
    KIDDER v. HALL, Commissioner of Insurance and Banking, et al.
    (No. 3866.)
    (Supreme Court of Texas.
    May 9, 1923.)
    1. Banks and banking <@=380(10) — Action on rejected claim must be brought in county where bank domiciled.
    Action on claim against insolvent bank, rejected by Commissioner of Banking under Rev. St. art. 464, must be brought in district court of the county in which the bank was located in view of other articles forming part of Acts 1909, 2d Called Sess., c. 15, § 9, and Rev. St. art. 1839.
    2. Banks and banking <@=>63!/2 — Property of bank being liquidated! is in custody of law.
    The property of an insolvent bank being liquidated by the Commissioner of Banking is in the custody of the law.
    3. Banks and banking <@=>80(10) — Action on rejected claim may be brought by petition or by intervention in liquidation proceedings.
    An action on a claim against insolvent state bank, rejected by the Commissioner of Banking, may be brought either by intervention in the liquidation proceedings, or by petition in the proper district court.
    4. Mandamus <@=>73(l) — Will not lie to compel allowance of rejected claim against insolvent bank.
    As jurisdiction of action on rejected claim against insolvent state bank is in the district court of the county where the bank was located, and, as Commissioner of Banking passes on questions of fact involving judgment and discretion, and- as there is a plain, adequate, legal remedy, mandamus will not issue from Supreme Court to compel allowance.
    5. Banks - and banking <@=>15 — Purchaser of draft not a “depositor” entitled to protection of guaranty fund.
    One purchasing draft or bankers’ check from state bank which became insolvent before payment of the draft was not a “depositor” entitled to protection of the depositors’ guaranty fund under Rev. St. art. 486.
    [Ed. Note. — For other definitions, see Words and Phrases, First and Second Series, Depositor.]
    6. Banks and banking <@=>15 — “Depositor” entitled to protection of guaranty fund defined.
    A “depositor” entitled to protection of bank depositors’ guaranty fund is one who delivers to or leaves with a bank money, or checks, or drafts, the commercial equivalent of money, subject to his order, by virtue of which action title to the money passes to the bank.
    7. Banks and banking <@=>4 — Construction of Depositors’ Guaranty Fund Act not controlled by Negotiable Instruments Act.
    The Depositors’ Guaranty Fund Act is to be interpreted and construed by its own language and that of the Constitution, and not by reference to the Negotiable Instruments Act.
    8. Banks and banking <@=>15 — Guaranty fund does not protect transaction, no matter how evidenced, if there has been no bona fide deposit.
    The law looks through all semblances and forms to ascertain the actual fact whether or not there has been a bona fide deposit, and, if not, the depositors’ guaranty fund does not protect the transaction, no matter how it may be evidenced.
    9. Banks and banking <@=>15 — Only deposit, and not evidence thereof, guaranteed by guaranty fund.
    The depositors’ guaranty fund does not guarantee the integrity of evidences of a deposit such as a certificate of deposit, but only the deposit itself.
    Original mandamus proceeding by W. O. Kidder against Ed Hall, Commissioner of Insurance and Banking, and others.
    Petition dismissed.
    Croom, Goldstein & Croom, of El Paso, for relator.
    W. A. Keeling, Atty. Gen., and Walace Hawkins and John W. Goodwin, Asst. Attys. Gen., for respondents.
   CURETON, C. J.

This is an original action for mandamus against the Commissioner of Insurance and Banking and the State Banking Board, to compel the former (a) to allow a claim against the Farmers’ & Merchants’ State Bank of Ranger, an insolvent state bank, (b) to classify the claim as a noninterest-bearing and unsecured deposit, and (c) to require the State Banking Board to pay, the claim thus allowed and classified out of the Depositors’ Guaranty Fund provided for by the banking laws of the state.

