Rogers v. The Bancokentucky Company

• Decision Date: 14 July 1931
• Citation: 156 A. 217,18 Del.Ch. 23
• Court: Court of Chancery of Delaware
• Parties: FON ROGERS, LON ROGERS and J. L. ROGERS, a partnership trading under the firm name and style of Rogers Bros., v. THE BANCOKENTUCKY COMPANY, a corporation created by and under the laws of the State of Delaware

156 A. 217

18 Del.Ch. 23

FON ROGERS, LON ROGERS and J. L. ROGERS, a partnership trading under the firm name and style of Rogers Bros., v. THE BANCOKENTUCKY COMPANY, a corporation created by and under the laws of the State of Delaware

Court of Chancery of Delaware, New Castle

July 14, 1931

BILL FOR APPOINTMENT OF RECEIVER of the defendant on the ground of insolvency, filed under Section 3883, Revised Code 1915.

Heard on bill, answer, testimony taken orally before the Chancellor, depositions and exhibits. The facts are sufficiently stated in the opinion of the Chancellor.

Bill dismissed.

Christopher L. Ward, Jr., of the firm of Marvel, Morford, Ward & Logan and Elwood Hamilton, of the firm of Woodward, Hamilton &amp Hobson, of Louisville, Ky., for complainants.

John Biggs, Jr., and David R. Castleman, of Louisville, Ky., for defendant.

OPINION

THE CHANCELLOR:

The defendant, a corporation created under the General Corporation Law of this State, is a so-called holding company and was organized principally for the purpose of investing its capital in bank stocks. It held the controlling interest in a number of banks located principally in Kentucky. Its most important holdings consisted of a controlling interest in the National Bank of Kentucky and the Louisville Trust Company, the two leading financial institutions in Louisville, Kentucky. These two institutions closed their doors on November 7, 1930, and were taken over by the respective Federal and State banking authorities. Their failure precipitated a near panic in the section of the country lying in the vicinity of Louisville and occasioned a wide-spread lack of confidence on the part of the public in banking institutions generally. The banks in which the defendant had an interest became the particular objects of public mistrust. As a consequence the defendant found its affairs suddenly thrown into a thoroughly demoralized condition which called for quick defensive action. Application was made to the Jefferson Circuit Court, Chancery Branch, in Louisville for the appointment of a receiver, and that court, on the company's consent answer, named a receiver for it. It is unnecessary to state the grounds on which the receiver was appointed. It should be said however that there was neither a charge nor an admission, in that suit, that the defendant was insolvent. The question of the defendant's insolvency, a material jurisdictional question of fact in this case, is one therefore which the answer in the Kentucky proceeding does not establish by way of admission. Insolvency must be made out in this jurisdiction by independent proof, unaided by any adjudication or admission of its existence.

In order to support a receivership bill under Section 3883 of our Code, the insolvency charged must be shown to have existed at the time the bill was filed. Manning v. Middle States Oil Corp., 15 Del.Ch. 321, 137 A. 79, 81; Freeman v. Hare & Chase 16 Del.Ch. 207, 142 A. 793; Kenny v. Allerton Corp., 17 Del.Ch. 219, 151 A. 257. This rule is founded on the generally accepted conception that a right of action speaks as of the time when it is alleged. When it is remembered that if a bill for a receiver is filed under the statute, it takes precedence over a bill for the same purpose subsequently filed in any county of the State (American Foundry Co. v. Premier Motor Corp., 13 Del.Ch. 286, 120 A. 485), the salutary nature of the rule which requires the bill to be supported by proof of facts existing at the time of its filing is apparent, for if such were not the rule the practice would be encouraged of filing class bills for receiver as cautionary measures for the purpose of squatting upon the future, so to speak, to the exclusion from the remedy, except as intervenors, of all other members of the numerous class equally entitled to sue. I do not mean to insinuate that the present bill was filed for any such purpose. There is not the slightest ground for any such insinuation. The observation was made for the purpose of fortifying the reasonableness of the rule that insolvency must be shown at the time the bill is filed, by showing that, in addition to its technical support, it is sustained by salutary considerations of policy in cases of the instant sort.

In passing upon the fact of insolvency, the fact of the appointment of a receiver in the State of Kentucky is of no relevancy, for the receivership there was not based on insolvency. In Manning v. Middle States Oil Corp., supra, is found this language:

"Unless the fact of insolvency is either admitted in the foreign proceedings or judicially found upon evidence in a suit of which the finding court has jurisdiction, this court should, in determining whether insolvency is shown, view the case entirely aside from what the foreign court has seen fit to do and decline to allow the existence of the foreign receivership to have any prejudicial influence in the judicial act of forming a judgment upon the evidence."

Our statute confers the jurisdiction to appoint a receiver only when insolvency...