Haskell v. Perrin

• Decision Date: 04 May 1927
• Docket Number: 12199.
• Citation: 138 S.E. 37,139 S.C. 358
• Parties: HASKELL v. PERRIN et al.
• Court: South Carolina Supreme Court

138 S.E. 37

139 S.C. 358

HASKELL v. PERRIN et al.

No. 12199.

Supreme Court of South Carolina

May 4, 1927

Appeal from Common Pleas Circuit Court of Abbeville County; William H. Grimball, Judge.

Action by L. C. Haskell, Jr., against Lewis Perrin and H. Marshall Kirkman, as receiver of the National Bank of Abbeville wherein defendant last named asked for a judgment against plaintiff. Judgment for defendant last named, and plaintiff appeals. Affirmed.

The decree of Circuit Judge Wm. H. Grimball was as follows:

"As this matter comes before me on motion of the receiver of the National Bank of Abbeville, above named, as one of the defendants, for judgment on the pleadings, it will be first necessary to set forth the case made by the pleadings.

Taking, for the purpose of this motion, all of the allegations of the complaint to be true, it seems that the plaintiff, on or about October 1, 1924, got his father to inquire of Mr. Lewis Perrin, the cashier of the National Bank of Abbeville, as to the condition of said bank and as to the value of its capital stock. The cashier informed Mr. Haskell that the bank was in good condition and its capital stock worth 125 cents on the dollar. Plaintiff's father told the cashier of the bank that he was making the inquiry for his son, who wished to invest some money in a sound investment paying 8 per cent per annum, and was unwilling to pay more than par for the stock. The cashier of the bank, knowing the purpose of the inquiry by plaintiff's father, deceived him into buying 10 shares of the capital stock of the bank; the said cashier knowing full well that the bank was hopelessly insolvent and the stock, in fact, worthless. On January 7, 1925, the bank suspended business, and defendant H. Marshall Kirkman was duly appointed receiver under the laws of the United States.

On March 28, 1925, under the banking laws of the United States of America in such case made and provided, an assessment and requisition upon the shareholders of the bank was duly made for 100 per cent. of the capital stock standing in their respective names, including an assessment against plaintiff for $1,000 against the 10 shares of stock standing in his name.

During the entire time since the purchase of the capital stock by plaintiff he has resided out of the state of South Carolina and has had no part in the management or control of the bank and no opportunity to know of its condition, and in purchasing the said 10 shares of capital stock relied entirely upon the statements of its cashier to his agent, Mr. L. C. Haskell, Sr., and believed said bank to be in a prosperous condition up to the time of its suspension of business on January 7, 1925.

As soon as the bank suspended business, plaintiff undertook to find out from whom his stock was in fact purchased, but due to the delay caused by the rules of the United States Treasury Department, it was not until May 4, 1925, that plaintiff ascertained that the stock was in fact transferred to him by Lewis Perrin, the cashier, individually. Plaintiff immediately tendered to Lewis Perrin the said capital stock indorsed back to him, and also a dividend check issued by the bank on December 31, 1924, which had never been cashed because of the closing of the bank before same could be presented for payment, and notified the said Lewis Perrin and the said receiver that he repudiated the sale of the capital stock to him. This tender the said Lewis Perrin refused.

Plaintiff alleges on information and belief that very little, if any, of the indebtedness of the bank was created after the time his name was entered on the list or registry of shareholders on or after October 3, 1924, and that the creditors of the bank did not rely on the fact that his name was on said list in extending said credit.

Plaintiff prays that his name be stricken from the list of shareholders; that the receiver be enjoined from bringing suit against him for the assessment; that said assessment be made against Lewis Perrin; and that Lewis Perrin be required to refund to plaintiff the amount paid for the stock, together with interest from October 3, 1924.

The receiver prays that he have judgment against plaintiff in the sum of $1,000, together with legal interest thereon from May 4, 1925.

While the natural inclination of any human court would be to lend a sympathetic ear to plaintiff in this cause, a careful study of the decisions leads me to the unavoidable conclusion that the weight of authority is against him. U.S. Compiled Statutes, § 9689; U.S. Revised Statutes, § 5151; Scott v. Latimer (C. C. A.) 89 F. 843; Scott v. Deweese, 181 U.S. 202, 21 S.Ct. 585, 45 L.Ed. 822; Pauly v. L. & T. Co., 165 U.S. 606, 17 S.Ct. 465, 41 L.Ed. 844; Lantry v. Wallace (C. C. A) 97 F. 865; Lantry v. Wallace, 182 U.S. 536, 21 S.Ct. 878, 45 L.Ed. 1218; Salter v. Williams (D. C.) 219 F. 1017; Page v. Jones (C. C. A.) 7 F. (2d) 541.

The right of the receiver of a national bank to make an assessment upon the stockholders of the bank is entirely statutory, and the statute giving that right, while formerly section 5151 of the U.S. Revised Statutes, is now section 9689 of the U.S. Compiled Statutes, being a part of the Federal Reserve Act of December 23, 1913. That statutes provides:

'The stockholders of every national banking association shall be held individually responsible for all contracts, debts, and engagements of such association, each to the amount of his stock therein, at the par value thereof in addition to the amount invested in such stock.'

The case of Scott v. Latimer, supra, was a case very similar to the one before me, and in that case the Circuit Court of Appeals of the Eighth Circuit rendered its opinion in 1898. In that case the court said:

'The remaining grounds of defense relied on by plaintiff in error are based upon the assumed right to rescind the contract of subscription to the capital stock of the bank on the ground that such subscription was procured through false representations made to plaintiff in error touching the actual pecuniary condition of the bank, and to avoid the effect of the acceptance by the plaintiff in error of the shares of stock issued to him on the ground that it was falsely represented to him that the whole amount of the proposed increase of $150,000 had been paid in. It will be borne in mind that this is not an action on behalf of the bank,

based upon the original contract of subscription, but it is a suit wherein the creditors of the bank, represented by the receiver, are seeking to enforce the liability which the statute imposes upon those who occupy the position of stockholders in a national bank; and the question is whether it is open to the plaintiff in error, after the bank has become insolvent, and has been put into liquidation, to disclaim liability as a stockholder after having occupied that position for nearly four years. ***

'It is thus made clear that the liability sought to be enforced in this case is not dependent upon the terms, or in fact upon the existence, of a contract of subscription to the capital stock of the bank, but it is a liability imposed by statute in favor of creditors, and it is a liability, as already said, which cannot be modified or released by any action on the part of the corporation or of the corporation and its stockholders. It is created for the benefit of the creditors, and no action on the part of the bank can estop the creditors from enforcing their rights in this particular. ***

'In the answer filed in this case it is admitted that the plaintiff in error subscribed for 50 shares of stock, accepted the certificate issued therefor, received the dividends paid thereon, and thus for nearly four years appeared as a stockholder on the books of the bank; and certainly these facts entitle the creditors to enforce, as against the plaintiff in error, the liability which the statute imposes upon those persons who allow themselves to be held out as owners of the capital stock of a banking association. To escape this liability, the plaintiff in error pleads that he was induced to become a stockholder in the bank by reason of certain false representations made to him by the officers of the bank with respect to the financial condition of the association, which were of such a character that he is now entitled to rescind the contract of subscription. Granting it to be true that, if a suit were now brought by the bank, or on its behalf, to enforce the contract of subscription against the plaintiff in error, he might successfully defend the action on the ground that he had been induced to enter into the contract by false representations on the part of the bank, does it follow that this defense is available against the

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