I cannot agree with the conclusions reached in the majority opinion, for it fails to take cognizance of the facts upon which the application for a receiver is based, and thereby fails to reach the merits of the controversy and apply the law applicable to the facts.
This is an original proceeding in this court, asking for a writ of prohibition to issue against the Honorable John Norman, as presiding judge of the district court of Okmulgee county in the Twenty-Second judicial district, to prohibit said district court and the Honorable John Norman, as judge thereof, from proceeding further in case No. 9172, entitled "The State of Oklahoma ex rel. S.P. Freeling, Attorney General, v. W.J. Harmon," which action is now pending in said court.
On the 6th day of February, 1922, an alternative writ of prohibition was issued by this court, made returnable on the 13th day of February, 1922. On that day the Honorable John Norman, as district judge, made his return to said alternative writ of prohibition, which return set forth his answer and defense to the allegations charged in the application for the writ. He attached to and made a part of his answer a complete transcript of all the pleadings filed, actions taken, and orders made in said case No. 9172, pending in the district court of Okmulgee county. In order to correctly determine whether or not the writ of prohibition should issue, it will be necessary to consider the pleadings filed by which the jurisdiction of the district court was invoked.
Said action No. 9172 was commenced by the state of Oklahoma, on relation of S.P. Freeling, Attorney General, against W.J. Harmon. The petition states that on and prior to the 2nd day of November, 1921, the Bank of Commerce was a banking corporation duly organized and doing business under and by virtue of the banking laws of the state of Oklahoma, with an authorized capital stock of $200,000, divided into 2,000 shares of the par value of $100 each, with its principal place of business in the city of Okmulgee, Okmulgee county, Okla. That on the 2nd day of November, 1921, the Bank of Commerce was taken over by the Bank Commissioner of the state of Oklahoma, for the reason that said bank was then and there in an insolvent and failing condition; that the Bank Commissioner took possession of the books, records, and assets of said bank for the purpose of converting its assets into cash and paying the claims of the unsecured depositors in said bank; that the assets of said bank will be insufficient to discharge its obligations to the unsecured depositors; that the Bank Commissioner had made an assessment of 100 per cent. against the stockholders of said insolvent bank. By reason thereof, the state of Oklahoma, by and through its Bank Commissioner and Banking Board, became liable to pay out of the depositors' guaranty fund of Oklahoma, to the unsecured depositors of the bank, the sum of $1,400,000, and that by virtue of the assumption of said indebtedness, and in consideration thereof, and by operation of law, the state of Oklahoma, for the use and benefit of the depositors' guaranty fund, became possessed of a first lien upon the assets of said bank, as well as the liabilities against the stockholders of said bank. That defendant, W.J. Harmon, was the owner of 30 shares of the capital stock of said Bank of Commerce, of the par value of $100 each; and prayed for judgment against the said W.J. Harmon, for the sum of $3,000.
To this petition the defendant, W.J. Harmon, and eight other persons, as interveners, *Page 44 who alleged they were stockholders of and depositors in said bank, filed a cross-petition in said action asking said district court to appoint a receiver for said insolvent bank. The grounds upon which the defendant, Harmon, and the interveners ask for the appointment of a receiver are set forth in detail in their cross-petition of intervention, which, briefly stated, are as follows:
It sets forth, in detail, the amount of capital stock owned by each of said interveners; that when said bank was closed, November 2, 1921, the unsecured deposits amounted to $1,459,000, and the secured deposits to $547,000; the assets as itemized are approximately $1,460,550. That the State Bank Commissioner, or the State Banking Board of Oklahoma, did not pay to the unsecured depositors any sum whatever from the state guaranty fund at the time said bank was closed, nor at any time since. Not only have they failed to pay the unsecured depositors out of the cash assets of said bank, or the cash assets that can be made immediately available of said bank, and the residue out of the depositors' guaranty fund, but the State Bank Commissioner and the State Banking Board have utterly failed and refused to make any effort to pay the unsecured depositors as provided by section 303, Revised Laws of 1910. That the State Banking Board of Oklahoma is now, and was on November 2, 1921, insolvent, having outstanding certificates of indebtedness known as depositors' guaranty fund warrants of the state of Oklahoma in the sum of $4,000,000, bearing six per cent. interest, and without any available assets with which to meet the same. That the State Bank Commissioner and the State Banking Board have filed a vast number of suits in the district court of Okmulgee county in the name of the state of Oklahoma ex rel. S.P. Freeling, Attorney General, against divers persons against whom the Bank of Commerce held notes on November 2, 1921, for the purpose of collecting the amount due on said notes, and in most all of said cases the petitions are signed by Huddleston Hockensmith, a firm of lawyers in the city of Okmulgee. In most of said suits attorneys' fees are sought to be recovered for the attorneys for plaintiff, notwithstanding the law of Oklahoma provides for an Assistant Attorney General of the state to have charge of all such litigation as attorney for the state. That in January, 1921, and for months prior thereto, there was a banking institution in the city of Okmulgee known as the Guaranty State Bank, which bank was insolvent on January 3, 1921, and for several months prior thereto, which insolvency was known to the State Bank Commissioner as far back as September 27, 1920, but that he permitted said Guaranty State Bank to continue in business, receiving deposits and making loans while insolvent, and in violation of law. That on the night of January 2, 1921, said Bank of Commerce, with the approval and under the direction and authority of the State Bank Commissioner, took over the assets of the Guaranty State Bank, and assumed its liabilities, and that said Bank of Commerce has been insolvent, making loans and carrying loans, far in excess of the amount permitted under the law, from January 3, 1921, until it was closed on November 2, 1921. All of this was done with the knowledge and consent of the Bank Commissioner. That the Legislature of the state of Oklahoma was in session from January 4, 1921, to April 4, 1921, and later, and a committee was appointed at said session of the Legislature to investigate and make a report of the State Banking Department of the state of Oklahoma, including the office of the Bank Commissioner. This committee reported that it appeared from the evidence adduced before it that, during the year 1920, the Bank Commissioner deposited about $700,000 in his personal account. For the year 1919, his account amounted to about $39,000. The Bank Commissioner testified that in the years of 1919 and 1920 he was buying commercial paper and selling it to the banks. The report then states:
"In the matter of the Guaranty State Bank of Okmulgee, it appears that Fred G. Dennis, Bank Commissioner, personally examined this bank on September 27, 1920, making a report on its condition as of September 25, 1920. The report is a very comprehensive report, and shows on sheets 'E' and 'E-2' a list of large loans, however, under the heading 'Excess Loans' nothing is shown, although at the date of the report, J.H. Rebold is shown to have been indebted to the bank in the sum of $462,000. The capital stock of the bank was $300,000 and surplus $100,000, so that the loan to Rebold was $62,000 in excess of the combined capital and surplus.
