company Case and regard the doctrine therein announced as being now the settled law of the state. Hence, opponents’ claim for a lien and privilege must be denied.

The opposition of the State Agricultural Credit Corporation, Inc., • is predicated on the following facts and circumstances, viz.: On the afternoon of March 1, 1933, that corporation deposited with the Interstate Bank two checks, aggregating $54,585.21, drawn by the Federal Intermediate Credit Bank on the Hibernia Bank & Trust Company. The deposit, was made on the regular form of deposit slip and the deposit was credited on the bank book of the depositor. The deposit was also credited to a checking account carried by the State Agricultural Credit Corporation, Inc., with the Interstate Bank, in which account there was at the time a balance of several thousand dollars. Opponent alleges that-the balance now due by the Interstate Bank on its account is $51,855.95, and opponent seeks to be recognized as a preferred creditor of the bank for that amount.

Opponent’s claim for a preference is based, first upon its contention that the checks, although delivered to the bank on March 1, 1933, were not in fact and in law collected by the bank until March 3, 1933, when the bank resumed the 100 per cent, status as to deposits made on that day and thereafter; and, secondly, in the alternative, upon the contention that opponent is entitled to a privilege under Act No. 63 of 1926.

Both the Interstate Bank and the Hibernia Bank were members of the New Orleans Clearing House Association. Under the rules of that association the method of dealing with checks was as follows, viz.: Each bank made up a package of checks drawn on each other clearing house bank which it received on a particular day and on the same day delivered the package to the drawee bank, which issued a receipt acknowledging that the package contained checks drawn on it aggregating in amount the total stated in the receipt. On the next morning at 8 o’clock representatives of the member banks met at the Federal Reserve Bank and cast up the accounts among'the member banks based on the tentative receipts of the preceding day, the result reached determining whether a bank was a debtor or a creditor for the day. If a debtor, it paid the amount to the Federal Reserve Bank before a specified hour or was charged with the amount by the Federal Reserve Bank, if it had sufficient funds there. If a creditor, it received a credit slip and credit for the designated amount on the books, of the Federal Reserve Bank.

In conformity with that practice, the Interstate Bank at about 4 o’clock on the afternoon of March 1, 1933, delivered to the Hibernia Bank all the checks drawn upon that bank, including the two- checks involved in this opposition, which had been received by the Interstate Bank that day. The Interstate Bank also delivered to all the other clearing house banks checks drawn on them and received by the Interstate Bank on March 1, 1933. Promptly at 8 o’clock on the morning of March 2, 1933, in conformity with the rules and regulations of the Clearing House Association, the representatives of its member banks met at the Federal Reserve Bank, at which time they produced the receipts given and received for the checks delivered on March 1, 1933. These receipts were immediately tabulated for the purpose of ascertaining whether the net result of the transactions was a debit bálance or a credit balance against or in favor of the respective banks.

As a result of the transactions of March 1, 1933, the Interstate Bank showed checks-drawn against the other member banks; totaling $356,561.21, and the other member banks showed checks drawn against the-Interstate Bank, totaling $287,494.96. The-result of these transactions, that is, the interchange of checks drawn on March 1, 1933, was to leave a credit balance in. favor of the Interstate Bank of $69,066.25. Prior to 9 o’clock on the morning of March 2, 1933, the tabulation of the clearings, of the previous day was completed, and the clearings settlement receipt showing the credit of $69,056.25 in favor of the Interstate Bank was delivered to that bank and entered upon its books. In conformity with the custom and the standing instructions of the clearing house banks, the-Federal Reserve Bank credited the Interstate Bank with the credit of $69,056.-25 resulting from the clearings of the-previous day.

On the morning of March 2, 1933, the Hibernia Bank & Trust Company, ora which the checks had 'been drawn, charged the account of the Federal Intermediate Credit Bank, the drawer, with the .amount of the checks involved here, the-charge being made as of date March 1,. 1933. At the same time, both checks were immediately marked paid by the Hibernia. Bank as of date of March 1, 1933, the payment stamp being perforated through, the checks.

