Murphy v. Pacific Bank

Insolvent Bank—Preference of Depositors not Stockholders—Loan to Bankby Stockholder.—In an insolvent bank incorporated under the act of April 11, 1862, the claims of depositors not stockholders are preferred over those of depositing stockholders, in the absence of a by-law entitling them to share equally with them. But if the stockholder is not a depositor, and has loaned the money to the bank, he is entitled to share equally in the assets with other creditors.

Ed.—Construction of Act of 1862—“Depositors”—Ordinary Certificates of Deposit—Loan not Represented.—In the act of 1862, the term “depositors” is intended to include not only those who have made deposits in the bank subject to check, but also the • holders of ordinary certificates of deposit, not subject to check, which are in the nature of a r.eceipt for a deposit executed by the bank, reciting that a sum specified has been deposited in the bank by the depositor payable to himself or order, upon return of the certificate properly indorsed. Such certificates, though negotiable and payable immediately, are not notes, and do not .represent a loan, nor bear interest not stipulated, but represent the money deposited in the bank to be retained until demanded.

Id.—Constitutionality of Act of 1862—Classification of Depositors.— The act of 1862 is constitutional and valid, and is not subject to the objection that it improperly classifies the depositors in a bank, and subjects individuals of the class who are stockholders - to special burdens, from which other depositors are exempt. The stockholders constitute the corporation, and are entitled to share in the profits derived from deposits made by those not stockholders, who are merely creditors of the bank; and depositors who are stockholders are not in the same class with depositors who are not stockholders.

Id.—Finding of Insufficient Assets—Judgment Upon Stockholder’s Certificate—Provision for Stay.—In an action against the bank by the assignee of a certificate of deposit issued to a stockholder, where the court found that the bank was insolvent, and that its assets were insufficient to pay the preferred depositors not stockholders, in rendering judgment for the plaintiff, such preference could not be secured otherwise than by a stay of the judgment until the preferred creditors should be paid, and it is not objectionable to insert such provision for stay in the judgment. If it amounts to a perpetual stay, because of the insufficiency of the assets, plaintiff is not injured thereby.

Id.—Change of Loan to Ordinary Certificates — New Deposit.—A stockholder who had made a loan to the bank, and received a time certificate, payable in one year, bearing interest, and after its maturity and part payment had surrendered it as paid, and then received an ordinary certificate of deposit for the balance, and upon further payment received another like certificate, which was outstanding when the bank became insolvent, cannot then be considered as a lender of money to the bank, or entitled to share in its assets with preferred depositors not stockholders. The legal effect of the transactions was that each ordinary certificate of deposit issued represented a new deposit made at its date.