Opinion
June 15, 1932.
1. BANKS: Finance Commissioner. The functions of the Finance Commissioner are limited to the powers and duties imposed by the statute which creates the office with no implied powers except such as are necessary to the effective discharge of the powers expressly conferred.
2. BANKS: Finance Commissioner. The Finance Commissioner, on taking charge of an insolvent bank, is authorized to liquidate the affairs of the bank and make such expenditures as in his judgment are necessary to conserve its assets. [Secs. 5316, 5319 and 5330, R.S. 1929.]
3. DEEDS OF TRUST: Insolvency: Finance Commissioner. Upon the insolvency of a bank, trustee in a deed of trust securing a debt, if it disqualifies the bank to act, the provisions in the deed of trust for substitute trustee in case of such inability would not authorize the Finance Commissioner in charge of such insolvent bank to act as trustee: nor could the court authorize him so to act.
4. ____: ____: ____. A Finance Commissioner in charge of a bank has no authority to continue its business and the execution of a trust in a deed of trust is not necessary for his purpose, where the debt secured by a deed of trust is one in which the Finance Commissioner has no concern in settlement of the corporation in his charge.
5. ____: ____: ____: Contingent Asset. Contingent assets, which might accrue to an insolvent trustee on the foreclosure of a deed of trust, are not assets of which the Finance Commissioner has authority to take charge where the deed of trust provides for contingent trustees.
6. ____: Trustees Obligations of Contract. If the act defining the powers of the Finance Commissioner be construed to authorize him to assume the duties of trustee in a deed of trust in which the bank in his charge was made trustee, where the deed of trust provides for substitute trustees in case of inability of the original trustee to act, it would be to impair the obligation of contracts, contrary to Article 1, Section 10, of the Federal Constitution.
PRELIMINARY RULE MADE ABSOLUTE.
R.H. McRoberts and Earl Seesman for relators.
(1) The officers of the Department of Finance of the State of Missouri have only the rights, duties, obligations, powers, and privileges conferred by the statutes creating the offices which they hold, and said statutory officers have no implied powers other than those necessary for the effective exercise and discharge of the powers and duties expressly conferred and imposed. Lamar Township v. Lamar. 261 Mo. 189, 169 S.W. 12; State ex rel. Bradshaw v. Hackman, 276 Mo. 607, 208 S.W. 445; 46 C.J. sec. 287, pp. 1031-32. (2) The powers and duties of the Department of Finance of the State of Missouri are conferred and limited by the statutes of Missouri. R.S. 1929, secs. 5316, 5319, 5322, 5324, 5327, 5330, 5332-33, 5340. (a) The primary rule for the interpretation of statutes is that the legislative intention is to be ascertained by means of the words it has used. Grier v. Railway Co., 286 Mo. 534, 228 S.W. 454; Clark v. Railroad Co., 219 Mo. 534, 118 S.W. 40; Betz v. Ry. Co., 314 Mo. 390, 284 S.W. 455; Hannibal Trust Co. v. Elzea, 315 Mo. 500, 286 S.W. 371; State ex rel. Cobb v. Thompson, State Auditor, 319 Mo. 496, 5 S.W.2d 57; 36 Cyc. pp. 1106-7. Statutes should not be construed as to pervert their very object. Missouri Granitoid Co. v. George, 150 Mo. App. 650, 131 S.W. 170. (b) Words in common use are to be construed in their natural, plain and ordinary signification. Hannibal Trust Co. v. Elzea, 315 Mo. 485, 286 S.W. 371; State ex rel. Williams v. Purl, 228 Mo. 1, 128 S.W. 196; Elsberry Drainage Dist. v. Winkelmeyer, 278 Mo. 268, 212 S.W. 893; State v. Plotner, 283 Mo. 83, 222 S.W. 767; Lauch v. Reis, 310 Mo. 184, 274 S.W. 827; State ex rel. Gray v. Wilder, 206 Mo. 541, 105 S.W. 272. The word "liquidation" has a well defined and clearly understood meaning. Ballentine's Law Dictionary (1930), p. 763; In re Union Bank of Brooklyn, 96 Misc. Rep. (N.Y.) 299, 161 N.Y.S. 42. (3) There are no statutory provisions, either express or implied, granting the Commissioner of Finance or his Special Deputy Finance Commissioner the