KRUGER v. LIFE & ANNUITY ASS'N et al. (No. 15,837.)

(Supreme Court of California. Feb. 13, 1895.) ACTION AGAINST ENDOWMENT ASSOCIATION-STATE TREASURER AS PARTY-LIEN ON FUND

DEPOSITED WITH TREASURER.

1. In an action on a coupon of an endowment association, wherein plaintiff makes the state treasurer a party defendant, and claims a lien upon the $5,000 deposited by the association with him as required by Act March 19, 1891, the defense that there are other coupons maturing at the same time, and that such fund is not sufficient to pay the coupons in full, must be set up by answer.

2. An action against an endowment association, in which plaintiff, claiming a lien on the fund deposited by the association with the state treasurer, as provided by Act March 19, 1891, makes said treasurer a party defendant, is not an action against the state.

Commissioners' decision. Department 1. Appeal from superior court, Alameda county; W. E. Green, Judge.

Action by Mary Kruger against the Life & Annuity Association and J. R. McDonald, treasurer of the state of California. From a judgment for the plaintiff, defendant McDonald appeals. Affirmed.

Atty. Gen. Hart, for appellant. Otto Tum Suden, for respondent.

BELCHER, C. The plaintiff was admitted to membership in the defendant corporation on the 26th day of February, 1886. A certificate of membership was then issued to her, by which it was stipulated and agreed that, "if the said Mary Kruger shall fully comply with the laws and regulations of said association, and shall pay to said association the annual dues, at the rate of $2 for each $1,000 benefit provided by this certificate, and shall pay within thirty days after notification each assessment made and levied by said association, in accordance with its by-laws, she shall be entitled to a benefit of ten thousand dollars, to be paid in five equal installments or endowments, at periods as follows, to wit: First endowment, April 26, 1893," etc. Attached to the certificate were endowment coupons, the first of which stated "that Mary Kruger is entitled to receive the sum of two thousand dollars as the first payment of her endowment certificate," etc., "on April 26, 1893." After the maturity of the said first coupon, plaintiff presented the same to the defendant corporation, at its office, and demanded payment of the amount due thereon, but payment was refused. She thereupon commenced this action, alleging, among other things, that she had duly kept and performed all the conditions of the said contract to be by her kept and performed; that on the 27th day of April, 1893, the said cor

poration had, and ever since has had, a sum of money in its beneficiary, coupon, endowment, and reserve funds fully sufficient to pay the demand and claim of the plaintiff, and that it then and ever since has had on deposit with the state treasurer of the state of California, in bonds and securities, an amount equivalent to the sum of $5,000, as required by section 2 of an act of the legislature of this state entitled "An act relative to life, health, accident and annuity or endowment insurance on the assessment plan, etc., approved March 19, 1891"; and also that, prior to the commencement of the action, plaintiff served notice in writing upon J. R. McDonald, state treasurer, of her said claim, and the denial of all liability therefor by said corporation, and that she claimed a lien upon the funds, property, or moneys deposited with said treasurer as provided by section 4 of the said act of March 19, 1891. The prayer was for judgment against the defendant corporation for the sum of $2,000, with interest and costs, and that the sum adjudged to be due be decreed to be a lien upon any funds, property, moneys, bonds, or securities belonging to said corporation, and in the hands or possession of the state treasurer, and that the said lien be foreclosed, etc. The defendant corporation demurred to the complaint on the ground that it did not state facts sufficient to constitute a cause of action; and the defendant McDonald demurred to it on the same ground, and the further ground "that the court has no jurisdiction of the person of the defendant, J. R. McDonald, state treasurer." The demurrers were overruled, and thereupon the corporation answered; alleging that the plaintiff had not complied with its laws and regulations in certain specified respects, and was therefore not entitled to the payment of the sum of money claimed by her, nor of any sum whatever. The case was tried, and the court found the facts in favor of the plaintiff, and rendered judgment and decree for the sum found due, as prayed for. From this judgment and decree the defendant McDonald alone appeals, and his only contention is that the court erred in overruling his demurrer.

