Kawahara v. Yokohama Specie Bank, Ltd.

Petitioners appeal from the order denying their petition to intervene in a proceeding in which the liquidator of the San Francisco and Los Angeles offices of the above bank petitioned for leave to pay an 80 per cent dividend on claims against those offices, and from the order granting such petition of the liquidator.

From the petition of the liquidator it appears that the Yokohama Specie Bank (hereafter called the bank) was a Japanese corporation authorized to do a deposit banking business in California pursuant to section 7 of the Bank Act,

Section 7 of the Bank Act contains provisions requiring a foreign bank to assign a certain part of its capital to the business in this state and to keep its California business and the capital, funds and deposits, accounts and transactions belonging to it separate and apart as if the California business were a separate corporation. Section 136 contains provisions requiring all claims against a corporation of which the superintendent has taken possession to be presented in writing, verified, within four months after the first publication of notice; any claim not so presented is declared forever barred, (with an exception, however, for “any deposit claim, appearing upon the books of said bank to be a valid claim”; such claim if presented after the time fixed shall be entitled to share in any dividends declared subsequent to the presentation). If the superintendent of banks rejects a claim presented he must serve notice of rejection on the claimant who must bring action within six months after service.

The liquidator’s petition for distribution of dividends on approved claims was filed July 14, 1947; hearing was set for July 28th, but on request of appellants was postponed to August 5, 1947. On August 4, 1947, appellants filed their petition for leave to intervene for themselves and as representing others similarly situated, all holders of “yen certificates” which total the sum of more than $10,000,000. They allege they are creditors of the California offices of the bank because of United States money deposited therein for which they were given as evidence “Fixed Deposit Certificates” (in yen) a specimen of which is affixed to the petition. This specimen certifies that a certain amount in yen has been remit

The next day at the hearing the liquidator did not file an opposition to the petition but answered orally that the petitioners had not complied with the provisions of the Bank Act and were not depositors in the California branches but in the Yokohama home office; that they could have made dollar deposits in the California branches, but preferred the yen deposits in Yokohama because of the much higher rate of interest. The California branches acted in these transactions as agents of the home office as any other bank could have done. Petitioners did not object to the oral answer but, when the liquidator wished to develop his position by witnesses, their attorney declared, “Your Honor, we were not prepared to contest factual matteis at this time.” However, the court ordered the liquidator to go ahead. No further objections to the proceedings or the hearings of witnesses were made, and petitioners cross-examined witnesses and made an offer of proof that the books and records of the California offices show who received yen certificates and whether they still were outstanding, which offer was rejected by the court.

After memoranda of points and authorities had been filed by petitioners and in opposition by the liquidator and by certain creditors of the California branches the court made its order denying petition for leave to intervene on the basis of findings in substance as follows: 1. Petitioners have been guilty of unreasonable delay and laches in asserting their claims, causing prejudice to the liquidator and creditors of the California offices. 2. The yen certificates do not represent deposits in the California offices of the bank and petitioners are not depositors in them. 3. The claims of the petitioners do not appear as valid in the books of the California offices and petitioners have no accounts therein. 4. The yen certificates represent deposits in the Yokohama office of the bank and are payable there. 5. ... 6. The California offices regularly issued yen certificates as agents of the Yokohama office for its account and the funds they so received were transferred to the Yokohama office on the interoffice accounts. 7. Branch offices of the Yokohama office, including the Cali

Appellants contend that the court below erred in not first and separately deciding appellants’ right to intervene on the basis of the allegations of their petition which prima facie show a direct interest in the pending proceedings. They alleged that they were depositors in the California branch offices and as such were entitled to participate in the intended distribution. No pleading in opposition had been filed. They argue that the right of a party with a sufficient interest to intervene is absolute and a matter of right; that it was against due process to go into the merits of petitioners’ right together with those of the principal proceedings before appellants’ right to intervene had been decided and they had had opportunity to plead and to prepare for trial in the principal proceedings, and that the question whether appellants’ claims were barred by the statute of limitations or laches cannot be investigated and decided on the petition to intervene, citing Maas v. Sullivan, 124 Misc. 295 [ 207 N.Y.S. 181 ]. Moreover, also on the merits they contend they were entitled to participate in the California assets, that their claims were not barred, and that, as holders of certificates of deposit, they were depositors of the bank and come under the depositors’ exception to the four months terms of presentation of the Bank Act. To complete the statement of the questions raised, we here state without comment the minor points advanced by petitioners: The petition constituted presentation prior to the intended distribution so that they were entitled to participate. The practice of the California offices as to

Respondent bank and its liquidator argue: A. The right to intervene is not absolute but can be lost by unreasonable delay and laches and is left to the sound discretion of the trial judge. The delay in the present ease is not explained by appellants either below or on appeal.

