Case Name: PEOPLE v. ST. NICHOLAS BANK OF NEW YORK et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1894-03-16
Citations: 28 N.Y.S. 114
Docket Number: 
Parties: PEOPLE v. ST. NICHOLAS BANK OF NEW YORK et al.
Judges: 
Reporter: West's New York Supplement
Volume: 28
Pages: 114–120

Head Matter:
(76 Hun, 522.)
PEOPLE v. ST. NICHOLAS BANK OF NEW YORK et al.
(Supreme Court, General Term, First Department.
March 16, 1894.)
Temporary Receivers—Right to Instructions prom Court.
Code Civil Proc. § 1788, authorizes a temporary receiver to collect debts and to preserve the property of the corporation, and to sell and otherwise dispose of property as directed by the court, and provides that, unless additional powers are specially conferred on him, he has only those specified. Section 1789 provides that the court may confer on a temporary receiver the powers of a permanent receiver. 'Held that, where a depositor in an insolvent bank was indebted to the bank on a note secured by collaterals, a temporary receiver could not allow the deposit as a set-off against the note, and therefore he was entitled to instructions from the court on an application by the depositor to surrender the collaterals on payment of the balance due on the note after deducting the amount of the deposits. Van Brunt, P. J., dissenting.
Appeal from special term, New York county.
Application by Hugh J. Grant, as temporary receiver of the St. Nicholas Bank of New York, for instructions. From an order denying the petition, petitioner appeals. Reversed.
Argued before VAN BRUNT, P. J., and O’BRIEN and FOLLETT, JJ.
John M. Bowers, for appellant.
Theodore E. Hancock, Atty. Gen., for the People.

Opinion:
O'BRIEN, J.
On the 26th of December, 1893, the applicant was appointed temporary receiver of the St. Nicholas Bank, in an action brought upon the relation of the attorney general, pursuant to sections 1785 and 1786 of the Code of Civil Procedure, to dissolve the corporation because of its insolvency. At this date one Charles Kurzman had to his credit in the bank $1,145.14,- and he was indebted to it upon three demand loans amounting to $3,000, which were secured by a pledge of collaterals. Kurzman notified the receiver that he was prepared to pay off the demand loans, upon the receiver applying such balance as an offset. • Thereupon, the receiver, being in doubt as to the propriety of granting such request, applied to this court for instructions as to whether he should make such application, and surrender the securities.
The court, while stating that a depositor who was indebted to the bank had a right to have the amount of his déposit offset against his debt, denied the application of the receiver, and refused to instruct him in the premises, for the reason, as stated in the opinion, that "there is no necessity for the receiver to make a special application to the court, in such cases." In this we think the learned judge overlooked the express provisions of the Code. As some question has arisen, and. the practice has not been definitely announced, we think it proper to refer at length to the sections of the Code which we regard as controlling. Preliminary thereto, it is to be remembered that the distinction between temporary and permanent receivers is a very old one, and the reason for it becomes apparent, when we consider the duties which each has to perform, and the powers essential and necessarily given to each to enable him to perform such duties. We do not deem it necessary to examine at length the powers and duties of a temporary and permanent receiver, respectively, prior to the Code, for the reason that the subject is fully discussed in the case of Herring v. Railroad Co., 105 N. Y. 340, 12 N. E. 763, and because the Code itself is explicit as to what are the duties and powers of such officers. Thus, by section 1788, it is provided that, in the action brought by the attorney general, the court—as was done in this case—may appoint a receiver, who, by the express language of the section—
"Is a temporary receiver until final judgment is entered. A temporary receiver has power to collect and receive the debts, demands and other property of the corporation, to preserve the property and the proceeds of the debts and demands collected, to sell or otherwise dispose of the property, as directed by the court. Unless additional powers are specially conferred upon him, as prescribed in the next section, a temporary receiver has only the powers specified in this section and those which are incidental to the exercise thereof."
Section 1789 provides as follows:
"A temporary receiver is in all respects subject to the control of the court. In addition to the oowers conferred upon him (as temporary receiver), the court may, by the order or interlocutory judgment appointing him, or by an order subsequently made in the action, or by the final judgment, confer upon him the powers and authority and subject him to the duties and liabilities of a permanent receiver, or so much thereof as it thinks proper, except that he shall not make any distribution among the creditors or stockholders before final judgment, unless he is specially directed so to do by the court."
From a reading of these sections, we think it clear that the receiver, without the instructions and order of the court, would have no power to surrender the collaterals which were pledged as security for the loan, and permit the offset of the amount on deposit. Hence, the necessity, in a proper case, of applying to the court. As correctly argued by counsel for the receiver, the latter is an officer and representative of the court. He is at all times entitled to, and must receive, the advice and protection of the court. The provisions of the Code referred to, moreover, limit his' powers, and expressly confer upon the court the duty of enlarging them from time to time as the exigencies of the situation may require. As said, therefore, by Danforth, J., in People v. Security Life Ins. & Annuity Co., 79 N. Y. 270:
"Since the receiver is an officer, or, as he is sometimes called, the 'hand,' of the court, it would be singular if he could not at any time go to it with his complaint, or for instructions, in regard to matters touching the fund placed in his custody."
It will be seen, moreover, that it was the view of the lawmakers that the assets of the corporation could be more wisely administered by not conferring general powers upon a temporary receiver, but by practically placing the corporation in the hands of the court, and conferring upon the court the right to enlarge the powers of, or give additional authority to, the temporary receiver, when, in a given case, it was shown to be necessary for the wise and proper administration of the affairs of such insolvent corporation. The theory of the law providing for a temporary receiver is that until the final judgment is entered in the action, declaring the corporation to be insolvent, and that its affairs are to be wound up, and its assets distributed, the temporary receiver may have to be discharged, and that he should only interfere with the assets, pending the litigation, just so far as is necessary to preserve them, and that he should not be allowed to sell or dispose of them, except from necessity, and then upon application to the court. With respect to the present application, the law was correctly laid down by the court, because the right of set-off exists between the bank and its depositor upon cross demands, where both are. due. Here, no demand having been made by the depositor, his claim was not due, unless such demand is excused by the insolvency of the bank. Now, it is not admitted or proved, in the case at bar, that the St. Nicholas Bank is or was insolvent. It has yet to be determined, and the temporary receiver has nothing to say on that subject, nor ought he be called upon to admit or deny that allegation. Yet it is only in the case of proved or admitted insolvency that the person liable on the call loan can set off his deposit, where he had not demanded payment thereof. The denial of the motion of the receiver upon the ground that there was no necessity for any instructions was, in effect, a denial of his right, in a proper case, to allow a set-off. Even though we assume that there was no doubt as to the right, upon the facts stated, of the depositor to' the set-off, the temporary receiver, being without power, could not allow it without the authorization of the court. Hence, the necessity of the application, leaving it for the court to determine, upon the facts presented, whether it should grant or refuse it. But the refusal to either grant or deny the application of the receiver upon the ground that there was no necessity for it seemsi to us to have been error. The order appealed from should therefore be reversed, and the receiver is instructed to apply the balance due to Charles Kurzman, and, upon receiving the difference, surrender the securities.
FOLLETT, J., concurs.