"There are several other parties who had loans in excess of 20 per cent. of the capital and surplus. The report does not contain any criticism as to any excess loans.
"It further appears from the testimony that on the same day Mr. Dennis examined this bank, he received from J.H. Rebold a check for $25,000, which Mr. Dennis testified was in payment for an oil lease of 130 acres located in sections 9, 10, and 15, township 2 south, range 23 west, Jackson *Page 45 county, Okla. It further appears from the evidence that there was a dry hole on an adjoining section at the time this sale is alleged to have been made, and that there was no producton of oil within 40 miles of this lease.
"It further appears from the evidence that this $25,000, which was in the form of a cashier's check, was cashed at the Wilkin Hale State Bank, Oklahoma City, Okla., and was divided into three equal parts, in the form of three cashier's checks. One of these checks was delivered by Mr. Dennis to Governor Robertson, and was deposited by the Governor in the First State Bank of Vinita, Okla., and part of it used to pay off a note of the Governor's in that bank, and the balance was later forwarded to the Governor and deposited to his account in the American National Bank of Oklahoma City.
"At this time Rebold was vice president and director in the bank, and was owner of 470 shares, as shown by the report of the Bank Commissioner.
"Mr. Rebold testified that he bought the lease from Mr. Dennis to sell to a man by the name of Clark, alleged to be from New York, who was negotiating for the purchase of the Harris oil property, southwest of Morris, and wanted this Jackson county lease in the deal. However, the deal was not made with Clark by Rebold, and the Harris property finally went to the Prairie Oil Gas Company, and Rebold still holds the Jackson county lease.
"We think it fair to conclude that the Jackson county lease, which Mr. Rebold says was 120 acres instead of 130 acres, was not worth more than $1 per acre, if it had any cash value at all. The sale by the Bank Commissioner of an oil lease not worth more than $120 for $25,000 to an officer and director in a bank under examination, and whose individual indebtedness to the bank exceeded its capital and surplus, seems to us a questionable transaction, and one which has not been satisfactorily explained by either the Bank Commissioner or Rebold, and they are the parties who apparently are the only ones able to give the facts.
"In view of the unsatisfactory explanation, the committee is at liberty to reject such explanation and draw its own conclusion as to the reasons for the sale, and these conclusions are that the transaction was purely colorable as far as being a bona fide sale of an oil and gas lease, and that the real consideration for the $25,000 was the permitting of the bank to run on without requiring Rebold to reduce his line of credit to the limit fixed by law."
The cross-petitioners aver that the facts stated in said report and the conclusions and deductions contained therein are true, and make all of said report a part of their cross-petition.
This cross-petition further states that a grand jury, before the superior court of Okmulgee county, is now in session (the cross-petition was filed January 27, 1922), and on January 24, 1922, said grand jury, having made an investigation of the acts and conduct of the State Bank Commissioner and those acting for and with him in handling the assets and affairs of the Bank of Commerce, filed its written report to the superior court of Okmulgee county setting forth its findings upon the acts and conduct of the State Bank Commissioner in the management of the affairs of said bank, which report is now a part of the court records of Okmulgee county, and is as follows, to wit:
"In the matter of the investigation of the affairs of the Bank of Commerce of Okmulgee, Okla., from evidence submitted before the grand jury, the grand jury begs leave to submit the following preliminary report:
"On Friday, January 20, 1922, a number of diamonds held by the said Bank of Commerce as security, were sold by C.T. Huddleston, attorney at law, as attorney for said bank, and the grand jury finds that although the legal notices as provided by law were given, we find that no advertising or any notice was given of said sale so as to protect the depositors and other creditors of the Bank of Commerce, with the following results:
"First: Two pieces of jewelry (diamonds), which the grand jury believes from evidence introduced before it, were reasonably worth the sum of $5,000, were sold for $1,650, a part of this lot having been bought by the attorney for the bank, who was conducting the sale.
"Second; A diamond ring, which the grand jury believes from evidence introduced before it was reasonably worth the sum of $3,000, and which a citizen of Okmulgee county would have purchased for that price at the sale, had he been permitted to examine the same, was sold for the sum of $400.
"Third: Another lot of diamonds, which the grand jury believes was reasonably worth the sum of $4,000, was sold for $1.987.50. Part of this lot was also purchased by the attorney for the bank, who was conducting the sale.
"The grand jury reports that parties desiring to purchase and bid on these diamonds were denied by the deputy Bank Examiner having them in charge, to wit, Charles G. Seaton, the privilege of examining *Page 46 said diamonds in advance of the sale, and that this fact alone, in the opinion of the grand jury, had much to do with the inadequate price at which these jewels were sold at said sale.
"In the opinion of the grand jury, if it is possible to do so, all of said sales should be set aside in the interest of the depositors, stockholders and creditors of the Bank of Commerce and the makers of the notes for which said diamonds were being held as security.
"The grand jury further reports that since the Bank of Commerce has been in the hands of the Bank Commissioner and within the past few days, the exact date of which is unknown to the grand jury, the parties in charge of the bank, representing the Banking Board, turned over to the Guaranty State Bank, or its agents, notes amounting to the total sum of $395,000. It is the opinion of the grand jury, from evidence before it, that these notes should have been held by the parties in charge of the assets of said Bank of Commerce, and not turned over to the Guaranty State Bank until an order was made by some court authorizing such delivery.