It is claimed for appellant that the complaint did not state facts sufficient to constitute a cause of action, because under section 2 of the act of March 19, 1891 (St. 1891, p. 126), the funds in his possession were held by him in trust for all the contract holders of the corporation defendant, and were not to be delivered by him to any one contract holder, to the exclusion of the others, but should be divided equally among them all, and that the complaint should have shown the right of the plaintiff to participate in the trust fund, and the proportionate share of the fund to which she was entitled. In support of this position, counsel cite the case of Perpoli v. Grand Lodge, 102 Cal. 592, 36 Pac. 936. In that case it was

held that, in a mutual benefit society, in which a special fund is created for the benefit of members of a certain class, to whom endowment coupons have been issued, one of the holders of such coupons is not entitled to recover the entire amount of his coupon, to the exclusion of members of the same class with himself, where the fund is insufficient to pay all of the coupons maturing at the same time, but in such case the fund should be divided equally between all the holders of such maturing coupons, and the plaintiff should recover only his proportionate part of such fund, and that the fact that other beneficiaries of the same class are not parties to the action, and are not before the court, assessing in their own names their right to participate in the fund, does not affect the right of the plaintiff to recover more than his proportionate share, but that the defendant, as trustee of the fund, may assert their rights for them, and resist plaintiff's right to recover more than his proportionate share of such fund. The case cited is not in point, for the reason that here it does not appear that there were any other contract holders having coupons maturing at the same time, nor, if there were, that the trust fund was not sufficient to pay all the coupons in full. If, however, there were other claimants whose rights defendants were authorized to assert, they should have set up the facts by answer, as they were in position to know them, and the plaintiff was not. The answer filed interposes no such defense, and the appellant cannot, therefore, avail himself of it on his demurrer.

In support of the demurrer, upon the ground that the court had no jurisdiction of the person of appellant, as state treasurer, it is claimed that "the action is really against the state, and not against the state treasurer, and no authority has been given by the legislature to private parties to sue the state in such actions." This claim has no support in law or reason. The statute (Act March 19, 1891) requires that bonds or securities of the value of $5,000 shall be placed with the state treasurer, and be held by him in trust for the contract holders of the corporation, and in section 4 it provides: "Unless the contract shall have been invalidated by fraud or by breach of its conditions, the corporation shall be obligated to pay the beneficiary the amount or amounts specified in its contract at the time or times therein named, and such indebtedness shall be a lien upon all the property of such corporation." Under these provisions the appellant was simply the custodian of the securities placed in his possession, holding them in trust for the plaintiff and other claimants, if there were such, and the indebtedness to plaintiff was a lien upon them. The state had no property or interest in the said securities. But the plaintiff, having a lien upon them for the payment of the in

debtedness to her, had a right to have that lien enforced, and to make the appellant, as such custodian, a party to the action. The demurrer was properly overruled, and the judgment should be affirmed.

We concur: VANCLIEF, C.; SEARLS, C.

PER CURIAM. For the reasons given in the foregoing opinion, the judgment is affirmed.

(106 Cal. 95)

F. A. HIHN CO. v. FLECKNER. (No. 15,814.)1 (Supreme Court of California. Feb. 13, 1895.) EJECTMENT-SUFFICIENCY OF EVIDENCE-TITLE IN PLAINTIFF-DEFENDANT'S POSSESSIONRENTS AND PROFITS.

1. Where the complaint in ejectment alleged that the plaintiff was seised in fee of the premises, and that defendant was in the unlawful and wrongful possession thereof, and wrong fully withheld the possession from plaintiff, and defendant denied merely that his possession and withholding were wrongful and unlawful, it was proper to find for plaintiff.

2. Where the defendant in ejectment offered no evidence, it was not error for the court not to make a finding upon the character of his possession.

3. Where defendant did not deny plaintiff's allegation as to the amount of the rents and profits, and the complaint failed to allege that defendant had been in possession for any length of time before suit, it was proper to include in the damages the value of the rents and profits from the commencement of the suit to the rendition of judgment.

Department 1. Appeal from superior court, Santa Cruz county; J. H. Logan, Judge.

Ejectment by the F. A. Hihn Company against William Fleckner. Finding for plaintiff, and from an order denying a new trial defendant appeals. Affirmed.

J. H. Skirm and Z. N. Goldsby, for appellant. Charles B. Younger, for respondent.

HARRISON, J. Ejectment. Appeal from an order denying defendant's motion for a new trial.

1. The complaint alleges that the plaintiff is seised in fee simple of the demanded premises, and that the defendant is in the unlawful and wrongful possession thereof, and wrongfully withholds the possession from the plaintiff. The defendant does not deny the seisin of the plaintiff or the possession by himself, but denies that his possession and withholding are wrongful or unlawful. Upon these admissions the court correctly found, as a conclusion of law, that the plaintiff is entitled to recover the possession of the land from the defendant. Payne v. Treadwell, 16 Cal. 221. If the defendant would claim the right to retain the possession, this is an affirmative defense, which it was incumbent upon him to establish. Id. As it appears from the record that he did not offer any evidence at the trial, the failure of the court to make a

Rehearing denied.

finding upon the character of his possession does not constitute error. Winslow v. Gohransen, 88 Cal. 450, 26 Pac. 504.

