Alsop v. Conway

• Decision Date: 02 May 1911
• Docket Number: 2,073.
• Citation: 188 F. 568
• Parties: ALSOP v. CONWAY et al.
• Court: U.S. Court of Appeals — Sixth Circuit

188 F. 568

ALSOP v. CONWAY et al.

No. 2,073.

United States Court of Appeals, Sixth Circuit.

May 2, 1911

[Copyrighted Material Omitted]

The appellees, four in number, all being citizens of states other than Kentucky, on behalf of themselves and all other creditors of the Owensboro Savings Bank & Trust Company (hereafter called the bank) who might choose to become parties to the suit and contribute to the expense thereof filed their bill in the court below against the bank, T. A Pedley, receiver of said bank, and a large number of individual holders of the capital stock of the same, including appellant (the defendants being all citizens of the state of Kentucky), for the purpose of enforcing against the individual defendants the so-called 'double liability' imposed by the Kentucky Statutes upon stockholders in banks and trust companies organized under the laws of that state. The suit proceeded to final decree in favor of complainants. The appeal is from so much of the decree as required payment by appellant of the sum of $9,000, being the face value of stock in the bank alleged to be owned by him, with interest thereon from the commencement of this suit. The material facts are these:

The Owensboro Savings Bank & Trust Company was organized with a capital stock of $100,000. On December 9, 1905, its capital stock was increased to $200,000, viz., 2,000 shares of $100 each. On April 24, 1908, the bank having become insolvent, T. A. Pedley was appointed (and soon afterwards qualified) as receiver of the bank, by order of the circuit court for Davies county, Ky., by virtue of section 616 of the Kentucky Statutes (Russell's St. Sec. 2256) which provides that:

'The Secretary of State, upon becoming satisfied that any bank or corporation has become insolvent, or that its capital has become, and is permitted to remain, impaired, or that it has violated any of the provisions of the law under which it was organized, may, with the approval of the Attorney General, apply to the circuit court, or judge thereof in vacation, of the county in which the bank or corporation is located, for the appointment of a receiver, who, under the direction of the court or judge, shall take possession of books, papers, and assets of every description, and all business of the bank or corporation, and collect all collectable debts and demands, and sell or compound, under the order of the court, all bad debts, and sell all the real and personal property of the bank or corporation, on such terms as the court may direct.'

Section 547 of the Kentucky Statutes (Russell's St. Sec. 2131) provides that:

'The stockholders of each corporation shall be liable to creditors for the full amount of the unpaid part of stock subscribed for by them, and no stockholder shall be liable because of being a stockholder, for any sum more than to the amount of the unpaid part of stock held by such stockholder of any company, except stockholders in banks, trust companies, guaranty companies, investment companies and insurance companies, shall be liable equally and ratably, and not one for the other, for all contracts and liabilities of such corporation to the extent of the amount of their stock at par value, in addition to the amount of such stock. * * * '

Section 595 (section 2184) provides that:

'The stockholders of each bank organized under this article shall be individually responsible, equally and ratably, and not one for the other, for all contracts and liabilities of such bank to the extent of the amount of their stock at par value in addition to the amount of such stock.'

The state permits the formation of corporations for the purpose of conducting both a banking and trust company business in counties of the population of that in which the bank in question was located; and under section 613 (section 2253) the stockholders of each trust company are made 'individually responsible, equally and ratably, and not one for the other, for all contracts and liabilities of such corporation to the amount of their stock at par value, in addition to the amount of such stock. * * * ' The order of the state court appointing the receiver directed the latter to 'take possession of all the books, papers and assets of every description, and all the business of the defendant, Owensboro Savings Bank & Trust Company, and collect all collectable debts and demands of said bank and trust company, and sell or compound, under the orders of this court, all bad debts, and sell all the real and personal property of said bank and trust company, on such terms as this court shall direct,' etc. The receiver so appointed, on May 12, 1908, filed his petition in the Davies county circuit court in equity, against the bank and certain of its creditors, the petition containing the statement that, 'in order to pay in full creditors of said (bank), including its depositors and other creditors, it will be necessary to resort to the double liability of the stockholders of said (bank) in aid of its property and assets, and he asks to be advised by the court as to his duties with reference to the enforcement of said liability. ' He asked that each of the creditors of the bank be enjoined from asserting claims or liens upon any of its property and from interfering with the administration of his trust as receiver except in and through the proceeding referred to, and asked the advice and direction of the court with respect to his duties in the winding up and administration of the affairs of the bank, as well as 'for equitable and proper relief.' Injunction was issued accordingly.

