Lankford v. Platte Iron Work, ante, p.
235 U. S. 461,
followed to the effect that, under the Eleventh Amendment, the
State Banking Board and Bank Commissioner of Oklahoma are not
subject to suit by depositors of insolvent banks.
Although one may become subrogated to all the rights of a
depositor in an insolvent bank in Oklahoma, that does not give him
the right of suit against the state officer administering the
Depositors' Guaranty Fund.
As the statute creating the State Banking Board of Oklahoma does
not give the Board power to waive the state's exemption from suit,
so
Page 235 U. S. 499
appearance on behalf of the members of the Board does not amount
to such a waiver.
Gunter v. Atlantic Coast Line,
200 U. S. 273,
distinguished.
Quaere where the court has entered a decree
establishing rights between the individual parties but dismissing
the suit as against the state officers on the ground that it was
one against the state, whether those officers, by employing counsel
to resist complainant's recovery, are not bound by the decree to
the extent of the rights adjudicated.
The facts, which involve the claims of depositors in certain
Oklahoma banks and the application of the Eleventh Amendment to
suits in the federal court to compel the members of the State
Banking Board of Oklahoma to make payments from and distribute the
Depositors' Guaranty Fund, and also the question of whether the
state consented to be sued, are stated in the opinion.
Page 235 U. S. 501
MR. JUSTICE McKENNA delivered the opinion of the Court.
Suit in equity brought by appellant against the State Banking
Board and the Bank Commissioner of the State of Oklahoma, the
Oklahoma Trust Company, the Alamo State Bank, the McNerney Company,
corporations, and one P. J. McNerney. Later the Union State Bank,
another corporation, was made a defendant. The object of the suit
was to compel the Banking Board to pay appellant, as an equitable
depositor of the Oklahoma Trust Company, a failed banking
institution, the sum of $25,351.63. Another object was subrogation
to and the establishment and enforcement of liens in the amount of
$61,252.40 upon certain funds and impounded securities,
Page 235 U. S. 502
with a decree against the Banking Board for any final deficiency
or unpaid balances.
The Banking Board demurred to the bill on the ground, stated
with much circumstance, (1) that the suit was in effect against the
State of Oklahoma, and (2) for want of equity. The demurrer was
overruled. The Banking Board and the Union State Bank filed answers
admitting some of the allegations of the bill and denying others,
to which there were replications. A decree
pro confesso
was taken against the other defendants, which was subsequently made
final.
On final hearing, the court decreed subrogation and established
and foreclosed a lien on certain of the securities in controversy
and rendered a money decree against the Union State Bank for
$18,018.58.
The court reversed its ruling on demurrer of the Banking Board,
holding that,
"because it is the opinion of the court that said State Banking
Board represents the state, and is not suable on such account, said
complainant shall take nothing as against said Banking Board, and
in that behalf the latter shall go hence without day."
Farish then prayed for an order allowing appeal from that part
of the decree which denied him relief against the State Banking
Board on the ground that it was one in effect against the state,
and that the question of the jurisdiction of the court be certified
to this Court. The appeal was allowed, and the certificate
made.
The Union State Bank and the State Banking Board also prayed an
appeal from that part of the decree which adjudged that judgment be
rendered against the Union State Bank for the sum of $18,018.58
with interest, being the amount of a certain deposit alleged to
have been transferred from the Alamo State Bank to it, and that the
State Banking Board and the State Bank Commissioner did not have a
first and prior lien as against complainant for the reimbursement
of the amount of money
Page 235 U. S. 503
taken by the Board and Commissioner from the depositors'
guaranty fund to pay off and discharge the deposits of the Alamo
State Bank and the Oklahoma Trust Company, and a first lien on the
same account and for the same purpose on certain other
securities.
There was an order of severance, and the case is here on these
appeals and the certificate of jurisdiction made by the district
court.
The pleadings are very long, and set forth the grounds of suit
with circumstantial detail. A repetition of them is not necessary.
The appellant's case depends upon two propositions: (1) whether he
was an equitable depositor of the Oklahoma Trust Company; (2) this
established, whether the Banking Board is subject to be sued by
him.
