Hood v. Guar. Trust Co. of New York

• Citation: 200 N.E. 55,270 N.Y. 17
• Court: New York Court of Appeals
• Decision Date: 28 January 1936
• Parties: HOOD, Com'r of Banks of North Carolina, v. GUARANTY TRUST CO. OF NEW YORK et al.

270 N.Y. 17

200 N.E. 55

HOOD, Com'r of Banks of North Carolina,

v.GUARANTY TRUST CO. OF NEW YORK et al.

Court of Appeals of New York.

Jan. 28, 1936.

Action by Gurney P. Hood, as Commissioner of Banks of North Carolina, against the Guaranty Trust Company of New York and others, as trustees of the estate of Theodore Roosevelt, deceased. From a judgment of the Appellate Division (243 App.Div. 470, 278 N.Y.S. 294), which reversed on the law a judgment (153 Misc. 298, 274 N.Y.S. 65) in favor of defendants dismissing the complaint, and granted judgment for plaintiff, defendants appeal.

Affirmed.

LEHMAN and HUBBS, JJ., dissenting.

Appeal from Supreme Court, Appellate Division, First Department.

George L. Kobbé, of New York City, for appellants.

Kenneth C. Royall, of Raleigh, N. C., and William D. Whitney and Bruce Bromley, both of New York City, for respondent.

FINCH, Judge.

This is an action brought by the commissioner of banks of the state of North Carolina, to collect an assessment on stock of the Page Trust Company, a banking corporation of North Carolina, held by the defendants, as trustees under the will of Theodore Roosevelt.

The complaint alleges that on May 20, 1933, the Page Trust Company voluntarily closed its doors and by formal resolution passed by a majority of its board of directors placed its assets and business under the control of the plaintiff for liquidation. Thereupon, on the 22d of May, the plaintiff duly filed in the superior court of North Carolina notice of possession and on the 22d of June levied a 100 per cent. assessment on all stock of the trust company, and duly filed a copy of such levy in the superior court. It is further alleged that on the date the plaintiff took possession the defendants were the owners and holders of 100 shares of the capital stock, and that under the provisions of the statutes of North Carolina they became liable for an assessment at the hand of the commissioner of banks of that state. It is alleged also that pursuant to statute the filing of the notice of levy of assessment is docketed as a judgment against the various stockholders. The plaintiff sues both upon the judgment and the assessment.

The defendant trustees by answer admit the stock ownership but set up as defenses:

First. That they are nonresident and that personal service has not been made upon them and that they have never appeared or submitted themselves to the jurisdiction of the court of North Carolina;

Secondly. That the commissioner of banks was not authorized to prosecute suits for the collection of assessments outside of the state of North Carolina; and

Thirdly. That the commissioner levied this assessment, not for the purpose of liquidation, but for the purpose of reorganization.

At the trial it appeared without contradiction that the bank had voluntarily closed its doors on May 20, 1933, and that the board of directors by formal resolution had placed it in the hands of the plaintiff for liquidation. Since then the liquidation has proceeded. At the trial there was also testimony as to the law of North Carolina. The plaintiff then rested and so also did the defendants, since the latter had presented their case by the introduction of exhibits during the cross-examination of the plaintiff's witness. These exhibits consisted of a copy of the resolution of the board of directors placing the trust company in the hands of the commissioner and a proposed plan of reorganization together with a notice of the reorganization sent to the stockholders, depositors, and creditors accompanied by a statement of the commissioner announcing his approval of the proposed reorganization. The plan of reorganization provided for liquidation of the trust company by selling its good assets to a new bank and levying a 100 per cent. assessment against the stockholders of the trust company with which to supply new cash for the new bank. In addition, each depositor and creditor was to receive a portion of his presently due claim in a time certificate. The record contains a formal abandonment of the proposed reorganization.

Motions for judgment by the plaintiff and to dismiss the complaint by the defendants were made. Both parties stipulated that findings of fact and conclusions of law be waived and a verdict directed as though a jury were present. The court at Trial Term dismissed the complaint upon the ground that the defendants were nonresidents and had never been served with process within the state of North Carolina. The Appellate Division reversed and granted judgment for the plaintiff.

