Hulse v. Argetsinger

• Decision Date: 31 March 1926
• Parties: HULSE v. ARGETSINGER et al. In re Receivership of NATIONAL BANK OF COMMERCE OF ROCHESTER, N. Y.
• Court: U.S. District Court — Western District of New York

12 F.2d 933 (1926)

HULSE v. ARGETSINGER et al.

In re Receivership of NATIONAL BANK OF COMMERCE OF ROCHESTER, N. Y.

District Court, W. D. New York.

March 31, 1926.

Carnahan, Pierce & Block, of Rochester, N. Y. (George A. Carnahan, of Rochester, N. Y., of counsel), for receiver.

Hubbell, Taylor, Goodwin & Moser, of Rochester, N. Y., for National Bank of Rochester.

James D. Harris, of Rochester, N. Y. (Edson W. Hamn, of Lyons, N. Y., of counsel), for certain stockholders.

Lee, Smyth, Wise & Bond, of New York City (Warren I. Lee, of New York City, of counsel), for certain stockholders.

James Johnston, of Rochester, N. Y., in pro per.

HAZEL, District Judge.

This is an application for an order of this court under section 9821, Comp. St., to authorize Jonas J. Hulse, as receiver of the National Bank of Commerce of Rochester, appointed by the Comptroller of the Currency of the United States under section 9826, Comp. St., to compound the liability of certain directors named in the petition and ratify a contract dated May 19, 1924, entered into between the National Bank of Commerce of Rochester (herein called the old bank) and the National Bank of Rochester (called the new bank), which was organized a short time prior to the suspension of payment and business of the former. It is averred that, being unable to pay the checks and drafts of its depositors, on May 17, 1924, the old bank closed its doors and made a contract transferring a part of its assets to the new bank, which, in consideration thereof and in further consideration of the deliverance of a promissory note of $2,124,365.13 with interest, assumed paying and discharging all depositors and the liabilities of the old bank as shown on its balance sheet. The note was collaterally secured by the remaining assets, which were accepted at their face value, and also stood for any deficiency or the difference between the total liabilities (except capital stock) and net value of the pledged assets. By this arrangement the new bank became the sole creditor of the old bank.

The validity of the contract of conveyance is questioned by dissenting stockholders, and the receiver, by the proposed adjustment and settlement, contemplates removing any doubt in relation thereto by making a sale and conveyance of his right, title, and interest in the properties previously sold to the new bank. It is shown that the receiver has carefully examined into the circumstances relating to the prior transfers, and has tested the considerations and values and is convinced that full value has been given. After searching investigation lasting many months, he concluded that the old bank was insolvent at the time it suspended payment; that considerable of its property had been negligently dissipated, and dividends had unlawfully been paid for which the named directors were probably liable. Before bringing an action against them, however, the directors named in the petition suggested compromising their liabilities, with the result that negotiations to that end started. During its continuance, the prospect of amicable adjustment became uncertain, and, upon the demand of the new bank for payment of the balance unpaid upon its note, this action was brought and answers have been interposed by the directors denying liability. Afterwards an offer to pay $750,000 was tendered by certain directors who had contributed to a fund in settlement of all claims and causes of action against them. The amount tendered was suggested by the Comptroller of the Currency during the negotiations, and the amount is considered by him and by the receiver as a reasonable and just sum to compose all differences as to any existing liability and responsibility of the contributing directors arising out of their negligence and maladministration. The new bank has expressed its willingness to waive all claims and rights to assessments on the capital stock of the old bank to pay the balance of its note, and to the return of any dividends that may have been unlawfully paid; and in fact waives any contribution from shareholders of the old bank, on condition that the amount for which the directors are willing to compound the claim of the receiver against them be paid within a reasonable time, and on the further condition that the receiver shall release and quitclaim any rights he may have in the assets and property conveyed to it.

The receiver in his petition states that any claim against the new bank from alleged undervaluation of the transferred property is, in his judgment, doubtful and uncertain, and should be compounded and quieted to remove any possible cloud on the title or possession.

Other facts bearing upon the questions...