On October 24, 1921, E. A. Estes purchased, in the usual way, from the Farmers’ & Merchants’ State Bank of Ranger, while it was still open and transacting business, a draft or banker’s check, drawn by the cashier on the National Reserve Bank of Kansas City, Mo., for $2,200. Estes was not a depositor of the bank, and had never been, and the draft when purchased was paid for, not by a check on the bank itself, but in cash. Payment of the draft was refused by the Kansas City Bank, for the reason that, after its issuance, and before presentation, the Ranger bank had failed and been taken over by the Commissioner of Banking. Proof of claim based upon this draft was presented to the Commissioner, who refused to allow it, either as a general or secured deposit claim. We therefore are not concerned with, nor will this opinion pass upon, the jurisdictional or any other question presented by a claim approved as against the bank, but rejected as against the guaranty fund.

We have concluded that the mandamus cannot issue against the Commissioner of Banking in this case for three reasons: (1) Because we have 'no jurisdiction to compel, the Commissioner to allow the claim against the insolvent bank; (2) because the relator has a plain, adequate, and effective remedy at law; and (3) because the facts do pot show that the claim is based upon or represents a noninterest-bearing and unsecured •deposit, payable out of the guaranty fund.

We will first discuss the question of jurisdiction.

Revised Statutes!, art. 464, requires the presentation of all claims against an insolvent bank to the Commissioner, makes it his duty to reject those “the justice and validity of which” are doubted by him, and authorizes an “action” on the rejected claims.

The statute does not in express terms provide that the action authorized must be brought in the district court of the county where the bank had its domicile, but we believe this to be the proper construction, in view of the effect which must be given to ■other articles of the statute relative to liquidation proceedings. It is likewise clear that the purpose of the various articles touching the control and disposition of the insolvent estate is to place it in custodia legis, and therefore in effect to designate the court administering the estate as the one in which contested actions must be brought. ’

We will consider some of ’the statutes on which these conclusions are based.

One of the articles requiring action by the district court particularly names the district court of the county of the bank’s domicile (R. S. art. 458), while others merely name the “district court,” or “court,” or the “district court of the district”, where the bank was located (R. S. arts. 467, 463, 471, 472, 473, 475, 478, 482). These articles were all a part of section 9, c. 15, Acts 2d Sp. Sess. 1909, and, .construed in the light of their context, and manifest purpose of the Legislature, all refer to the same court— that is, to the district court of the county where the bank was located. Or, if we should say that the effect of the statutes was to fix jurisdiction in the district court of the district in which the bank is located, without naming the county, then the general venue statutes looalize and fix that venue in the. district court of the county where the bank had its domicile, since all the orders required of the court are either against the bank or affect its property and rights. Revised Statutes, art. 1830.

We will now discuss the effect of these statutes on the question of the venue of the action authorized by article 464.

In the compounding of debts, sale and disposition of all personal and real property of the insolvent bank, in the payment of expenses and dividends, and in the disposition of the residue of the estate after the settlement of all debts, the Commissioner must have an order of the district court, or of the judge of that court. Revised Statutes, art. 458, 467, 469, 478, 475. Unproved or unclaimed deposits or assets not disposed of in the course of liquidation remain subject ultimately and finally to the disposition of the district court or judge. Revised Statutes, arts. 472, 480, 482. When a claim has been approved by the Commissioner, it may be contested by interested parties only, in the district court. Revised Statutes, art. 471. Articles 460 and 466, while not referring to court orders, do indicate a purpose to localize the liquidation proceedings.

Erom a consideration of all the articles named, it is quite apparent that every feature of the distribution of the estate of an insolvent bank is within the jurisdiction of the district court -(or judge thereof) of the county in which the bank was located when it transacted business. Article 464, which authorizes an action on rejected claims, does not specify the court in which the action is to be brought; but the fact that this article is a part of section 9, c. 15, Acts of 1909, above referred to, is strongly suggestive, if not conclusive, that the action contemplated is to be in the district court named in the other portions of the section — that is, the district court of the county of the bank’s domicile. Again, it is clear from articles 471 and 469 that, where objections are made to claims allowed by the Commissioner!, the contest must be in the district court, regardless of the amount involved. It is entirely consistent with the general purposes of the act to say that contests for the establishment of rejected claims must likewise be brought in that court. We know of no reason why the Legislature should have permitted contests of approved claims in one court, and have prescribed another court for actions to establish rejected claims.

