Doty v. Love, 295 U.S. 64 (1935)

Doty v. Love

No. 585

Argued March 11, 12, 1935
Decided April 1, 1935
295 U.S. 64

APPEAL FROM THE SUPREME COURT OF MISSISSIPPI

Syllabus

1. The constitutional rights of a depositor of an insolvent state bank, which is in the hands of a liquidating official under direction of a state court, are held not violated by the adoption, under a later statute, of a plan consented to by three-fourths of the depositors and approved by the liquidating official and the court whereby, instead of bringing about liquidation and distribution of the assets through the officer as provided by the general law, the bank was reopened in a reorganized form with new shareholders and took the place of the officer for the purpose of gathering and guarding the assets and discharging the liabilities. P. 70.

2. The statute is not given an unconstitutional application because, by the plan approved and decreed under it, some of the assets of the old bank are risked in the business of the new one, this being done to improve the chances of collection for the benefit of existing creditors, and provision being made to insure that the equivalent of such assets shall be repaid the creditors or be deposited in a fund held by the new bank for their benefit, before any profits of its business shall inure to its shareholders. P. 71.

3. To make such a reorganization possible, some of the shareholders of the old bank contributed capital to the new one in return for its shares, upon which they became personally liable, and were released from personal liability on their old shares. Held that the release did not infringe constitutional rights of nonassenting creditors, since it was a necessary incident to the plan for the protection of all, and was but an exercise of the power of the liquidating officer, with approval of the court, to compromise claims of uncertain collectibility and value upon terms beneficial to his trust. P. 72.

4. Mere error in judgment in the compromising of claims of an insolvent bank by state officials in charge of its liquidation is not an unconstitutional taking of the property rights or impairment of the contract rights of nonassenting creditors. P. 73.

5. It is not an unconstitutional discrimination against depositors of an insolvent bank to pay in full the claims of other banks which are fully secured by collateral, or to discharge in full other deposit accounts which are so small that it will be more economical to pay them than to incur bookkeeping expenses incidental to calculation of dividends. P. 74.

6. One who has appeared generally and been fully heard upon the merit cannot complain of insufficiency of notice to others. P. 74.

172 Miss. 342, 155 So. 331, affirmed.

Appeal from the affirmance of a decree of the Court of Chancery in Mississippi which ordered the reopening of a closed bank under a plan approved and presented to it by the Superintendent of Banks. The appellants were two of the depositors who did not assent, but whose objections were overruled.