People v. Manhattan Real Estate & Loan Co.

Majority

p. 535

The People of the State of New York, Respondent, v. Manhattan Real Estate and Loan Company of New York, Appellant.

Headnote

Appeal from a judgment in default of an answer, after a demurrer has been overruled with leave to answer — action to dissolve a corporation brought by the Attorney-General without a relator.

Where an interlocutory judgment, overruling a demurrer to a complaint provides that, in the event of the defendant’s failure to serve an answer within twenty days, the plaintiff may apply for final judgment for the relief demanded in the . complaint, the defendant is not precluded from appealing from a final judgment entered pursuant to the provisions of the interlocutory judgment, upon the defendant’s failure to answer, upon the theory that the final judgment was rendered by default.

Where a savings, loan and building association, organized under the Banking Law (Laws of 1892, chap. 689), has been insolvent for more than a year and the Superintendent of Banks notifies the Attorney-General that he deems it unsafe

p. 536

and inexpedient for the corporation to continue to transact business, an action to dissolve the corporation and restrain the officers thereof from exercising any corporate powers, franchises and privileges and from transferring, disposing of or in any manner interfering with its property or assets, may be maintained - by the Attorney-General in the name of the People of the State of New York, without the intervention of a relator, under and pursuant to section 18 of the Banking Law and sections 1785,1786 and 1808 of the Code of Civil Procedure.

Appeal by the defendant, the Manhattan Real Estate and Loan Company of New York, from a final judgment of the Supreme Court' in favor of the plaintiff, entered in the office of the clerk of the county of Oneida on the 11th day of February, 1902, upon the decision" of the court, rendered after a trial at the Oneida Special Term, dissolving "the defendant corporation and appointing a permanent receiver thereof, with notice of an intention to bring up for review an interlocutory" judgment, entered in said clerk’s office on 18th day of December, 1901, overruling a demurrer to the complaint.

William Hepburn Russell, William Beverly Winslow and John E. Ruston, for the appellant.

John C. Davies, Attorney-General, for the respondent.

The defendant is a domestic corporation, organized under the provisions of the Banking Law of this State (Laws of 1892, chap. 689), and is conducting business as a savings, loan and building association, with its principal office at No. 277 Broadway, in the city of New York.

The present action was brought to dissolve such corporation and to restrain the officers thereof from exercising any corporate powers, franchises and privileges, and from transferring, disposing of, or in any manner interfering with its property and assets.

The complaint contains allegations of facts tending to establish the defendant’s' insolvency and violations of its charter, and it also alleges : “ 12th. That from an examination made by and under the direction of the Superintendent of Banks of the State of New York of the defendant, and its books and business, in or about the month of February, 1901, the fact appeared that it was unsafe and inexpe

p. 537

dient for the said defendant to longer continue to transact business, and that the interests of the creditors and shareholders of said defendant require that its assets and property should be taken from the control and management of said defendant and preserved for the benefit of the persons entitled thereto.

“13th. That the said Superintendent of Banks of the State of New York, believing said facts to be true, has communicated the same to the Attorney-General of the State of New York for the institution by the latter named official of such action or proceeding as the nature of the case may require, and as will protect the interests of the creditors and shareholders of said defendant; and the Attorney-General is of the opinion from such facts, that the defendant should not longer be permitted to transact business, and that its corporate rights and franchises should be terminated.”

To this complaint a demurrer was interposed, alleging, first, that the Supreme Court had not jurisdiction of the subject of the action; second, a want of legal capacity to sue upon the part of the plaintiff, because an action cannot be brought or maintained by the Attorney-General in the name of the People of the State of New York, under and pursuant to section 18 of the Banking Law, and sections 1785, 1786 and 1808 of the Code of Civil Procedure against this defendant; and third, that the complaint does not state facts sufficient to constitute a cause of action.

The issues thus joined came on for trial at Special Term where the defendant’s demurrer was overruled, with costs, and an interlocutory judgment was thereupon entered, which adjudged and decreed, among other things, that “ in case the defendant does not within twenty days of the service of a copy of this judgment on its attorney, with notice of entry, answer the complaint and pay said costs, * * * then plaintiffs^[1] may apply to this court for final judgment against the said defendant for the relief demanded in the complaint.”

No answer was served within the time specified and final judgment was subsequently directed and entered on the 11th day of February, 1902, from which judgment this appeal is brought.

It is contended by the plaintiff that the judgment appealed from

* Sic.

p. 538

was rendered upon the defendant’s .default, and that consequently no appeal will lie; but a contrary rule was held hy the former General Term of the fourth department (Smith v. Barnum, 3 N. Y. Supp. 476 ), and we are disposed to acquiesce in that decision. It only remains, therefore,-, to consider the defendant’s proposition that the Attorney-General cannot maintain this action in the name of the People, without a relator, merely because the Superintendent of Banks deems it unsafe and inexpedient for the corporation to continue business.

It will be seen by reference to section 18 of the Banking Law that whenever it is made to appear to the Superintendent of Banks that it is unsafe and inexpedient for a corporation organized under the provisions of that law to continue business, he shall communicate the facts to the Attorney-General, who shall thereupon institute such proceedings against the corporation as are authorized in the case of i/nsol/oemb corporations, or such other proceedings as the nature of the case may require; and by turning to sections 1785, 1786 and 1808 of the Code of Civil Procedure, it will be found that the Attorney-General, when certain conditions exist, is expressly authorized “in the case of insolvent corporations” to bring an action in the name and in behalf of the People to dissolve the same, and to procure a judgment declaring its corporate rights, privileges and franchises forfeited.

As we construe the complaint herein, it not only alleges facts which bring the case within section 18 of the Banking Law (People v. Empire Loan & Investment Co., 15 App. Div. 69 ), but it also alleges such as tend to establish a condition of-insolvency which had existed for a period of more than one year prior to the commencement of this action. It would seem to follow, therefore, that the action is properly brought and that the complaint states facts sufficient to support the same.

Did we entertain any doubt as to the correctness of this conclusion we should not lack for ample authority to support the same, ■ inasmuch as the precise questions here raised have been recently decided adversely to the defendant’s contention by the Appellate Division in the first and second departments. (People v. Mercantile Co-operative Bank, 53 App. Div. 295 ; People v. Republic Sawings & Loan, Assn., Id. 384 .) The opinions in these two cases

p. 539

consider these questions with so much care and elaboration as to render any further discussion of them unprofitable.

The judgment appealed from should be affirmed.

McLennan, Spring, Williams and Hiscock, JJ., concurred.

Judgment affirmed, with costs.

Cases cited

People v. Empire Loan & Investment Co. 15 App. Div. 69 N.Y. App. Div. 1897-03-16 p. 538

Statutes and regulations cited

Banking Law p. 536, p. 537, p. 538