Power to hear contests of all allowed' claims could only be conferred upon the district court, by reason of that court having been given jurisdiction of the entire subject-matter of the liquidation and the custody of the property involved. In addition, decisions from other states support the view that the property is in custodia legis.

The liquidation sections of the banking acts of New York, Alabama, Mississippi, Oregon, and Wisconsin do not materially differ from our own laws. Birdseye’s Consolidated Laws of New York, vol. 1, pp. 509 to 526; General Acts of Alabama 1911, pp. 60 to 67; Hemingway’s Annotated Code Miss. § 3623, pp. 1861-1864; Olson’s Oregon Laws (1920) § 6223; Wisconsin Statutes (Official 1913) § 2022.

The New York courts hold that the Superintendent of Banks is in effect a statutory receiver and arm of the court in administering the estate of an insolvent bank. In re Union Bank of Brooklyn, 96 Misc. Rep. 299, 161 N. Y. Supp. 29, 36; In re Union Bank of Brooklyn, 204 N. Y. 313, 310, 97 N. E. 737; Van Tuyl v. Scharmann, 208 N. Y. 62, 101 N. E. 779, 782; In re Bank of Cuba in New York, 198 App. Div. 733, 191 N. Y. Supp. 88; In re Carnegie Trust Co., 161 App. Div. 280, 146 N. Y. Supp. 809; Richards v. Robin, 178 App. Div. 535, 165 N. Y. Supp. 780.

In Alabama he is an agent or receiver of the court administering the insolvent estate. Walker v. Mutual Alliance Trust Co., 196 Ala. 154, 71 South. 697, 698; Walker v. McCrary Co., 197 Ala. 638, 73 South. 342; Montgomery Bank & Trust Co. v. Walker, 181 Ala. 368, 61 South. 951.

In Mississippi the property of an insolvent bank in the hands of the Bank Examiners, who correspond in authority to our Commissioner, is in the hands of a receiver, and in custodia legis. Anderson v. Owen, 112 Miss. 476, 73 South. 286.

In Oregon the property of an insolvent bank is referred to as being administered by the court, and suits on rejected claims are brought with the permission of the court. Steelhammer v. Bramwell, Supt. of Banks (Or.) 209 Pac. 100, 106; Upham v. Bramwell (Or.) 210 Pac. 706, 709.

In Wisconsin the trial court has general supervisory control over the liquidation proceedings, with authority, in the absence of a statute, and upon proper showing, to grant permission to file a claim after the expiration of the time originally fixed by the Commissioner. Wisconsin Trust Co. v. Cousins, 172 Wis. 486, 179 N. W. 801, 806.

The necessary effect of all the foregoing cases is that the property of the insolvent bank is in custodia legis. Under assignment statutes somewhat similar to our banking laws, the insolvent estate is in custodia legis. Hanchett v. Waterbury, 115 Ill. 220, 32 N. E. 194, 196; In re Mann, 32 Minn. 60, 19 N. W. 347.

Since the property of the insolvent bank is in custodia legis, the fact that article 464 authorizes an action in general terms, without specifying the court, necessarily refers to an action in the court having custody of the estate. Citizens’ Savings Bank v. Ingham, 98 Mich. 173, 57 N. W. 121.

We conclude that the district court of the county where the bank was located is the court in which all actions for the establishment of rejected claims against the insolvent bank must be brought, regardless of contractual venue or jurisdictional amount; such actions to be either by intervention in the liquidation proceedings or by petition in that court.

Having concluded that the action on a rejected claim against an insolvent bank, authorized by article 464, is one in the district court of the county where the bank was located, it follows that it is not one by mandamus in the Supreme Court.