His rights have their origin in an assignment to him by a
corporation called the Texas Company.
The Texas Company furnished material to the contractors for
certain paving work in the City of Muskogee, Oklahoma, for which
bonds were issued and upon which, by agreement between the parties
and the Oklahoma Trust Company, the Texas Company was given a first
lien. Bonds to the amount of $154,035.92 were issued and delivered
to the Oklahoma Trust Company, and disposed of by it or carried as
a deposit to the credit of itself as trustee, and of which there
remained to its credit as trustee on January 3, 1910, the sum of
$25,351.63. It paid to the Texas Company only $27,906.57 of the
proceeds of the sale of the bonds. The balance of the sum was used
by the Oklahoma Trust Company in various ways which are detailed at
length in the bill of complaint and traced to the possession of the
Alamo State Bank, and through that bank to the Banking Board, the
Banking Board having taken possession under the banking laws of the
State of the Alamo State Bank upon its becoming insolvent. The
Alamo State Bank obtained the assets
Page 235 U. S. 504
of the Oklahoma Trust Company through a sale by the latter
company to it on January 3, 1910. Composing these assets was the
sum of $25,351.63, carried as a deposit by the Oklahoma Trust
Company, and other sums, being credit balances of the Oklahoma
Trust Company in other banks, cash paid to the Alamo State Bank and
used by it to pay the indebtedness of the Oklahoma Trust Company or
its depositors.
The assets of the Alamo State Bank were sold to the Union State
Bank by the Banking Board, acting under the authority of an order
of the district court of Muskogee County. The Union State Bank
assumed in consideration thereof the payment of the depositors of
the Alamo State Bank.
On December 18, 1909, the complainant herein brought suit
against the Oklahoma Trust Company and others to establish his
right to the paving bonds or their proceeds. The suit was numbered
1239. A receiver was appointed who was directed to demand and
receive from the Oklahoma Trust Company the proceeds of the paving
bonds and from all persons who might have them. The receiver duly
qualified. On the 6th of August, 1910, subsequent to the sale by
the Oklahoma Trust Company of its assets to the Alamo State Bank,
the complainant filed a motion against the latter bank for the
purpose of obtaining an order for contempt and peremptorily
requiring it to immediately pay and turn over to the receiver the
proceeds of the bonds received by it.
The Banking Board subsequently appointed counsel to appear in
that suit for the purpose of defeating the recovery by the
complainant. In that suit, all of the defenses herein pleaded were
set up. The Union State Bank also appeared in that suit and aided
in its defense. The final decree in that case adjudged, among other
things, that the complainant became entitled to the proceeds of the
paving bonds, and the Oklahoma Trust Company
Page 235 U. S. 505
was ordered forthwith to deliver their proceeds to him.
The Oklahoma Trust Company and the Alamo State Bank were banking
institutions under the laws of the state, and subject to the
banking laws, and paid in accordance with such laws assessments to
the Banking Board, including certain emergency assessments for the
purpose of creating and maintaining a depositors' guaranty fund as
provided by law. And it is alleged that the depositors of the
Oklahoma Trust Company, except complainant, were paid or caused to
be paid by the Alamo State Bank, and that this was accomplished by
the use of the proceeds of the paving bonds obtained by the Alamo
State Bank. That the latter bank received not less than $65,000 of
the proceeds of the bonds as a part of the consideration of the
assumption of the payment of the depositors of the Oklahoma Trust
Company:
"that the state, and, through it, said depositors, had a lien on
all of the assets of said Oklahoma Trust Company to secure the
payment of said depositors, and that, to the extent that the
proceeds of said paving bonds were so used, your orator is
subrogated to said lien, and, moreover, since said depositors were
entitled to resort to the depositors' guaranty fund in the hands of
the State Banking Board, and this was averted by said use of the
proceeds of said paving bonds, a trust fund to which your orator
was entitled, he is subrogated to that extent to the rights of said
depositors against said guaranty fund, as it exists and shall
exist, and against said State Banking Board."
The facts of the case are set out in the opinion of the court,
and need not be further stated, and the grounds of decision and the
relief granted are expressed in the decree hereinafter set out.
