The morning call., 1893-10-15
AGAINST McDADE.
Question of Receiversf1ip
Settled.
THE SUPREME COURT DECIDES
The Opinion Places the Pacific Bank
In the Hands of the Bank
Commissioners.

of prohibition prayed for by the creditors
of the Pacific Bank. and decision to that
effect was rendered in bank yesterday,
Judge Paterson writing the opinion.
This reverses the action of the lower
court, by which Sheriff McDade was ap-
pointed receiver, and puts the bank into
the hands of the Bank Commissioners.
The Pacific Bank suspended on June %,
1S93 On August II seven of its creditors.
representing an indebtedness of S3O63 90.
filed petition in involuntary insolvency,
asking for an order to show cause why it
should not be adjudged an insolvent. The
grounds of the petition were that the bank
had suffered Its property to remain un-
der attachment for moro than four
days: that in contemplation of insolvency
it had conveyed to the Peoples Home
Savings Bank some real estate; that it
was concealing and removing portion of
its property, and that it had failed for over
forty days to pay money deposited by de-
positors. Thereupon an order was made
directing the corporation to show cause on
The "a day of August why it should not
be adjudged an insOlvent debtor and di-
rected TO surrender its estate for the benefit
of its creditors.
On August Is Vice President Mcdonald
filed an answer denying that the transfer
Of the bank property to the Peoples Home
Savings Bank was without consideration.
or to give preference, or to hinder. delay
or prejudice creditors. and denying that it
was removing or conceallng any OF its
property; but the insolvency Of the bank
was admitted. The answer alleged the
willingness of the corporation to surren-
der its property Tor the benefit OF its cred
ltors and TO comply with all the prOvis-
ions of the insOlvent act.
On the day this answer was filed an or
der was made by the Superior Court ad-
judging the corporation lnsOlvent. direct
ing schedules to be filed and appointing
Sheriff McDade receiver to take charge
until the appointment OF an assignee, and
November Is was fixed as the day upon
which the creditors should appear to prove
their debts and elect an assignee. The
usual orders were made at the same time
granting a stay of all proceedings. On
August 80 the board of directors of the
bank held a meeting, and by resolution
ratified the act of its vice. e-president In filing
the answer, and on August 81 the court
made and filed another order substantially
the same as the order of August Is. A
motion was made in the Superior Court by
the petitioners to set aside the orders on
the ground that the court had exceeded its
jurisdiction in making the same. This
motion having been denied an application
was made to the Supreme Court for writ
of prohibition.
Attorney-General Hart claimed at the
argument that the Pacific Bank was
savings bank, ami as such WAS expressly
excepted from the provisions OF the in.
solvent act OF 1880 by section 3; that the
provisions relating to insolvency proceed
ings do not include corporations; that the
order Of adjudication was void because
mature-made before the return day
10 10 q q
OF the bank could not con nsent to the adj
Indication, nor could the directors author
ize him to do so or ratify his act after he
had done so.
The Supreme Court, however, found 1t
unnecessary to consider these con tentions
of MIR. Hart, but devoIed its attention to
| the question of the powers and duties of
the Bank Commissioners as defined by sec
tion II, in particular. of the Bank Com
missioners' act" approved March 80, 1878.
as amended in 1887. This section describes
the method by which the Bank Commits
sioners. through the Acknowledgement,
may proceed against an unsafe bank.
The court holds that the Bank COM
missioners' act, as finally amended in 1887,
supersedes the ''insOlvent act" of 1880. so
far as this class of corporations is con-
cerned. The opinion on this point reads:
1t Is entirely clear that II a substantial eff
feet is TO be gwen 10 the provisions of this sec.
tion the Pacific Bark cannot be put through in
sOlvency under the provisions OF the Insolvency
act. The two acts are utterly repugDant in
letter and III spirit. The Bank Commis ssoners'
act attempts 10 provide scheme for the visita-
ti0n and examination OF all banks, and the
winding up OF the affairs of such as are found
10 be insolvent. provided that 1t appears
that t Is unsafe for the corporation to continue
to transact business. The act Is not as perfect
in detail as ii might be-a complaint which has
been made In other States with respect to sim-
lar statutes-but 1t cannot for this reason be
held invalid. 1t Is provided in section 21 that
all acts are repealed IN so lar as they are In.
consistent with the provisions OF this act"
! he enforcement OF the fnsOvent act would
defeat the plain purposes contemplated by the
Bank Commissioners act. Tb- question Is not
so much whether the scheme provided is COM
Dlete in all matters Of detail, but whether the
Legislature intended TO exempt banking cor
pOrations from the operation of the insoIvenr
act and this intention we think Is clearly
manifested, though not expressly stated. =
The question OF compensating an as
signee the court found worthy OF con-
sideratiOn, and said:
The Bank Commissioners receive no fee
OF course, the fact that large COM
missions are allowed and great expenses wOuId
be incurred under the insoIvent act is no
reason why the act should not be enforced, but
iU Is matt for consideration IN deter mining
the intent with which the Legislature passed
the Bank Commissioners act. Ii five creditors,
representing $500. can throw banking cor
poration into insolvency and enforce winding
up of its affairs, stockholders and creditors
=
the provisions OF section IL OF the Bans Com
missioDers' act. There are very few banking
institutions which nave passed through
periods OF financial distress without being
in a condition of inSolyency-wben enough
could not have been realized from
their assets In a speedy way to discharge their
liabilities. Al such times assets shrink and
shrivel iu value, but liabilities remain I'M
changed. They never vanish. Now, IL Is easy
to see, II the court should put forth Its power at
such time, merely because the corporation
assaied hau from such causes become insol-
vent 1t would do harm rather than g0od, and
that instead OF giving protection to creditors. it
would imperil their safety and instead OF pre-
serving the rights of stockholders, IL would de-
stroy The value OF their stock. Mere
insolvency Is not enough to induce the court to
act; but 10 induce 1t 10 act. such a state Of
insolvency must be shown satisfies IL that
the corporation will not be able In a short time
to resume its business with safety to the pub
lie and advant ge 10 the stockholders.
These were the considerations which actuated
the Legislature In passing this act. 1t was seen
that if the door we're left open to few credit
ors To bring suit 10 wind up tue affairs of
banking corporation under the summary and
expensive proceedings provided In the insol-
vent act, financial ruin might result to every
banking institution in the State. BY this act
no injustice Is done to any creditor or stock.
holder.
1t was claimed by counsel for respond
.nts that the act is unconstitutional be-
cause it traverses the provisions of article
VT aaofinpc and X and articlA Nv sac.