109 N.Y.S. 509 | N.Y. App. Div. | 1908
The defendant is a domestic moneyed corporation organized for the purpose of conducting a hanking business. On the 31st day of January, 1908, a resolution was passed by its board of directors closing its doors and requesting the- State Superintendent of Banks to take charge' of its affairs. That official complied with the request, and on the fourth day of 'February following advised the Attorney-General of the State that the defendant had suspended payment and that he had taken possession of its assets at its request and formally reported to him that it was unsafe and inexpedient at that time for the defendant to continue business.
Examiners from the Banking Department were directed by the Superintendent to examine as to the assets and liabilities of the defendant and they found and reported that, exclusive of liability on its capital stock of $750,000, the defendant had on the day the Superintendent took possession a surplus of $1,233,686.34.' Certified public accountants were also employed and they found the surplus to be, after making such deductions as they considered proper, $1,498,432.17. Since these reports were made it appears the liability of defendant upon clearing house certificates has been reduced by nearly $600,000.
These examinations having shown the solvency of defendant, negotiations were entered into by authority of defendant’s board of directors with the Metropolitan Trust' Company for the loan of a sufficient sum of money to pay all depositors and creditors of the defendant. These negotiations resulted in an agreement on the part of the trust company, the details of which we do not deem material, to advance sufficient money for that purpose. The Superintendent of Banks gave his approval to tins arrangement, subject, however, to acquiescence on. the part of the Attorney-General. That official was apprised of what the financial condition of the bank had been found to be and of the arrangement that -had been made to pay its debts, and of the approval of the Superintendent of Banks,
The appointment of receivers of moneyed corporations is regulated by chapter 60 of the Laws of 4902, which provides that the court may, in a case provided by law, appoint a receiver of such corporation, and may, in its discretion, dispense with notice of the application.
The complaint, upon which alone the application was made, showed that the defendant’s assets were in the hands of the Superintendent of Banks, voluntarily placed there by the defendant itsélf.
The Attorney-General should have-given the defendant notice of his application for the appointment, of the temporary receivers. Unless there be some emergency requiring immediate action, the law contemplates the. giving of notice of an application for the appointment of receivers. The court -to which application - may be
. The court having been led into improperly dispensing with notice of appointment of the temporary receivers, it was very proper for the judge who granted the original order to- grant an order to show cause and thus give the defendant an opportunity to be heard to set aside the order which he had improvidently granted without notice. The effect of this order to show cause was not to review the former order, but rather to grant a hearing on the propriety of appointing receivers at all, and to advance the hearing on the original order to show cause appointed for March twenty-fourth to an earlier date.
Treating the procedure in this manner, as it is proper we should, it is manifest that on the hearing the defendant was shown to be perfectly solvent and that receivers ought not to have been appointed, and that the order vacating their appointment was proper.
The report of the bank examiners- • showed a surplus over debts of nearly $1,250,000, and that of the public accountants of nearly $1,500,000. The liability of the defendant to its stockholders on its $750,000 of capital stock is of no concern to the People. The Attorney-General is not the guardian of investors against their will. Paternal government in this State has not yet gone to the extent of regulating in what its citizens shall invest their money. It is primarily the creditors of an insolvent corporation with which the State is concerned. It is hardly probable that the assets of the defendant, cut down as" they have been, will further shrink sufficiently to wipe out the large surplus shown so that the creditors of the defendant will not obtain their money in full. The papers upon which the receivers were appointed were insufficient to establish insolvency of the defendant.
The complaint alleges that from reports made by the Superin
It is true that the law provides that the Superintendent of Banks shall inform the Attorney-General with respect to the financial condition of moneyed corporations. The report, however, even of the Superintendent of Banks zis not conclusive as to insolvency, any more than the .conclusion on that subject of the Attorney-General himself. “The report of the Superintendent (of Banks) to the Attorney-General in' regard to the defendant’s transactions, may have been quite'sufficient to justify the Attorney-General in bringing the action, but the report in and of itself Was not a sufficient basis for a cause of action. ■ Neither the opinion of the Superintendent nor. of the Attorney-General that it is unsafe or inexpedient to allow a bank * * * to transact business is a sufficient basis for a judgment dissolving a corporation and distributing, its assets through the medium of a receiver or otherwise. * * * A mere statement that the Superintendent is of the opinion that it would be unsafe and inexpedient for the defendant to transact business any longer, and that the Attorney-General concurs with him, does not constitute a cause of action.” (People v. Manhattan Real Estate & L. Co., 175 N. Y. 133, 137, 138.)
There, is a further broad allegation in the complaint that the defendant is insolvent. The Attorney-General does not allege that he himself examined as to the assets and liabilities of the defendant, so that he acquired personal knowledge of its financial condition; The whole tenor of his complaint is that his conclusion, which he alleges as a positive fact, is based on information furnished" by others. The- complaint, therefore, standing alone, stated .no facts upon which a judgment of insolvency could be based.
The closing of defendant’s banking houses and calling upon the Superintendent of Banks to take charge of its assets may very properly be deemed acts of insolvency, hut'they are not conclusive acts. When it was shown, as it was, that this course was unnecessary, that the defendant was able to pay its debts and have a large surplus besides, these acts resulting, as they must,.from fright or over-caution in view of the financial situation existing, or from ignorance of the solvency how disclosed, lose their probative force.
Mor Were such acts a surrender of defendant’s corporate franchise. A surrender of corporate franchises cannot be inferred even from insolvency and suspension of business for a less period than that designated by statute to consummate it, unless the circumstances are such as to make it appear that the corporation has not power to continue or resume its business. (United Glass Co. v. Vary, 79 Hun, 103.)
It is urged that Matter of Murray Hill Bank (153 N. Y. 199) and People v. Mercantile Co-operative Bank (53 App. Div. 295) are authority for sustaining the- appointment of the receivers. In our view those decisions are not controlling. The point involved in the first of these cases was, whether proceedings taken by the Attorney-General took precedence over a proceeding for voluntary dissolution of a cóncededly insolvent banking institution, and it was held that the Attorney:General’s right was paramount. In the latter case it was determined upon the facts that the acts of the corporation were such that it would not longer be permitted to do business.
Concerning the proposed contrabt with the trust company, it is urged that it is not a binding contract on the trust -company obligating it to advance the money necessary to pay defendant’s creditors,- and that the terms are extravagant, and that the trust
So far, however, as concerns the approval in the order appealed from of the proposed agreement between the Oriental Bank and the Metropolitan Trust Company it was unnecessary, as was also the direction to the Superintendent of Banks to release the assets in his hands. This latter result would naturally follow*, if he shall ■ be satisfied that the bank is solvent and will be able, under the proposed agreement if executed, to pay its creditors at once. As soon as the receivers are discharged the management of the affairs of the bank revert to the directors, who have full authority to enter into any lawful arrangement' for the purpose of promptly meeting its obligations, and, therefore, the order in these regards should be modified.
The order appealed' from will be modified in the' manner herein before indicated, and as modified affirmed.
Patterson, P. J., McLaughlin and Scott, JJ., concurred.
I concur in the discussion in tlie'opinion of Mr. Justice Houghton with respect to the solvency of the bank and the impropriety of the -appointment of the receivers,- and I agree that the order appointing the receivers was properly vacated.' It appearing that the receivers were improperly appointed and that the order appointing them should be vacated, it seems to me that the jurisdiction of the court in the premises ends. It is not tlie province of the court to advise the directors of a. bank with respect to their powers or
Order modified as indicated in opinion, and as modified affirmed.