Hulse v. Argetsinger , 18 F.2d 944 ( 1927 )

18 F.2d 944 (1927)

HULSE
v.
ARGETSINGER et al.
HULSE et al.
v.
SAME.

Nos. 189, 206.

Circuit Court of Appeals, Second Circuit.

April 4, 1927.

Lee, Smyth, Wise & Bond, of New York City (Warren I. Lee and Eugene M. Strouss, both of New York City, of counsel), for certain appellant stockholders.

James D. Harris, of Rochester, N. Y., for other appellant stockholders.

Percival D. Oviatt and Arthur E. Sutherland, both of Rochester, N. Y., for appellees directors.

Carnahan, Pierce & Block, of Rochester, N. Y., for appellee receiver.

Before MANTON, HAND, and SWAN, Circuit Judges.

HAND, Circuit Judge (after stating the facts as above).

The receiver of a national bank appointed by the comptroller is his officer, not an officer of the court, nor are its assets while in his hands in custodia legis (In re Chetwood, 165 U. S. 443, 458, 17 S. Ct. 385, 41 L. Ed. 782); they do not become such by an order confirming a composition of debts made by him. Such an order is merely a condition upon the receiver's power to compound the debt; it is not made in any suit, nor does it adjudicate any rights inter partes. Fifer v. Williams, 5 F.(2d) 286 (C. C. A. 9); Jackson v. McIntosh, 12 F.(2d) 676, 678 (C. C. A. 5); Ex parte Moore, 6 F.(2d) 905, 908 (D. C. S. C.). It is the exercise of a visitatorial power, given to the court by the statute and limited to that function. It is an administrative check upon the otherwise unconditioned powers of the comptroller. In discharge of this duty the judge is not confined to the information given him by the receiver; that would be an unreasonable limitation which would hamper him in reaching a conclusion. He may refer the matter to a commissioner to inquire and report (In re Platt, 1 Ben. 534, Fed. Cas. No. 11,211), or he may, and ordinarily will, find it advisable to inform himself more adequately by citing other parties interested. Yet if upon their appearance the proceeding becomes a suit, and the judge's decision a final adjudication, plainly the proceeding must lose that summary character which it appears to us it was intended to have. Issues arise which pleadings should define, and evidence must be taken with the right of cross-examination. Nothing else would be tolerable, if the order is to be conclusive.

We do not think that Congress had any such consequences in mind when it enacted the section. If so, we are at a loss to know why the matter should have been left so at large. There is no suggestion that a suit, or anything equivalent to a suit, was intended, and none that all parties interested must be cited. As the receiver must get such an order for every debt that he compounds, if the appellants be right, the judge must at his peril proceed ex parte, or be prepared for the delays of a litigation. Rather we think that the proceeding was merely to advise the judge and imposed upon creditors and stockholders the initiative, if they meant to attack the result. In such an attack they must proceed by plenary suit, which alone is fitted to determine the issues. This was the course adopted later in the case of Fifer v. Williams (Gockstetter v. Williams, 9 F.[2d] 354 [C. C. A. 9]), and such bills were entertained in Jackson v. McIntosh, 12 F.(2d) 676 (C. C. A. 5), and Liberty National Bank v. Williams, 16 F.(2d) 906 (C. C. A. 4). This procedure offers a complete remedy to any party aggrieved, and avoids an inconvenient and anomalous situation which must otherwise arise. The judge remains free to get such information as he can from any sources, and the parties who appear do not do so at the peril of becoming finally concluded by the order. This very record is a good example of the impropriety of attempting anything else under section 5234. We have no means of deciding the merits, no evidence, indeed nothing but one affidavit to meet the allegations of the receiver's petition. If serious disputes are to be dealt with, some more adequate procedure must be found.

Since the proceeding is not judicial but administrative in character, we agree with Fifer v. Williams that no appeal lies. Hence the appeals at bar must be dismissed so far as the order is entitled in the proceeding under Revised Statutes, § 5234 (Comp. St. § 9821). It was also entitled in the suit of the receiver against the directors, and in that aspect it must be reversed. The receiver is not subject to the court's supervision, except as the statute prescribes. He must, it is true, get its consent to compound debts or to sell assets, but that is merely a condition upon powers which are otherwise like those of the bank itself. He needs no order to discontinue the suit, in which he appears like any other plaintiff. After getting leave to compound, his hands are free and he may do as he wills. It is neither necessary nor proper for him to get an order in the suit authorizing its discontinuance or other disposition.

Appeals dismissed so far as the order is entitled in the statutory proceeding; order reversed without prejudice, so far as it is entitled in the suit.