The case of complainant is, indeed, sufficiently though
generally stated in a letter which his counsel addressed to the
Banking Board. It is as follows:
Page 235 U. S. 506
"Dallas, Texas, July 26, 1910"
"State Banking Board, Guthrie, Oklahoma"
"State Banking Board, Oklahoma City, Oklahoma"
"Gentlemen:"
"Under contracts of January 5 and June 14, 1909, and transfer of
December 9, 1909, my client, W. S. Farish, had a lien for more than
$180,000 on certain paving bonds issued to P. J. McNerney and the
McNerney Company, of Muskogee, and on the proceeds of such paving
bonds, when sold. In the latter part of the year, a considerable
amount of such bonds were turned over to the Oklahoma Trust
Company, which was engaged in the banking business at Muskogee,
with its depositors guaranteed under your state law, and that
company afterwards sold these bonds and used the proceeds in paying
its depositors. The amount thus used, and to which my client was
entitled, was $88,002.31."
"Of the amount stated, $63,117.85, or about that amount, was
thus misapplied in defiance of an injunction of the United States
Circuit Court for the Eastern District of Oklahoma, made in cause
Eq. No. 1239,
W. S. Farish v. P. J. McNerney et al.,
pending at Muskogee, by which injunction the Oklahoma Trust Company
was restrained from commingling or confusing the proceeds of said
paving bonds with other funds, and was peremptorily required to
keep the same separate and apart."
"My client contends that, when the trust fund was wrongfully
taken and applied to the payment of depositors, who were guaranteed
under the state law, he, Farish, became subrogated to the rights of
such depositors, and is entitled to resort to the Depositors'
Guaranty Fund, and to have you make such assessments as may be
necessary to replenish said fund if it is depleted or from any
cause is inadequate to meet this demand."
"If you desire further particulars of the claim, I shall be glad
to furnish them, but hardly consider it necessary
Page 235 U. S. 507
at this time, as, if I am correctly informed, you already have
full knowledge of the matter."
"Please consider this as a formal demand for payment, and let me
have your decision as soon as possible."
"Yours very truly,"
"(Signed) A. L. Beatty"
"Attorney for W. S. Farish."
No particularization of the allegations of the answer of the
Banking Board is necessary except to say in explanation of its
attitude that it admitted that the Bank Commissioner took
possession on the twenty-fifth of August, 1910, of the Alamo State
Bank and of its property and assets, and sold and transferred them
to the Union State Bank in pursuance of an order of sale of the
District Court of Muskogee County, State of Oklahoma. The sale, it
is alleged, was in pursuance of an agreement whereby the bank
assumed and agreed to pay the deposits owing by the Alamo State
Bank, amounting to the sum of $450,000, and the Bank Commissioner
and the Banking Board agreed to guarantee the solvency of the
assets of the Alamo State Bank to the extent and for a sufficient
amount to pay all of the deposits assumed by the Union State Bank,
and to protect it against loss. On August 25, 1910, in pursuance of
the agreement, the Banking Board advanced to the Union State Bank
the sum of $50,000, and has since from time to time advanced to the
bank the additional sum of $150,000. These payments were made in
the course of the liquidation of the assets of the Alamo State
Bank, and in discharge of the obligations assumed by it to pay the
deposits of the Oklahoma Trust Company.
It is further alleged that, under the law the State of Oklahoma,
for the benefit of the Depositors' Guaranty Fund, has a first lien
on the assets of the Oklahoma Trust Company and the Alamo State
Bank for the reimbursement of the sum to the Union State Bank in
the payment
Page 235 U. S. 508
of the deposits assumed by it. That the lien of the state is
superior to any lien claimed by complainant under and by virtue of
the assignments of the paving bonds under the contract set forth in
the first paragraph of the bill, and the Banking Board has a right
under the law to enforce the lien of the state against the assets
transferred to the Alamo State Bank by the Oklahoma Trust Company,
and by the former to the Union State Bank.
The answer of the Union State Bank repeated the allegations of
the Banking Board in regard to the transfer to it of the assets of
the Alamo State Bank, and alleged that its purchase of them was in
good faith, for a valuable consideration, and without notice of any
claim or lien of complainant or his assignor, the Texas Company,
and the bank became the owner thereof free from any such claim or
lien.