On May 19, 1908, appellees filed their bill in this cause, alleging (in substance sufficient for the purposes of this opinion) that they were respectively creditors of the bank as holders of interest-bearing certificates of deposit therein, amounting in the aggregate to $5,770; alleged the insolvency of the bank, the double liability of its stockholders under section 595 of the Kentucky statutes, the fact that its assets were not more than one-half of its liabilities, and the necessity of assessing each stockholder a sum equal to the par value of his stock for the benefit of the bank's creditors, such assessment being alleged to be insufficient to pay the liabilities of the bank; alleged the appointment and qualification of Pedley as receiver, under the proceedings in the state court, and the receiver's possession of 'all the assets, property, etc., of the defendant' bank; that the defendant Pedley, as receiver of the bank, 'has no authority to enforce said statutory liability as such receiver, either in law or in equity, said statutory liability being a liability enforceable only by the creditors of the defendant' bank; alleged that the creditors of the bank who have a common and general interest in enforcing the double liability of stockholders are more than 2,000 in number, and so numerous as to make it impracticable to bring all of them before the court in a reasonable time. The bill asked an order permitting complainants to sue 'for and in behalf of all the creditors of defendant bank who will unite with them in this suit,' prayed judgment against the bank upon complainant's demands; that all other creditors be enjoined from prosecuting any action against the stockholders for their double liability except by uniting in this suit; that 'the liability of all stockholders be fully determined and adjudicated; that each defendant stockholder herein be assessed for the benefit of the creditors herein an amount equal to the par value of his stock'; for judgment against the individual defendants for the amounts of their stockholdings; 'that all said sums be ordered paid into court; and that same be distributed under order of court, and if necessary a receiver be appointed to collect and enforce the judgment of the court and distribute the funds under order of court,' and for general relief.

Upon the filing of this bill, Pedley, the receiver appointed by the state court, was appointed receiver under the bill in this cause 'to receive and hold, subject to the orders of the court, all funds collected herein and all funds brought in by reason of said statutory liability herein relied upon and to do all things that may be hereinafter ordered by the court. ' The appellant here demurred to the bill: First for lack of jurisdiction of the subject-matter, on the ground that complainants had an adequate remedy at law and that matters of equitable cognizance are not alleged; second, that the bill relates to several distinct and independent matters in which defendant is not interested; third, that the bill is without equity; and, fourth, that the court is without jurisdiction of the parties, in that the bill does not show that the parties for whom the complainants are suing are citizens of states other than Kentucky, or that their respective claims exceed $2,000. This demurrer was overruled. Appellant answered, alleging (in substance sufficient for the purposes of this opinion) that he was never the owner of but 10 shares of the capital stock of the bank; that he purchased this block from the bank, as part of its increased capitalization and by reason of false and fraudulent representations made by the bank's officers as to the financial condition and solvency of the bank; that he was never the owner of the remaining 80 shares of the capital stock on account of which it was sought to charge him; that said 80 shares belonged to one Parrish; that after the failure of the bank he learned of the transfer of said shares to him under an alleged contract therefor, and at once repudiated the same and returned to the receiver the dividends which had been credited to his bank account upon said shares; that, if he ever contracted to purchase said shares, h...