"The grand jury respectfully recommends, if it is possible to be done, that an order issue out of this court, to the Banking Board and all persons having charge of any of the assets of the Bank of Commerce of Okmulgee and the Guaranty State Bank of Okmulgee, which bank is still in existence, directing that no property belonging to either the Bank of Commerce or the Guaranty State Bank be sold or in any manner disposed of, or removed from Okmulgee county, without an order from this court and subject to the approval of this court.
"All of which is respectfully submitted by the grand jury this 24th day of January, 1922,"
The cross-petitioners then aver that the facts stated in said report and the conclusions and deductions contained therein are true, and make all of said report a part of their cross-petition, and further allege that said diamonds were sold without first obtaining an order of the court as provided by law.
That on November 2, 1921, the Bank of Commerce procured a loan of $50,000 from the Park National Bank of New York City, and placed with said bank, as collateral security, good solvent notes aggregating approximately the sum of $97,000. That while the State Bank Commissioner has had charge of the assets of said Bank of Commerce one of the directors of said bank paid off said $50,000 loan to the Park National Bank and procured an assignment to himself of said collaterals amounting to $97,000, and is now claiming to be the owner of all of said collaterals and is proceeding to collect the same, which entails a loss of $47,000 to the creditors of said Bank of Commerce.
That at the time the Bank Commissioner took charge of said Bank of Commerce it had good notes of the value of about $50,000 which had been delivered to the Liberty Central Trust Company of St. Louis as collateral to secure the payment of a much smaller sum owing from said Bank of Commerce to said Liberty Central Trust Company. That the Bank Commissioner has failed and neglected to protect these collaterals, which will cause the stockholders, including these cross-petitioners and creditors of the Bank of Commerce, to sustain a loss of thousands of dollars.
The cross-petition of interveners sets forth many other allegations of fraud and misconduct on the part of the Bank Commissioner as the grounds upon which the cross-petitioners pray for the district court to appoint a receiver. This petition is duly verified by two of the interveners. The plaintiff, State of Oklahoma ex rel. S.P. Freeling, Attorney General, filed a motion to strike the cross-petition from the files, which motion the court overruled. Thereupon a demurrer was filed by the Attorney General in behalf of the state of Oklahoma. One of the grounds of said demurrer was that the cross-petition or petition of intervention does not state facts sufficient to constitute a cause of action, or entitle the said defendant and cross-petitioners to the relief prayed for or the appointment of a receiver. On the 4th day of February, 1922, the district court passed on the demurrer, as shown by the journal entry of said date, which reads in part as follows:
"Thereupon plaintiff filed its demurrer to said petition for receivers, which demurrer was duly heard and considered by the court, and said demurrer was also overruled and denied, to which holding and judgment of the court plaintiff excepts and refuses to plead further, said motion to strike said petition and said demurrer being treated and ordered filed as of this date."
By this demurrer the plaintiff in this action admits that all of the allegations contained in the petition are true. By refusing to plead further and standing upon its demurrer, the plaintiff still admits the allegations in the petition are true, and in passing on plaintiff's right to a writ of prohibition in this action this court must consider these allegations as true. *Page 47
The court then proceeded to hear the petition for the appointment of a receiver, at the conclusion of which the court made an order appointing two receivers. We quote from paragraph five of the journal entry as follows:
"5. Thereupon counsel for the respective parties agreed upon and recommended to the court, the appointment of D.M. Smith and M.F. Graham, citizens of the city of Okmulgee, as receivers of said bank."
This is followed by an order appointing said D.M. Smith and M.F. Graham as receivers for said bank. The plaintiff excepted to the order of the court appointing the receiver, and gave notice of its intention to appeal to the Supreme Court of the state of Oklahoma. It thereafter made this application for a writ of prohibition.
It is clear that cross-petitioners were invoking the equitable jurisdiction of the district court and asking that a receiver be appointed because the assets of the bank were being depleted and their property rights jeopardized to their detriment and loss in thousands of dollars by reason of the fraud, corruption in office, and maladministration on the part of the Bank Commissioner. There are no other grounds stated in the petition upon which they rely for the appointment of a receiver. The only purpose stated in the cross-petition for the appointment of a receiver is that the assets of this bank shall he protected from wanton, ruthless, and fraudulent dissipation and depletion by the Bank Commissioner. The Attorney General, by his demurrer, admits the truthfulness of each and all of the charges of fraud contained in the cross-petition, and the district court found they were true, yet the majority opinion, in one sentence, disposes of these charges of fraud contained in the petition by assuming they are not seriously relied on. It says:
"In justice to counsel, we may say that while their application for the appointment of a receiver and their return to the alternative writ are replete with serious charges of maladministration, dishonesty, and corruption in office, in their brief, which was prepared more soberly after mature reflection, they do not seriously rely on these charges."
To say they do not seriously rely on these charges of fraud or that they have abandoned them is to say they have abandoned the only right to relief the cross-petitioners have. In other words, they have abandoned the facts constituting their clients cause of action when the statement of facts has been sworn to by their clients and are not only admitted to be true by the demurrer of the Attorney General, but also found to be true by the solemn decree and judgment of the district court of Okmulgee county. Instead of this being in justice to counsel, as stated in the sentence quoted from the majority opinion, I consider it an injustice to counsel to assume they have abandoned these charges of fraud. This court has no right to disregard the admitted facts in the record, or assume any part of the answer to the alternative writ has been abandoned, and upon that assumption say that the district court of Okmulgee county is without jurisdiction to appoint a receiver.