Upon the issues thus formed and upon the proofs presented, the
court decreed: (1)-(2) that to secure complainant in the payment of
a portion, to-wit, the sums of $16,530.98 and $20,000, with
interest thereon at the rate of 6 percent per annum on the first
sum from the 18th of April, 1910, and on the second sum from
January 22, 1910, of a certain decree for money rendered by the
court in equity cause No. 1239 on the September 5, 1911, and costs,
complainant, W. S. Farish, has a lien, which is hereby foreclosed
against each and all of the defendants, upon those certain notes
mentioned in paragraphs IX and X of the original bill of complaint
in the cause, and on the proceeds of such of the notes as have been
collected. The notes are described; (3) that complainant recover
from the Union State Bank the sum of $18,018.58, with interest at
6% per annum from August 25, 1911, the net amount, when paid, to
apply as a credit on the decree in equity cause No. 1239; (4) that,
if the last-mentioned amount be not paid within ten days, execution
shall issue therefor, and if the defendants, including the Banking
Board and the Bank Commissioner
Page 235 U. S. 509
or his successor, fail to pay the amounts adjudged against the
securities, then the securities, or such of them as remain unpaid,
shall be sold to satisfy the amounts so adjudged against them. A
special master was appointed to make the sale; (5) the
complainant
"was a depositor of the defendant, Oklahoma Trust Company,
within the meaning of the laws of the State of Oklahoma governing
the guaranteed payment of bank deposits, to the extent of
$25,351.63, on the third day of January, 1910; but because it is
the opinion of the court that the State Banking Board represents
the state, and is not suable on such account, said complainant
shall take nothing as against said Banking Board, and in that
behalf the latter shall go hence without day;"
(6)
"That the decree
pro confesso heretofore entered
against the defendants, Oklahoma Trust Company, Alamo State Bank,
the McNerney Company, and P. J. McNerney, is hereby made final,
and, as to said defendants, the complainant is adjudged fully
subrogated to the rights of depositors of said Oklahoma Trust
Company, not only to the amount of the aforesaid sum of $25,351.63,
but also as to any deficiency that may remain after he shall have
collected the amount in this decree awarded against said Union
State Bank and such amounts as may be realized on the securities
mentioned in the first and second paragraphs hereof, which is to
say, it is hereby adjudged that, in addition to said $25,351.63,
funds amounting to $61,252.40, on which the complainant had a lien,
and to which he was entitled, were, on the third day of January,
1910, wrongfully used by said Oklahoma Trust Company and said Alamo
State Bank at the instance, request, and demand of the Bank
Commissioner representing said State Banking Board, to accomplish
the payment of depositors of said Oklahoma Trust Company, and
therefore the complainant is fully subrogated to all rights of such
depositors; but, because it is the opinion of the court that said
State Banking Board represents
Page 235 U. S. 510
the state, and is not suable on such account, said complainant
shall take nothing as against said Banking Board, and in that
behalf, the latter shall go hence without day."
It is contended by appellant in No. 446 that
"the Banking Board does not represent the State of Oklahoma in
any true governmental capacity, and therefore is not within the
exemption from suit contained in the Eleventh Amendment."
It is further contended:
"But even if the Banking Board did represent the state, it could
not successfully claim here an exemption from suit, since it owes
the appellant a specific statutory duty."
These contentions are the same as those made in
Lankford,
Comm'r v. Platte Iron Works Company, ante, p.
235 U. S. 461, and
American Water Softener Co. v. Lankford, ante, p.
235 U. S. 496, and
are disposed of by the decisions in those cases. It was there held
that the Banking Board and Bank Commissioner were not subject to
suit by depositors of insolvent banks. Therefore, as a depositor,
subrogated or direct, of the Oklahoma Trust Company, Farish has no
right of suit against the Banking Board.
It will be observed from the decree of the court, two sums,
to-wit, $16,530.98 and $20,000, with interest on each, were, in
accordance with the judgment rendered "in equity cause No. 1239,"
declared a lien on certain securities, the lien foreclosed, and the
securities ordered to be sold.
