State, Ex Rel. v. Superior Court of Marion County

177 N.E. 322, 202 Ind. 589, 1931 Ind. LEXIS 32

Opinions

Myers, J.

This is an original action brought by the relator, Meyer-Kiser Bank, filed June 12, 1931, against the superior court of Marion County, Thomas D. McGee, special judge, and seven other persons named, for a writ of prohibition prohibiting the Marion Superior Court and Thomas D. McGee, as special judge, from further acting in cause No. A61,387, wherein the seven persons are asking judgment in the aggregate of $5,560 against the Meyer-Kiser Bank and for the appointment of a receiver. A temporary writ was issued on June 17, 1931. Luthér F. Symmons, as bank commissioner of Indiana, by permission of the court, became á party to this action, and, as relator, filed his cross-complaint showing, among other things, in keeping with the showing made by the relator Meyer-Kiser Bank, that this bank was incorporated under the provisions of the general banking act approved February .7, «1873, and acts amendatory thereof and supplemental thereto; that it continued in business until May 12, 1931, when, by resolution of its board of directors passed the previous day, the bank was closed “with-a view to voluntary liquidation” and the banking commissioner notified of the action so taken by the bank’s officials; that, since the bank was closed, the commissioner caused an examination of the bank to be made and, upon a careful check and audit, he found the total assets, as per the books of the institution, to be $3,004,033.83; total liabilities, $2,282,640.07; apparent excess of assets available to meet losses, $721,393.76; that a conservative value of the assets on liquidation is $2,382,771.97, and, with prudent management, the assets should exceed the liabilities by $100,000.

On May 23,1931, after notice to the stockholders had been given, shareholders, in person, representing 13,537 shares, and by proxy, 25 shares, out of a total of 15,000 shares, the entire capital stock of the bank, met and, by unanimous vote, ratified and confirmed the action theretofore taken by the board of directors, and by additional resolutions, in substance, directed that the board of directors proceed to the liquidation of the bank through the medium of liquidating agents to be appointed by the board, subject always to the further supervision, direction and control of the department of banking of the State of Indiana; that the assets of the bank be converted into cash, and, after paying expenses incident thereto, they be applied, first, to the payment in full of claims of depositors and creditors of the bank in accordance with their respective equities as established by law, and, second, the residue to be paid to the stockholders in proportion to the shares of capital stock owned by them; that no dividends or profits shall be paid to the stockholders nor shall any part of the capital stock be withdrawn by nor paid to the stockholders in any manner whatever until the debts and liabilities of the bank of every kind are fully paid. Notice of these resolutions was given by publication. Immediately .following the stockholders’ meeting, the banking department of Indiana approved the proposed liquidation of the bank and ordered that its assets and its business be restored to the custody of the liquidating agents, subject always to the supervision, direction and control of the department of banking of the State of Indiana.

On the same date, May 23, the board of directors, at a special meeting, convened and, by resolution, appointed three persons as liquidating agents, and, in other respects, the resolutions were practically the same as those adopted by the stockholders. The liquidating agents, after their appointment had been approved by the Commissioner of Banking, entered upon the discharge of their duties under the supervision and control of the Commissioner of Banking, and were so acting on June 4, 1931, when Leland Thorne and six others commenced cause No. A61,387 in the Marion Superior Court.

The title of the act under which the relator, MeyerKiser Bank, was incorporated reads as follows: “An Act to authorize and regulate the incorporation of Banks of Discount and Deposit in the State of Indiana.” Section 11 of that act is still in force and provides that, “Any such association may go into liquidation and be closed, by a vote of its shareholders owning two-thirds of its stock. And when such vote shall be taken, it shall be recorded on the record-book of the association, and notice thereof given by publication for at least three successive weeks. . . . And after such vote shall be taken, no dividend of profits or of the capital shall be made to the stockholders, nor any part of the capital withdrawn by nor paid to the shareholders, in any manner whatever, until all the debts and liabilities of the association of every kind are fully paid.” Acts 1873 p. 21, §3867 Burns 1926. In connection with this section, the Legislature, in 1915 (Acts 1915 p. 546, §3972 Burns 1926) gave the Auditor of State, now bank commissioner, the right to petition for a receiver of a bank, when, in his opinion, its “affairs are not being administered to the best interests of‘the depositors and stockholders,” although the same is in voluntary liquidation.