The respondent, in passing upon the application for the appointment of a receiver, was performing his duty under his oath of office as district judge. As such district judge he could not disregard the allegations of fraud and maladministration set forth in the cross-petition and presented to him as the grounds upon which the cross-petitioners were asking that they be granted relief by a court of equity for the protection of their property rights. The respondent in answering the application for the writ of prohibition is still discharging his duty under his oath of office as district judge. In doing this he cannot waive, abandon, or disregard the charges of fraud set forth in the petition, upon which he acted in the appointment of a receiver, and which charges of fraud he found were true. They can only be waived or abandoned by the parties seeking the relief from the fraudulent practices alleged in their cross-petition. A district judge or judicial officer, against whom a writ of prohibition is asked for, does not stand before this court In the same position as parties litigant on appeal, who may waive or abandon certain grounds of error they may have theretofore alleged or relied upon. The question presented to this court in this application for a writ of prohibition is, Did the court have jurisdiction to make and enter the order complained of? If, under the facts presented to it, it did have jurisdiction to make and enter the order, the writ of prohibition should be withheld. However, I do not understand these charges of fraud have been abandoned by the respondent. In his printed brief, at pages 25 and 26, he states:
"Thus, in Lovett v. Lankford, 47 Okla. 12, 145 P. 767, the court, in holding that the Bank Commissioner and the Banking Board constitute a part of the executive branch of the state government, and the *Page 48 duties devolving upon said officials require the exercise of judgment and discretion,' expressly said in this same connection that 'in the absence of allegation and proof of fraud, or arbitrary action, their decision in a matter Within their jurisdiction will not be reviewed or controlled by a writ of mandamus.' This court, in that opinion, clearly recognizes the fundamental proposition that fraud cuts down every act, whether judicial or executive. Fraud cuts away the solemn judgment of courts of record, as they may be nullified by proof of fraud.
"We are not going to set out at large the allegations in the petition in the district court for the appointment of receivers, but suffice it to say that the petition charges, and the court found, that the Bank Commissioner was proceeding in positive violation of section 304, Rev. Laws 1910, in disposing of assets of the bank without an order of the court, and that various assets of the bank were being dissipated, etc. The cross-petition upon which the district court appointed the receivers alleges that the grand jury investigating the Bank of Commerce affairs made a report to the district court 'that since the Bank of Commerce has been in the hands of the Banking Commissioner, and within the last few days, the exact date of which is unknown to the grand jury, the parties in charge of the bank, representing the Banking Board, turned over to the Guaranty State Bank or its agents, notes amounting to the total sum of $395,000' and that 'it is the opinion of the grand jury, from evidence before it, that these notes should have been held by the parties in charge of the assets of said Bank of Commerce, and not turned over to the Guaranty State Bank until an order was made by some court authorizing such delivery.' The cross-petitioners aver 'that the facts stated in said report' are true. Now that allegation is not denied. That is a clear dissipation of the assets of the bank and in absolute violation of section 304, Rev. Laws 1910. Yet there is no remedy, as we cannot sue the Banking Board or the state. Thus the only thing to do was to appoint a receiver and stop this spoliation."
The above quotation from respondent's brief clearly indicates the charges of fraud have neither been abandoned nor waived. The record shows the fraud did exist. The facts constituting the fraud are set forth in the petition, which is duly verified by two of the cross-petitioners. The facts are admitted to be true by the demurrer of the Attorney General, and by the solemn decree and judgment of the district court they were found to be true; then why should counsel elaborate upon or extensively argue in their brief that the fraud existed, when all the parties to the action admitted it existed and nobody denies it. Under the record in this case the fact of the fraud is not only established, but admitted; therefore, in the further consideration of this case, I will treat the question of fraud as an established fact.
The majority opinion says:
"Fraud cuts down everything, even judgments of courts and renders them void."
I agree with that statement; therefore, under the allegations of this petition, everything done by the Bank Commissioner in connection with the Bank of Commerce is void. Its insolvency was conceived by the fraudulent act of the Bank Commissioner in permitting it to assume the liabilities of the insolvent Guaranty State Bank and make loans to its stockholders and others in violation of law. The petition contains a recital of numerous acts and things done by the State Bank Commissioner, everyone of which reeks in fraud. Under the charges contained in the petition the depositors and stockholders of this bank have already suffered a loss of more than a half million of dollars if the acts of the Bank Commissioner are upheld. Surely if the state of facts disclosed by this record does not authorize a court of equity to appoint a receiver to take charge of these assets and to vacate the fraudulent acts of the Bank Commissioner and protect the property of the depositors and stockholders, then fails that ancient adage, "There is no wrong without a remedy."
Under this state of facts the district court would have jurisdiction to appoint a receiver, unless positively prohibited by the Constitution or statute, and I am unable to find any such inhibition.
We must not lose sight of the fact that the foundation principle upon which our government is based, is, "There shall be three co-ordinate branches, viz., executive, legislative, and judicial. The judicial is that branch which safeguards and protects the life, liberty, and property of the people. The district courts of this state are courts of general jurisdiction, and as such have power and authority under section 4979, Revised Laws 1910, to appoint receivers. Said section reads as follows:
"A receiver may be appointed by the Supreme Court, the district or superior court, or any judge of either, or, in the absence of said judges from the county, by the county judge:
"First. In an action by a vendor to vacate a fraudulent purchase of property, or *Page 49 by a creditor to subject any property or fund to his claim, or between partners or others jointly owning or interested in any property or fund, on the application of the plaintiff, or of any party whose rights to or interest in the property or fund, or the proceeds thereof, is probable, and where it is shown that the property or fund is in danger of being lost, removed, or materially injured. * * *
"Fifth. In the cases provided in this Code, and by special statutes, when a corporation has been dissolved, or is insolvent, or in imminent danger of insolvency, or has forfeited its corporate rights."
The court has jurisdiction of the parties, and, unless its jurisdiction is prohibited either by the Constitution or statutes, this court is not authorized to issue the writ of prohibition. The Constitution does not prohibit the court from exercising this jurisdiction, for sections 6 and 7 of the Bill of Rights reads as follows:
"Sec. 6. The courts of justice of the state shall be open to every person, and speedy and certain remedy afforded for every wrong and for every injury to person, property, or reputation; and right and justice shall be administered without sale, denial, delay, or prejudice.
