NATIONAL EXCHANGE BANK OF LANSINGBURGH v. SILLIMAN

NATIONAL EXCHANGE BANK OF LANSINGBURGH v. SILLIMAN. N. Y. Supreme Court, Third Department; General Term, 1877. Security for Costs. Where, in an action commenced by a National bank against accommodation indorsers, an appeal having been taken by the defendants, a new trial was ordered by the court of appeals, with costs to abide the event, and before the second trial, the plaintiff ceased to exist as a National bank, and was re-organized under the State banking law, omitting the word National from its corporate name, and afterward relinquished business, and took proceedings to close its affairs;—Held, on defendant’s motion for the purpose, that it must give security for costs, or all further proceedings on its behalf should be stayed. Appeal by the plaintiff from an order staying proceedings until filing security for costs. This action was commenced by the National Exchange Bank of Lansingburgh against Robert F. Silliman and others, in January, 1869, on a promissory note on which defendants were accommodation indorsers. The plaintiff obtained judgment at the circuit in June, 1870, and that judgment was affirmed at the general term. The commission of appeals, however, in June, 1875, granted a new trial, with costs to abide the event (See case reported in 65 JY. Y. 475). About two years after the commencement of this action, and after the trial thereof at circuit aforesaid, the plaintiff was reorganized and converted into a State bank, under the name of the Exchange Bank of Lansingburgh, and by virtue of such reorganization, became the successor of the plaintiff, and the owner of all its assets and interests. In August, 1876, and after the cause was on the calendar for the second trial, the defendants moved that the plaintiff should file security for costs. The affidavits of Robert F. Silliman, one of the defendants, presented to the court on the motion, stated the fact of the former trial and appeal; that the plaintiff, in the latter part of 1870, under section 42 of the act of Congress to provide for a national currency, &c., approved June 3, 1864, went into liquidation, and became closed by a due vote of its shareholders owning two-thirds of its stock, the publication of the required notices, the payment of its outstanding notes, &c.; that thereafter a majority of the directors of said dissolved association duly reorganized under the State banking law, by the name of the Exchange Bank of Lansingburgh; that it so continued until the corporation was dissolved and a receiver appointed to take charge of the remaining effects ; that several suits were commenced against John S. Fake, as president of said bank, Henry W. Mosher, cashier, and others ; that afterwards such suits were settled, and the stocks or shares of such plaintiffs in said actions purchased for the benefit of some of the officers of the bank, and the receiver discharged from his duties; that on or about July 13,1872, said banking association was dissolved according to law, its affairs all closed up, so that at the time of the motion neither the said National Exchange Bank of Lansingburgh, nor the said The Exchange Bank of Lansingburgh has any existence; that all the assets had been distributed ; that the president of the association had recently died, the owner of all the capital stock and shares of the said bank, and the same were returned by his executors in the inventory of his effects at 200 shares, at par value of $100,000, but as entirely worthless ; that the defunct corporation, mentioned as the plaintiff in this case, had no funds, nor could a judgment for costs be enforced or collected, in case defendants were successful; that the suit was being urged by Alfred W. McMurray, the son-in-law and executor of said Fake, and by Henry W. Mosher, aforesaid, and that one of them had become responsible for the services of the plaintiff’s attorneys, and that the same was being carried on for their benefit; that said Mosher was a bankrupt, and claimed not to be responsible for a dollar; that the note in suit had been paid in full; that deponent, in the name of his firm, indorsed said note solely for accommodation, and never received a penny from the transaction; that said McMurray and Mosher were stockholders and directors of said nominal plaintiff and its successor ; and at the„time of aforesaid dissolution, the latter association was in possession of assets and securities more than sufficient to pay all its debts and liabilities, and the same had been divided and distributed; that defendants had already necessarily expended several hundred ■dollars in defending the suit; that the real estate of the Exchange Bank of Lansingburgh had been sold, and its circulating notes had been redeemed ; that he Ibelieved the estate of John S. Fake to be insolvent. Annexed to these affidavits and marked “A” and “ B ” were two affidavits, one of Henry W. Mosher, the cashier, and the other of John S. Fake, the president of the Exchange Bank of Lansingburgh, made in •one of the suits above referred to. The affidavit of Henry W. Mosher stated that in ■July, 1872, the said bank took steps to relinquish its business, and soon thereafter discontinued the business of banking ; that it had redeemed all its circulating notes except $1,500, which had not yet been presented ; that it had paid off all other debts and liabilities •except to its stockholders, on which one dividend of 25 per cent, had been declared and paid; that since the above date the bank had made no investments of any kind, and with the exception of certain lands taken in payment for debts, the said bank had no funds; that nothing remained to be done for the final closing of said bank except to sell its real estate, collect balances due on it for loans and discounts, redeem the residue of its circulating notes presented prior to July-16, 1878, when the time limited by law for such redemption would expire, and then distribute and pay over what remained of its capital to its stockholders. This was corroborated by the affidavit of John S. Fake. The affidavit of Franklin J. Parmenter, the defendant’s attorney, also corroborated those of Robert F. Silliman. The affidavit of Alfred W. McMurray, in opposition to the motion, stated that the Exchange Bank of Lansingburgh had never been dissolved, but was then an existing corporation; that it had outstanding debts due it, some of which were then being prosecuted in the courts, as well as some against it; that about July, 1872, said bank took steps to close up its business, and thereupon