Again, all actions brought under article 464 for the establishment of claims against the bank necessarily involve questions of fact, which, in the first instance, must be passed on By the Commissioner, and in doing so he must exercise judgment and discretion. We therefore have no jurisdiction to revise his action by mandamus. Edwards v. Terrell, 100 Tex. 26, 93 S. W. 426; Davis v. Terrell, 100 Tex. 291, 99 S. W. 404; Schell, v. Terrell, 100 Tex. 585, 102 S. W. 109; Teat v. McGaughey, 85 Tex. 478, 22 S. W. 302; Arberry v. Beavers, 6 Tex. 457, 55 Am. Dec. 791; McFall v. State Bank, 101 Tex. 572, 110 S. W. 739; Ewing v. Cohen, 63 Tex. 482; 12 Michie’s Digest, pp. 99 to 101. It follows also from what has been stated, that the relator has, under article 464, a plain, adequate, legal remedy for the establishment, and, in connection therewith, the classification of his claim by the District Court administering the insolvent estate. Having such remedy, it is elementary that a mandamus will not issue out of this court. Screwmen’s Benevolent Ass’n v. Benson, 76 Tex. 552, 555, 13 S. W. 379; Rume v. Schintz, 90 Tex. 72, 36 S. W. 429; Jackson v. Swayne, 92 Tex. 242, 246, 47 S. W. 711; Ewing v. Cohen, 63 Tex. 482, 485; 26 Cyc. 168 to 172.

Aside, however, from the technical question of jurisdiction, it is plain relator’s claim is not based upon a noninterest-bearing and unsecured deposit, the only class of obligations protected by the depositors’ guaranty fund. Revised Statutes, art. 486. The word “depositors” is to be given its generally accepted and understood meaning. 7 Corpus Juris, p. 485; Lankford v. Schroeder, 47 Okl. 279, 147 Pac. 1049, 1053, L. R. A. 1915E, 623; Critchfield v. Nance County, 77 Neb. 807, 110 N. W. 538. A depositor is one who delivers to or leaves with a bank money, or checks or drafts, the commercial equivalent of money, subject to his order, and by virtue of which action the title to the money passes to the bank. 2 Michie on Banks and Banking, pp. 887 to 890, pp. 908, 909, and notes; Fleming v. State, 62 Tex. Cr. R. 653, 139 S. W. 598, 600; Lankford v. Schroeder, 47 Okl. 279, 147 Pac. 1049, 1052, L. R. A. 1915F, 623; State v. Corning State Bank, 136 Iowa, 79, 113 N. W. 500, 502.

Various distinctions may be noted between the relationship created by the issuance and sale of a draft, and the receipt of a deposit by a bank. In the case of a deposit, the money is placed in the bank in' reality for the benefit of the depositor (Elliott v. Capital City State Bank, 128 Iowa, 275, 103 N. W. 777, 1 L. R. A. [N. S.] 1130, 1134, 111 Am. St. Rep. 198), while in the sale of a draft the transaction is for the benefit of the bank making the sale. When a deposit is made the bank receives assets, and the depositor has a direct claim against the bank— the relationship is one of primary liability, directly on the contract — while in the issuance of a draft the bank sells assets, a*nd the primary liability is that of the bank against which it is drawn, and the issuing ■hank is not liable until payment has been refused by the drawee bank. See Texas Negotiable Instruments Act, tit. 1, arts. 5 to 8; Vernon’s Ann. Civ. St. Supp. 1922, vol. 2, pp. 1772 to 1779; Harper v. Winfield State Rank (Tex. Civ. App.) 173 S. W. 627.

Another illustration may be given. Take the instance where money, belonging to another than the one making the deposit, is placed in a bank without the consent of the owner. In such a ease the relation of banker and depositor is not created; the bank does not take title to the fund, and, regardless of the innocent purposes of the bank, it is guilty of conversion. 2 Michie on Banks and Banking, pp. 897, 898, 899; Winslow v. Harriman Iron Co. (Tenn. Ch. App). 42 S. W. 698, 699; Mingus v. Bank of Ethel, 136 Mo. App. 407, 117 S. W. 683, 685; Board of Fire & Water Commissioners v. Wilkinson, 119 Mich. 655, 78 N. W. 893, 44 L. R. A. 493; Patek v. Patek, 166 Mich. 446, 131 N. W. 1101, 35 L. R. A. (N. S.) 461. See, also, Wilson v. Wichita Co., 67 Tex. 647, 4 S. W. 67, and 3 Rose’s Notes ofi Texas Rep. p. 810, and 1913 Supplement, p. J54S. On the other hand, if one having the money of another goes to a bank and purchases a draft, and the bank innocently receives the money and issues a valid draft therefor, the bank becomes the owner of the money paid for the draft, regardless of the title which the purchaser may have had to the funds. Oklahoma State Bank v. Bank of Central Arkansas, 120 Ark. 369, 179 S. W. 509, 511; Eirst National Bank v. Gilbert, 123 La. 845, 49 South. 593, 25 L. R. A. (N. S.) 631, 131 Am. St. Rep. 382, and cases cited in notes; State Bank v. United States, 114 U. S. 401, 5 Sup. Ct. 888, 29 L. Ed. 149; Holly v. Missionary Society, 180 U. S. 284, 293, 21 Sup. Ct. 395, 45 L. Ed. 531; 27 Cyc. pp. 863, 865.

