Case ID: ad_10/html/0328-01.html
Source: Caselaw Access Project
Author: {"author": "Brown, P. J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The People of the State of New York, Respondent, v. Murray Hill Bank, Appellant. Committee of Depositors of the Murray Hill Bank, Appellant.
    
      Banking corporations — dissolution of, in proceedings by the directors, and in an action by the Attorney-General — the former not a bar to the lattes'— the receiver may be appointed by the eowtfis'st acquiring jurisdiction.
    
    The right and power conferred upon th.e officers of an insolvent corporation to prosecute a proceeding for the voluntary dissolution thereof and the distribution of its property, through the medium of receivers, among those entitled to receive it, is permissive merely, and cannot be construed as a surrender by the State of its right to enforce a forfeiture of the charter of the corporation whenever it sees fit to do so.
    In an action brought by the Attorney-General in the county of Kings to obtain a judgment dissolving the defendant corporation, he alleged that it was insolvent, had suspended its ordinary business, and that the Superintendent of Banks had taken possession of its property. The answer did not deny the insolvency of the defendant, but alleged as a separate defense that prior to the commencement of this action a majority of the directors had begun an action in the city and county of New York for a voluntary dissolution of the corporation, and that, on notice to the Attorney-General, the Supreme Court in the county of New York had appointed receivers thereof.
    Upon an appeal from an order appointing temporary receivers in the Kings county action,
    
      Held, that the court in the city and county of New York had jurisdiction of the subject-matter of the action brought therein, and had authority to appoint temporary receivers;
    That its decision that the petitioning directors in that action had the management of the concerns of the corporation, within the meaning of section 3419 of the Code of Civil Procedure, was a judicial one and could not be reversed except upon appeal;
    That as it had been already held by the Appellate Division in the first department, upon an appeal from the decision in the action brought in the city and county of New York, that the fact that the Superintendent of the Banking Department had taken possession of the defendant, its property and business,
    
      did not preclude a majority of the directors from prosecuting proceedings for a dissolution of the corporation, nor deprive the court of the right to exercise any of the powers which the statute conferred upon it in proceedings of that character, that decision must be accepted as conclusive on this appeal;
    That, conversely, the pendency of the proceedings for a dissolution instituted by a majority of the directors was not a bar to the maintenance of an action by the Attorney-General in the name of the People for substantially the same relief; That the Supreme Court was a single tribunal existing for the purpose of administering the law throughout the State, and-if the court in the first department, on notice to the Attorney-General, had already appointed receivers of the corporation in the action brought by a majority of the directors for a voluntary dissolution of the corporation, the court in the second department would abide by the decision of the court which first acquired jurisdiction in the matter, aud would vacate an order subsequently made by the court in the second department appointing other persons receivers of the corporation.
    Appeal by tbe defendant, the Murray Hill Bank,, and by the Committee of Depositors of tbe Murray Hill Bank, from an order of the Supreme Court, made at tbe Orange Special Term and entered in the office of tbe clerk of tbe county of Kings on tbe 23d day of September, 1896, appointing temporary receivers of tbe defendant and granting an injunction, and also an appeal by tbe defendant, the Murray Hill Bank, from an order entered in said clerk’s office on the 9tli day of October, 1896, overruling the defendant’s answer as frivolous and directing that the plaintiff have judgment as demanded in the complaint.
    
      Louis Marshall and Samuel Untermyer, for the appellant.
    
      W. E. Kisselburgh, Jr., for the respondent.
   Brown, P. J.:

There are two appeals before the court in this action.

Tbe first is from an order appointing temporary receivers; the second from an order overruling tbe answer of the defendant as frivolous and directing judgment for the relief demanded in the complaint.

The action was brought by the Attorney-G-eneral in the county of Kings, in the second judicial district, to obtain a judgment dissolving tiie defendant corporation and declaring forfeited its corporate privileges and franchises. The essential allegation pf the complaint is that the defendant was insolvent, that it liad suspended its. ordinary business, and that the Superintendent of Banks had, pursuant to the authority of the Banking Law of the State, after an examination of its books and affairs, determined that it was unsafe for it longer to continue to transact business, and had taken possession of its bank and its property.