"Sec. 7. No person shall be deprived of life, liberty, or property, without due process of law."
It is clear these sections of the Bill of Rights recognize in and intend to confer upon the judicial branch of the government that power and authority it was intended to perform, namely, to safeguard and protect life, liberty, and property. This safeguard and protection cannot be frittered away without weakening and eventually destroying the government. Neither can it be delegated to or conferred upon any legislative, administrative, or quasi judicial body, board, or commission to the exclusion of the judicial branch of the government. It has been well said that a government is no stronger than its courts.
The only authority the Bank Commissioner derives from the Constitution is found in section 1 of article 14, which reads:
"General laws shall be enacted by the Legislature providing for the creation of a Banking Department, to be under the control of a Bank Commissioner, who shall be appointed by the Governor for a term of four years, by and with the consent of the Senate, with sufficient power and authority to regulate and control all state banks, loan, trust and guaranty companies, under laws which shall provide for the protection of depositors and individual stockholders."
The majority opinion refers to the Bank Commissioner as a constitutional and statutory officer and says that certain acts on his part would not warrant the district court in discharging him and replacing him with a receiver appointed by the court. The section of the Constitution above quoted provides for a Banking Department to be under the control of a Bank Commissioner with sufficient power and authority to regulate and control state banks, loan, trust and guaranty companies under laws which shall provide for the protection of depositors and individual stockholders. By this section of the Constitution, the Bank Commissioner is not a constitutional receiver for insolvent banks. The Constitution only provides for the appointment of a Bank Commissioner to regulate and control state banks, etc., not insolvent institutions. The Legislature may define his duties, and limit the scope of his authority. As a receiver he is not a constitutional officer, for the Legislature could take away from him the right to act as a receiver; therefore his power and duties as a receiver for an insolvent bank are statutory, and in acting as such he would be a statutory receiver.
In removing the Bank Commissioner as the statutory receiver for the insolvent Bank of Commerce, the district court of Okmulgee county was not discharging a constitutional or statutory officer. It was merely exercising its equitable jurisdiction by removing a receiver for good and sufficient cause, taking the assets of this insolvent bank under its control and appointing a receiver as an arm of the court, to protect the property of these cross-petitioners under sections 6 and 7 of the Bill of Rights, supra. In other words, by the fraudulent acts of the Bank Commissioner these cross-petitioners were being fraudulently deprived of their property without due process of law, and said section of the Bill of Rights guarantees that the courts of justice of the state shall be open to every person to afford a remedy for every wrong or every injury to their property.
The fact that a receiver was appointed by the district court of Okmulgee county to take charge of the assets of the insolvent Bank of Commerce does not prevent the Bank Commissioner from exercising his authority to regulate and control state banks that are not insolvent, neither does it prevent him from acting as a statutory receiver for other banks that may now be or may hereafter become insolvent. But whenever the Bank Commissioner, as a statutory receiver, is fraudulently disposing *Page 50 of and dissipating the assets of any state bank, on a sufficient showing thereof made to the district court of the county in which such bank is situated, it becomes the duty of such court to remove such receiver and take such further proceedings as will protect the property rights of the depositors and individual stockholders as are guaranteed to them under said sections 6 and 7 of the Bill of Rights and said section 1 of article 14 of the Constitution.
Said section I of article 14, supra, does not purport to vest any exclusive authority in the Banking Department to wind up the affairs of an insolvent bank, neither does it purport to authorize the Legislature to enact a law that would vest exclusive control in the Banking Department to wind up the affairs of an insolvent bank and thus invade the judicial branch of the government by depriving the courts of jurisdiction to protect individuals in their property as guaranteed to them under the Bill of Rights.
The only exclusive control of insolvent state banks ever attempted to be vested in the Bank Commissioner was provided for in section 5, chapter 58, Session Laws of 1915, and this is only intended to be binding upon surety companies and prevent such surety companies from going into a court of equity and having a receiver appointed to wind up the affairs of the bank. This section reads as follows:
"Section 5. On and after the passage and approval of this act, in all cases where a surety company is compelled to pay, or voluntarily pays, a deposit of any state, county, municipal, or other public funds for which it is liable in a failed bank, operating under the banking laws of this state, such surety company shall be entitled to participate in a pro rata division of the proceeds of the assets of any such bank with the depositors' guaranty fund; and the Bank Commissioner shall have exclusive control of the administration and collection of the assets of failed banks, in which any part of the depositors' guaranty fund has been used for payment of depositors, until the depositors' guaranty fund is fully reimbursed and the Banking Board shall pay to such surety company its pro rata share of the proceeds of such assets from time to time as collections from such assets are made; and such surety company in writing a depository bond for any such bank specifically agrees to such administration and that the Bank Commissioner's jurisdiction shall be exclusive. All public deposits secured by surety company bonds or by the assets of any bank shall be included in the computations of average daily deposits as a basis for assessments for the depositors' guaranty fund."
It is also noticeable that the exclusive jurisdiction thereby sought to be conferred upon the Bank Commissioner does not apply except in cases where any part of the depositors' guaranty fund has been used for the payment of depositors, and then only continues until the depositors' guaranty fund is fully reimbursed. It cannot be said that the Bank Commissioner has any exclusive control over the assets of the Bank of Commerce of Okmulgee, because no part of the depositors' guaranty fund has been used for payment of depositors.
Notwithstanding the Legislature of 1915 passed the act above referred to, being chapter 58, and that it was approved March 3, 1915, the same Legislature thereafter passed chapter 102, Session Laws of 1915, which was approved March 10, 1915. Section 5 of said chapter 102 reads as follows:
"Section 5. Wherever state banks are placed in the hands of a receiver, it shall be the duty of the court making the order appointing a receiver, to also make an order appointing the Attorney General as attorney for said receiver, and to allow a reasonable fee for such services; and such fee shall be paid over to the Bank Commissioner, and by him at the end of the month converted into the state treasury as a part of the general revenue fund."