B. The intervention proceedings try to circumvent the procedure of section 136, Bank Act, meant to provide an orderly and speedy distribution of assets in liquidation, which procedure is comprehensive and exclusive. Action can only be brought on a claim rejected. Before rejection any action is premature. The procedure as to claims under the Bank Act is analogous to the filing of claims in probate. In California a complaint against an executor fails to state a cause of action unless it is alleged that the claim has been presented within the time allowed by the Probate Code. As their claims were barred by failure of timely presentation they had no interest entitling them to intervene. The statutory requirement of presentation within four months is not a statute of limitations but a substantive condition precedent (citing Zuroff v. Westchester Trust Co., 273 N.Y. 200 [ 7 N.E.2d 100 , 109 A.L.R. 1401 ], under an almost identical statutory provision), without fulfillment of which there is no right whatever against the liquidator.

C. The petition of appellants with the conditions of the appended yen certificates clearly showed on its face that appellants were not depositors in the California offices of the bank but in the Yokohama office. Custom and usage cannot vary the terms of a clear and unambiguous contract. The parol evidence rule debars evidence of the alleged oral agree

D. As the petition did not state facts entitling intervention the court should deny it both below and on appeal, even without a demurrer. If the procedure in the court below did not conform to standard practice the defect was waived by failure to object to and cooperation in it. Felice v. City of Inglewood, 84 Cal.App.2d 263 [ 190 P.2d 317 ]. Appellants were not prejudiced as the court decided after submission of points and authorities and the decision could never have been otherwise as the facts which appellants alleged and those they offered to prove, even if true, would not establish an interest entitling them to intervene.

B. The appeal from the order granting the liquidator’s petition for leave to pay a dividend must be dismissed as appellants are not parties to these proceedings.

It would serve no useful purpose to compose an extended treatise concerning the major and minor points raised by the respective parties. Academically some of them appear debatable, but none of them can stand against the unescapable conclusion that, for the three reasons hereinafter noted, there was no prejudicial error in the proceedings under review, and therefore the order should not be disturbed.

(1) On June 1, 1945, the liquidator caused notice to creditors to be published in full accord with the provisions of section 136 of the Bank Act. None of the petitioners for leave to intervene filed a verified claim based on his yen certificate and no holder of a yen certificate has filed suit against the liquidator based on a yen certificate. For these reasons none of the petitioners had any right to intervene in these proceedings. None had a justiciable right which he could seek to enforce adverse to the liquidator’s petition for leave to pay dividends to the legitimate creditors. By the express terms of section 136 of the Bank Act a claim is forever barred which has not been presented within four months after the first publication of notice. Appellants must concede

It should be noted that, under section 136 of the Bank Act, if appellants’ claims appear on the books of the corporation as valid claims they are entitled to share in the dividends notwithstanding a failure or delay in presentation. This right to share in dividends does not necessarily entail a right to intervene in these proceedings. The undisputed evidence is that appellants’ claims do not appear on the books of the corporation as valid claims. Insofar as the interests here sought to be protected are concerned, appellants appear on the books of the corporation, when they appear at all, only as purchasers of yen certificates—a simple transaction of purchase and sale in which both parties got what they bargained for—a transaction which is not challenged on the ground of fraud, or any similar ground, and one which could not be attacked in this proceeding.

