In re the Receiver of the City Bank — 10 Paige Ch. 378

Majority

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In the matter of the Receiver of the City Bank of Buffalo.

Headnote

Where a bill had been filed by the bank commissioners, before the office was abolished, against an incorporated bank which had become insolvent, for the appointment of a receiver to close up its concerns, and a final decree had been made appointing such receiver, and declaring that the bank had forfeited its corporate rights and privileges, and perpetually enjoining the bank and its officers from using them; and an order had been made in such suit requiring the creditors of the bank to present their claims to the receiver for adjustment ; Held that, after the office of bank commissioner had been abolished, the court had power to revive the suit, upon a proper bill filed for that purpose by any person interested in such revival; or upon an application of the attorney general, if the interest of the people of the state required such revival.

Held further, that as there was nothing further to litigate with the defendants in the suit, no revival of the suit was necessary to enable the court to adjust and settle the claims of the creditors of the bank against the fund in the hands of the receiver, who was under the jurisdiction and control of the court in the discharge of his duties.

Held also, that as the office of bank commissioner had been abolished, and the corporation had been dissolved, the further proceedings should be entitled “ In the matter of the receiver of the banknaming it. And that an order might be entered, without reviving the suit, for the master to proceed

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and adjust the claims of the creditors, which the receiver had declined to allow, when they were presented to him for that purpose.

1843. October 17.

Where a final order has been made for the appointment of a receiver of the property and effects of a corporation, and to close up its concerns and distriBute such property and effects among its creditors and stockholders, under the provisions of the revised statutes relative to proceedings against corporations in equity, such order is in the nature of the usual decree in a creditor’s suit against executors or administrators; and any creditor who has a claim upon the fund, but who is not a nominal party to the suit, may make himself a party thereto, in fact, by coming in and presenting his claim under the decree, and submitting himself to the jurisdiction of the court, for the settlement and adjustment of his claim upon the fund to be distributed, as directed by the decree or order of the court, under which such claim is presented.

A creditor who comes in and makes his claim under such a decree is quasi a party to the suit, and is entitled to the benefit of the decree, as such party; and he may be restrained from proceeding at law for the recovery of such claim."

After a final decree has been made for the administration of a fund, in the hands of executors, &c. for the benefit of all creditors who have a claim upon such fund, the court may restrain the creditors from proceeding at law; and may compel them to come in and establish then' claims under such decree or lose their claims upon the fund.

Nor will such creditors be permitted to file a new original bill, against the executor or trustee of the fund. But if any of the creditors are so situated that they cannot come in under the decree in the original suit, or if they are entitled to more extensive relief than they can obtain under such decree, they will be permitted to file a new bill in the nature of a supplemental bill.

Creditors entitled to come in under a general decree for their benefit are, for every substantial purpose, parties to the suit; and if the nominal complainant neglects to proceed with due diligence, they may apply and obtain leave to prosecute the suit. And if the suit becomes abated by the death of the sole complainant, or if it abates by the death of a defendant, and the complainant or his representative neglects to revive, within such time as may be fixed by the court for that purpose, it is a matter of course to permit any creditor who has established his debt before the master, under such decree, to file a bill, in the nature of a bill of revivor and supplement, to revive and continue the proceedings.

Any other creditor who is entitled to come in under such decree, and who has an existing claim upon the fund, has also a right to file such a bill to revive and continue the proceedings, and to have the benefit thereof; stating in such bill the existence of his debt. But if the existence of his debt is denied, by the defendant’s answer, he must establish it by proof, before he will be entitled to a decree to revive and continue such proceedings.

This was an application by the receiver of the property and effects of the City Bank of Buffalo, for the instruction and direction of the court, in relation to the settlement and adjustment of certain claims against the bank, which claims had been presented to and disallowed by him.