The court also rendered a judgment against the Union State Bank
for the sum of $18,018.58, above mentioned as coming under the
decree in cause No. 1239, and which, when paid, with the interest
thereon, was to be applied as a credit on that decree. In other
words, such sum was decreed as part of a fund which the court said
in its opinion "equitably belonged to the complainant," Farish. Of
this part of the decree appellant makes no complaint.
Page 235 U. S. 511
The court further decreed that "complainant [appellant] was a
depositor of the Oklahoma Trust Company, within the meaning of the
laws of the State of Oklahoma governing the guaranteed payment of
bank deposits, to the extent of $25,351.63, on the 3d day of
January, 1910." And
"that, in addition to said $25,351.63, funds amounting to
$61,252.40, on which complainant had a lien and to which he was
entitled, were, on the 3d day of January, 1910 [the day when the
Alamo State Bank acquired the assets of the Oklahoma Trust
Company], wrongfully used by said Oklahoma Trust Company and said
Alamo State Bank at the instance and request and demand of the Bank
Commissioner representing said Banking Board to accomplish the
payment of depositors of said Oklahoma Trust Company, and therefore
complainant is fully subrogated to all rights of such depositors. .
. ."
Relief was not granted against the Banking Board because, as the
decree declared, of the immunity of the Board from suit.
Based on the decree, the contention of appellant is that he was
not only a depositor to the extent of the $25,351.63, but also to
the extent of the sum of $61,252.40, it having been used to pay
depositors, and he thereby became subrogated to the rights of
depositors, and "entitled to be treated as though holding
assignments from the various depositors who were thus paid," and
hence the Banking Board should be required to pay him the first sum
and also so much of the second sum as may not be realized from the
impounded securities or on the decree against the Union State Bank,
and "if necessary" -- we quote from the prayer of his bill -- "to
make assessments for the payment of any balance of his debt."
The contention of appellant is therefore that he has become a
depositor of the Oklahoma Trust Company by subrogation, his money
having been used to pay the depositors of that company, and the
court so decreed, carefully distinguishing the rights of
complainant against
Page 235 U. S. 512
what the court called "impounded collaterals" and the sum of
$18,018.58 which the Union State Bank had received, and his right,
to use the language of the court, "as a depositor, either directly
or by subrogation." It may be admitted, therefore, that he has the
rights of a depositor, but the right of suit against the Banking
Board is not one of them,
Lankford, Comm'r v. Platte Iron Works
Co. and
American Water Softener Company v. Lankford,
supra.
It is further contended by appellant that,
"by participation in the former suit [cause 1239] and
interference with the process of the court, the Banking Board
waived any exemption from suit which otherwise it might have
claimed."
Gunther v. Atlantic Coast Line, 200 U.
S. 273,
200 U. S. 292,
is cited in support of the contention. The case is not apposite.
The case was, it is true, ancillary to another, but in it the
Attorney General of the state appeared, being directly authorized
so to do by statute, and "defend said action for and on behalf of
the state." The state therefore consented to be sued. The Oklahoma
laws do not give the State Banking Board such power. Besides, the
judgment in the former suit was that appellant was a depositor of
the Oklahoma Trust Company, a right which was confirmed in the
decree in the present case. In making this comment, we assume, but
do not decide, that the Board, by employing counsel to resist the
complainant's recovery in cause No. 1239, became bound by its
decree.
And we see no reason for disturbing the decree in other
particulars -- that is, in No. 477. Indeed, there are no briefs
filed in the latter case.
Decree affirmed.
MR. JUSTICE PITNEY, with whom concurred MR. JUSTICE DAY, MR.
JUSTICE VAN DEVANTER, and MR. JUSTICE LAMAR, dissenting:
Page 235 U. S. 513
In No. 446, the appeal of Farish, the depositor, for reasons
expressed in the dissenting opinion in
Lankford v. Platte Iron
Works Company, this day decided,
ante, p.
235 U. S. 461, it
seems to me that the decree here under review should be
reversed.
In No. 447, the cross-appeal, I concur in the result reached by
the Court.