In re the Examination of Union Bank

147 A.D. 593, 133 N.Y.S. 62, 1911 N.Y. App. Div. LEXIS 2930
CourtAppellate Division of the Supreme Court of the State of New York
DecidedDecember 8, 1911
DocketAppeal No. 2
StatusPublished
Cited by9 cases

This text of 147 A.D. 593 (In re the Examination of Union Bank) is published on Counsel Stack Legal Research, covering Appellate Division of the Supreme Court of the State of New York primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
In re the Examination of Union Bank, 147 A.D. 593, 133 N.Y.S. 62, 1911 N.Y. App. Div. LEXIS 2930 (N.Y. Ct. App. 1911).

Opinions

Burr, J.:

On and prior to April 5, 1910, a corporation known as the Union Bank of Brooklyn was transacting business in that borough. It was a moneyed corporation and within' the statutory definition of a bank. (Banking Law [Consol. Laws, chap. 2; Laws of 1909, chap. 10], § 2.) Edward M. Grout was the president thereof. . Upon that date the Superintendent of Banks took possession of its property and business, as provided in section 19 of the Banking Law. That'he was authorized to and lawfully took possession of the same is not questioned. Since then it has transacted no business. Its assets have not yet been finally distributed or its affairs finally liquidated, nor has it been judicially dissolved or its charter annulled. It is still a bank (Lafayette Trust Co. v. Higginbotham, 136 App. Div. 747), although for the time being prohibited from transacting business as such. Following the nomenclature of the Banking Law, it may be termed a delinquent bank. On July 17, 1911, the Superintendent of Banks began an examination into, the condition and management of said bank,,and on the twenty-second of August a subpoena was issued under his hand and seal, requiring Mr. Grout to appear on the twenty-fifth day of August and téstify and give evidence upon such examination. Upon proof by affidavit of his failure to appear, on September sixteenth a justice of the Supreme Court of the State Of New York issued a warrant to the sheriff of Kings county, requiring him to apprehend said Grout and bring him before the Superintendent of Banks on the eighteenth day of [595]*595September at the hearing, fixed for that day. Thereupon a motion was made upon notice to the Superintendent of Banks at a Special Term of the Supreme Court to vacate and set aside said warrant. From an order denying such motion this appeal is taken.

The first question presented is one of authority to issue the subpoena. . If no such authority exists, it follows that all proceedings to compel obedience to its provisions must' fall. The Banking Law provides (§ 8) as follows: Every corporation * * * specified in' section two of this chapter shall be subject to the inspection and supervision of the Superintendent of Banks. He shall, either personally or by some competent person or persons to be appointed by him, to be known as examiners, visit and examine every bank * * * at least twice in each -year. * * * On every such examination inquiry shall be made as to the condition and resources of the corporation, the mode of conducting and managing its affairs, the action of its directors, the investment of its funds, the safety and prudence of its management, the security afforded to those by whom its engagements are held, and whether the requirements of its charter and of law have been complied with in the administration of its affairs, and as to such other matters as the Superintendent may prescribe. He shall have power in like manner to examine every corporation * * * specified in section two> whenever, in his judgment, its condition and management is such as to render an examination of its affairs necessary and expedient. ”

Appellant contends that section 8 applies only to banks which are still transacting business, and not to delinquent banks. Upon the argument of this appeal much discussion was had as to the meaning of the word liquidate,” and whether upon the facts disclosed by the motion papers it will be possible for the Union Bank to resume business. Such discussion seems to us wholly irrelevant. The section either limits the power of the Superintendent to those banks of which he has not taken possession as provided in section T9 of the Banicing Law, or it applies to all banks delinquent or otherwise, so long as they have legal existence. The statute makes no distinction in express terms between active and [596]*596delinquent corporations. It applies to them equally. Nor is the power of the Superintendent to conduct an examination limited to active hanks by necessary implication arising from the declared .purpose .for which examinations should be held. The statute first provides for examinations of banks, tó be held at least twice a year. Upon “ such examination ” the general scope of the inquiry is indicated. We regard these words of the statute as suggestive rather than exclusive. ‘ But if we assume for the sake of the argument that they limit the scope of such inquiry to the matters specified in the statute, and that the words “as to such other matters as the Superintendent may prescribe ” under the rule of ejusdem generis are to be limited to subjects of a similar nature; and if. we assume for the sake of the argument that these inquiries are from their nature more applicable to a “going” than a “delinquent” bank, still appellant’s contention fails. In addition to the examinations, just referred to, the Superintendent of Banks “ shall have power in like manner ■ to examine every corporation * * * whenever, in his judgment, its condition and management is such as to render an examination of its affairs necessary and expedient.” This clause of the statute cannot be intended to give authority to conduct more frequent examinations of a similar character to those above referred to. The words “at least twice in each year” simply fix the minimum number of such examinations. Beyond that, their number .is always 1 in the reasonable discretion of the Superintendent. The words “in' like manner” in the clause under consideration cannot, for the same reason, refer to those earlier provisions thereof indicating the scope of the examination. Thus construed, they would add nothing to the Superintendent’s previously existing- power. These words .must, therefore, • refer to the method of conducting the examination,- which shall be either personally or by ¡some competent person appointed by the Superintendent of Banks. If, therefore, it is reasonably shown to be “necessary and expedient” to examine into the affairs of a bank, whether active or delinquent, in order to enable the Superintendent of Banks prop-, erly to discharge the duties devolved upon him by the statute, such examination is authorized. Referring again to section 19 [597]*597of the Banking Law, we find that in the case of a delinquent bank, “ Upon taking possession of the property and business of such corporation * * * the Superintendent is authorized to collect moneys due to such corporation * * * and do such other acts as are necessary to conserve its assets and business, and shall proceed to liquidate the affairs thereof as hereinafter provided. The ■ Superintendent shall collect all debts due and claims belonging to it, and upon the order of the Supreme Court may sell or compound all bad qi* doubtful debts, and on like order may sell all the real and personal property of such corporation * * * on such terms ás the court .shall direct.” It is quite apparent that in such case it may be not only expedient but necessary for the Superintendent to examine the officers of the bank and perhaps other persons, in order to be' able to reach a just conclusion as to the validity of apparent debts and claims due to the bank, the value of doubtful claims, whether it is wise to sell or compound the same, or to apply to the court for authority to do so, the validity of claims against it and with regard to many other matters in connection with the liquidation of its affairs, respecting which a mere inspection of the books of the bank might give meagre and imperfect information.

The appellant contends that the history of legislation respecting the power of the Superintendent militates against this construction of the statute.

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147 A.D. 593, 133 N.Y.S. 62, 1911 N.Y. App. Div. LEXIS 2930, Counsel Stack Legal Research, https://law.counselstack.com/opinion/in-re-the-examination-of-union-bank-nyappdiv-1911.