In re Murray Hill Bank

• Decision Date: 08 June 1897
• Citation: 153 N.Y. 199,47 N.E. 298
• Parties: In re MURRAY HILL BANK.
• Court: New York Court of Appeals Court of Appeals

153 N.Y. 199

47 N.E. 298

In re MURRAY HILL BANK.

Court of Appeals of New York.

June 8, 1897.

Appeal from supreme court, general term, First department.

Application of a majority of the directors of the Murray Hill Bank for its dissolution. From a judgment of the supreme court (43 N. Y. Supp. 836) reversing an order dissolving the corporation and dismissing a proceeding instituted for the voluntary dissolution of said bank, the directors appeal. Affirmed.

On the 11th of August, 1896, the superintendent of the banking department, considering a banking corporation known as the Murray Hill Bank to be in an unsound and unsafe condition to do banking business, closed its doors, and took possession of its property. He at once caused an examination to be made into the affairs of the bank, and discovered that it was insolvent. Its capital of $100,000 was exhausted, and there was a deficiency of about $260,000. Thereupon he directed the attorney general to institute proceedings for the dissolution of the bank and the appointment of a receiver, ‘but at the request of the officials and a portion of the directors of the said bank he requested the said attorney general to defer the commencement of such action or proceeding for a reasonable time, it being claimed by said officials of said bank that, if an opportunity were afforded them, they could restore the impairment of the capital of the bank, and place its affairs in such a condition that it would be safe and expedient for it to continue business.’ Without the knowledge of the superintendent of banks, and without consultation with him, the directors and officials availed themselves of the delay to prepare a petition and schedules for the voluntary dissolution of said bank. The preparation of the petition and schedules, which were very long, involved considerable time. The petition was verified by the directors on the 26th, 27th, and 28th of August, and on the day last named was filed, and an order based thereon was issued requiring the attorney general to show cause at a special term of the supreme court in the city of New York, on the 1st of September, 1896, why the usual order should not be made as required by section 2423 of the Code of Civil Procedure. The attorney general opposed the application upon the various grounds involved in this appeal, and presented affidavits showing the foregoing facts, in substance. In an affidavit made by the bank superintendent on Monday, August 31, 1896, that officer stated that he had ‘repeatedly informed the president of said bank and others in interest that he would report the facts in the case to the attorney general, who would apply for the appointment of a receiver; that no objection was thereupon made to this proposition by said president or anybody in interest; that on Thursday last deponent saw and had a conversation with the president of said bank, and then informed him that he would immediately make his report to the attorney general, so that the attorney general could make application for the appointment of a receiver; that no objection was then made by said president to such a course; * * * that said president did not inform deponent of this proceeding, and deponent did not know that this application was to be made, and knew nothing of it until the 29th inst.’ The attorney general insisted that the directors of an insolvent bank, the assets of which had been taken possession of by the superintendent of the banking department, had no right to institute proceedings for voluntary dissolution, or to take the assets out of the hands of the superintendent; but his objections were overruled, and an order was made, returnable on the 10th of December, 1896, requiring all persons interested in the bank to show cause why it should not be dissolved, and appointing Spencer Trask and Miles M. O'Brien temporary receivers. On the 4th of September, 1896, the attorney general commenced an action in the name of the people to dissolve the bank, the summons being dated August 31st, and the complaint verified the same day. On the 11th of September following a motion was made in said action, the venue of which was laid in the county of Kings, for the appointment of temporary receivers, and Benjamin B. Odell, Jr., and Edward H. Hobbs were appointed accordingly, and the bank superintendent transferred to them the assets of the bank. Subsequently the bank served an answer, which, on the 3d of October, 1896, was stricken out, by an order made at special term, as frivolous, and judgment was directed for the relief demanded in the complaint. On the 12th of October proof was taken at special term as to the material allegations of the complaint, but before judgment was entered proceedings in the action were stayed until the hearing and determination of an appeal taken from the order striking out the answer. That appeal, together with one taken from the order appointing temporary receivers in the action, was decided on the 20th of November, 1896; the former being affirmed, but the latter reversed. The usual orders were entered, and, November 24th, final judgment was rendered in the action, dissolving the corporation, adjudging that its corporate rights, privileges, and franchises were forfeited, and appointing Messrs. Odell and Hobbs permanent receivers. Subsequently, upon motion of the bank, the appellate division resettled its order of affirmance, so as to provide that the defendant's answer should be overruled as frivolous, and that the plaintiff should have judgment only for the dissolution of the corporation, without the appointment at that time of permanent receivers, but that the plaintiff or the attorney general might apply at the foot of the judgment for the appointment of permanent receivers if an order should be entered in the special proceeding to dissolve the corporation, directing that it be discontinued or dismissed. On the 12th of December the final judgment of dissolution was amended, so as to conform to the amended order of the appellate division, and to provide for the dissolution of the defendant and the forfeiture of its franchises. It also contained the usual injunction restraining the bank, its directors, managers, and officers from exercising any of the corporate franchises, powers, rights, or privileges. Upon the return day of the order to show cause in the special proceeding, a referee was appointed, and, subsequently, the usual testimony was taken. The judgment roll in said action brought by the people against the bank was put in evidence, and the referee, in his report, found the facts relating to the history of that action which resulted in such judgment, but recommended that the bank should be dissolved by a final order in the usual way, although it had already been dissolved by final judgment entered as aforesaid. On the 19th of December, 1896, the special term confirmed the report, adjudged the dissolution of the bank, and appointed Messrs. Trask and O'Brien permanent receivers, notwithstanding the opposition of the attorney general, based upon various grounds, and, among others, that, as the corporation had already been dissolved in the action, there was no power to continue the special proceeding, and that the same had abated by the entry of said judgment. On the 21st of December, 1896, an order was made, on notice in the special proceeding, directing Hobbs and Odell to transfer the assets of the bank, received by them upon their appointment as temporary receivers in the action of the attorney general, to Trask and O'Brien, the receivers appointed herein, and shortly thereafter they turned over the assets accordingly. The people, through the attorney general, appealed to the appellate division of the First department from the final order of dissolution, made, as above stated, in this proceeding, and gave notice of a desire to review on such appeal the order of the special term, made herein on the 2d of September, 1896, which, among other things, appointed Trask and O'Brien temporary receivers. Notice was also given of a desire to review the order, made in this proceeding, appointing those gentlemen permanent receivers of the bank. A like appeal was brought by the attorney general in his official name, and also by Mr. Kilburn, as superintendent of banks. Upon the hearing of said appeals, the appellate division of the First department reversed the order dissolving the corporation, made in the special proceeding, and dismissed the proceeding itself. From the order of the appellate division the directors of the bank did not appeal, but Messrs. Trask and O'Brien, the receivers appointed in the special proceeding, and a committee of depositors of the bank, appealed to this court.

Louis Marshall, for appellants.

Theodore E. Hancock and John M. Bowers, for respondents.

VANN, J. (after stating the facts).

The appellate division based its determination upon the ground that the proceeding for a voluntary dissolution of the Murray Hill Bank, instituted by its directors, abated upon the entry of a judgment dissolving said corporation in the action brought by the attorney general. We think this is a sound conclusion, and that it is so well supported by the reasoning of the learned justice who prepared the prevailing opinion as to make further discussion of the subject unnecessary. 14 App. Div. 318,43 N. Y. Supp. 836. We should affirm the order now before us for review upon that opinion, but for the fact that it recognizes as settled law the doctrine that, after the superintendent of banks has taken possession of the assets of an insolvent banking corporation, with the intention of having an action brought by the attorney general to dissolve the same, the directors may anticipate such action on the part of the...