power to succeed to the execution of the duties and powers of a trustee in a deed of trust. (a) The Commissioner of Finance and his Special Deputy Finance Commissioner hold possession in the instant case only for the purpose of liquidation, and not for the purpose of continuing as trustee in the deed of trust executed by the Skinker-Northwood Investment Company wherein the Fidelity Bank and Trust Company was named as trustee. R.S. 1929, sec. 5316, et seq., supra; Sullivan v. Kuolt, Commissioner of Banking, 156 Wis. 72, 145 N.W. 210; Mitchell, Chief State Bank Examiner v. Shuford, 156 S.E. 513; Brackett v. Middlesex Banking Co., 89 Conn. 645, 95 A. 12. (b) The Missouri statutes heretofore set forth were apparently copied from the Wisconsin Statute interpreted in Sullivan v. Kuolt. Commissioner of Banking et al., supra, and it is assumed that the Legislature in adopting the procedure for the liquidation of banking and trust institutions hereinabove described, also adopted the construction placed upon it by the highest court of the State of its original enactment. Schott v. Continental Auto. Ins. Underwriters, 326 Mo. 92, 31 S.W.2d 7; Ball v. Mercantile Trust Co. et al., 220 Mo. App. 1165, 297 S.W. 415; Joplin Supply Co. v. Smith, 182 Mo. App. 212, 167 S.W. 649; State ex rel. Guion v. Miles et al., 210 Mo. 127, 109 S.W. 595; State ex rel. Kemper v. Carter et al., 257 Mo. 52, 165 S.W. 773; St. Louis National Bank v. Hoffman, 74 Mo. App. 203; State ex rel. Crow v. Carothers, 204 Mo. App. 209, 222 S.W. 1043; Jegglin v. Randolph, 222 Mo. App. 738, 7 S.W.2d 441; Laws of Mo., 1915, secs. 29-55, pp. 116-127; Laws of Mo., 1921, secs. 1-10, pp. 393-97; R.S. 1929, sec. 5316, et seq., supra; Statutes of Wis., 913, sec. 2022. (c) It is well settled that a deed of trust in the nature of a mortgage invests the trustee with legal title. Hurst Automatic Switch Signal Co. v. Trust Co., 216 S.W. 954; McNutt v. Mut. Benefit Ins. Co., 181 Mo. 94, 79 S.W. 703. The Commissioner of Finance of the State of Missouri takes no titles to the assets of a closed bank. Bank of Oak Ridge v. Duncan, 40 S.W.2d 656. (4) The power to sell under a deed of trust is a matter of convention and contract between the parties, and they are authorized to select their own trustee. Kelsay v. Farmers' Traders' Bank, 166 Mo. 157, 65 S.W. 1007; Bales v. Perry et al., 51 Mo. 449; Graham et al. v. King et al., 50 Mo. 22; Swabey v. Boyers, 274 Mo. 332, 203 S.W. 204; Polliham v. Reveley et al., 181 Mo. 635, 81 S.W. 182; St. Louis v. Priest, 88 Mo. 612; Markel v. Peck, 144 Mo. App. 706, 129 S.W. 243; Perry on Trusts (3 Ed.) sec. 602.
Leahy, Saunders Walther for respondents.
(1) Mere insolvency does not disqualify a trustee. 1 Perry on Trusts (7 Ed.) 1929, sec. 279; Shryoch v. Waggoner, 28 Pa. 430; Moorman v. Crockett, 17 S.E. 875. (2) The Finance Commission is given powers broad enough to continue all functions of a bank in liquidation. R.S. 1929, secs. 5330-5332; 3 Michie on Banks and Banking, p. 153; Tomasella v. Murphy, 129 So. 328; Power v. Amos, 114 So. 364. (3) A bank liquidator has powers and functions of a receiver. 7 C.J., pp. 725-738, sec. 507; Mothersead v. Harris, 298 P. 602; Baggett v. Mobley, 155 S.E. 334. (4) Construction given a statute by those charged with duty of executing it will be given consideration. Ross v. Kansas City, 111 Mo. 18; State v. Cupples, 223 S.W. 75; Huntsville v. Noel, 12 S.W.2d 751; State ex rel. Barrett v. First Nat. Bank, 297 Mo. 397, 249 S.W. 619. (5) The law abhors a multiplicity of suits. (6) Public policy of State to allow a state official to function where interests of numerous persons are involved. State ex rel. v. Hyde, 286 S.W. 365; Equitable Life v. Brown, 213 U.S. 25; Koch v. Missouri-Lincoln Trust Co., 181 S.W. 44.
The Fidelity Bank Trust Company, a Missouri Corporation, October 2, 1931, by resolution of its Board of Directors was placed in the hands of the Finance Commissioner of Missouri.
The Commissioner, S.L. Cantley, who took charge October 23, 1931, placed Special Deputy Commissioner, Hans Wulff, in charge and Wulff was in charge at the time of filing the petition for prohibition here.
