Tefft v. North River Bank

Two separate proceedings have been instituted to effect substantially the same ends,—one by certain stockholders, to secure the appointment of a receiver under the general act relating to banks, banking and trust companies (Laws 1882, c. 409;) the other by the attorney general, to obtain a decree dissolving the corporation pursuant to the provisions of the Code of Civil Procedure, (1785 and 1788,) and incidental hereto to secure pendente lite the appointment of a temporary receiver. It is conceded by all in interest that under one or the other of these proceedings a receiver should be appointed. It is important, however, in view of the great interests involved, that the order appointing a receiver should be regular and valid beyond dispute, so that no question can arise as to the title of the receiver so appointed. Were it not that a serious, and, I think, fatal, objection is made as to the right of the court to appoint under the banking act of 1882,1 should have been inclined to avail myself of the provisions of that act, for, in addition to other benefits, it would not have involved the destruction of the corporation or corporate franchise at the termination of the proceedings. In the action of the attorney general, brought, as it is, for the dissolution of the corporation, the final judgment will destroy the corporate franchise. In the attorney general’s action, however, no question can arise or doubt exist as to the validity of any appointment made thereunder. On the other hand, an examination of the banking act under which the Tefft application is made has satisfied me that subchapter 6 of the act applies only to the banking corporations actually issuing banknotes, or any kind of paper credits which circulate as money. Subchapter 6, with the exception of the one hundred and thirty-second section, is are-enactment of chapter 226 of the Laws of 1849, which was entitled “An act to enforce the responsibility of stockholders in certain banking corporations and associations, as prescribed by the constitution, and to provide for the prompt payment of demands against such corporations and associations.” It would therefore seem that the class of corporations embraced within subchapter 6 had reference *10solely to corporations or joint-stock associations for banking purposes which were issuing bank-notes or some kind of paper credits which circulate as money. This is made clearer when we recall the fact that section 134 was intended to give to stockholders upon whom the liability was fixed in cases where the bank issued notes, a summary remedy to obtain an injunction, and the appointment of a receiver in cases where they had become liable by reason of the issuance of bank-notes or paper money under the provisions of the act. It is conceded here that the North River Bank has never issued during the last 24 years bank-bills or paper credits to be circulated as money, and the period of redemption for bank-bills theretofore issued expired under the statute on the 31st of December, 1872. The question here presented has been indirectly passed upon in the Case of the Empire City Bank, 6 Abb. Pr. 386. There the question presented was whether, under the act of 1849, (which has been re-enacted, as stated in the chapter under discussion,) to enforce the personal liability of stockholders of an insolvent bank, where the objection was made that it did not affirmatively appear that the bank was an association or corporation “issuing bank-notes to circulate as money.” Held, that the objection was well taken, and that that fact must affirmatively appear in order to confer jurisdiction on the court. By parity of reason, it would seem, therefore, that although the North River Bank has, in common with all other banking institutions organized under the state law, power to issue bank-bills to circulate as money, that fact does not render it amenable to the provisions of chapter 6 of the general banking act. Therefore, as to banks engaged in circulating bank bills, in case of insolvency two concurrent remedies are provided to secure the appointment of a receiver. In cases of banks not issuing bank-bills, and whose stockholders are not liable to the penalty prescribed by the act, the proper proceeding in case of insolvency is an action such as has been here brought by the attorney general to dissolve the corporation. As undoubted power to appoint a receiver in the attorney general’s action exists, and as the question of power to appoint, under the provisions of the general banking act, is, to say the least, in serious doubt, the application made by Tefft and others should be denied, and that of the attorney general granted.

It is proper, moreover, that I should say that the objection made as to the effect upon depositors is not well taken. While it is true that formerly a temporary receiver appointed in an action brought by the attorney general had power only to collect, preserve, and hold the property of the corporation, and was not authorized to pay out any moneys until final judgment, this has been changed. Section 1789 of the Code provides that a temporary receiver shall be subject to the control of the court, and, when specially directed so to do, may make distribution among depositors, creditors, and stockholders. In the order therefore appointing a receiver, a provision should be inserted that the receiver have leave, puisuant to section 1789, when he has sufficient funds, to apply to the court to make distribution thereof among the depositors, and this will enable the receiver, from time to time, as moneys come into his hands, to speedily pay all depositors of the bank without obliging them to await the result of any litigation or final judgment in the action. Ordered accordingly.