McIlvaine v. City Nat. Bank & Trust Co. of Chicago
Decision Date | 05 June 1942 |
Docket Number | Gen. No. 40902. |
Court | United States Appellate Court of Illinois |
Parties | MCILVAINE ET AL. v. CITY NAT. BANK & TRUST CO. OF CHICAGO ET AL. |
OPINION TEXT STARTS HERE
Appeal from Superior Court, Cook County; James F. Fardy, Judge.
Action by Wynnett W. McIlvaine and others, stockholders of the Central Republic Trust Company, against the City National Bank and Trust Company of Chicago and others to enforce a derivative cause of action in favor of the Central Republic Trust Company. From a decree dismissing an amended and supplemental complaint and denying leave to file a second amended and supplemental complaint, plaintiffs appealed to the Supreme Court, and that court, 371 Ill. 565, 21 N.E.2d 737, transferred the cause to the Appellate Court.
Affirmed. Breen, Lyle & O'Keefe, Seyfarth and Atwood, James W. Breen, John H. Lyle, Karl Edwin Seyfarth, and Benton Atwood, all of Chicago, for appellants.
Pam & Hurd, Michael J. Ahern, and Arthur T. Leonard, all of Chicago, for appellees.
This appeal, which seeks to reverse a decree of the Superior court, was originally perfected to the Supreme court of Illinois. That court in McIlvaine et al. v. City National Bank & Trust Company of Chicago et al., 371 Ill. 565, 21 N.E.2d 737, holding that no debatable constitutional question was involved, transferred the appeal to this court. In its opinion in that case the Supreme court stated the facts as follows:
“The decree of the trial court dismissed the complaint and denied leave to file a second amended and supplemental complaint on the grounds that (1) the good-will of the old bank was of no value on October 5 and 6, 1932; (2) that it was transferred to the new bank as part of other transfers; (3) that the transfers were fully executed at the time of the filing of the present suit; (4) that the cause of action of the plaintiffs is exclusively vested in [the receiver appointed by] the Auditor of Public Accounts; (5) that plaintiffs could enforce this cause of action only by application to the court in charge of the liquidation; (6) that the plaintiffs are barred by laches, and (7) that the second amended and supplemental complaint is subject to the same defects as the first.”
The first question argued in the briefs relates to the finding of the chancellor that the cause of action asserted herein is vested exclusively in the receiver appointed by the Auditor of Public Accounts. Plaintiffs contend that they are entitled to maintain a derivative suit upon showing that the managing agency of the bank has either actually or virtually refused to prosecute the suit; that the receiver is the managing agency of the bank; that the right of the receiver to sue is cumulative and not exclusive; and that the construction placed upon section 11 of the Banking act by the trial court renders it unconstitutional as depriving plaintiffs of due process of law. Defendants' position is that section 11 of the Banking act vested title to the alleged cause of action in the receiver and that no cause of action could be brought or maintained except by him or in his name; that the alleged cause of action no longer existed in the old bank (Central Republic Trust Company) after the appointment of the receiver; and that there was, therefore, no derivative right in the plaintiffs to bring this action.
Section 11 of the Banking act Ill.Rev.Stat.1937, c. 16 1/2 provides, among other things, that:
“Such receiver, under the direction of the Auditor, shall take possession of, and for the purpose of the receivership, the title to, the books, records and assets of every description of such bank, and shall proceed to collect all debts, dues and claims belonging to it. * * *
“Such receiver shall have authority to sue and defend in his own name with respect to the affairs, assets, claims, debts and choses in action of such bank.”
Plaintiffs assert that this section merely confers upon an administrative officer the power to do certain acts therein enumerated or necessarily implied therefrom, and that the remedy thereby afforded to the receiver to enforce claims of the bank is cumulative rather than exclusive We do not understand that defendants take the position, as stated by plaintiffs, that an unconditional title is vested in the receiver by section 11 of the Banking act. An unconditional title would imply that the receiver would have the right to appropriate to his own use the assets which came into his hands. Title to the bank's assets is conferred only “for the purpose of the receivership,” but for this purpose we think it must be deemed to be exclusive. While authorities of other jurisdictions are in conflict on this question, it is unnecessary to decide on which side of the question lies the greater weight of such authority, inasmuch as sound reason, practical considerations, analogous decisions in Illinois and section 11 itself point clearly to the exclusive character of the receiver's title “for the purpose of the receivership.”
This proceeding was originally instituted by Wynnette W. McIlvaine, the owner of two out of one hundred and forty thousand shares of stock of the Central Republic Trust Company, as sole plaintiff. Since the cause of action is one allegedly belonging to said bank, a derivative suit could be maintained, if at all, by a single stockholder or a single creditor who had a pecuniary interest in the result, and any recovery had would inure to the benefit of the creditors in the first instance and, thereafter, to the benefit of all stockholders. The addition of other stockholders or creditors as plaintiffs does not make the suit any more representative or any less derivative. It must stand or fall as a derivative suit. Under the provisions of section 11 of the Illinois Banking act, any recovery would have to be paid to the receiver of the bank and, by him, distributed to the creditors and, if any surplus then remained, to the stockholders, and this regardless of whether or not the recovery was had through the maintenance of the suit by a single stockholder or creditor, or by all of them.
Plaintiffs contend that this suit is brought “to enforce the cause of action of said Central Republic Trust Company.” The difficulty with plaintiffs' position in this regard, as we view it, is that the...
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