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In Re Possession & Control of Knight

NOVEMBER 2, 1965.

IN THE MATTER OF THE POSSESSION AND CONTROL OF JOSEPH E. KNIGHT, DIRECTOR OF THE DEPARTMENT OF FINANCIAL INSTITUTIONS OF THE STATE OF ILLINOIS, OF THE FIRST STATE BANK OF WESTMONT, WESTMONT, ILLINOIS. CREST FINANCE COMPANY, INC., A CORPORATION AND LEO NIEDERBERGER, RESPONDENTS-APPELLANTS.


Interlocutory appeal from the Circuit Court of DuPage County; the Hon. WILLIAM C. ATTEN, Judge, presiding. Order affirmed.

MR. JUSTICE PETERSEN DELIVERED THE OPINION OF THE COURT.

The issue before this court is the priority, if any, of jurisdiction as between the Superior Court of Cook and the Circuit Court of DuPage Counties over the particular matters before each court relating to the First State Bank of Westmont. An enumeration of the chronological order of the procedures before each court is essential to a determination of this litigation.

On April 18, 1963, a notice was given to the Board of Directors of the First State Bank of Westmont by the Director of Financial Institutions of the State of Illinois, pursuant to the provisions of section 51 of the Illinois Banking Act, Ill. Rev Stats 1963, chap 16 1/2, par 151. This notice specified instances wherein the business of the bank was being conducted in an unsafe and unlawful manner as set forth in section 51(2) of the Act and wherein the bank's managers had violated the provisions of section 32 of the Act. The notice gave the bank until June 17, 1963, to correct these deficiencies, the time being controlled by the Act. Certain of the business activities stated in the notice to have been improper, related to transactions between the bank and Crest Finance Company, Inc.

Thereafter, on April 30, 1963, the Crest Finance Company, Inc., one of the appellants here, herein called Crest, filed a complaint in the Superior (now Circuit) Court of Cook County, herein called the Superior Court, for an injunction and a declaratory judgment as to the ownership and right to possession to certain property and collateral then in the possession of the First State Bank of Westmont.

On May 15, 1963, the Superior Court ordered that a temporary injunction issue restraining the bank from disposing of, in any manner, or in any way clouding the title and right to possession of the plaintiff, Crest, in and to certain collateral in the hands of the bank.

The following day, May 16, the Director of Financial Institutions, finding that an emergency existed, took possession and control of the bank and its assets for the purpose of examination, reorganization or liquidation through receivership. This action was specifically authorized by section 52 of the Act (Ill. Rev Stats 1963, c 16 1/2, par 152). The taking of possession was accomplished by the posting of notice on the premises of the bank as required by Section 53 of the Act (Ill. Rev Stats 1963, c 16 1/2, par 153). On the same date, he filed a copy of the notice with the Clerk of the Circuit Court of DuPage County, herein called the Circuit Court, as required by section 53, which provides, "Promptly after taking possession and control of a bank, the Director shall file a copy of the notice posted on the premises in the circuit or superior court in the county in which the bank is located. . . ."

Section 53 further sets forth the effect of the filing of such notice, as follows:

". . . and thereupon the clerk of such court shall note the filing thereof upon the records of the court, and shall enter such cause as a court action upon the docket of such court . . ., and thereupon the court wherein such cause is docketed shall be vested with jurisdiction to hear and determine all issues and matters pertaining to or connected with the Director's possession and control of such bank as provided in this Act and such further issues and matters pertaining to or connected with the Director's possession and control as may be submitted to such court for its adjudication by the Director." (Italics ours.)

On the same date, May 16, the Director of Financial Institutions filed a motion in the Circuit Court stating that an emergency existed and asking for an injunction restraining thirteen named persons, including Crest and Leo Niederberger, appellants here, from disposing of any property in which the bank may have an interest or from interfering in any manner with the examination, possession, control, operation or reorganization, or liquidation of the bank by the Director. On the same day, an order was entered granting the relief sought and an injunction writ was issued restraining the parties as prayed in the motion. It was served upon the respective appellants on May 20 and May 21, 1963.

On May 23, 1963, attorneys for the bank filed an answer to the complaint of Crest in the Superior Court action. On May 24, 1963, the Director filed his complaint in the cause previously commenced in the Circuit Court on May 16, by the filing of the notice. The purpose of the complaint was to dissolve the bank and note the Director's appointment of the Federal Deposit Insurance Corporation as receiver, pursuant to section 58 of the Act (Ill Rev Stats 1963, c 16 1/2, par 158). The complaint alleged that the issuance of the injunction by the Superior Court on May 15, 1963, in the action commenced by Crest, had caused the Director to determine that an emergency existed.

On May 28, 1963, the judge of the Superior Court referred that case to a Master-in-Chancery for hearing. On June 21, the Circuit Court granted leave to the Federal Deposit Insurance Corporation, as Receiver of the bank, to intervene in the Superior Court proceeding. On June 28, the Superior Court entered an order, in effect granting leave to the Federal Deposit Insurance Corporation to intervene and ordered that Leo Niederberger, an officer of Crest, be made a third party defendant.

After extended hearings, a final decree was entered in the Superior Court action on September 25, 1964, finding that the bank and receiver were entitled to retain all the securities and adjudging that Niederberger and Crest were jointly and severally liable to the receiver in the sum of $605,882.46, which sum had been collected by them on securities in the possession of the receiver. An appeal was taken by Crest and Niederberger from the Superior Court decree, but was not made a supersedeas. The amount of the judgment has not been paid over to the receiver.

On November 13, 1964, the receiver filed a petition in the Circuit Court for an order directing Crest and Niederberger to show cause why they should not be adjudged in contempt of the order of that court on May 16, 1963, and for an order directing Crest and Niederberger to turn over to petitioner the sum of $605,882.46, and for other relief. The petition recited facts, the gist of which was that Crest and Niederberger had engaged in a calculated interference with the receivership estate.

Crest and Niederberger filed a special and limited appearance, challenging the jurisdiction of the Circuit Court. The court denied the special and limited appearance, and thereafter, Crest and Niederberger moved to dissolve the injunction writ as to them on the grounds that the Superior Court had obtained prior jurisdiction, to the exclusion of the Circuit Court. The Circuit Court denied ...


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