Willcox v. Goess
| Decision Date | 24 June 1936 |
| Parties | WILLCOX (FIRST NAT. BANK & TRUST CO. OF ROCHESTER, Intervener) v. GOESS. |
| Court | U.S. District Court — Southern District of New York |
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Morris Ehrlich, of New York City (Morris Ehrlich and Bernard H. Nearman, both of New York City, of counsel), for plaintiff.
Conboy, Hewitt, O'Brien & Boardman, of New York City (Martin Conboy and Bernard Sobol, both of New York City, of counsel), for defendant Frederick V. Goess, receiver of Harriman Nat. Bank & Trust Company of City of New York.
George B. Rice, of Bayside, L. I., N. Y. (Percival D. Oviatt, of Rochester, N. Y., and George B. Rice, of Bayside, L. I., N. Y., of counsel), for First National Bank & Trust Co. of Rochester, New York, intervener.
My decision herein is as follows:
In the first suit there will be a decree for the plaintiff.
In the second suit there will be a decree dismissing the complaint.
In the third suit there will be a decree providing for a dismissal of the complaint as against the plaintiff and of the petition of intervention as against the intervener.
In the fourth, fifth, sixth, and seventh suits, there will be decrees dismissing each of the complaints.
Costs will not be granted to any party herein.
I. This is a consolidation of seven alleged causes of action brought by the plaintiff William R. Willcox, as trustee in bankruptcy of the estate of the J. A. M. A. Realty Corporation (hereinafter called "JAMA") against Frederick V. Goess, as receiver (hereinafter referred to as the Receiver) of the Harriman National Bank & Trust Company of the City of New York (hereinafter referred to as the Bank).
The subject-matter jurisdiction of this court in this consolidated cause is based on the fact that it is brought against a receiver of a closed national bank, who was appointed by the Comptroller of the Currency, and so arises under the laws of the United States. Title 28, United States Code, § 41 (1), 28 U.S.C.A. § 41 (1). Cf. Wyman v. Wallace, 201 U.S. 230, 241, 242, 26 S.Ct. 495, 50 L.Ed. 738; Auten v. United States National Bank, 174 U.S. 125, 141, 19 S.Ct. 628, 43 L.Ed. 920.
The several alleged causes of action which have been thus consolidated have to be separately dealt with hereinafter in some respects. It is necessary, however, first to summarize the facts which constitute the background of the situation out of which all these suits arose.
II. The corporate and other principal dramatis personæ herein, their respective descriptions with some comments on them, are as follows:
1. The J. A. M. A. Realty Corporation- of which the trustee in bankruptcy is plaintiff herein — was organized under the laws of the state of New York in 1923, and, during all the times involved herein, it had outstanding, issued for cash and property, 20,000 shares of capital stock, of which Joseph W. Harriman and his wife, Augusta B. Harriman, owned 19,992 shares. It was the holding corporation of the Harriman family property.
During all the times involved herein and until 1934, the officers of JAMA of importance to the discussion in this cause were as follows: Joseph W. Harriman, president, who had held that office from its organization in 1923; Augusta B. Harriman, vice president, who had held that office from its organization in 1923, and had been secretary from August 7, 1928; John A. Noble, vice president from January 4, 1926, to September 30, 1932; Matthew A. Foley, assistant secretary from September 15, 1931.
Joseph W. Harriman and Augusta B. Harriman were throughout also directors of JAMA.
The sources of JAMA'S income were: (1) Harriman bank stock; (2) interest on mortgages and loans; (3) interest from rent of real estate or equities therein; and (4) credits on accounts with brokers. Its income for the year 1931 was $152,646.81, and for the year 1932, $42,412.79.
On January 17, 1934, an involuntary petition in bankruptcy was filed in this court by Evan W. Hughes — formerly the confidential financial secretary of Joseph W. Harriman — against JAMA.
An order adjudicating JAMA a bankrupt was duly entered in this court on February 2, 1934, and thereafter William R. Willcox, the plaintiff herein, was elected trustee in bankruptcy of the said corporation and duly qualified as such.
