Gray v. First Nat. Bank & Trust Co. of Yonkers

• Decision Date: 27 February 1934
• Court: New York Court of Appeals Court of Appeals
• Parties: GRAY v. FIRST NAT. BANK & TRUST CO. OF YONKERS.

263 N.Y. 479

189 N.E. 557

GRAY

v.FIRST NAT. BANK & TRUST CO. OF YONKERS.

Court of Appeals of New York.

Feb. 27, 1934.

Action by Virginia Gray against the First National Bank & Trust Company of Yonkers, N. Y. From an order of the Appellate Division 240 App. Div. 893,266 N. Y. S. 1002, reversing an order of the Special Term denying plaintiff's motion for summary judgment, such order of reversal granting plaintiff's motion, and from the judgment entered thereon, defendant appeals, and plaintiff cross-appeals.

Judgment of the Appellate Division reversed, and order of Special Term affirmed.Appeal from Supreme Court, Appellate Division, Second Department.

Horace M. Gray, of New York City, for plaintiff-appellant and respondent.

William J. Wallin, of Yonkers, for defendant-respondent and appellant.

CROUCH, Judge.

On March 3, 1933, the plaintiff had a savings account with the defendant bank, in which there was a balance of $27,728.07. About 2:20 o'clock p. m. on that day she went to the bank and stated that she wished to purchase at the then market price $10,000 par value of Fourth Liberty Loan 4 1/4 per cent. bonds, the cost thereof to be charged to her savings account. She was told that the bank would put in an order to its brokers for the bonds, if plaintiff would sign the customary form. She thereupon signed the following order:

‘The First National Bank & Trust Co., 3 Main Street, Yonkers, N. Y.

‘No. 4691

‘Date Mar. 3, 1933.

‘Buy For my account and risk the following securities: I hereby authorize you to place the order with any broker having a membership on the New York Stock Exchange, and to charge my deposit account with you for cost of same.

‘Name/sgd/Virginia W. Gray Address 2 Sherwood Terrace

‘10M Liberty 4th 4 1/4

‘Order placed on Mar. 3, 1933, at 2:20 p. m.

‘JH.’

The bank official told plaintiff that she should leave her passbook with the bank, as the exact cost of the bonds would not be known by the bank until the following day, and the bank could not make any charge or withdrawal from her account until then. The bank telephoned the order to its brokers, and the bonds were purchased by the brokers about 2:24 o'clock p. m. The brokers billed the cost to the bank, which received the statement the following morning, March 4, 1933. The bank at that time was closed under the proclamation of the Governor of the state, and thereafter remained closed under the subsequent proclamation of the President of the United States.

On March 20, 1933, a conservator was appointed by the Comptroller of the Currency under the Bank ConservationAct of March 9, 1933. The bank has never been licensed to reopen or to do business as provided in the Bank Conservation Act. It is still in charge of the conservator. The bank has not paid for the bonds, nor have they been delivered to it. The cost of the bonds, with interest and brokerage as billed to the bank, was $10,247.78.

This action was brought on July 25, 1933, upon the theory that, by reason of the facts above stated, the entire balance in plaintiff's savings account was segregated from the assets of the bank and set aside as a trust fund out of which the purchase price of the bonds was to be paid. The judgment asked for was that defendant pay from said trust fund to its brokers the amount due for the bonds, and order said brokers to make delivery thereof to the plaintiff. For that relief plaintiff has been granted a summary judgment.

The conservator was not made a party to the action. Upon the argument a question was raised as to whether he should have been made a party and as to what, in any event, would be the effect of a judgment against the bank or against its conservator.

Section 203 of the Bank Conservation Act (U. S. Code, tit. 12, c. 2, § 203 (12 USCA § 203) provides as follows: ‘Conservator; appointment, powers and duties; compensation. Whenever he shall deem it necessary in order to conserve the assets of any bank for the benefit of the depositors and other creditors thereof, the Comptroller of the Currency may appoint a conservator for such bank and require of him such bond and security as the Comptroller of the Currency deems proper. The conservator, under the direction of the Comptroller, shall take possession of the books, records, and assets of every description of such bank, and take such action as may be necessary to conserve the assets as such bank pending further disposition of its business as provided by law. Such conservator shall have all the rights, powers, and privileges now possessed by or hereafter given receivers of insolvent national banks and shall be subject to the obligations and penalties, not inconsistent with the provisions of this title, to which receivers are now or may hereafter become subject. During the time that such conservator remains in possession of such bank, the rights of all parties with respect thereto shall, subject to the other provisions of this subchapter, be the same as if a receiver had been appointed therefor. * * *’

It is the function of a conservator to conserve and not, as in the case of a receiver, to liquidate. Nevertheless, by the terms of the act the rights of all parties are ‘the same as if a receiver had been appointed.’ For guidance on jurisdictional and procedural matters we may therefore resort to decisions made in receivership cases. It seems that the taking over of a national bank by the Comptroller of the Currency still leaves the bank capable of suing and being sued. Bank of Bethel v. Pahquioque Bank, 14 Wall. 383, 20 L. Ed. 840; Green v. Walkill Nat. Bank, 7 Hun, 63. Nor is the receiver a necessary party (Denton v. Baker [C. C. A.] 79 F. 189), though he may...