In Re the Matter of the Examination of the Union Bank

I concur in the result reached by WERNER, J.

Under section 8 of the Banking Law it is made the duty of the superintendent of banks, either personally or by a person appointed by him, to examine banks, trust companies and individual bankers at least twice in each year, and whenever, in his judgment, an examination of their affairs is necessary and expedient. On every such examination inquiry should 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. For this purpose the superintendent or his examiner is given power to administer oaths to the persons whose testimony may be required, and the power to compel their attendance for the purpose of such examination. Under section 17 *Page 321 of the law, if he finds by such examination that the capital stock of the bank has been impaired he is given power to require the same to be made good by the stockholders, and if it appears that the charter of the bank or any law binding upon it has been violated or that the business is being conducted in an unsafe or unauthorized manner it becomes his duty to direct the discontinuance of such acts and unauthorized practices; and under section 19 of the act, in case the directors and stockholders have neglected and refused to carry out his orders and directions, and it further appears that the bank is in an unsound or unsafe condition to transact business, he may take possession thereof and liquidate its affairs.

In this case the superintendent had made an examination of the Union Bank provided for by section 8 of the law and finding the same in an unsafe condition had taken possession thereof on the 5th day of April, 1910, and for upwards of a year had been engaged in liquidating its assets. During the summer of 1911 while the superintendent of banks was still in possession of the bank and its assets, through his special deputy, Edward L. Dodge, another examination was entered upon and a subpœna was served upon Edward M. Grout, the president of the bank, requiring him to appear and give testimony. He having refused to appear, the petition was presented to the court at Special Term upon which the warrant was issued, which the appellant seeks in these proceedings to have set aside.

The purpose of the examination, as stated in the petition of the superintendent, was the ascertaining the mode of conducting and managing the affairs of the bank; the action of its directors; the investments 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 had been complied with in the administration of its affairs. The evidence upon these subjects was all pertinent *Page 322 and material in the examination made by the superintendent to enable him to determine whether the bank was insolvent and in an unsafe condition and as to whether he should take possession of it and wind up its affairs. But the superintendent having already taken possession of the bank and its assets it is not apparent that the evidence upon those subjects is longer pertinent or material, or that it will in any manner aid the superintendent in the discharge of his further duties in administering its assets.

It further appears from the allegations of the petition that an official report had been made to the superintendent's predecessor stating, in substance, that all the reports made by the bank to the banking department of the state while Edward M. Grout was president were false, as they did not state the true condition of the bank. This and the other matters above set forth, he stated, are being inquired and examined into, and that in that connection it was necessary and material to examine Grout to ascertain what knowledge or information he had concerning these matters. The superintendent of banks is one of the administrative officers of the state charged with the duty of looking after the banks, and his deputies and examiners are ministerial officers acting under his direction. Neither is vested with judicial powers and consequently cannot determine or decide whether a person is or is not guilty of a crime. Such questions are reserved for the judicial branch of the government, and magistrates, grand juries and district attorneys are provided for the purpose of the investigation and determination of criminal complaints. If, therefore, false reports were made to the banking department it should be investigated through the judicial branch of the government which has jurisdiction over such matters.

I am not, however, disposed to construe section 8 of the statute so strictly as to cut off all rights of the superintendent to make examinations after he has taken possession *Page 323 of a bank; he then becomes charged with other and different duties; that of ascertaining the validity and value of claims due to the bank, the legality and justness of claims presented against it, the value and location of its real estate, if any, and the tracing of its assets. Information upon these subjects he may properly seek through the officers and directors of the company. Such information is not only material but necessary in order to enable him to properly discharge his duties and, I think, within a fair and reasonable construction of the statute he may require such information to be given him under oath and through the aid of a subpœna, but no evidence of this character was called for in the subpœna or in the petition upon which the warrant was issued.

I, therefore, favor a reversal of the orders appealed from.