65 N.Y.S. 766 | N.Y. App. Div. | 1900
The defendant is a corporation organized on the 9th of October, 1889, under the authority of chapter 122 of the Laws of 1851. Its business operations extend not only through the State of New York, but several other of the United States, and the nominal amount of its transactions is very large. By the General Banking Law (Laws of 1892, chap. 689) chapter 122 of the Laws of 1851 was repealed, and all corporations which had been organized under the provisions of that law were made subject to the provisions of the Banking Law, and were placed for certain purposes under the supervision of the Superintendent of Banks. (General Banking Law, §§ 1, 2.) In the month of May, 1899, the Superintendent of Banks began an investigation into the affairs of this corporation. The investigation continued some time, and its result was made to appear in the report of the examiner, which was filed in the office of the State Banking Department on the 23d of September, 1899, and in the official report of the Superintendent of Banks made to the Attorney-General, both of which are by the Banking Law made presumptive evidence of the facts stated in them in all proceedings of this character. (General Banking Law, § 24.) By the report of the examiner it appeared that there was an actual deficit in the
The appellant insists as its first objection to this order that the Attorney-General has no power to bring this action, or in any event lie has no authority to bring it without a relator. By section 18 of the General Banking Law it is provided that if it shall appear to the Superintendent of Banks that any of the corporations mentioned in that section are conducting business in an unsafe or unauthorized manner, or that it is unsafe and inexpedient for such a corporation to longer continue in business, he shall report the facts to the Attorney-General, who shall thereupon institute such proceedings against the corporation as are authorized in the case of insolvent corporations, or such other proceedings as the nature of the cáse' may require. The corporations referred to in section 18 are corporations which are subject to the general provisions of the act. (§ 17.) Issue is taken by the defendant with the conclusion that the corporation is insolvent, and with the determination of the superintendent that it was unsafe and inexpedient for it to continue business. It is said that the corporation is not insolvent. The facts with respect to this matter are that upon an examination made in October, 1898, .it was made to appear that the assets of the corporation amounted to $1,021,589, and its liabilities to $1,017,871.39, so that upon the books of the company it was solvent. Another examination, made in May, 1899, which lies at the foundation of this action, resulted in the conclusion by the examiner that the assets had been altogether too highly estimated, and as a result of a reassess-.
The defendant claims that this scaling down was within the authority of the officers of the corporation within the case of People v. Bankers’ Loan & Investment Co. (13 Misc. Rep. 221), and that when it had been done the solvency of the corporation was restored. It appeared in that case that the loss Sought to be made good by reducing the amount to be paid to the shareholders was the result of a depreciation in the value of property out of the State upon which loans had been made by the corporation. It can hardly be said that was the cause of the loss here; but it is fairly to be inferred that the losses of this corporation, resulting in this great deficit, were caused not only by the extravagant estimate made as to the value of its property, but by the reckless purchase of real estate for the profit of some of the directors themselves and by the mismanagement of the affairs of the company by. these directors. If that be so, the case is more within that of People v. Empire Loan c& Investment Co. (15 App. Div. 69), in which it was held that losses caused in that way could not be restored by scaling down the sums due to the members and so re-establishing the solvency of the corporation without the consent of those members.
But it is unnecessary to determine in this case whether the solvency of the corporation was restored by the act of the directors in reducing the amounts to which the members were entitled, because it is quite clear from the report of the superintendent to the Attorney-General that the manner of conducting the business was such that it was unsafe and inexpedient to permit the corporation to longer continue in business, and that, therefore, the condition
This conclusion also substantially disposes of the second ground urged' by the appellant, that the case does not come within the provisions of paragraph 4 of section 1785 of the Code. It is not necessary that it should. Section 1785 is referred to, not as the source of the power of the Attorney-General to bring this action, but as prescribing the action which must be brought when the necessary facts required by section 18 of the Banking Law appear. The result of the two statutes is as though there had been added to section 1785 a new subdivision prescribing that an action to dissolve a corporation
Van Brunt, P. J., Patterson, O’Brien and Hatch, JJ., concurred.
Order affirmed, with costs.