This act clearly contemplated that courts of equity are not deprived of their power to appoint receivers for insolvent state banks. While chapter 102, Session Laws of 1915, was repealed by House Bill No. 334, chapter 215, Session Laws of 1919, section 3 provided that the Attorney General should assign one or more of his Assistants Attorney General to service in the Banking Department on request of the Banking Board or the Governor. The act in no way attempted to vest exclusive control in the Bank Commissioner to take charge of insolvent state banks or deprive a court of equity of its inherent power to appoint receivers for an insolvent bank. As no part of the depositors' guaranty fund has been used to pay depositors of the Bank of Commerce of Okmulgee, the Bank Commissioner cannot have exclusive jurisdiction to wind up the affairs of this bank. Neither has the Bank Commissioner or the Banking Board any lien upon the assets of the bank, because no part of the depositors' guaranty fund has been invested or used in connection with this bank that would create any lien. As the Bank Commissioner *Page 51 has not complied with either section 303, Revised Laws of 1910, or section 6 of chapter 22, Session Laws of 1913, supra, the only authority he has to act is conferred by section 302, Revised Laws of 1910. Under this section he is a statutory receiver, being appointed by statute; it being contemplated that he will immediately proceed under the succeeding section 303, Revised Laws of 1910, and pay the depositors. This gives him the right to have exclusive control of the administration and collection of the assets of the failed bank as provided for in section 5, chapter 58, Session Laws of 1915, supra. However, the above section could not be construed as depriving a court of equity of the right to appoint a receiver in place of the Bank Commissioner, if the Bank Commissioner was dissipating the funds or fraudulently disposing of the assets, such as is established in this case.
The case relied upon by the Attorney General and cited in the majority opinion are all cases in which neither fraud, incompetency, mismanagement, nor other dereliction of duty on the part of the Bank Commissioner is alleged or relied upon as grounds for a court of equity to exercise its equitable powers and appoint a receiver for the protection of the creditors of the insolvent bank. On the other hand, these very decisions clearly indicate, and most of them state, that a court of equity would not hesitate to appoint a receiver if applied for upon any of these grounds.
In Re Murray Hill Bank (N.Y.) 47 N.E. 298, cited in the majority opinion, the only question presented was whether or not the Superintendent of Banks had the right to continue as receiver in an action brought by the Attorney General under the statute, or whether the directors of the insolvent bank had the right to make application for the appointment of a different person to act as receiver. In this opinion it clearly recognizes that the Superintendent of Banks is merely a statutory receiver. We quote from the opinion at page 301 of the North-eastern Reporter as follows:
"By the banking law it confided summary power to the Superintendent of Banks to temporarily sequester the property of the bank and take it into his possession for the protection of the public, in anticipation of action by the Attorney General through the courts for its sale and distribution. The command was that when a bank, upon due examination, should be found in an unsound or unsafe condition to do banking business, the superintendent might not only take possession of its property, but he could also retain such possession during the continuance of the action commenced by the Attorney General. The object of this unusual power is to preserve the property for the purpose of administration under the banking law and the provisions of the Code. The superintendent is made the statutory custodian until either the capital is restored by the voluntary action of the directors and stockholders, or proceedings in invitum are taken by the Attorney General. * * *"
In McDavid v. Bank of Bay Minette (Ala.) 69 So. 453, the court quotes from the case of Anderson v. Seymour, 70 Minn. 358, 73 N.W. 171 (both of these cases are cited in the majority opinion), and says:
"The Supreme Court of Minnesota had under consideration in the case of Anderson v. Seymour, supra, an act somewhat similar to the one here under review, and in which case a number of objections were presented to the act upon constitutional grounds. The law was held to be free from constitutional objection. It was also held that the receiver appointed pursuant to the banking act had the prior right to enforce the stockholders' liability — a right theretofore held by creditors only — and that the receiver had, so to speak, the right of way, and the creditor was not permitted to supersede it or to commence proceedings himself without good cause shown,as for example, that the receiver is incompetent ordisqualified or has willfully neglected his duty."
In Cartmell v. Commercial Bank Trust Co. (Ky.) 156 S.W. 1048, cited in the majority opinion, the Court of Appeals of Kentucky clearly recognizes the right of creditors to seek relief in a court of equity if the Bank Commissioner was not discharging his duty. We quote from page 1052 of the Southwestern Reporter as follows:
"Indeed, there is no necessity for a receiver, when the Banking Commissioner proceeds as directed by the provisions of this act, for, when he takes charge of a bank, all of his acts are such as might properly be discharged by a trustee or other person or officer occupying a fiduciary position. The object and aim of the law, in the appointment of a receiver, is to see that the assets of the institution, in charge of which he is placed, are properly, honestly, and economically administered. The ends of the law are satisfied, if the estate is administered in this way, whether the person charged with its administration be termed a Banking Commissioner, a trustee, or an assignee. The duties are the same. * * *
"Of course, if the commissioner does not act and directors refuse to take the initiative, a court of chancery would undoubtedly have the right to appoint a receiver for the preservation of the assets of the bank and *Page 52 the protection of the interests of the creditors, upon a proper showing and request on the part of creditors. But the basis for the action, in a case of this character, would be the failure and refusal of the commissioner to discharge a duty which the act under consideration plainly imposes upon him. The act, when properly and fairly construed and administered, affords ample, full, and complete protection to all depositors and creditors of a bank when found to be in an unsafe or insolvent condition; and, as stated, in all cases where the Banking Commissioner should refuse to discharge the duties imposed upon him by the act, creditors would have the undoubted right to seek relief in a court of equity. No such condition existed in the case at bar. The commissioner and a majority of the board of directors, when the bank was found to be insolvent, at once placed its assets in the hands of the commissioner as provided by the act; and at the time of the institution of this suit, the assets were being preserved and collected for the benefit of appellants and all other creditors of the bank. The interests of appellants were as fully, amply, and completely safeguarded and protected as they would have been were a receiver of court, instead of the Banking Commissioner, discharging these duties. The Banking Commissioner and directors have proceeded in strict conformity with the requirements of the act. It being conceded that the bank was, at that time, insolvent, their act and proceedings were fully justified."
