Meeker v. Baxter

• Decision Date: 06 April 1936
• Docket Number: No. 297.,297.
• Citation: 83 F.2d 183
• Parties: MEEKER v. BAXTER et al.
• Court: U.S. Court of Appeals — Second Circuit

83 F.2d 183 (1936)

MEEKER v. BAXTER et al.

No. 297.

Circuit Court of Appeals, Second Circuit.

April 6, 1936.

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 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"; on this account the assessment was "made in bad faith and is fraudulent, illegal and void." The third defence and counterclaim was that by the transfer of the assets on January 15, 1932, to the new bank and its assumption of the debts, all creditors consented to and accepted the new bank as their debtor and released the old bank from their claims. That when the plaintiff was appointed receiver there were therefore no creditors whose claims arose before the date of this agreement, January fifteenth; and that after that time the bank transacted no business. The answer concluded with a prayer for inspection of the books; for a declaratory judgment that the defendants might examine them; for an injunction against the Comptroller, "his agents and employees," from prosecuting the action; and for an injunction pendente lite to the same effect. The plaintiff moved to dismiss all the defences and counterclaims. The judge granted that motion; but, without giving the plaintiff opportunity to reply, and apparently without any formal motion by the defendants he granted the defendants an inspection of all the records of the bank. Later he resettled this order in the same terms except that he gave the defendants "leave to plead over, setting up fraud if justified, twenty days after the last day of such inspection." Both sides appealed.

The defendants' appeal must be dismissed. The first order did indeed dismiss their counterclaims without condition, and as they asked that the action be enjoined, the order "refused" an injunction and was appealable under section 227 of title 28, U.S.Code (28 U.S.C.A. § 227). General Electric Co. v. Marvel Rare Metals Co., 287 U.S. 430, 53 S.Ct. 202, 77 L.Ed. 408; Enelow v. New York Life Ins. Co., 293 U.S. 379, 55 S.Ct. 310, 79 L.Ed. 440. But the order, as resettled, modified this dismissal by giving them leave to plead over, which they have not yet done. If they do, the amended pleading alone will survive for any purpose, and we could not review the earlier ruling now before us. United States v. Boyd, 5 How. 29, 51, 12 L.Ed. 36; Clearwater v. Meredith, 1 Wall. 25, 42, 17 L.Ed. 604; Aurora City v. West, 7 Wall. 82, 92, 19 L.Ed. 42; Campbell v. Haverhill, 155 U.S. 610, 15 S.Ct. 217, 39 L.Ed. 280; City of Anniston v. Safe-Deposit & Trust Co., 85 F. 856 (C.C.A.5); Frishmuth v. Farmers' Loan & Trust Co., 107 F. 169, 173 (C.C.A.2). Only in case they do not amend, but stand upon their pleadings, will an appeal lie. In the...