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A bill was filed by the bank commissioners, against the corPorati°n> charging it with insolvency and with a viola-t*on *ts c^arter 5 and praying for an injunction to restrain such corporation and its officers from exercising any of its franchises and privileges, and for the appointment of a receiver of its property and effects to distribute the same among its creditors &c. And upon due notice of the application, to the proper officers of the bank, a final order for an injunction and for the appointment of a receiver was made accordingly. Subsequently an order was made, according to the directions of the statute, to restrain the creditors from proceeding at law against the bank ; and requiring them to exhibit their claims and demands to the receiver, and to become parties to the suit, within a certain time, specified in that order. In pursuance of such order various claims were presented to the receiver, some of which-were allowed by him, and others were rejected. The cause was afterwards brought to a hearing, upon the bill taken as confessed against the corporation. And in July, 1841, the chancellor made a final decree thereon, adjudging and declaring that the bank had forfeited its corporate rights and privileges, and perpetually enjoining it from exercising them ; that the corporation be continued in existence so far only as might be necessary to enable the receiver to collect foreign debts and to recover the foreign property in the name of the corporation, but for no other purpose whatever ; and when those objects should have been accomplished, that the corporation should be deemed to be actually dissolved. The final decree also directed the payment of the costs of the complainants’ solicitor, out of the funds of the bank in the hands of the receiver.

The parties who had presented claims against the bank, which the receiver had disallowed, not having agreed to the appointment of referees to settle such claims, nor applied to the chancellor for the appointment of such referees, as authorized by the article of the revised statutes relative to the powers, duties and obligations of trustees of insolvent debtors, the receiver applied to the chancellor

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and obtained an order, referring it to a master to settle and adjust all claims which had been presented within the time allowed by the former order, and which had been disallowed by the receiver 5 except such as the claimants and the receiver should within thirty days mutually agree to refer to referees, to settle and adjust, according to the statute. ÍTone of the claims having been submitted to referees within the time prescribed, the master proceeded in the reference as to the claims, and had made his report in relation to one of those claims at the time when the act of the 18th of April, 1843, abolishing the office of bank commissioner, went into operation. That act having made no provision for the revival or continuance of suits in chancery, commenced by and in the names of the bank commissioners, the master doubted whether he had a right subsequently to proceed in the execution of the order of reference to him. And the object of this application was to obtain the decision and direction of the court in the premises._

E. Fitch Smith, for the petitioner.

The sixth section of the act abolishing the office of bank commissioner, (Laws of 1843, p. 301,) authorizes the comptroller, in certain cases, to appoint an officer as a substitute for those whose office is abolished. But his powers and duties do not appear to apply to a case like the present, where a bank has already been proceeded against j even if he would be authorized to institute a proceeding, in this court, for an injunction against the bank which he was appointed to examine. The power of such special commissioner to apply, in his own name, for an injunction, or for the appointment of a receiver against the particular bank to which his appointment relates, is at least doubtful. For the legislature, in the adoption of the sixth section of the act, appear only to have had in contemplation an examination into the condition of the bank. And if they had intended to give him the power which the former bank commissioners, or a majority of them, jointly possessed, in instituting

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proceedings against the bank in this court, they probably would have employed different language to express that intention.

But although the statute has made no provision for the revival or continuance of a suit of this kind, commenced by the bank commissioners, if such revival is absolutely necessary for the purposes of justice, this court has unquestionably the power, upon a proper bill filed, by a party interested in such revival, or by the attorney general where the interest of the people requires it, to allow the proceedings already instituted to be continued. In cases of this kind, after the making of a final order for the appointment of a receiver, such receiver becomes absolutely entitled to all the property and effects of the corporation, for the purpose of distributing the same among the creditors and stockholders. (2 R. S. 464, § 42; 469, § 67.) Such final order, therefore, is in the nature of a decree in an ordinary creditor’s suit, against executors, or others, who are trustees of a fund upon which several distinct creditors have claims for the payment of their debts rateably, or according to a specified order of priorities. In cases of that kind, creditors who are not nominal parties-to the suit may make themselves such parties in fact by coming in and presenting their claims to the master, under the decree; and by submitting themselves to the jurisdiction of the court, for the settlement and adjustment of their respective claims upon the fund, as directed by the decree or order under which such claims are presented. A creditor who comes in and makes his claim under such decree is quasi a party to the suit, and is entitled to the benefit of the decree' as such party. And he may be restrained from proceeding at law for the recovery of his debt, after he has made his election to proceed in this court for the recovery of his debt under the decree. (Farnham v. Burroughs, 1 Dick. Rep. 63.) It is now settled that, after such a decree, a creditor who is entitled to come in under it, although he has not so come in, and is not in fact a party, may be restrained from proceeding at law; and may be compelled to come in under the decree or lose his claim upon the fund.