The question presented for decision, in brief, is: To what extent did these defendants, by acquiring stock of the Page Trust Company, make themselves liable to the assessments levied against their stock in North Carolina pursuant to statutory authority and sued upon here by the commissioner of banks of North Carolina?

It may be taken as settled that when these defendants acquired stock they impliedly agreed that the Page Trust Company in the state of North Carolina should represent them therein in any action to enforce stock liability, except as to their status as stockholders and such other defenses as may be deemed personal to them. In Marin v. Augedahl, 247 U.S. 142, 150, 38 S.Ct. 452, 455, 62 L.Ed. 1038, when a receiver of an insolvent corporation in Minnesota sued in North Dakota to enforce an assessment against a stockholder, a nonresident of Minnesota, pursuant to an order of the Minnesota court, it was said: ‘Whether the stockholder against whom the order is here sought to be enforced was personally a party to the suit in which it was made does not appear; nor is it material. Under the rule in Minnesota, as also the general rule, he was sufficiently represented by the corporation to be bound by the order in so far as it determined the character and insolvency of the corporation and other matters affecting the propriety of a general assessment such as was made.’

Likewise in Bernheimer v. Converse, 206 U.S. 516, 529, 27 S.Ct. 755, 759, 51 L.Ed. 1163, it was said: ‘It may be regarded as settled that upon acquiring stock the stockholder incurred an obligation arising from the [statutory] provision, contractual in its nature and, as such, capable of being enforced in the courts not only of that State, but of another State and of the United States.’

We are thus brought to a consideration of the pertinent statute of North Carolina. If there has been compliance with this statute, the defendants are bound by the order in so far as it determined the insolvency of the bank and the necessity for an assessment, and they are only entitled to set up personal defenses.

The statute provides that ‘Whenever any bank for any reason shall suspend operations for any length of time, said bank shall, immediately upon such suspension of operations, be deemed in the possession of the commissioner of banks and subject to liquidation hereunder.’ Code N.C.1931, § 218(c), subd. 2.

The statutes further require the commissioner of banks within forty-eight hours after taking possession of a bank to file a notice of his action with his reasons therefor in the office of the clerk of the superior court. Subdivision 3. Within thirty days from the filing of the notice of taking possession the commissioner of banks must make and state an inventory of the assets and liabilities of the bank and he may levy an assessment on each stockholder and file a notice of this levy with the court, which levy shall be indexed as judgments and shall have the force and effect of a judgment of the superior court. Subdivisions 9, 13. It is further provided that ‘any stockholder may appeal to the Superior Court from the levy of assessment; the issue raised by the appeal may be determined as other actions in the Superior Court.’ Subdivision 13. Any surplus remaining in the hands of the commissioner of banks after the payment of all liabilities to depositors and other creditors is to be repaid pro rata to stockholders who have paid the assessment. Subdivision 13.

From the facts as stated, itis clear that the commissioner has complied with all the provisions of the statute. It cannot be held that the commissioner failed to comply with the statute because the commissioner gave notice on June 5 that an assessment would be levied on June 22. His action was in accordance with the statute which provides that an assessment may be levied thirty days after the filing of the notice of taking possession. The date of levy was thirty days after notice of taking possession and an earlier giving of notice of intention to levy does not violate the statutory requirement.

The argument is raised, however, that the statutory liability of stockholders cannot be enforced unless there is a necessity for such enforcement and that no such necessity exists unless the bank is found to be insolvent. Turning to the order of levy of assessment, we note that it contains a finding by the commissioner that an assessment ‘is necessary in order to discharge the liability to general creditors of the said Page Trust Company.’ Slight effort was necessary to determine the hopeless insolvency of this trust company. Insolvency had been implicit in its every act for a number of months. Even previous to the bank holiday declared by the President's order the officers of the Page Trust Company had requested the Commissioner of banks to issue an order restricting the withdrawals of deposits. Pursuant to this request such an order had been issued. At the close of the bank holiday the trust company made application for a license to reopen without restrictions, but, after an examination of its assets, the license to reopen without restrictions was denied. From then, until it finally closed its doors on May 20th, the Page Trust Company limped along and continued business only under restrictions. Subsequently the board of directors attempted to reorganize in accordance with a statute (Pub.Laws N.C.1933, c. 271, § 1)...