The answer contains no denial of the insolvency of the defendant, but it alleges, as a separate defense, that, prior to the commencement of this action, a majority of the directors having the management of the concerns of the defendant had commenced, in this court in the first judicial district, a proceeding for the voluntary dissolution of the coiqioration, pursuant to the provisions of the Code of Civil Procedure; and that the ground for such application was that the defendant was insolvent; that such proceedings had been had, ujion due notice to the Attorney-General, that on September 2, 1896, an order had been made at a Special Term, held in and for the city and county of Hew York by Mr. Justice Pbyor, directing all persons interested in the defendant corporation to show cause, upon a day named therein, why the defendant should not be dissolved; that upon application of said petitioners, and upon like notice to the Attorney-General, and upon the same day and at the same term of the court, an order had been made and duly entered appointing two temporary receivers of the property of said corporation; that said receivers had duly qualified and filed the security required of them by the court, and duly demanded possession of the property of the defendant from the said Superintendent of Banks ; that an appeal had been taken from said last-named order by the Attorney-General, and that such proceedings were still pending in this court.

The answer contained other matter, alleged as separate defenses and denials of other allegations of the complaint, but none of them were, we think, material to the question presented by the complaint and they require no notice.

Upon the summons and complaint, and upon the affidavit of the Superintendent of the Banking Department of the State, a motion was made by the Attorney-General, at a Special Term held at the city of Newburgh by Mr. Justice Dickey on September 12, 1896, for the appointment of temporary receivers of the defendant in this action. In opposition to such motion the defendant read all the papers presented to the court in the first department, in the proceeding for a voluntary dissolution of the corporation, and the order of Mr. Justice Pryor appointing as temporary receivers of the defendant Mr. Spencer Trask and Mr. Miles O’Brien, of the city of Hew York, and also the bonds filed by said receivers, and the approval thereof by a justice of this court.

Thereupon, after argument, Mr. Justice Dickey granted the motion of the Attorney-General and appointed as temporary receivers of the defendant in this action Mr. Edward H. Hobbs, of Brooklyn, and Mr. Benjamin B. Odell, Jr., of Hewburgh.

The order of Mr. Justice Dickey appears, from his opinion, to rest upon his determination that, inasmuch as the Superintendent of the Banking Department had taken possession of the bank and its business and property, the directors of the corporation, at the time they presented their petition to the court in the proceeding for a voluntary dissolution, were not, in the language of section 2419 of the Code of Civil Procedure, “ directors * * * having the management of the concerns of a corporation,” and that consequently the Special Term held by J ustice Pryor, at which said petition was presented, had no jurisdiction to entertain the application.

This proposition the Attorney-General has very fully argued at our bar.

Since the argument, the order granted by Justice Pryor has been affirmed by the Appellate Division in the first department, and that decision is conclusive upon the right to maintain the proceedings for the voluntary dissolution. The ¡lower of the court in the first department to entertain that application cannot be questioned in this action.

The court had jurisdiction of the subject-matter and the authority to appoint temporary receivers, and it necessarily possessed the power to decide any controverted question of fact upon which the exercise of its power depended.

Jurisdiction, in the strict meaning of the term, as applied to judicial officers and tribunals, means no more than the power lawfully existing to hear and determine a cause. It is the power to adjudge concerning the general questions involved, and is not dependent upon the state of facts which may appear in a particular case. It is entirely independent of the manner of its exercise, involving the power to decide either way upon the facts presented to the court. (Hunt v. Hunt, 72 N. Y. 217; People ex rel. Davis v. Sturtevant, 9 id. 263; People ex rel. Negus v. Dwyer, 90 id. 402; People ex rel. Gaynor v. McKane, 78 Hun, 154, and cases cited.)

As the Code has conferred upon the Supreme Court the power to dissolve a corporation upon the petition of a majority of the directors having the management of its concerns, the question whether the petitioning directors had the management of its concerns was a judicial one, which the court at Special Term was called upon to decide, and its decision either way did not affect its jurisdiction and could be reversed only upon appeal. It may have been erroneous, but until reversed it is conclusive in all other tribunals, upon the questions presented.