May 1, 1929, relator Skinker-Northwood Investment Company executed a first deed of trust conveying to the Fidelity Bank Trust Company, as trustee, certain real estate described in the relator's petition to secure an issue of six per cent gold bonds amounting to $670,000 and that deed of trust was in force at the time the said Fidelity Company was placed in charge of the Finance Commissioner. Relator, Fred Schmitt Contracting Company, was the owner and holder of one of the first mortgage bonds secured by said deed of trust. The deed of trust provides:
"In the event of the death, resignation, disqualification or any other inability or incapacity of said Fidelity Bank Trust Company, when and while its services shall be required under any provisions hereof, J.U. Menteer of the City of St. Louis, State of Missouri, shall be and is hereby appointed its successor in trust created hereby, and in the event of the death, resignation, sickness, refusal, disqualification or any other inability or incapacity of said J.U. Menteer, his successor in trust, when and while his services shall be required under any provision hereof, Wm. Brace, of the City of University City, State of Missouri, shall be and hereby is appointed second successor in the trust created hereby. Said J.U. Menteer or Wm. Brace, or either or both of them as such successors in trust, shall have identically the same title to said premises and the same rights, powers and duties as are hereby vested in or imposed upon said Fidelity Bank Trust Company."
The deed of trust further provides:
"In case at any time said trustee or any successors in trust hereunder shall fail or refuse to act, resign, or be removed or otherwise become incapable of action, a successor may be appointed by the holder of the majority in amount of the bonds then outstanding, and an instrument signed by such bondholders and recorded in the office of said Recorder of Deeds, but in case no such appointment shall be made by the bondholders within ten (10) days after the occasion for such appointment has arisen, a new trustee may at any time thereafter be selected and appointed by any court of competent jurisdiction in the premises upon the application of the grantor or of the holders of any of the bonds hereby secured upon such notice as said court shall direct. Such new trustee if appointed by order of court, shall in all cases be a trust company with a capital and surplus aggregating at least one million dollars ($1,000,000)."
February 24th and again February 26, 1932, Special Deputy Commissioner Hans Wulff filed in the Circuit Court of the City of St. Louis in the case entitled "In re Liquidation of the Fidelity Bank Trust Company" five applications for orders to continue to act as trustee in various deeds of trust in substantially the same form as that in which the Fidelity Bank Trust Company was made trustee, and in each of said cases the said circuit court entered the order prayed for and, it is alleged, proposes and threatens to make a similar order with respect to the deed of trust of the said Skinker-Northwood Investment Company.
Relator E.W. Banister, March 10, 1932, was appointed receiver of the Skinker-Northwood Investment Company, and as such appears for it in this case.
Relator, E.W. Banister, Receiver of Skinker-Northwood Investment Company, March 12, 1932, filed in said Circuit Court of the City of St. Louis, Missouri, and in the cause entitled "In re Liquidation of Fidelity Bank Trust Company," a motion to set aside said orders authorizing respondent, Hans Wulff, Special Deputy Commissioner of Finance, to continue to act as trustee in said deeds of trust. Honorable MOSES HARTMANN, the judge presiding in said Division No. 1 of said Circuit Court, after argument and submission of said motion, indicated that he would overrule said motion of relator.
Another motion looking to the same end was overruled by Judge NORTONI, respondent.
Whereupon E.W. Banister, Receiver of the Skinker-Northwood Investment Company, and Fred Schmitt Contracting Company, owner of one of the bonds secured by said deed of trust, bring this proceeding to prevent Hans Wulff, Deputy Commissioner of Finance, from exercising the functions of trustee in said deed of trust.
I. It is claimed by relators that the Finance Commissioner has no authority to assume and discharge the functions of trustee with which the Fidelity Bank Trust Company was invested by the deed of trust.
The functions of the Finance Commissioner, like any other official, are limited to the powers and duties imposed upon him by the statute which creates the office. [46 C.J. 1031; State ex rel. Bradshaw v. Hackmann, 276 Mo. 600, 208 S.W. 445; Lamar Township v. City of Lamar, 261 Mo. l.c. 189, 169 S.W. 12.]
An official such as the Finance Commissioner has no implied powers except such as are necessary to the effective discharge of the powers expressly conferred. [46 C.J. 1032.]
Section 5316, Revised Statutes 1929, provides that whenever the examination of the Finance Commissioner or one of his deputies shows that a private bank is insolvent or that its continuance in business shall jeopardize the safety of its depositors or other indebtedness he is authorized to take charge.
Under Section 5319, Revised Statutes 1929, the Commissioner shall hold such possession until the affairs of the bank are finally liquidated by him, unless circumstances mentioned arise under which he may surrender such possession.
Section 5330 provides that the Commissioner is authorized, upon taking possession of the property and business of such corporation, "to liquidate the affairs thereof and to do all acts and make such expenditures as in his judgment was necessary to conserve its assets and business."
He can proceed to collect the debts, sell or compound all bad or doubtful debts, compromise claims, other than deposit claims, upon such terms as the court shall direct; he may sell or dispose of any or all of the real estate or personal property of such corporation.