Opponent’s contention is founded on. its interpretation of rule 21 of the Clearing House Association. That rule which was in effect in March, 1933, reads ira part as follows, viz.:

“Rule 21. Return Items. Section 1. Errors in exchanges and claims arising from the return of checks from any cause, except for lack of endorsement, shall be adjusted directly between the Banks by Federal reserve checks, if requested, otherwise by receipt in approved form to be collected through clearings of the following business day, before two o’clock p. m., and on half holidays before twelve o’clock M. * * * ”

Opponent argues that the purpose and effect of fixing the delay in which checks may be returned “from any cause” is to suspend the finality of payment of checks concerned in the clearance until the expiration of the time so fixed. Payment is not made in law or in fact until such hour according to opponent.

But our reading of the rule satisfies us that its purpose is to permit only a return of items by the bank on which they are drawn where an error exists in making the exchange or from any other cause. Testimony adduced on the trial of the opposition concerning the meaning and intent of the rule as understood by the representatives of the clearing house banks of New Orleans was to that effect, and, further, that the" rule was intended for the convenience of the banks themselves and not for the convenience •of their customers.

We agree with the conclusion of the trial judge that opponent’s contention that credits to customers’ accounts prior to 2 o’clock p. m. on the day following the receipt of checks by a bank on which they were drawn were intended solely as conditional credits is untenable. We further agree with the conclusion of the trial judge that the credits were intended, on the contrary, to be absolute, in the absence of an error in exchange of an error on the part of the banks themselves, from the moment the checks were delivered on the afternoon of the day they were received to the bank on which they were drawn. The construction > of the rule contended for by opponent, that no check was to be regarded as paid until 2 o’clock p. m. of the day following its receipt, would mean that the drawee bank could not properly start its posting until that hour, although the evidence in the record shows that all banks started their posting before that time, frequently posting on the night of the day on which the checks were received, or, at the latest, in the early morning hours of the following day. Such construction would place an undue burden on the banks themselves, in that as they are not in a position to discover overdrafts until the posting is completed, if the posting were delayed until 2 o’clock of the day following the receipt of a check it would be too late to make adjustments with the other clearing house banks which had received and forwarded to the drawfee banks N. S. F. items. Further, if a check were not to be regarded as paid until 2 o’clock of the day following its receipt, it would necessarily follow that any check received by a bank through the clearings would be subordinated to any check received over the counter by the drawee bank from its own customers before that time.

It is clearly shown by the record that rule 21 of the Clearing House Association was never interpreted by any of the member banks as permitting a bank to return a check merely because the drawer requested of the drawee bank that payment be stopped. A request by the drawer of a check that payment be stopped is not a “cause” contemplated by the rule.

Opponent contends that March 2, 1933, was a holiday, having been proclaimed as such by the Governor. If the Governor were authorized under the law to declare the holiday, which it is not necessary to decide, it is shown by the record that he notified the New Orleans Clearing House Association that he approved their proposed action to suspend payment of demand obligations effective as of 9:30 o’clock a. m., which hour was actually set by the Clearing House Association in order that the clearings might be completed before the holiday became effective. And, as a matter of fact, the clearings were actually completed ' and the meeting adjourned before 9 o’clock on the morning of March 2, 1933.

Our opinion is that the checks involved in this opposition were delivered to and received by the Interstate Bank as a deposit and not as a mere collection. The deposit was absolute and not conditional and the deposit became effective as of March 1, 1933. And this is so, notwithstanding that the deposit slip as well as the bank book itself contained clauses to the effect that “checks, drafts and other items payable in this city may be charged back to the customer if not finally paid through the New Orleans Clearing House,” of which the Interstate Bank was-a member. That question is settled by the recent decision of this court in the case of In re Liquidation of Canal Bank & Trust Company (Intervention of Clark & Company), 181 La. 856, 160 So. 609, 99 A.L.R. 473. There the court showed the distinction between a bank’s receiving a check for collection and receiving a check for deposit. And the court held that the depositing of checks without restriction on deposit slips containing provisions to the effect that the bank is acting as agent and reserves the right to charge items back to the depositor passes title to the checks where the amount of the checks is credited to the depositor’s account at the time of delivery. In such a case the depositor becomes an ordinary creditor, not a privileged creditor, of the bank for the amount of the checks deposited. See, also, the case of In re Liquidation of Hibernia Bank & Trust Company (Intervention of Progressive Investment Company, Inc.), 182 La. 856, 162 So. 644.