2. The allegation in the complaint that the rents and profits of the land are of the value of $36 per year is not denied. The action was commenced September 1, 1893; and the court rendered its judgment February 3, 1894, awarding the plaintiff $15 for damages, "estimated by the value of the rents and profits of said land during the detention and withholding from plaintiff by defendant." As there was no issue upon the value of the rents and profits, the damage to the plaintiff was determined by a computation of this value during the withholding of the land by the defendant. The denial in the answer that the plaintiff had been damaged by such withholding made no issue of fact, in view of the admission regarding the value of the rents and profits, and was only the denial of a legal conclusion. The complaint does not allege that the defendant had been in possession for any length of time prior to the commencement of the action, but the court was authorized to include in its judg ment for damages the value of the rents and profits from the commencement of the action down to the time of rendering judgment. Love v. Shartzer, 31 Cal. 487.

1. The bank commissioners' act (St. 187778, p. 740, as amended by St. 1887, p. 90 et seq.) provides that the board of bank commissioners may examine into the solvency of any bank, and if it finds that the bank is violating its charter or the laws of the state, or is in an unsafe condition, it may order the bank to discontinue its unsafe practices, and, on its refusal, the attorney general may commence suit to enjoin the transaction of further business; and that if the court finds that the business is carried on in an unsafe manner, and that the bank is insolvent, he shall grant the injunction, and direct the commissioners to take such proceedings against the bank "as may be decided upon by its creditors." Held, that the act was intended for the equal benefit of all creditors, and that no attachment can be levied on the assets of a bank after the date of its insolvency, as decreed in proceedings under the act.

2. On motion to dissolve an attachment levied on the assets of a bank, the pleadings and decree in a former proceeding under the bank commissioners' act, wherein such bank was adjudged to have been insolvent at a time prior to the levy of the writ, are admissible in proof of insolvency, and the decree is conclusive for all the purposes of the act.

Commissioners' decision. Department 2. Appeal from superior court, city and county 'Rehearing denied.

of San Francisco; J. C. B. Hebbard, Judge. Action by H. R. Crane against the Pacific Bank to recover money deposited with de fendant. Plaintiff sued out an attachment, and, from an order dissolving the writ, appeals. Affirmed.

A. Barnard, Thos. V. Cator, and W. H. Hutton, for appellant. Sawyer & Burhett, for respondent.

HAYNES, C. Appeal from an order dissolving an attachment. On the 10th day of August, 1893, the plaintiff brought his action in the superior court of the city and county of San Francisco to recover from the defendant, a banking corporation, a certain sum alleged to have been deposited with it as a commercial deposit, and on the same day procured a writ of attachment to issue in said action, and which was on the same day levied upon assets of said bank sufficient to cover his claim. On November 17, 1893, the defendant served upon plaintiff notice of a motion to dissolve said attachment, "upon the ground that the attachment was improperly issued and levied, and on the ground that said attachment is dissolved by operation of law, by reason of the transaction of unsafe business and the insolvency and suspension of business by said Pacific Bank, defendant, prior to the issuance of said attachment, and by reason of the judgment of said superior court, duly made and entered, that it was unsafe for said bank to continue business, and that said bank was insolvent, and enjoining said bank from transacting business." Said motion was based upon affidavits served therewith, and upon the records and papers in said superior court in the action entitled: "The People, etc., v. Pacific Bank. No. 42,863." The affidavit of A. Gerberding read in support of said motion shows, in substance, the following facts: That from January 5, 1891, he was a member of the state board of bank commissioners; that the defendant was incorporated in 1863, under an act of the legislature entitled "An act to provide for the formation of corporations for the accumulation and investment of funds and savings," approved April 11, 1862, under the name and style of the Pacific Accumulation & Loan Company, with a capital stock of $1,000,000; that in 1866 the name of said corporation was changed to that of the Pacific Bank, under an act of the legislature approved March 31, 1866, authorizing it to change its name; that said corporation closed its doors for business, and wholly suspended payment of its debts, dues, and liabilities, on the 23d day of June, 1893, and has not since resumed payment; that on said last-mentioned day said bank held in trust for persons, partnerships, and corporations an aggregate fund amounting to about $1,868,041.45; that, prior to said last-mentioned day, said bank com

