The morning call., 1893-08-22
THE PEOPLES BANK.
Arguments on the Application to Re-
Scind the ReceiVerShip.

SAAhd AAtC
Arguments on the application of Joseph
Winterburn to set aside the order of the
court appointing J. E. Farnum receiver of
the Peoples Home Savings Bank were
heard before Judge SandersOn yesterday.
The case had been postponed from last
week to allow the attorneys concerned
therein further time to prepare their
briefs, some of the attorneys having been
only recently appointed. Yesterday when
the matter came up every one interested
was present, including Farnum. the re-
ceiver, and his attorneys, A. Z. Shaw and
c. n. Fox. while the petitioner aud other
stockholders were represented by NJ. a.
Dorm. L. NJ. Hneffier and p. f. Dunno.
with Attorney General Hart to represent
the people of the State OF California.
Dorm opened the case in support of Win
terburn's application. He commenced by
reciting the various allega tions made
against the bank directors and endeavo red
to show that Farnum ind0rsed the very
acts which are alleged to have got the bank
into trouble. Ii was claimed that the Pa
cihc Bank was Indebted to the PEOPLES
Bank, and that the directors of the one
bank were interested in the other. If so
they should be in position to protect the
interests OF depOsitOrs and stockholders in
both banks.
The main point claimed by Dorm was
that the Peoples Home Bank was in
reality not in difficulties at all, but was a
solvent institution, CAPABLE under skillful
and honest management of settling all its
liabilities and leaving handsome surplus
for he benefit of drDositors and stock
holders. And yet" said counsel, 'on
certain representations TO the court they
ask to wind up the banks affairs in a man
ner not provided by law, with all expenses
and a very modest with an lronical
bOw-'counsel fee to my friend Judge
Fox"
Dorm went on to say that there was no
allegation whatever that the Stockh olders
acquesced in this appointment of a re-
ceiver; nor is there any mention Of
protest against such a proceeding. The
fact was the whole thing took place at
meeting of only five stockholders, repre-
senting among them but an infintesimal
proportion of the cauital of the bank.
These men surrepttiously appointed
receiver for really solvent banking insti-
tuition.
Then, again." said Dorm, ''as to the
duties of a receiver. He cannot conduct
the business for the benefit Of parties in
terested. He is compelled by law TO wind
the whole cOucern up whatever loss may
be incidental to the proceedings" So at
all costs the appointment OF a receiver
should be avoided. The whole proceed
ines were unauthorized, and counsel
quoted various authorities, notably we'll
known French bank case, to eX Lain the
law on this subject.
Objections, therefore, 10 ths order to
show cause were manifold. In the first
place it was maintained that the court had
no jurisdiction TO appoint n receiver. If
an officer of the company had been un-
faithful TO his trust there WAS a remedy
well known TO all. Secondly, the facts of
fI1a n 4 ffsninr
that the court had jurisdiction, to necessi-
tate the appointment of a receiver. No
insolvency was alleged in the complaint
nor any malfeaSance on the part OF the
directors. And. even if such were the
case. the law did not allow the property of
others 10 be cOnnscated because of the
wrongdoing Of certain parties.
AT this point Att0rney-General Hart
said that he had few suggestions to offer.
and as he had TO go away early Dorm gave
way to him. Hart indorsed what had
been urged by Attorney Dorm, and then
proceeded to define the nature Of the bank.
1t was the same argument that Hart had
used in the case of the Pacific Bank,
namely, that 1t was incorporated as saw
ingS bank and therefore had special privl-
.leges ana was governed by special laws.
In such corporations the directors had
lien Oh all the assets of the concern, while
the stockholders manage and control the
business.
Now. the bank had franchise granted
by the State, which franchise was IN the
nature of a contract. Therefore. in the case
OF misconduct on the part of any officer OF
the company proceedings must be taken
according TO law, and the court had no
jurisdiction in the present instance. BE
fore such steps rs these can be TAKEN"
said Hart, that is, before the court Can
appoint a receiver there must be disso-
luton of the concern, or the State must
withdraw the franchise granted. The
Attorney-General must be informed of
what has occurred, and the Bank Commis-
missioners are the Droper persons TO in
vestigate matters" In this way the
Attorney-General argued. quoting nulner-
Gus authorities in support of his argument
and concluded by insisting that the order
appointing receiver be revoked.
After the recess Attorney A. 4. Shaw
replied. He recited the original complaint
under which Mr.. FaInum was appon ted
receiver Of the bank. and pointed out the
allegations against the director, endeav-
oriDg TO show that there had been gross
misconduct on their part. as we'll as care
lessness in the management Of affairs The
most glarlng of all was their acceptance of
the note for $4,000 OF g. +. Holder. On
the night If June %. 1898, the defendants
took out of the vaults of the bank certain
bonds of the value of $4,000, and ac-
cepted in lieu of these this note for 500, 600.
The nOta WAS Ia Ean at the Pacific RanK in