Opponent cannot recover under its contention that it is entitled to a preference because the checks were not collected in fact and in law until March 3, 1933. Both facts and law show that the checks were collected and actually deposited to opponent’s credit on March 1, 1933, and not on March 3, 1933. Nor can opponent recover under its alternative contention that it is entitled to a privilege under the provisions of Act No. 63 of 1926. No agency existed to collect the checks. They were delivered to and received by the Interstate Bank for deposit and not as opponent’s agent for collection and remittance.

Robert W. Elsasser and Charles B. Stewart, who filed an opposition which was dismissed by the trial judge, filed with the Bank Commissioner within the designated period what they termed a proof of claim. But they claimed no preference and demanded no protection under Act No. 63 of 1926, hence, we think the claim for a preference or a lien set up in their opposition brings them squarely within the statutory limitation pleaded by the liquidators in bar of their action. For that reason as well as the reasons assigned by the trial judge, their opposition was properly dismissed.

Our conclusion, briefly stated, is that the oppositions to the liquidators’ account present four legal propositions which are determinative of the opponents’ right to be paid by preference because of the alleged paramount rank of their claims or because of the alleged lien securing their claims. The first is as to the effect of the limitation provisions of Act No. 300 of 1910. The second is as to the claim for an equitable lien or privilege. The third is whether Act No. 63 of 1926 grants any protection in what is commonly known in banking circles as a “paying agent” relationship. And the fourth is whether a lien or privilege exists under the provisions of Act No. 63 of 1926 where the defunct bank was acting as trustee under collateral trust agreements, mortgage, bond, and other security issues.

The limitation provisions of Act No. 300 of 1910 require the dismissal of the oppositions to which the provisions are applicable under the plea in bar filed by the liquidators. The nonrecognition of equitable liens or privileges in this state, as shown by the decision in Daugherty v. Canal Bank & Trust Company, 180 La. 1003, 158 So. 366, requires- the dismissal of the oppositions founded upon that proposition. The nonapplication of Act No. 63 of 1926 to a “paying agent” case, as settled by the decision in the case of In re Hibernia Bank & Trust Company (Pan American Life Insurance Company, Intervener), 185 La. 448, 169 So. 464, requires the dismissal of the oppositions claiming a lien under the statute in such cases. And the nonexistence under Act No. 63 of 1926 of any lien in a case where the defunct bank was made the trustee in a security issue, as also settled in the Pan American Life Insurance Company Case, requires the dismissal of the oppositions based on that contention. The opposition of the State Agricultural Credit Corporation is controlled, in addition, by the decision in the case of In re Liquidation of Canal Bank & Trust Company (Intervention of Clark & Company), 181 La. 856, 160 So. 609, 99 A.L.R. 473, as we have hereinabove shown. Therefore, all the oppositions herein filed to the liquidators’ account must be dismissed.

Predicating their action upon the accounts of the respective claimants as reflected on the books of the defunct bank, the liquidators have recognized all the claimants as depositors, except Carroll, McCall, Plough & Carroll and the Avenue Realty Company, and have placed them as such upon their account. Neither the claim of Carroll, McCall, Plough & Carroll nor the claim of the Avenue Realty Company can be considered as a deposit or in the nature of a deposit. Therefore, all the claimants who are entitled to do so will share equally and ratably with the other depositors in the proposed distribution of funds and in any other distribution of funds made to the depositors.

For the reasons assigned, the judgment appealed from is annulled so far as it maintains the oppositions of Carroll, McCall, Plough & Carroll, St. Tammany Parish School District No. 2, Police Jury of the parish of Jefferson, Water District No. 1 of the parish of St. Bernard; Police Jury of the parish of St. Bernard, and Bayou Terre-Aux-Boeufs Drainage District for the parish of St. Bernard, and it is now ordered that those oppositions, and each and every one of - them, be and they are hereby dismissed. It is further ordered that in all other respects the judgment appealed from be and it is hereby affirmed.

ODOM, J., concurs in the decree. O’NIELL, C. J., concurs in the ruling of Judge Cage, that the claimants, other than depositors, who failed to file their claims on or before the 26th day of April, 1934, did not lose their claims, by effect of the provisions of section 4 of Act No. 300 of 1910; and the Chief Justice dissents from that part of the prevailing opinion in this case which repudiates the doctrine of the Jones County Case, and will assign written reasons therefor.