missioners examined said bank, and found that it had been guilty of a violation of law in conducting business contrary to its articles of incorporation in an unsafe manner, and so as to seriously jeopardize the capital, property, and business of the bank, and thereupon directed it, by an order addressed to it, to discontinue such illegal and unsafe practices, and to conform to the requirements of its charter, but that the bank refused and neglected to comply with said order; that on said 23d day of June, 1893, the indebtedness of said bank was largely in excess of the reasonable and actual value of its assets; that the entire capital stock, together with the surplus, had become completely exhausted, and that the directors and stockholders neglected and refused to pay in said depleted stock, or any part of it, and "that on said 23d day of June, 1893, said Pacific Bank was wholly insolvent and remains so insolvent"; that the commissioners reported the condition of the bank to the attorney general, as required by law; that said attorney general commenced an action in the superior court on the 14th day of October, 1893, entitled, "The People of the State of California v. The Pacific Bank, a Corporation, et al.," in which action it was decreed on November 3, 1893, that said bank was insolvent, etc., and enjoining it and its officers from transacting any further business. The complaint in said action of People v. Pacific Bank alleged substantially the facts stated in the foregoing affidavit of Mr. Gerberding, and, in addition, specified particular acts of mismanagement and of losses sustained by the bank, and its insolvency. The answer of the bank in that case denied all acts of fraud and mismanagement, admitted its insolvency, and alleged that the interest of the creditors and stockholders required that the bank should be enjoined from the transaction of any further business, and that its business and affairs should be closed under the provisions of the bank commissioners' act. This answer, it was further alleged, was duly authorized by vote of the board of directors.

Appellant excepted to the reading of the said complaint, answer, and decree in support of said motion, upon the ground that he was not a party to said action, and was not bound by the proceedings therein. The affidavits read by appellant in opposition to the motion did not deny that the Pacific Bank was insolvent on the 23d day of June, 1893, which was prior to the issuance of the attachment, nor that said bank was incorporated under the act of 1862, providing for the formation of corporations "for the accumulation and investment of funds and savings" (St. 1862, p. 199), but alleged that it conducted the business of a commercial bank, and no other, and advertised and held itself out as "the oldest chartered commercial bank on the Pacific coast"; that the

claim upon which his attachment issued was a balance due him upon an ordinary commercial deposi and upon these facts appellant contends that the property and assets of the bank were properly subject to attachment, and that the court erred in dissolving it; while counsel for respondent contend (1) that the Pacific Bank is a savings bank; that the act of 1862, under which it was organized, declared that "the capital stock and assets of the corporation shall be a security to depositors who are not stockholders," and that such security is sufficient to prevent an attachment under section 538 of the Code of Civil Procedure; and (2) that, at the time respondent moved to dissolve the attachment, the bank was in liquidation under the bank commissioners' act, and that the judgment of the superior court in the case of People ex rel. Bank Commissioners v. Pacific Bank, rendered November 3, 1893, related back to the time the bank became insolvent, viz. June 23, 1893, which was prior to the attachment.

Whether the Pacific Bank should be held to have been a commercial bank or a savings bank is an important question, in some aspects affecting the settlement and adjustment of its affairs; but, so far as this appeal is concerned, I think it immaterial, and therefore not necessary to be considered or decided; for if it were beyond doubt or question that it not only conducted its business as a commercial bank, but was chartered as such, I think the attachment was properly dissolved. Under the act creating a board of bank commissioners, and prescribing their duties and powers (St. 1877-78, p. 740), and the amendments thereof (St. 1887, p. 90), the state not only requires all banks, including commercial as well as savings banks, to report twice each year, under oath, to said board, their financial condition, but through said board exercises the high prerogative power of visitation without notice, and of making an independent examination of its books, papers, bonds, and all securities, "to ascertain the condition of every such corporation, its solvency, its ability to fulfill all its obligations and report its condition to the attorney general as soon as practicable after such examination." St. 1887, p. 91, § 4. Section 11 of said act, as amended (St. 1887, p. 91), further prescribing the powers and duties of said board and of the attorney general, and the mode of liquidation of insolvent banking corporations, is quoted in full in People v. Superior Court of City and County of San Francisco, 100 Cal., at pages 111-114, and 34 Pac., at pages 493 and 494, and need not be inserted here. It will there be seen that if the commissioners find that the bank has been violating its charter or the law, or is conducting its business in an unsafe manner, they shall by order direct the bank to discontinue such practices; and if the bank refuses to comply with such or