For the purpose of this appeal, therefore, we must assume that the fact that the Superintendent of the Banking Department had taken possession of the bank and its property and business, did not preclude the directors from prosecuting the proceedings for a dissolution of the corporation or deprive the court of the right to exercise any of the powers which the statute conferred upon it in proceedings of that character. But we are also of the opinion that the pendency of the proceedings for a voluntary dissolution are not a bar to the maintenance of an action by the Attorney-General in the name of the People for substantially the same relief. It was so decided in People v. Seneca Lake Grape & Wine Company (52 Hun, 174). While it is true that the statutes relating to the voluntary dissolution of corporations have, since that case was decided, been very much changed, and the power which the court may exercise in those proceedings very much enlarged, and while the grounds upon which dissolution was sought in that action were different from those alleged in the petition of the directors in the voluntary proceeding, the relief sought in each case was the same, and we think the decision rested upon a sound principle of law. There would, we think, be serious objections to treating a proceeding for the voluntary dissolution of a corporation as an action between the People and the corporation, or to holding that the People were a party to that proceeding in the true sense of that term. But however that may be, we place our decision upon the ground the State will not be held to have surrendered its right to enforce against a corporation a forfeiture of its charter, without express legislative declaration to that effect. The right and power conferred upon the officers of an insolvent corporation to prosecute a proceeding for the voluntary dissolution thereof and the distribution of its property, through the medium of receivers, among those entitled to receive it, is permissive merely, and cannot be construed as a surrender by the State of its right to enforce a forfeiture of the charter of the corporation whenever it sees tit to do so. The proceedings by the directors depend for their success upon proof of many facts which are not material in an action by the People, and we think that the Attorney-General may prosecute an action upon any of the grounds specified in section 1785 of the Code of Civil Procedure, without any regard to proceedings instituted by the directors,, whenever, in his opinion, the public interests require that such an action should be brought. (Code Civ. Proc. § 1808.)

We, therefore, conclude that the answer of the defendant set forth no defense, and that the order overruling it as frivolous must be affirmed.

But, while we affirm the right and power of the Arrorney-General to maintain this action for the purpose of obtaining a judgment dissolving the corporation, it by no means follows that receivers of the property of the corporation should be appointed herein either by an intermediate order or by final judgment, while the other uroeeeding is pending.

The distribution of the property of the corporation among the creditors, and stockholders is chiefly an administrative function. It is the result of, and an incident to, the dissolution of the corporate body. It is to be performed by the court, through the medium of receivers; and such receivers, when appointed, are the officers of the court, and subject to its direction and control. When, therefore, the court has, in one proceeding brought for the dissolution of the corporation, acquired jurisdiction over the fund, and has appointed its officers to take possession thereof and administer upon it, it is difficult to see how the order of another and co-ordinate branch of the same court, which seeks merely to take the fund out of the hands of one set of receivers and place it in the possession of another set, is to be upheld.

The Supreme Court is a single tribunal, existing for the purpose of administering the law throughout the State. It performs its functions through many judges in different parts of the State, but its orders, whenever made, are the orders of the court, and are to be respected and enforced as such in all parts of the State and by all branches of the same court. In this action it was made apparent to the court, at Special Term, that receivers had already been appointed of the defendant corporation, and that they had qualified as such and given the security required of them. They thereby became entitled to the possession of the corporate assets. Upon the view of the law entertained by the learned judge who heard the motion he was probably permitted to ignore Judge Pryor’s order. If the order had been granted by a judge who had no jurisdiction over the corporation or its assets, it would have had, of course, no binding force anywhere. But, as we have shown, the learned judge fell into an error in this respect. There was jurisdiction to grant that order, and the assets of the corporation were, at the time the motion for receivers was made in this action, in legal contemplation, in the control of the court, and the receivers appointed by Justice Pryor were entitled to the possession thereof.

Should receivers be appointed in this action the legal relation of the court to the fund would not thereby be in the slightest degree changed. It would still be in the possession and control of the court. All that would be accomplished would be to displace one set of receivers and substitute another.

Ho step can be taken in the voluntary proceedings except upon due notice to the Attorney-General. The duties imposed upon him in reference to the administration of the fund are authorized mainly for The protection of the stockholders and creditors, and are precisely the same in one proceeding as in the other. The interests of all parties are, therefore, amply protected, and no public or private interests demand any further order by the court in this action. If the receivers appointed by Justice Pryor are for any reason objectionable, application may be made to the court for their removal. The fund is now in the possession and control of the court, and no further order or judgment is at the present time necessary to enable it to decree its proper distribution among those entitled to it.

Judgment may be entered in this action for the dissolution of the corporate body. But the corporate assets must be distributed through the voluntary proceeding where jurisdiction first attached. The order appointing receivers must, therefore, be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

All concurred.

Order overruling the answer as frivolous affirmed, with ten dollars costs and disbursements. Order appointing receivers reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.