These illustrations show a clear distinction between the obligations and rights which arise from contracts of deposit and of sale and purchase of drafts. Others might be stated, but we deem it unnecessary.

Counsel for relator insists that the so-called “cashier’s check” involved in this action is analogous to a certificate of deposit, under the Negotiable Instruments Law; and, since a certificate, if representing a noninterest-bearing and unsecured deposit, is secured by the guaranty fund, the instrument here involved is likewise payable out of that fund.

The Depositors’ Guaranty Eund Act is to be interpreted and construed by its own language and that of the Constitution, and not by the Negotiable Instruments Act. The contention that a cashier’s check and a certificate of deposit are analogous in origin and legal effect, and that both presuppose a deposit of money, is without merit. A draft or cashier’s check does not presuppose any deposit of money, and in the instant case no deposit was made.' The money received from the sale of a draft is not within the usual definition of a deposit. The power to issue drafts or bills of exchange is a distinct, separate, and entirely different power from that of receiving deposits. Our statutes separately name those two powers. Revised Statutes, art. 376. This division is as old as modem banking, which originated in banks of exchange only in mediaeval times. See generally the article on Banks and Banking in the eleventh edition of the Encyclopaedia Brittanica.

The case of Middlekauff v. State Banking Board, 111 Tex. 561, 567, 242 S. W. 442, is not in point in this case, for the reason that here there was no deposit made the basis of or out of which the worthless draft was purchased.

Relator illustrates his position - by stating, in effect, that, had Estes placed his money in the bank, and taken a negotiable certificate of deposit therefor, or had immediately given his check against such deposit, instead of paying for the draft in money, the claim here involved would be protected by the guaranty fund. We do not agree to either of these propositions. If Estes in good faith had become a depositor, and received a certificate of deposit, he would be protected; or, if, with his cheek against an actual deposit, made in good faith, he had purchased a cashier’s check such as was involved in the Middlekauff Case, or a draft, which proved worthless, then the original deposit, not'the check or draft, would have been protected. But in the instances suggested the deposit- would not have been made in good faith with the intention of creating in fact a deposit contract, but for the purpose of obtaining a cashier’s check, bill of exchange, or negotiable certificate of deposit, and placing the guaranty fund behind a piece of commercial paper. Such a simulated transaction would not have created a deposit within the meaning of the Guaranty Fund Law. The law will look through all semblances -and forms to ascertain the actual fact as to whether or not there has been a bona fide deposit made, and, if not, the guaranty fund does not protect the transaction' no matter how it may be evidenced. The guaranty fund does not guarantee the integrity of the evidences of a deposit, such as a certificate, but only the deposit itself. State ex rel. Carroll v. Corning State Bank, 136 Iowa, 79, 113 N. W. 500; American State Bank v. Wilson, 110 Kan. 520, 204 Pac. 709; Fourth National Bank v. Wilson, 110 Kan. 380, 204 Pac. 715; Widman v. Kellogg, 22 N. D. 396, 133 N. W. 1020, 39 L. R. A. (N. S.) 563.

It is plain that relator’s claim is not based upon a deposit in the insolvent bank, and therefore is not payable out of the guaranty fund.

Relator’s claim not being payable out of the depositors’ guaranty fund, the State Banking Board as such has no duty to perform relative thereto; therefore mandamus will not be awarded against it.

Since the status of the .claim as-herein set forth appears on the face of the petition for mandamus, we should not, in the first instance, have granted leave to file it, and it is, for the reasons stated in this opinion, accordingly dismissed. 
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