In Ex rel. Lofthus, State Bank Examiner, v. Langer, Attorney General (N. Dak.) 177 N.W. 408 (cited in the majority opinion), Robinson, J., in a special concurring opinion, used this language:
"But it is insisted that this court has not jurisdiction and that it should not follow the example of him who took water and washed his hands, saying: 'I am innocent of the blood of this just man; see ye to it.'
"When in the language of the Scripture, it might be well said: 'Therefore is judgment far from us, neither doth justice overtake us; we wait for light, but behold obscurity; for brightness, but we walk in darkness. We grope for the walls like the blind, and we grope as if we had no eyes; we stumble at noonday as in the night. And judgment is turned away and equity cannot enter.'
"But such is not the condition. The Supreme Court is supreme. It has justice (jurisdiction) over all other courts, state banking boards, and all other such administrative boards, and it may say to each of them: 'Thus far shalt thou go and no farther.' Manifestly, it is within the power and duty of the Supreme Court to use and adopt such measures as may be necessary to enforce and protect all the constitutional guaranties of life, liberty, and property. It is not competent for the lawmakers to give arbitrary power to any board or body of men. Every power is given on condition that it must be used justly, fairly, honestly, and not in an arbitrary manner."
The respondent in his brief cites and relies upon some decisions in which the facts are similar to the facts in the instant case wherein the various courts have announced the doctrine that a court of equity has power to appoint a receiver where the assets of an insolvent bank are being wasted or its affairs mismanaged.
In State v. Farmers' State Bank of Decatur (Neb.) 170 N.W. 901, the Supreme Court of Nebraska said:
"This is in direct contravention of the statute. Where the direct provisions of the statute with reference to the disposition of a trust fund are ignored to the injury of a contributor to the fund, it occupies a like position to that of a stockholder in a corporation whose directors are diverting the property of the corporation to its damage. In such case he has a property right which a court of equity will protect if the proper officers of the corporation refuse or neglect to protect his interest. An analogous situation is presented here if the proof bears out the charges made, and the contributors to the fund are entitled to apply to a court of equity to protect their interests, if they are not taken care of by the officers of the state."
In Jeffries v. Bacastow. Receiver (G. Luther Brown et al., Appellants), 90 Kan. 495, 135 P. 582, the court said:
"The fact of insolvency having been discovered, the statute directs the Bank Commissioner's course, and the designation by him of a person to wind up the affairs of the bank is no more a judicial act than his order to the board of directors to remove a dishonest cashier. His powers are purely administrative, and in no way infringe upon the ancient authority of courts to determine rights of person and property in specific controversies pending before them."
The majority opinion does not refer to section 303, Revised Laws of Oklahoma, 1910. This section reads as follows:
"In the event that the Bank Commissioner shall take possession of any bank or trust company which is subject to the provisions of this chapter, the depositors of said bank or trust company shall be paid in full, and when the cash available or that can be made immediately available of said bank or trust company is not sufficient to discharge its obligations to depositors, the *Page 53 said Banking Board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in section 300, the amount necessary to make up the deficiency; and the state shall have, for the benefit of the depositors' guaranty fund, a first lien upon the assets of said bank or trust company, and all liabilities against the stockholders, officers and directors of said bank or trust company and against all other persons, corporations, or firms. Such liabilities may be enforced by the state for the benefit of the depositors' guaranty fund."
It is clear from the reading of this section that neither the Banking Board, the Bank Commissioner, nor the state of Oklahoma has any lien upon the assets of an insolvent bank until the depositors have first been paid in full. The petition states and the demurrer admits that not any one of the depositors of this bank has been paid either in full or in part out of the guaranty fund. Neither have they been paid any part of their deposits out of the cash available or that can be made immediately available of said bank. How can there be a lien created on the assets of the bank in favor of the Banking Board or the bank guaranty fund when it has not paid out any money or thing of value that it is entitled to recover back out of such assets?
The majority opinion relies in part on section 300, Revised Laws of Oklahoma, 1910, and quotes extensively from said section. This section of the statute has been repealed. Section 2, article 2, House Bill No. 615, Session Laws of 1908, provides for creating and maintaining a depositors' guaranty fund. This law did not provide for issuing certificates of indebtedness to depositors in lieu of cash. Section 3, article 2, chapter 5, act of March 11, 1909, amended section 2, of article 2, Laws of 1908, supra, and provided that the Banking Board shall issue and deliver certificates of indebtedness to depositors of failed banks when such depositors could not be paid in full out of the depositors' guaranty fund. The latter part of said section 3 is embodied in section 300, Revised Laws of 1910. Section 3, chapter 31, Session Laws of 1911, amended section 3, article 2, chapter 5, Session Laws of 1909, and, as thus amended, it was the law at the time of the adoption of the Harris-Day Code, otherwise known as Revised Laws of 1910. Chapter 39, Session Laws of 1911, pages 70 and 71, is the act adopting the Harris-Day Code. The last portion of section 2 of said chapter 39 reads:
"Provided. Further, that this act shall not be construed to repeal any act of the Legislature enacted subsequent to the adjournment of the extraordinary session of the Legislature which convened in January, 1910."
Therefore, said section 3, chapter 31, Session Laws of 1911, amending said section 3, article 2, chapter 5, Session Laws of 1909, became the law and section 300, Revised Laws of 1910, was thereby repealed. Chapter 22, Senate Bill No. 231, Session Laws of 1913, page 23, is an act amending sections 1, 2, and 3, of chapter 31, Session Laws of 1911, and section 3, article 2, Session Laws of 1908. Section 6 of said chapter 22, Session Laws of 1913 specifically amended section 3 of the act of the Legislature of 1911. We quote a part from page 29, Session Laws of 1913, as follows:
"If at any time the depositors' guaranty fund on hand shall be insufficient to pay the depositors of failed banks, or other indebtedness properly chargeable against the same, the Banking Board shall have authority to issue certificates of indebtedness to be known as 'depositors' guaranty fund warrants of the state of Oklahoma,' in order to liquidate the deposits of failed banks, or any other indebtedness properly chargeable against said depositors' guaranty fund.
