Siebert, Application of

• Decision Date: 03 April 1979
• Citation: 99 Misc.2d 32,415 N.Y.S.2d 589
• Parties: Application of Muriel SIEBERT, as Superintendent of Banks of the State of New York, for court authorization, pursuant to the provisions of Banking Law § 618, to dispose of the real and personal property of Citizens Savings and Loan Association of New York, by merger pursuant to a Plan and Agreement of Merger of said Association into Astoria Federal Savings and Loan Association.
• Court: New York Supreme Court

Page 589

415 N.Y.S.2d 589

99 Misc.2d 32

Application of Muriel SIEBERT, as Superintendent of Banks of

the State of New York, for court authorization, pursuant to

the provisions of Banking Law § 618, to dispose of the real

and personal property of Citizens Savings and Loan

Association of New York, by merger pursuant to a Plan and

Agreement of Merger of said Association into Astoria Federal

Savings and Loan Association.

Supreme Court, Special Term, Queens County, Part I.

April 3, 1979.

Cadwalader, Wickersham & Taft, New York City, for Superintendent of banks

Golar & Silverman, New York City, for Citizens Sav. and Loan Ass'n of New York.

MEMORANDUM

HAROLD HYMAN, Justice.

On January 31, 1979, this court signed an Order to Show Cause at the request and upon the application of Muriel Siebert in her capacity as Superintendent of Banks of the State of New York. The application, in part, was based upon her formally executed certification (dated that day) that "I (she) have taken possession of Citizens Savings and Loan Association of New York * * * pursuant to Banking Law Section 606 on the grounds that such banking organization: (1) is conducting its business in an unauthorized and unsafe manner; (2) is in an unsound and unsafe condition to transact business; and (3) cannot with safety and expediency continue business."

The application also contained an affidavit of said Superintendent indicating, that, pursuant to section 606 of the Banking Law, she had taken possession of the business and property of Citizens at 3:00 P.M. that day; and, that she sought authorization by court order, pursuant to section 618 of the Banking Law, "to dispose of all the real and personal property of Citizens * * * by effecting the Plan and Agreement of Merger * * * of Citizens into Astoria Federal Savings and Loan Association"; a copy of the "Plan" was annexed.

Additionally, there was annexed to the application a duly subscribed and acknowledged written Statement reciting her determinations made and her acts performed pursuant to the powers vested and duties imposed upon (her, as) the Superintendent pursuant to Article 13 of the Banking Law.

There can be no doubt that the above Statement and the Certificate were, and are entitled to be, regarded as presumptive evidence of the facts therein stated, "in any action or proceeding now pending or hereafter commenced." (Banking Law § 612)

Beyond cavil the Superintendent has complete discretion to take possession of any banking organization "whenever it shall appear (to her) that such banking organization * * * (b) Is conducting its business in an unauthorized or unsafe manner; (c) Is in an unsound or unsafe condition to transact its business; and, (d) Cannot with safety and expediency continue business."

The authority to take possession of a banking organization, by Legislative enactment, vests in the Superintendent, and is not as a result of any court proceeding (In re Bologh, D.C.N.Y., 185 F. 825); the exercising of such power is purely discretionary and is not subject to review (Matter of Union Bank, 96 Misc. 299, 161 N.Y.S. 29, rev. on other grnds, 176 App.Div. 477, 163 N.Y.S. 485). However, within ten days after the Superintendent takes possession such banking organization may apply to the Supreme Court for an order requiring the Superintendent to show cause why she should not be enjoined from continuing such possession, and thereupon, "The court may, upon good cause shown, direct the Superintendent to refrain from further proceedings and to surrender such possession" (Banking Law § 607).

The court is mindful of the fact that the Legislature has reposed in its specially constituted State official the sole power to act, following investigation, examination and determination (Matter of Union Bank, 204 N.Y. 313, 97 N.E. 737), and that it does not lie with the court to substitute itself for such legally constituted authority (In re Lunghino & Sons, 176 App.Div. 285, 163 N.Y.S. 9), but that at best, the court merely has the right to review the Superintendent's act of "taking possession" from the judicially limited perspective of whether the Superintendent acted arbitrarily, capriciously, without good cause, and or whether there has been an abuse of her discretionary prerogative. But when the court determines the propriety and justification of the Superintendent's determination to take, and in taking possession, based upon the banking organization's activities coming within the purview of such cause as is provided for in section 606, sub. 1(a-j) of the Banking Law, then it is not for the court to substitute its own opinion for that of the Superintendent and to then revoke the Superintendent's discretionary act (In re Lunghino & Sons, supra ).