The vote of the shareholders was had and resolutions adopted, record made, and notice given in compliance with §11, supra. Section 18 of the 1873 act provided for an examination of such associations under direction of the Auditor of State, but that section was amended in 1895 (Acts 1895, ch. 98, p. 202) to the effect that when an examination disclosed an insolvent or failing condition of the bank, it was the duty of the examiner to notify the Auditor of State, who at once was required to put some one in charge of the affairs of the bank and to immediately apply to the judge of the circuit or superior court of the county in which the bank is located for the appointment of a receiver. This same provision with reference to the duty of the Auditor of State to put some one in charge and to have a receiver appointed was carried forward into the act of 1907 (Acts 1907, ch. 182, p. 300, §2) which impliedly repealed the 1895 amendment of §18, supra, and which provision as to placing some one in charge and the appointment of a receiver was also a part of the act of 1911 (Acts 1911, ch. 17, p. 30) which superseded the act of 1907.

The act of 1911 consisted of five sections. The fourth section repealed all laws in conflict therewith and the fifth was an emergency section. The first three sections were amended in 1921 (Acts 1921, ch. 263, p. 816) whereby (§2) the bank commissioner was substituted in place of the Auditor of State, in conformity with an act of the Legislature approved March 7,1919. (Acts 1919, ch. 50.) This section was again amended in 1929 (Acts 1929, ch. 161, p. 495, §3965 Burns Supp. 1929) in several important particulars, each of which gave the bank commissioner additional power and discretion. Owing to the length of the section amended and as amended, we deem it sufficient for this opinion to call attention to the amendments alone pertinent to this case.

Prior to the amendment of 1929, the Bank Commissioner, on notice by an examiner of the insolvent or failing condition of a bank, “shall thereupon direct the examiner or some other person appointed by him to at once take charge and control” of the affairs of the bank, “and said bank commissioner shall immediately thereafter make application to the judge of the circuit court or superior court of the county where such” bank is situated for the appointment of a receiver. But the section as amended permits the commissioner, upon such notice by the examiner, to exercise discretion, that is to say, “if said bank commissioner shall deem it necessary and expedient, he shall thereupon direct said examiner or- some other person appointed by him to at once take charge and control of said private bank . . . and said bank commissioner shall, if he finds it to be to the best interests of the depositors and creditors of said bank, make application to the judge ... for the appointment of a receiver.” (Our italics.) Furthermore, in place of the provision "Banks . . . being administered by receivers and assignees shall be subject to the same examination and be required to report to the bank commissioner as is required of solvent banks . . . and safe deposit companies,” it now reads, "Banks ... in voluntary liquidation shall be subject to the same examination and shall be required to report at the discretion of the bank commissioner the same as solvent banks . . . and safe deposit companies. ” There is also a provision, not at this time material, whereby the Attorney-General may be called to perform the duties of the -bank commissioner.

The Legislature, in 1919, created a department of the state government, to be known as the “department of banking.” All laws relating “to the incorporation, organization, supervision, control and management of all banks, of all kinds authorized by law to transact business in this state, ” and other kindred institutions mentioned in the act were "continued in full force and effect, excepting as modified by this Act,” which took effect September 30, 1920, when "the banking department of the auditor of state” ceased to function. By that act, the power and authority of the Auditor of State, together with all books, records and other equipment connected with the business of banks, was transferred to the new department, to be “administered by a bank commissioner and such deputies, examiners, clerks and assistants as are provided for in this Act.” Acts 1919 p. 112, ch. 50, §§1-4, §3967 et seq. Burns 1926. Section 1 of this act was amended (Acts 1921, ch. 263, p. 259), only to the extent of increasing the bank commissioner’s salary from $3,000 to $5,000 a year and increasing the number of bank examiners from eight to 10.,