"Depositors' guaranty fund warrants of the state of Oklahoma shall bear six per cent. interest from date of issue, payable annually, and shall be issued in such form as may be prescribed by the Banking Board, and shall constitute a charge and first lien upon the depositors' guaranty fund when collected, as well as a first lien against the capital stock, surplus, and undivided profits of each and every bank operating under the banking laws of the state of Oklahoma to the extent of liability of any such bank to the depositors' guaranty fund under the provisions of this act, and said Banking Board shall have authority to negotiate or otherwise dispose of such depositors' guaranty fund warrants, at not less than par value, in such manner as it may see fit to facilitate the liquidation of failed banks."
From and after the passage of said act of 1913, the Banking Board has had neither power nor authority to issue to any depositor of a failed bank certificates of indebtedness. The only provision under the law, as it has existed since 1913, is for the Banking Board to issue and sell warrants at not less than par and bearing six per cent.
The majority opinion states that there are two ways for the State Banking *Page 54 Board to function, and relies on section 300, Revised Laws of 1910, as providing one of the ways. As already pointed out, this section has been repealed, and section 6, chapter 22, Session Laws of 1913, is now the law governing the Banking Board in taking over insolvent state banks and it provides the only way. It is not even contended the Banking Board has followed this statute.
The object of the framers of the Constitution was to so safeguard the banking institutions of this state that those who deposited their money in such banks would be protected from loss: First, by creating a Banking Department with authority to regulate and control such banks, and thus reduce the number of bank failures to the minimum; second, by providing a guaranty fund to immediately pay depositors the amount of their deposits in any such bank that may become insolvent. In every act of the Legislature pertaining to the banking system they have sought to attain this object of protection to depositors and individual stockholders. The Legislature of 1913, realizing that issuing certificates of indebtedness in lieu of cash to depositors of insolvent banks was not the best way to protect such depositors, enacted section 6, chapter 22, Session Laws of 1913, supra, which provides that guaranty fund warrants shall be negotiated and the proceeds thereof used to pay such depositors. Just as there is a scarlet thread running through the entire length of every rope used upon any man-of-war, or other vessel belonging to the British Navy, so in every act of the Legislature pertaining to the banking laws of Oklahoma do we find a thread running through such acts and laws designated for the protection of depositors and individual stockholders. In construing these laws this court should follow the thread which emanates from the Constitution and is clearly discernible in every act of the Legislature and is designed to protect the depositors of insolvent state banks and guarantee them from loss by reason of the failure of such banks. To prohibit a district court from appointing a receiver to protect the assets of such insolvent bank from being fraudulently dissipated is to place such depositors in a worse position than if the framers of the Constitution had not even attempted to protect such depositors.
It is admitted that the warrants issued by the State Banking Board cannot be negotiated nor any payment made to the depositors of this insolvent bank, therefore these depositors can only be protected by receiving their pro rata share derived from the assets of the failed bank. The Attorney General, in his brief, recognizes the hopeless insolvent condition of the bank guaranty fund, for he says:
"The guaranty fund at present is financially embarrassed because of the fact that the demands made upon it for the last two years have greatly exceeded the amounts collected from the assessments on state banks. At present depositors cannot be paid in full in cash from this fund, and the Bank Commissioner cannot raise cash by the issuance of warrants, because he cannot sell guaranty fund warrants at par as required by the law. However, we do not know how soon the fund will be restored. We do not know but what even the next session of the Legislature will provide some means of repairing this fund."
The Bank Commissioner took charge of the assets of this bank on November 2, 1921, yet on February 6, 1922, more than three months after the bank was closed by the Bank Commissioner, not one cent had been paid to the depositors. Surely there was a sufficient amount of assets of said bank that could have been immediately available to pay depositors so that the depositors could have received some part of their deposits.
Briefly summarized, the record and admitted facts show the unsecured depositors had on deposit in said bank at the time it was taken over by the State Bank Commissioner the sum of $1,459,000. The assets amounted to approximately $1,460,000. The Bank Commissioner by his fraudulent acts and failure to conserve the assets of said bank has depleted said assets to the extent and amount of $500,000. This amounts to a loss of more than one-third of its available assets, yet the majority opinion affords no relief for these unfortunate depositors. If the Bank Commissioner may squander, embezzle, or otherwise dispose of one-third of the bank's assets in less than three months, before one cent has been paid to depositors, and the courts can afford no relief, then what is to prevent him from dissipating the remainder of its assets before its affairs are wound up? If he can dissipate one-third and the depositors and stockholders have no relief, then if he dissipated another third or two other thirds, they would still have no relief. Then, I ask, what has become of the protection to life, liberty, and property, to be *Page 55 afforded by the courts as guaranteed under the Bill of Rights?
In the depleted condition of the assets of this bank, caused by the arbitrary actions, mismanagement, and fraud of the Bank Commissioner, the unsecured depositors will eventually receive at least 40 per cent. less than they would have received by a careful and judicious management of its affairs.
As stated in the majority opinion, "Fraud cuts down everything, even judgments of courts and renders them void." The fraud disclosed by this record would vitiate the Bank Commissioner's fraudulent transactions, and by action timely taken these assets which have been fraudulently disposed of could be returned into the channel from which they had been diverted. In this way these depositors could be protected by a court of equity. The district court of Okmulgee county was affording the only relief available to these depositors. By appointing the receivers, proper actions could have been instituted by them and court orders legally made by which these receivers would have been possessed of practically all of the assets that had been fraudulently dissipated.
I conclude that under the facts presented by this record and under the Constitution and laws of this state, the district court of Okmulgee county had jurisdiction to appoint a receiver for the insolvent Bank of Commerce and to make the order it did make. Therefore, the writ of prohibition should not issue.
I am authorized to say that ELTING and KENNAMER, JJ., concur in this dissenting opinion.