From past experience and unsatisfactory situations which resulted in the demand by the general public for reform, the Legislature caused to be enacted the present Banking Law and its various amendments, which has as its salutary purpose, intent, and objective, the unqualified protection and security of the general public from loss resulting from such type organization violating the law or conducting its business in an unauthorized or unsafe manner or transacting its business while in an unsound or unsafe condition, continuing business at a time when it cannot with safety and expediency do so, and such other deterrents provided for therein (Banking Law § 606, sub. 1 (a-j inc.)). Each, or any, of the foregoing reasons or conditions, whether separately or together, constitutes a sufficient basis unto itself permitting the Superintendent to act, or as more particularly stated in the Matter of Union Bank, 204 N.Y. 313 at pg. 316, 97 N.E. 737 at pg. 738, "One or more or all of the conditions specified must exist and must 'appear to the Superintendent' before he is authorized to exercise this drastic power." The statute referred to therein is the forerunner (Banking Law § 19 enacted by the Legislature, Chap. 143 of the Law of 1908) of the present statute (Banking Law § 606).

In reviewing the discretionary act of the Superintendent, and although recognizing her authority "per se", there always arises the specter, that disembodied spirit written into our Federal and State Constitutions, the fear of authoritarian violation of the principle of liberty and the right to "due process".

The Superintendent presented to the court her application seeking a "final order" (a) determining and confirming her exercise of discretion in taking possession of the business and property of the Citizens Savings and Loan Association pursuant to section 606 of the Banking Law; and, (b) determining and confirming that the actions of said Superintendent while in possession, to dispose of the real and personal property of Citizens by merger pursuant to the Plan and Agreement of Merger, were lawful and proper, and that such Plan and Agreement of Merger be deemed effective as of the time such action was taken. The order issued authorized the Superintendent to put such Plan and Agreement into motion "in the interim", but, "subject to review and final approval by the court", and, that, during such "interim period, prior to the hearing by the court that there be kept and segregated separate books and records of all transactions"; the Order (to Show Cause) was made returnable thirteen (13) days later (February 13, 1979). In so doing, the court made known to the Superintendent that it had in mind and intended such judicial protection as it could reasonably and judiciously afford to, and for safeguarding the rights of the alleged offending bank to "due process", regardless of whether the bank overlooked, failed, or even refused to move pursuant to section 607 of the Banking Law on its own behalf.

The following day (February 1, 1979), the bank presented its own application pursuant to section 607 of the Banking Law, seeking to enjoin the Superintendent from (a) continuing in possession, (b) to refrain from further proceeding, and (c) directing that she surrender possession to said bank; such Order to Show Cause was made returnable on February 7, 1979; but, presenting counsel for the bank were then specifically advised by the court that on that return date, the court intended to consolidate both applications for hearing on February 13, 1979 in order to avoid a multiplicity of hearings.

Therefore, when on February 7, 1979 the Bank's application came on to be heard, the court consolidated for "hearing" purposes, (the taking of testimony and evidence), both applications to February 13, 1979.

Counsel for the Bank specifically asked what the ground rules would be on February 13th and who would start. They were promptly then and there advised, Without objection from the Superintendent, that the Superintendent would start by proving her right to possession. The Bank's counsel had also been previously informed that the Superintendent intended to rely, as to her "prima facie" case, upon section 612 of the Banking Law and the "presumption" therein legislatively provided.

On February 7, 1979, the Bank's counsel also requested "discovery of documents" and the right to photocopy such documents which they requested take place that very day, and no objection to such request was raised by the Superintendent; it was therefore allowed by the court.

On the return date set for the consolidated hearing (February 13, 1979), counsel for the Bank requested information as to whether the Superintendent's "Appraisers" were present in court so that he could call them on the part of the Bank. Having received an affirmative answer, both sides marked the hearing "Ready".

Section 612 of the Banking Law provides authorization to the Superintendent "to subscribe and acknowledge written statements reciting determinations made or acts performed pursuant to the powers vested in and duties imposed upon the superintendent pursuant to the terms and provisions of this chapter * * * (which) shall be received in...