As we have seen, in 1919, the Legislature created the “department of banking” as a separate department of government. The head of this department is the bank commissioner appointed by the Governor. The commissioner is an administrative officer charged with certain important official duties, in their nature, of a business character. The subject of banking and similar businesses, their control and supervision, have frequently had the attention of the Legislature, with the result that it continued to affirm in more positive terms its purpose of classification of banking and kindred subjects, and to exclude all outside interference with the duties imposed upon the bank commissioner, one of which is, under certain contingencies, to apply for a receiver. Prior to the 1929 act, supra, the exclusive right of the bank commissioner to apply for a receiver was questioned, but since that act gives him the right to exercise a discretion, among other things to apply to the court for the appointment of a receiver, we deem the question settled that he alone has such right. The bank commissioner is supplied with all of the facilities to obtain the true financial condition and manner of conducting the institutions confided to his department, and no doubt, in the opinion of the Legislature, a qualified commissioner would be as well, if not better, equipped than the court, and at less expense, to determine the methods to be applied to such institutions, even though they might appear to be in an insolvent or failing condition. The question for decision is not whether the Marion Superior Court has jurisdiction to appoint receivers, but whether, in this class of cases, the bank commissioner has the exclusive right to make the application. This court has so held. Farmers Deposit Bank v. State, ex rel. (1929), 201 Ind. 117, 166 N. E. 285.

The magnitude of the affairs of the Meyer-Kiser Bank, called to the attention of the bank commissioner and which affected several thousand depositors whose deposits exceeded $2,000,000, was a serious matter. “The best interests of depositors and creditors” of this bank was a question for business judgment, and business judgment, we may say, requires business discretion, which the Legislature, in this class of cases, has conferred upon the bank commissioner. Acts 1929, supra. The stockholders of the Meyer-Kiser Bank decided that the bank should go into voluntary liquidation. This it might lawfully do. The State Bank Commissioner was called, who took charge of the assets of the bank, and, after a thorough examination and audit of its affairs, found it to be solvent and approved voluntary liquidation through approved liquidating agents. Notwithstanding the bank commissioner released the assets of the bank to such agents, he nevertheless, under the law, retained supervisory jurisdiction over the liquidation, with authority, should he later find danger of insolvency, or that the bank’s assets were being wasted or improperly used or converted, whether from excessive cost of operation or otherwise, to again take charge and control of the bank and its affairs, and subject it to the same treatment and to apply the same remedy applicable to going banks found in like financial condition (Acts 1929, supra) without any regard whatever for the 18-months provision in the statute. Acts 1915, supra.

Section 11, supra, authorizes state banks to go into voluntary liquidation. The Legislature, in 1915, 1919 and 1929, by enactments to which we have referred, provided for their control and supervision. True, they carry a title embracing matters regulatory and supervisory, which is not inconsistent with the word “regulate” found in the title of the 1873 act. Moreover, these enactments are germane to the subject expressed in the title of the original apt. They are the outgrowth of §18, supra, and of such a character to be properly incorporated into the act of which §18 was a part, and clearly responsive to its title. They do not introduce an additional subject, but are matters properly connected with the subject of banking. “ The rule is that new matter which, if it had been a part of the original act would have been embraced in the subject expressed in the title, may be subsequently made a part of the act by amendment. ” State v. Closser (1912), 179 Ind. 230, 234, 99 N. E. 1057. The act of 1921 had for its object the alteration and improvement of the act of 1873, which purpose was extended by the amendment of 1929. The acts of 1915 and 1919 clearly supplement the original act by the addition of things which time and experience have proved were necessary to complete, and extend that which was already in existence, namely, organization, control and supervision of banks. McCleary v. Babcock (1907), 169 Ind. 228, 82 N. E. 453.

