Meeker v. Baxter, 297.

• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Writing for the Court: L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit
• Citation: 83 F.2d 183
• Parties: MEEKER v. BAXTER et al.
• Docket Number: No. 297.,297.
• Decision Date: 06 April 1936

83 F.2d 183 (1936)

MEEKER
v.
BAXTER et al.

No. 297.

Circuit Court of Appeals, Second Circuit.

April 6, 1936.

83 F.2d 184

Lynch, Cahn & Weed, of White Plains, N. Y. (Monroe J. Cahn, of White Plains, N. Y., of counsel), for plaintiff.

Hurlbert McAndrew, of Larchmont, N. Y., for defendant.

Before L. HAND, SWAN, and AUGUSTUS N. HAND, Circuit Judges.

L. HAND, Circuit Judge.

This case comes up on appeals by both parties; the defendants from an order striking out three defenses and counterclaims; the plaintiff from an order granting a general inspection of books and papers in his possession. The plaintiff is the receiver of the First National Bank & Trust Company of Mamaroneck; the defendants are two of its shareholders; the action is to recover the full amount of their liability as such. The complaint alleged only that on the second of February, 1934, the Comptroller of the Currency declared that the bank was insolvent and appointed the plaintiff receiver; and that on the ninth of March of that year he determined that it was necessary to enforce the full liability of all shareholders. Then followed a statement of the number of shares held by each defendant and a prayer for judgment for the full amount. The answer denied everything in the complaint — except that the defendants were holders of the shares alleged — and set up three separate defenses, pleaded both as such and as counterclaims. As the appeals come before us only on the pleadings, it is necessary to set out these pleas in some detail.

The first alleged in substance as follows: The bank did not open on the eighteenth day of January, 1932, and has not been engaged in the business for which it was organized since that day; in the year 1928 it had extravagantly and unnecessarily built a new banking house at a cost of $466,000; and by 1931 it was "hopelessly and irretrievably" insolvent, so that the Comptroller in October of that year notified it that its capital stock had been impaired to the extent of $150,000, and that the deficit must be made up within three months, or he would liquidate it. In the week beginning January 11, 1932, he also notified it that it could not go on in business unless the village of Mamaroneck took the banking house off its hands, and unless it merged with a trust company of the same place. In compliance with these demands a "corrupt and illegal" agreement was made, to which the Comptroller was a party, by which the village should take over the building for $300,000; the directors should subscribe $150,000; and the trust company

83 F.2d 185

and the bank should merge into a new bank, which would take over all the bank's assets and assume its liabilities. The bank's shareholders, the defendants among them, had no knowledge of this agreement, which was negotiated and executed behind closed doors, and later performed at the procurement and with the connivance of the Comptroller. The defence then concluded with a demand for inspection of all books and papers in the plaintiff's hands, so that the defendants might learn (1) the facts respecting the merger, including the condition of the bank and any waste by its directors; (2) whether any meetings of stockholders had been held regarding the merger; (3) when the banking house was conveyed and the terms of the deed; (4) whether the assets of the bank had been appraised upon the merger; (5) what steps, if any, the bank's officers took to determine the fair valuation of the trust company, the other party to the merger; (6) whether the directors were guilty of any violations of the Banking Act, which had played a part in the consolidation

The second defence and counterclaim alleged that the bank had been indebted to the Reconstruction Finance Company in the sum of $200,000; that on the twenty-eighth of June, 1932, in fraud of its creditors it conveyed the banking house for $366,000 to the Mamaroneck Trading Company; and that the grantee had then executed a mortgage back to the bank which it in turn assigned to the Reconstruction Finance Company. The fair value of this property had not been "taken into account in determining the alleged liability for which this action is brought";...