The morning call., 1893-09-07
BANK INSOLVENCY
The Supreme Court Hears
Arguments.
THE PACIFIC RECEIvERSHIP.
Strong Points Made For and Against
the Appointment of John j.
McDade.

When argument in the matter of the re-
ceiverShip Of the Pacific Bank was re-
sumed yesterday morning in the Supreme
Court. Attorney-General Hart picked up
the thread of his discussion at the point
where he was abruptly checked on Tues
day evening. At the juncture Of estoppel
he had essayed a definition of the latitude
of the Bank Commissioners, as e0ntem-
plated in the act creating the body and
prescribing its functions.
THE manner of carrying out the in
solvent act" said Mr.. Hart. "as intended
by the court below, is great injustice TO
the banks Of this State. For instance. the
average rate Of compensation to a receiver
is per cent upon the amount involved.
There are S205, 100000 on deposit in the
savings and commercial banks of Cali
fornia, and were this amount to be han
died according to the Interpretation of the
lower court, it would pay the receivers
SIS, 200. 600, a compensation out of all pro-
portion to the service rendered There is
broad distinction between a depositor
and creditor, and the separate interests
must be carefully defined and considered
in the distribution of the assets of an insti-
tuition that comes within the province of
dissolution.
when the Bank Commission act was
passed it took pre- dence. succeeded and
repealed all prior acts with reference to
the administration of savings and COM
merciar banks that have passed the limit
of profitable continuance. If Judge is
convinced of the insolvency of any bank
upon report of the Commissioners. he
shall make such appointments as are rec
commended by the Commissioners and the
Attorney-General, after the whole number
OF creditors shall have met and decided
upon person to finally adludlcate the
banks affairs. When the Rct SAYS that
the Commissioners shall name the officers
and stipulate their compensation il does
nOtmean that they shall appoint one OF their
number or political friend, bnt IL i'm
plies that they shall appoint one of the
defunct bank officials, II one can be found
that has not been found guilty of irregu-
larity. If then the Commissioners can ap-
point the receiver, now can such receiver
be awarded 4 per cent commission, as
contemplated in the insolvency law, as ap-
piled TO mercantile institutions and other
business than banks? lsubmit the matter
to your Honors and expect favorable de-
cision as respects the rights and duties Of
Bank Commissioners"
G. h. Maxwell followed General Hart
saying: 'In an Involuntary insolvency
the court has no right to appoint a re-
ceiver Previous to the act of 1891 the
courts duty was to appoint the Sheriff of
the county as receiver when involuntary
insolvency attached to any banking or
commercial institution, but with the
amended act the appointment of re-
ceiver is not valid until the inventory of
assets and liabilities has been filed. If j.
j. McDade has been appointed as Sheriff
it is gross error of the court below, but if
he has been appointed as an individual, to
prepare schedule, because of eminent
qualifications, Ii is An entirely different
matter and will not be argued against A
petition ln insolvency can only be filed
when the individual, firm or corporation
applying has not means sufficient to pay
the liabilities existing, and then, in order
tn protect the stockholders, depositOrs or
creditors, the court is only permitted 10
proceed as defined in the laws governing
insolvency. Iu the first and second appl-
cations for the appOin of a receiver,
irregularly made by Pacific Bank depos-
ltOrs, Judge Levy has disregarded the
laws governing the final disposition of a
defunct banks affairs"
Mr. MaXwelPs citations were frequent
and pointed. and he produced many pre-
cedents and opinions tending TO sustain
his point OF argument.
IF uncertain stock-Owners can confess
judgment at midnight, before bona-fde
stockholders have been consulted, 1t es-
tablISbes dangerous precedent and i'm
perils the validity and value of every
snare of bank stock issued by the institu-
tions of California. The law upon all
these points is conclusive and we'll estab-
lished, and yet Judge Levy has openly
and Dersistently disregarded it and cuts
out the right of all stockholders to come in
and be heard. While, by virtue of charter
rights. the officers of a bank have the
right to manage IFS affairs as long as it re-
mains solvent, they have no right to out
line such steps as will terminate its exist
ence and preclude consideration of stock
holders rights. the misman agement and
lugelery practiced by the Pacific Bank
officials has been well established, and /
now submit the case and the facts in be-
half Of The rights anu province of the Bank
Commits siOneTs."
Attorney p. j. Dunno, for the Pacific
Bank, renewed his championship of the
course pursued by the McDonalds, asking
How can bank be wound I'D independ-
ent OF the Bank Commissioners ?" In
answer to his own question, he said that
banks were not exceptions to the rights of
entering voluntary insolvency, and in
furtheraDce of his argument he produced
vast array of authorities, among them the
receivership of the Havemeyer Sugar Re
nnery. what / want to impress upon the
COURT" he said, sis the fact that the bank
act, section II, looks TO the final settlement
OF banks affairs either by the Commis-
soneTs or a receiver appointed by the
court, TO which body he must at all times
be amenable and responsible until his
duties shall have been completed"
w. I. Baggett requested that he should
be permitted to file an answer of stock
holders to the petition in insolvency pre-
sented by the Pacific Bank.
This request was granted. and the court
announced that it would take the case
under advisement, having first requested
the attorneys for the several sides to file
memoranda of their points and authorities.