The following persons and corporations have filed proofs of claim in the following principal amounts against JAMA in said bankruptcy proceeding:
Frederick V. Goess, as receiver
of the Harriman National
Bank & Trust Company
of the City of New
York ....................... $ 477,350.65
Kings County Trust Company 190,000.00
Chase National Bank of the
City of New York............ 101,250.00
Lawyers' County Trust Company
........................ 67,144.86
Union Trust Company of
Maryland ................... 150,000.00
The First National Bank &
Trust Company of Rochester
(on a judgment) ............ 50,000.00
Marie T. Dixon ............... 75,000.00
2 East 70th Street Corporation
(on a judgment) ............ 5,000.00
1170 Fifth Avenue Corporation
............................ 470.00
Evan W. Hughes................ 32,929.00
______________
$1,149,145.44
The only collateral held by any of these creditors, other than the Bank, is as follows:
Lawyers' County Trust Company, 596 shares of Bank stock.
Union Trust Company of Maryland, 600 shares of Bank stock.
First National Bank of Rochester, 200 shares of Bank stock.
Marie T. Dixon, chattel mortgage on certain furniture and works of art.
On December 31, 1935, the funds of the bankrupt estate in the hands of the plaintiff trustee amounted to $68,394.49.
2. The Harriman National Bank & Trust Company of the City of New York — of which the receiver Frederick V. Goess is defendant herein — at all times hereinafter mentioned was a banking corporation organized and existing under the National Bank Act of the United States (12 U.S.C.A. § 21 et seq.) having its principal place of business at 527 Fifth avenue, in the city of New York, where, from March, 1911, it had carried on a general banking business as successor to the Night & Day Bank which had opened at the same address on May 1, 1906.
The capital stock of the Bank was originally $200,000. At the time of its closing in March, 1933, and for several years prior thereto its capital stock consisted of 20,000 shares of the par value of $100.
The persons in control of the Bank during all the times hereinafter mentioned were the following:
Joseph W. Harriman, who was president from its beginning to July 14, 1932, and thereafter was made chairman of the board of directors without the power of the authority previously had and exercised by him as president.
Henry B. Cooper was elected president of the Bank on July 14, 1932, actively took over the functions of that office on July 21, 1932, and continued as president until the Bank was closed at the end of the so-called bank holiday in March, 1933.
On March 13, 1933, after the so-called bank holiday, on Mr. Cooper's recommendation the Bank was not reopened and he was appointed conservator thereof and duly qualified as such.
On October 16, 1933, the defendant, Frederick V. Goess, was appointed by the Comptroller of the Currency to be receiver of the Bank and duly qualified as such.
3. The Harriman Securities Corporation — hereinafter referred to as the Securities Corporation — was organized on or about April 27, 1925, under the laws of the state of New York at the instance of the then directors of the Bank for the purpose of purchasing and dealing in securities and in doing business and carrying on transactions, including the purchase of securities, which the Bank was prohibited from doing by the national banking laws, and it continued as such during the times hereinafter mentioned.
The stock of the Securities Corporation was held by trustees, and, pursuant to an agreement dated April 16, 1925, the owner of each share of stock of the Bank became entitled to a beneficial interest — transferable only with the shares of the Bank stock — in a share of stock of the Securities Corporation.
During the years before 1929 to 1932, Joseph W. Harriman was president of the Securities Corporation.
On or about July 15, 1933, the Securities Corporation filed a voluntary petition in bankruptcy in this court and the Irving Trust Company was thereafter duly appointed its trustee in bankruptcy and duly qualified as such.
4. The M. H. O. Company, Inc., was a corporation organized under the laws of the state of New York and all the stock thereof was owned beneficially by Joseph W. Harriman and Augusta B. Harriman. The said company was used by Harriman to engage in trading in securities on margin. All the funds of the said company were obtained either by borrowing from JAMA or from the Bank.
5. The Midtown Trading Corporation was a corporation organized under the laws of the state of New York. All its stock was owned beneficially by Harriman. Its funds were also secured by borrowing from JAMA or from the Bank.
6. Augusta B. Harriman was the wife of Harriman. Her principal role herein is as vice president of JAMA. She filed a voluntary petition in bankruptcy on March 21, 1933, in this court, and was adjudicated a bankrupt thereon on March 21, 1933. The Irving Trust Company was appointed her trustee in bankruptcy and duly qualified as such. All the claims against her estate in bankruptcy, except the claim of Henry E. Cooper, as conservator of the Harriman National Bank & Trust Company of the City of New York, were expunged, and on June 19, 1934, the Irving Trust Company, as trustee in bankruptcy of Augusta B. Harriman, indorsed and delivered to Frederick V. Goess, as receiver of the Bank, a demand promissory note of JAMA to her, dated May 7, 1932, in the principal amount of...
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