deposited with the comptroller, as required by law, about $1,500, with which to redeem its outstanding circulating notes, and that the said bank would necessarily continue to exist as a corporation until the expiration of six years from that time ; that certain others together with himself were then directors of the said bank, and each and every one of them was then solvent and responsible, and also that the estate of John S. Fake, the late president, was solvent and responsible. This affidavit was corroborated by another, by Levi Smith, one of the attorneys for the plaintiff, and also of its successor, the Exchange Bank of Lansingburgh. The following order was granted by Mr. Justice Westbbook : [Title of the cause.] [At a special term, &c.] “On reading and filing the motion papers in this cause, consisting on the part of the defendants of the printed case in this action, on which the appeal was argued in the court of appeals, the affidavits of Robert F. Silliman made on the 2d day of May, 1876, and on the 18th day of August, 1876, copies of two affidavits annexed to last mentioned affidavits, called schedule A, and made by Henry W. Mosher and John S. Fake, affidavits made by F. J. Parmenter on 2d day of May and 19th day of August, 1876, a certified copy of the certificate of association of the Exchange Bank of Lansingburgh, and the notices of motion ; and on the part of the plaintiff affidavits made by Alfred W. McMurray and Levi Smith, by which among other things it appears that the above named plaintiff when this action was commenced was a corporation under the name of the National Exchange Bank of Lansing-burgh, and that the same was afterwards duly dissolved and this action continued by the plaintiff in the name of the original plaintiff. And after hearing Mr. F.- J. Parmenter of counsel for the defendants, and Mr. E. L. Fursman and Mr. Esek Cowen of counsel for the plaintiff, and after due deliberation had; Ordered that all futher proceedings in this action on the part of the plaintiff be and the same are hereby stayed unless the plaintiff shall within twenty days after the service of a copy of this order on the attorneys of record for the plaintiff, give and file an undertaking or bond with at least two sufficient sureties, conditioned for the payment to the defendants herein of all costs and disbursements which shall be recovered and allowed to them in this action, which said sureties if excepted to, shall justify in the same manner as prescribed in cases of arrest and bail, under chapter 1 of title 7 of the Code of Procedure. Upon the giving of such security for costs, this action may continue in the name of the above entitled plaintiff.” From this order the plaintiff appealed to the general term. Edgar L. Fursman (Smith, Fursman & Cowen, attorneys), for appellant. I. The plaintiff is not one of those persons mentioned in section 317 of the Code of Procedure, of whom the court may require security for costs ; and this is the only section of the Code authorizing it. II. Nor is the plaintiff one of those mentioned in the revised statutes, who may be required to file security for costs when plaintiff (3 R. S. 6 Ed. p. 900, § 1). III. The effect of 2 R. S. 6 Ed. p. 355, which authorizes the reorganization of a National into a State bank, is to make the Exchange Bank of Lansingburgh the assignee of all the effects of the plaintiff (including the promissory note in suit), with all the rights and privileges, and subject only to the liabilities of an assignee. IV. By section 121 of the Code of Procedure, the action was properly continued in the name of the plaintiff, after the reorganization had effected, by operation of law, an assignment of the note in suit to the reorganized corporation. V. The Exchange Bank of Lansingburgh has not ceased to exist as a corporation, and can still sue and be sued, and can certainly continue to a conclusion an action commenced long before any step was taken to wind up its affairs (2 R. S. 6 Ed. p. 339, § 224). If it did not exist, how could the court order it to give a bond with sureties, for the payment of costs, and by implication permit it to proceed with the action in case it gave such bond (People ex rel. Genesee County Bank v. Olmsted, 45 Barb. 644, 650, et seq.). VI. The court at special term placed its decision , upon the language of L. 1832, c. 295, § 1, also found, in 2 R. S. 6 Ed. p. 392, § 11. In construing this section with reference to its application to the present case, the court erroneously assumed that the Exchange Bank of Lansingburgh was dissolved, and that this action was being continued by a receiver, or by trustees. In this case there was no receiver, and the steps for dissolution were taken by the association itself. F. J. Parmenter, for respondent. I. The court has power, by express statute as well as by virtue of the general powers which it exercises over its officers, and in actions in the furtherance of justice, to compel plaintiff to give security for costs (L. 1832, c. 295). II. If the nominal plaintiff was dissolved by the action of its shareholders in pursuance of the act of Congress to provide for a national currency, &c., passed June 3, 1864, before or at the time of the creation of the new corporation, the court has power to compel plaintiff to give security for costs. III. It is enough for our purpose, if the National Exchange Bank is dissolved, but we insist, also, that the Exchange Bank of Lansingburgh is dissolved. It was dissolved by surrender of its corporate rights (3 R. S. 5 Ed. p. 763, § 46). The affidavits show the insolvency, and that since 1873, the ordinary and lawful business of said corporation has been suspended. The word “adjudged” in section 46, above, means “deemed” (Slee v. Bloom, 19 Johns. 456; Bradt v. Benedict, 17 N. Y. 93, and cases cited). IV. Moreover in this case, the plaintiff is estopped from raising the question of dissolution, for itself voluntarily did all the acts for the express purpose of dissolving the corporation. V. The court, by virtue of its general powers, which it exercises over its officers, may order the plaintiff’s attorneys to disclose the name of the firm who is urging on this prosecution, and who are beneficially interested in the recovery, and compel plaintiff’s attorneys to disclose their authority for prosecuting the action, and then require such person to give security for costs (Board of Commissioners of Excise, &c. v. Purdy, 36 Barb. 266; Vincent v. Vanderbilt, 10 How. Pr. 324). [MAJORITY] The court at general term affirmed the order appealed from.