Appellants mistake the issue on their failure to file claims under section 136 of the Bank Act as presenting a question of the bar of the statute of limitations calling for a plea. This is not the effect of the statute. To the contrary it establishes a condition precedent operating as a prohibition against assertion of the right and pointing directly to the failure of the petition to state a cause of action. As such it is at one with those statutes calling for filing a claim against an estate in probate, a county, or other public agency. In cases involving those statutes it has been uniformly held that the pleading fails to state a cause of action unless it alleges presentation of a claim within the time fixed in the statute or a valid excuse for failure of presentation. Hays v. Bank of America, 71 Cal.App.2d 301 , 304 [ 162 P.2d 679 ]; Rhoda v. Alameda Co., 52 Cal. 350 ; 7 Cal.Jur. § 113, p. 549; 4 Cal. Jur. 10-Yr. Supp. § 113, p. 473; Zuroff v. Westchester Trust Co., 273 N.Y. 200 [ 7 N.E.2d 100 , 109 A.L.R. 1401 ], a case arising under a provision of the New York Bank Act similar to section 136.

The premise upon which appellants rest their ease is that intervention is “an absolute right,” and it is true that some of the cases have used the expression inadvertently and loosely. But it is a false premise. The right is statutory and is controlled by the statute. Section 387, Code of Civil Procedure provides that a person “may” intervene, and that intervention takes place when a third person is “permitted” to become a party, and that the application for leave may be “filed by leave of the court.” Now the fact that “leave” must be requested and that the court has power to grant or deny the request negatives all conception of an “absolute right.” Since the court has the power to grant or deny, and since no other procedure is presented, we cannot say that the court here was in error when it gave the parties a hearing to determine whether the petition had merit. If the leave had been denied arbitrarily, we can see where appellants might present a case of abuse of discretion. But here the record shows the contrary. On the hearing it developed that appellants had no justiciable interest in the litigation and that their intervention would have served no end except to delay the distribution of the funds to those who were legally entitled to a prompt distribution.

(3) For another reason the trial court properly denied leave to intervene. Notice to creditors was given June 1, 1945. These petitioners were charged with knowledge that this would be followed by the liquidator’s request for leave to make distribution. The petition for leave to intervene was not filed until August 4, 1947, one day prior to the hearing of the liquidator’s application. It is settled that any unreason

We should not be understood as holding that appellants have no cause of action against the home bank or against either of its branches located in this state. That question does not arise in this litigation and we do not decide it. Here the sole question is whether appellants have the right to delay distribution to the qualified creditors while their independent claims for relief are being litigated.

The controlling issue is the power of the superior court to deny a petition for leave to intervene when it appears that the petition if granted would delay the main proceeding and also that the petitioner could not under any circumstances become a proper party to the proceeding. On this issue appellants argue that the court erred in taking evidence which supported his order denying the petition. We are satisfied that a reasonable and liberal interpretation of section 387 of the Code of Civil Procedure permits the superior court to examine into the petition to determine whether the petitioner is one entitled to intervene under the statute and whether there has been unreasonable delay in making the application. The question whether the petitioner “has an interest in the matter in litigation” is a question of fact which must be determined by the court before “leave” to file is granted. The statute does not require that leave to file must be granted on the face of the petition alone. If the court can act more intelligently by giving the parties a hearing, we know of no authority which prevents such procedure.

On the question of delay that too is a question of fact. Here the superior court took evidence without objection of the petitioners. On that evidence it found that petitioners have been guilty of unreasonable delay and laches in asserting their claims, causing prejudice to the liquidator and creditors of the California offices. On the issue of laches the appeal is controlled by Allen v. California Water & Tel. Co., supra, 31 Cal.2d 104 , 108 [ 187 P.2d 393 ], where the court said: “Aside from the statutory limitation upon the time of intervention, it is the general rule that a right to intervene

Since the evidence here supports the finding of the .superior court that the petitioners were guilty of unreasonable delay and that their intervention would seriously prejudice the distribution proceedings we find that there was no error in the order denying their petition. Other questions do not require further consideration.

Appellants are not parties to the order granting the liquidator leave to pay dividends and cannot appeal therefrom. Braun v. Brown, 13 Cal.2d 130 , 133 [ 87 P.2d 1009 ]; 20 Cal.Jur. 529.

The appeal from the order for distribution is dismissed. The order denying leave to intervene is affirmed.

Goodell, J., and Dooling, J., concurred.