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(Douglas v. Clay, 1 Dick. Rep. 893. Mocher v. Reed, 1 Ball & Beatty, 318. Goate v. Fryer, 2 Cox’s C. C. 201.) Neither will he be permitted to file a new original bill, in this court, against the executor, or the tiustee of the fund. But if he could not come in under the decree in such suit, or if he is entitled to more extensive relief than he could obtain under that decree, he may be permitted to file a new bill in the nature of a supplemental suit. (Brooks v. Gibbons, 4 Paige’s Rep. 374.)

Under such a decree for the benefit of creditors generally, therefore, all the creditors who may wish to come in under the same and avail themselves of its provisions, are for every substantial purpose considered as parties. And if the nominal complainant neglects to proceed with due diligence under the decree, a creditor who is entitled to come in and prove his debt before the master, will have leave to prosecute the suit. (Powell v. Walworth, 2 Mad. Rep. 183. Cook v. Bolton, 5 Russ. Rep. 282.) And where the sole complainant in such a suit dies, or the suit becomes abated by the death of a defendant therein, if the complainant, or his representative, does not revive within such reasonable time as may be fixed by the court for that purpose, it is a matter of course to permit any creditor, who has established his debt before the master, to file a supplemental bill in the nature of a bill of revivor, to revive and continue the proceedings. (Dixon v. Wyatt, 4 Mad. Rep. 392. Houlditch v. The Marquis of Donegall, 1 Sim. & Stu. Rep. 491. Mitf. Pl. 79, 4th Lond. ed. 3 Dan. Ch. Prac. 173.) Although the cases referred to by Lord Redesdale were those in which the creditor had already come in and established his claim before the master, I apprehend that any creditor who had an existing claim against the fund, and who has a right to come in and prove the same under the decree, has an equal right to file a supplemental bill to revive, and to have the benefit of the former proceedings. The only difference between his case, and that of a creditor who has established his claim, appears to be, that the former would be bound not only to state the existence of his

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debt, in the supplemental bill, but also to prove it, if it was denied by the defendant’s answer, before he would be entitled to a decree to revive and continue the proceedings. (White on Sup. & Rev. 156.)

If a revival of the suit in this case was necessary, therefore, I should, under the circumstances, permit any of the creditors of the bank who had presented and proved their claims to the satisfaction of the master, under the order for that purpose made by the court, to file a supplemental bill to revive and continue the proceedings. And similar permission would be given to any creditor who had presented his claim to the receiver within the time limited by the order for that purpose, upon the presentment of a petition, on oath, showing that his claim which had been rejected by the receiver was a valid claim against the bank at the time of its failure.

A revival of the proceedings does not, however, appear to be necessary where there is no further litigation to be had with the defendant in the original suit, and where the only questions to be settled are between the different creditors claiming payment out of a fund which is in possession of an officer of the court, and is under its control. (3 Dan. Ch. Pr. 224.) In the case under consideration the nominal complainants are no longer in existence, and their right to continue these proceedings has not; devolved upon any other persons or officers representing the same rights. Indeed the whole object of the suit has already been attained, by placing the funds of the bank in the hands of the receiver, to be distributed among the creditors and stockholders of the corporation, under the direction of the court. And the charter of the bank has in fact been annihilated by the decree; so that the citizens of the state are in no danger of being injured hereafter by any proceedings of its officers. All that is necessary, therefore, is to direct an order to be entered that the master proceed upon the reference, to ascertain and determine the validity of the claims which have been presented to the receiver and disallowed.

As there are in fact no bank commissioners, and the corpo

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ration itself is dissolved, so far as relates to any proceedings in this state, it appears to be improper to entitle the papers hereafter as in the original suit; except in the order for the master to proceed, which should be so entitled. But that order will direct that all subsequent proceedings shall be entitled 66 In the matter of the receiver of the City Bank of Buffalo.” And the right of the creditors against whose claims the master has reported, to except to his report, must be exercised within the usual time, allowed by the rules and practice of the court, after service of a copy of the order upon them, or upon their solicitor.