The morning call., 1893-09-06
UPON ITS MERITS.
The Pacific Banks Final
administration.
RIGHTS OF THE DEPQSITORS.
Lengthy Argument in Reference to
the Application for Writ of
Dissolution.

cases tNab the supreme OOuTL OIL Oall1OT-
MIA has been called upon to decide" said
Attorney General Hart yesterday when
the case of the receivership of the Pacific
Bank was called. ''In this State there lis
S13S. .OOO. 900 on deposit, and the question
10 decide is whether the Attorney General
has a right to inquire into the affairs of a
bank before the depositors have 1t thrown
into insolvency by proceedings in attach
ment We must have special reference
of the case"
I'VE don't desire to modify our case"
said Attorney Dunno of the Pacific Bank
counsel. The possession of the assets
by the Bank Commissioners is an un-
known quantity, and we are only desirous
of having the functions OF the several in
terested parties defined"
'Dr. r. 81. Mcdonald was president of
the bank" said r. II. Mcdonald Jr. "On
the 30th of August the directors had a
meeting IN the bank. There were six
members present. My father was absent
in New York. had sent out notices call
ing the meeting and stating its object.
The resolution contemplating insolvency
was carried by five votes"
"AIe you a stock ?" asked W. T.
Baggett.
There was stock in my name" an
l.
my name and some that was not in my
name"
who gave it to you?"
My father l don't remember the date
Ireceived if, but had it about two years
and half"
Glow many shares did vOur father give
you?''
About fifty shares; 1 don't remem Der
the exact number"
"Wers you duly qualified to act as vice
president?" asked Mr.. Baggett. This
question was aimed directly at the point
the writ requested, in which it was as
serted that the president or vice president
of corporation has no right virtue
offiCii to confess judgment of insolvency
against corporation. In the statute
creating the Board of Bank Commissioners
il is a lso prescrib bed that 1.-THE winding up
and liquidatng of banks and banking cor
poratiUns in the State of California is in
the bands of the Bank Commissioners ex-
cusively, and banks are EXEMPT from the
provisions OF the insOlvent act"
In the application for the writ of prohi-
bition Judge Levy and Sheriff McDade,
receiver, are named as respondents, and
the salient point is set up that the adjudi-
cation of insolvency of the Pacific Bank
was premature and void, having been
made nine days before the legal date of
return.
Were yon a bona-ide stockholder, Mr..
Mcdonald ?" asked the court.
es, sir; 1t was mine wholly and abso-
lutely. always understood that a man
owned stock when ii was recorded in his
name. My stock has been put up as col
lateral security, but it has never been
transferred on the books. | don't know
the status of the stock. because | only have
been told that II was hypothecated at the
Peoples Home Savings Bank. My brother
handled it IN the transaction"
do you owe the Peoples Home Savings
Rap
Dan "No." ! any money asked MI DagSo't'
Then why was the stock nut up as col
lateral?' Mr.. Baggett again queried.
Il loaned it TO my brother"
Frank V. Mcdonald, cashier of the un-
fortunate institution, was then called to
explain the status of his brothers
stock. He began with the time the
first uncertainty arose, saving that
ten shares Of Pacific Bank stock were
then in the Peoples Home Savings
Bank. but that there was no ncum-
brance upon them and that they should
have been returned. I'VE were contiuu-
ally selling and exchanging stock and cer-
tihcates," he said, ''aDd 1t was perfectly
natural that the actual shares might at
times have peen at one bank when they
were actually owned by the other"
L. h. OsmOnt arose at this point, tho
several sides having declared the testimony
closed. He briefly outlined the purpose of
the application for restraining order, say
Ing that insolvency proceedings did not
apply to the settlement of the affairs of the
Pacific Bank. He said the laIer act Great
ing the Bank Commissioners absorbed the
IDsnIvent law In so far as it related to
banks and banking institutions. I'VE
proceed upon the assumption that the
racine Bank was organized and incorpoT-
hted as savings bank. and if it has acted
as Il commercial bank it has gone beyond
Its province. though it legally remains a
bank for savings. The Bank Commits
sionerS Get was passed in 1873 and amended
in 1882. 1t repealed the inSOlYent act of 1890
III SO lar as 1t concerned savings bank and
contemplates one com prehenSiVe scheme
for winding up iDsolvent banks. The
policy of this enactment was discreet be-
cause the Legislature decided that the in
ierests OF depOsitorS and the character of
banks required different method of adiu-
dicatlOn from the average business insti-
tuition Untold ot disasters might arise if
lndscrlmlnate runs were to occur, and
were the Bank Commissioners act not on
the statute books, few dep0sitOrs might
preclptate run and bring financial en-
barrasSment to a bank that was perfectlv
solvent when Its securities were examined.
For this reason rational, meGhodical plans
were gathered into one practical mea sure
and out OF 1t came the act creating the
Bank Commissioners and defining their
duties. In fact, its terms were actually
repugnant to the terms of the insoyent
act The Bank Commissioners are allowed
to name the number Uf employees and their
salaries, and it is IN sdemeanOr todisobey
any direction they give in regard to the
final adjudication of Il banks affairs. The
conrt below, therefore, was in error when
1t took cognizance of the in nsolvencv law
and made an appointment in CONF pliance
with its misapplied terms"
Mr.. OsmOnt made numerous citations TO
the effect that the modified system was for
the purpose of protecting all interests.
placing the banks affairs IN the hands of
practical business men and not trusting to
the hasty and disastrous efforts of impet-
nous depostors. Again" he read, "the
whole purpose is to provide an equitable
distribution TO those who are entitled To
share In the assets of any suspended
banking institution. The Bank Commits
sioners, therefore, have right 10 make
previous investigation. and If the affairs OF
bank portend comm g complications they
may apply to the Supreme Court for a
writ of injunction and lOrestal danger
that seemed certain 20 occur.
"The court below acted without iuris
dictiOD," said Mr.. Osmoni, "necause
neither the president nor vice president
had rover to confess judgment and pre-