der, and if it shall appear to the commissioners that it is unsafe for such bank to continue to transact business, they shall notify the attorney general of such fact, who, after examination, in his discretion may commence suit to enjoin and prohibit the transaction of any further business; and if the court is of opinion that it is unsafe for the parties interested, or for such corporation, to continue to transact business, and that such corporation is insolvent, he shall grant the injunction, and direct the bank commissioners to take such proceedings against such corporation as may be decided upon by its creditors. This section further fixes the time within which liquidation shall be accomplished; that the commissioners shall have a general supervisory control thereof, may extend the time for final settlement, shall designate the number of officers and employés necessary to close up the business of the corporation, and fix the salaries of the same; and imposes heavy penalties, by fine or imprisonment, or both, upon any officer or employé of any insolvent corporation mentioned in the act if they shall disregard or refuse to obey the directions of the bank commissioners given in accordance with the provisions of the act.

It needs no argument to show that the exercise of the sovereign power of the state over such corporations in the manner above indicated is intended for the protection, not only of the stockholders, but especially for the protection of depositors and all others transacting business with or through the bank. In People v. Superior Court of City and County of San Francisco, supra, certain creditors of the Pacific Bank, the respondent here, filed a petition in insolvency against said bank, under the insolvent act of 1880; and the case there was an application on relation of the bank commissioners for a writ of prohibition to prevent the superior court from proceeding under the insolvent act against the bank. After quoting said section 11 of the bank commissioners' act, the court said: "We have no doubt that this section was intended by the legislature to provide for every case involving the winding up of the business of a banking corporation, and that it necessarily supersedes the provisions of the insolvent act of 1880 so far as this class of corporations is concerned." This conclusion was approved in Long v. Superior Court, 102 Cal. 449, 36 Pac. 807. The case of People v. Superior Court of City and County of San Francisco, supra, seems to me to be conclusive of the question involved in this case. If the bank commissioners' act operates to take banks out of the operation of the insolvency act, the proceedings under which, though summary and expensive, result in the equal distribution of its assets among its creditors, it is equally clear that it was not intended that the moment a bank closed its doors its assets should be

the prey of the first creditors who should secure the issuance of attachments, and thus permit its assets to be converted into money by a still more expensive process, and that the proceeds should be applied to the payment in full of these attachments, leaving other creditors, who, by reason of distance or otherwise, should not be informed of the bank's condition, or be able to secure the prompt issuance of an attachment, wholly without a right to share in its assets. The great care and supervision exercised by the state over banking corporations through the board of bank commissioners indicates a different purpose than that the commencement of proceedings by the state through the attorney general should be a mere signal to conveniently located creditors to absorb the bank's assets by means of writs of attachment, to the exclusion of equally meritorious creditors less favorably located. The direction of the statute is that if the court should be of the opinion that it is unsafe for the corporation to continue to transact such business, and that it is insolvent, an injunction shall be issued, and thereupon "said judge shall further direct said commissioners to take such proceedings against such corporation as may be decided upon by its creditors"; thus clearly showing that the creditors-all the creditors-are interested in and affected by the proceedings in liquidation, and are to be equally protected.

Appellant contends, however, that the right of attachment is a positive statutory right, and that the bank commissioners' act makes no provision for dissolving attachments levied before the machinery of the act was put in motion by the commencement of the action by the people. But, before the attach ment was levied, the bank had suspended and closed its doors. The affidavits in support of the motion not only state that fact, but also that it was in fact insolvent, and these facts are not denied. Under these circumstances, the right of attachment did not exist. Section 21 of said bank commissioners' act (St. 1877-78, p. 745) declares that "all acts are hereby repealed in so far as they are inconsistent with the provisions of this act." It requires no argument to show that the right of attachment under the provisions of the Code of Civil Procedure is inconsistent with the machinery of the bank commissioners' act, as well as with its obvious purpose and intent. The state never intended that after the continued exercise of its high prerogative powers for the safety of all depositors and creditors, as well as stockholders, its purpose should be thwarted by the seizure of the assets of the bank by one or more creditors, perchance through the connivance of one of its officers or employés. In the later case of People's Home Sav. Bank v. Superior Court of City and County of San Francisco, 103 Cal. 27, 36 Pac. 1015, a case involving the construction of the