Section 5332 provides that he may prosecute and defend all actions and legal proceedings necessary in the performance of his duty; he may execute, acknowledge and deliver any and all assignments, bills of sale, releases, etc., necessary and proper to effectuate any sale, lease or transfer of real or personal property, and carry into effect any power or duty imposed upon him.
It is thus seen that the general purpose of placing any financial corporation in the hands of the Finance Commissioner is to liquidate its affairs. To liquidate means to adjust, to reduce to precision in amount; to ascertain the balance due and to whom payable; to clear up; to pay and settle; to satisfy. A number of other expressions of similar import are used to define "liquidate." [37 C.J. 1263-4.]
II. The Finance Commissioner, however, assumes, and respondent contends, that under the powers granted him he may succeed to the functions exercised by the Fidelity Bank Trust Company, as trustee in said deed of trust. It is asserted that mere insolvency does not disqualify a trustee. If the mere insolvency does not disqualify the Fidelity Company to act as trustee then it may act, and the Finance Commissioner cannot take upon himself the duties which the corporation can still discharge. But the contract, the deed of trust by which the trust is created, controls that matter. Successive substitute trustees are appointed in the event of the death, resignation, disqualification or any other inability or incapacity of the said Fidelity Bank Trust Company to act. The Finance Commissioner, by filing his motion to have an order of court authorizing him to perform the trust, admits that the Fidelity Bank Trust Company can no longer act by reason of disqualification or inability. If the Finance Commissioner by virtue of being placed in charge, steps into the place of the Fidelity Bank Trust Company and is authorized to perform all its functions as if it were a going concern, no court order was needed. If the Commissioner must have an order of court to authorize him to discharge a trust committed to the Fidelity Company, then his right to perform that trust must arise from the letter of the statute which gives him his power or it must arise from the powers necessarily implied in order that he may carry out the duties imposed. His duties are to liquidate the affairs of the bank in his charge. [4] There is nothing in the statute which authorized him to continue its business. He is not authorized to make loans, to extend credits, or to perform any of the functions of the finance corporation in his charge in the regular conduct of its business except as adjustments and collection of its debts and the disposition of its property are necessary for the purpose of paying its creditors. The execution of a trust in a deed of trust is not at all necessary to that purpose. If it were a debt due the corporation of which he has charge, or if it were a debt which that corporation owed, he certainly would have some duty with respect to it. But the particular debt secured by the deed of trust is one in which he has no concern in the settlement of the financial corporation in his charge.
It is suggested by respondents in their argument that during the period of liquidation there might be some foreclosures and commissions accrue to the trustee in such deeds of trust which would be for the benefit of the creditors. Such commissions are not debts due the bank of which the Commissioner has charge. They are assets contingent upon the future service to be rendered. The commission is an asset in case there is a foreclosure. The Fidelity Company, by virtue of being in charge of the Finance Commissioner cannot earn that commission any more than it could loan money and gain assets by the interest on it. The deed itself expressly provides that in such a contingency other persons named shall discharge the trust and receive the compensation and in order to provide against every contingency in the case of failure of substitute trustees, the circuit court is authorized to appoint a trustee upon the application of the grantor, the Skinker-Northwood Investment Company, or the holder of any of the bonds secured by the deed of trust. The trustee disqualified to act has no voice in the matters, but the mortgagor who incurs the obligation and encumbers its property and those whose debt is secured by the mortgage. They are the ones who selected the original trustee and provided for substitutes in case of inability to act. The "inability" of the trustee to act includes the very contingency here, as if the deed of trust had specifically provided that in case the trustee shall be placed in the hands of the Finance Commissioner, then the certain other persons named successively shall discharge the duties of trustee.
III. If the Act creating the Finance Department and defining the powers of the Finance Commissioner may be construed as the respondents construe it, it would impair the obligation of contracts in violation of Article I, Section 10, of the Federal Constitution. The contract in this instance formulated and executed by the parties interested, the debtor and creditors, particularly the debtor, provided for a trustee to perform the duties of such in such case. And in the event of disqualification or other inability to act another trustee was named, and in case of his inability a second substitute was named; and in order that the rights of the parties might be conserved and the function of trustee placed in hands entirely satisfactory to the parties, it is further provided that in case neither the first nor the second substitute trustee could act the bondholders secured might appoint a trustee, or in default of such appointment the court on application of the mortgagor or any bondholder could appoint. Only the parties directly and solely interested in the proper discharge of the trust had any right or concern with the appointment. The court in making the order objected to disregarded and violated those particular provisions of the contract. If the Act creating the Finance Department and defining the duties of Finance Commissioner should be construed as authorizing the Commissioner, with or without court orders, to take over the trust, such construction would place the statute in direct conflict with the terms of the contract upon which the parties depend for protection of their rights. It would impair the obligation of the contract. Therefore the statute under consideration cannot be given the construction contended for. [12 C.J. pp. 1052-1059.]
The preliminary rule is made absolute. All concur.