The claim that these latter enactments violate Art. 4, §19, of the Indiana Constitution, in that they introduce matters not properly connected with the title of the original act, cannot be sustained. In Board, etc., v. Scanlan (1912), 178 Ind. 142, 147, 98 N. E. 801, it is said: “The word ‘subject’ in the Constitution (article 4, §19) indicates the thing about which the legislation is had, and the word ‘matters’ the incident or secondary things necessary to provide for its complete enforcement.” The laws enacted since the act of 1873, supra, pertaining to state banks, other than private and partnership banks, and now in force in this state, are either amendatory or supplementary to that act, and they furnish the rules and procedure and are sufficiently comprehensive to include every phase essential to the complete administration by the Bank Commissioner of the department of which he is the head.

It is here made to appear that the Marion Superior Court, over the objection of the Bank Commissioner, has assumed jurisdiction to appoint a receiver for the Meyer-Kiser bank upon the application of a creditor. It seems to us the Legislature has reserved to itself, through its administrative officer, the Bank Commissioner, the right to determine when and who may make such application. Hence, until the courts are requested to function by proper legislative authority, the subject-matter involved would be under legislative administration and control and clearly without judicial interference.

In this state, this court not only determines its own jurisdiction, but it “also has the power and authority, ultimately and conclusively, to determine under the law, the jurisdiction of all other judicial tribunals within the State. By its decisions it determines what is the law of the land within its territorial jurisdiction, and all courts within the State, as well as all persons therein, are controlled by its decisions relative to what is the law, and should yield obedience thereto. Elliott, App. Proc., §25.” Pittsburgh, etc., R. Co. v. Peek (1909), 172 Ind. 562, 577, 88 N. E. 939.

Applying the principle announced in the case last cited, and the question of jurisdiction properly before us, our ruling in Farmers Deposit Bank v. State, ex rel., supra, should be respected by all trial courts of the state until changed or modified by this court.

No one is insisting that the Bank Commissioner has not discharged his full duty, but, on the contrary, it affirmatively appears that his action in approving the voluntary liquidation of the Meyer-Kiser bank was the result of careful investigation of all the circumstances that would enable him to exercise a sound business judgment in the interest of all parties con cerned. Furthermore, it appears that there is no other remedy as adequate for the protection of all the parties in interest as the one sought in the instant case. A writ of prohibition, in its prerogative character, is not unlike the writ of mandamus. Although tested by a well-recognized rule, it issues in the sound legal discretion of the court, having in mind what is necessary and proper to be done in the particular instance for the attainment of justice. State, ex rel., v. Board, etc. (1903), 162 Ind. 580, 68 N. E. 295, 70 N. E. 373; State, ex rel., v. Foland, Auditor (1921), 191 Ind. 342, 132 N. E. 674; State, ex rel., v. DeBaun, Judge (1926), 198 Ind. 661, 154 N. E. 492. Were we not to take into consideration the effect of remedies possibly open to petitioners, and our former decision of the precise question submitted to the Marion Superior Court, presided over by Thomas D. McGee, as special judge, we might hesitate to issue the extraordinary writ of prohibition. But, in keeping with our ruling in Farmers’ Deposit Bank v. State, ex rel., supra, to which we still adhere, that the Bank Commissioner alone has been selected by the Legislature to apply to the courts for the appointment of a receiver for a state bank, and our conclusion that petitioners have no other remedy as full and complete as the one here demanded, it follows that.a permanent writ should issue. In conclusion, we hold that the Marion Superior Court did not acquire jurisdiction to appoint a receiver in cause No. A61,387, for the reason that such applications must be made by the Bank Commissioner who is, by law, made the statutory plaintiff in all cases for the appointment of a receiver for the institutions over which the Legislature has given him exclusive control. Lowery v. State Life Ins. Co. (1899), 153 Ind. 100, 54 N. E. 442.

It is, therefore, ordered that the temporary writ heretofore issued, prohibiting the Marion Superior Court and Thomas D. McGee as special judge thereof from further acting in cause No. A61,387, be and the same is now made permanent.

Travis, J., concurs.

Treanor, J., concurs with opinion.

Martin, C. J., dissents with opinion.

Roll, J., dissents with opinion.