Ames v. American Nat. Bank

Decision Date20 September 1934
Citation163 Va. 1
CourtVirginia Supreme Court

Present, Holt, Epes, Hudgins, Gregory and Chinn, JJ.

1. BANKS AND BANKING — Agreement for Liquidation — Suit to Cancel Note Executed by Officers of Transferring Bank — Laches — Case at Bar. — In the instant case complainants, as stockholders of a bank which had transferred all its assets to defendant bank in consideration of the latter's assumption of liabilities, filed a bill to cancel, as an ultra vires act, a note executed by the officers of the transferring bank to defendant bank, alleging that the terms of the note were contrary to the liquidation agreement. Defendant bank demurred on the ground, among others, that complainants, having remained silent for three years since the contract was executed were guilty of laches, but the Supreme Court of Appeals declined to notice this ground of demurrer further than to say that the allegations of the bill do not show that either the transferring bank or its stockholders had been guilty of laches which would bar the relief prayed, if complainants were otherwise entitled to it.

2. DEMURRERS — Effect — Facts Well Pleaded. — A demurrer admits that all material facts which are well pleaded are true. Facts well pleaded, and therefore admitted, are (1) facts expressly alleged; (2) facts which are by fair intendment impliedly alleged; and (3) facts which may be fairly and justly inferred from the facts alleged.

3. DEMURRERS — Facts Sufficiently Alleged Taken as True — Exceptions. — Facts sufficiently alleged must be taken as true upon demurrer (unless they are inherently impossible, or contradicted by other facts pleaded) even though the court may be of opinion that it is improbable that they are true.

4. DEMURRERS — All Reasonable Inferences of Fact Considered in Aid of Pleading. — Upon a demurrer all reasonable inferences of fact which a trier of facts may fairly and justly draw from the facts alleged must be considered by the court in aid of the pleading.

5. DEMURRERS — Matters Not Admitted by Demurrer. — A demurrer does not admit the correctness of the conclusions of law stated by the pleader, or that the inferences of fact drawn by the pleader from facts alleged may be fairly and justly drawn therefrom.

6. CONTRACTS — Interpretation and Construction — Court Must Construe Contract Made by the Parties and Not Alter It or Make a New One. — It is the function of the court to construe the contract made by the parties, not to make a contract for them, or to alter the contract they have made so as to conform it to the court's notion of the contract they should have made in view of the subject-matter and the surrounding facts and circumstances.

7. CONTRACTS — nterpretation and Construction — Expressed Intention of Parties Governs. — The polestar for the construction of a contract is the intention of the contracting parties as expressed by them in the words they have used.

8. CONTRACTS — Interpretation and Construction — Words to Be Given Natural Meaning — Consideration of Surrounding Facts and Circumstances, Subject Matter and Purposes of Contract. The court may and should, as an aid to the interpretation of the words used in a contract, take into consideration the subject-matter, the facts and circumstances surrounding the parties when they entered into the contract, and the purposes for which it was made. But it is not at liberty, because it has acquired a knowledge of those facts, to put a construction on the words the parties have used which they do not properly bear. It is the court's duty to declare what the instrument itself says it says.

9. CONTRACTS — Construction — Construed as a Whole. — A contract is to be construed as a whole, and effect given to every provision thereof if possible. No word or paragraph can be omitted in construing a contract if it can be retained and a sensible construction given to the contract as a whole.

10. CONTRACTS — Interpretation and Construction — No Word or Clause to Be Treated as Meaningless or Discarded Unnecessarily. — No word or clause in a contract is to be treated as meaningless if any reasonable meaning consistent with the other parts of the contract can be given to it; and no word or clause should be discarded unless the other words used are so specific and clear in contrary meaning as to convincingly show it to be a false demonstration.

11. CONTRACTS — Construction — Seemingly Conflicting Provisions to Be Harmonized if Possible. — When two provisions of a contract seemingly conflict, if, without discarding either, they can be harmonized so as to effectuate the intention of the parties as expressed in the contract considered as a whole, this should be done.

12. CONTRACTS — Construction — Presumption against Aimless Use of Words and Superfluous Provisions. — The presumption always is that the parties to a contract have not used words aimlessly and that no provision is merely a superfluity unless it is plainly merely a repetition.

13. CONTRACTS — Interpretation and Construction — Words Given Their Ordinary Meaning. — Words used by the parties to a contract are to be given their usual, ordinary, and popular meaning, unless it can be clearly shown in some legitimate way that they were used in some other sense, and the burden of showing this is always upon the party alleging it.

14. BANKS AND BANKING — Contract for Liquidation of Bank — Interpretation and Construction — Case at Bar. — In the instant case, by the terms of a contract between defendant bank and another national bank, the latter transferred all its assets to defendant bank which assumed all liabilities of the transferring bank, except to stockholders. The contract provided for the classification, by defendant bank, of all the assets of the transferring bank as collectible or uncollectible, with the right to exchange an asset denominated collectible for one of equal amount denominated uncollectible, and vice versa, and the execution by the transferring bank of its note for the difference between the amount of the collectible assets, as so classified, and the liabilities. Any balance remaining after complete liquidation and full payment to defendant bank of all liability assumed, together with expenses, was to be paid to the stockholders of the transferring bank. The true meaning of such a contract is that the transferring bank conveys all its assets, real and personal, except its corporate franchise and the transferee agrees to pay all liabilities, except to stockholders, regardless of the sufficiency of the assets. The transferee shall, within a reasonable time, honestly and fairly according to the facts as they then are known or appear, classify the assets as collectible, i.e., those to which the terms collectible or uncollectible are properly applicable deemed worth their face value (e.g., matured promises to pay a fixed sum), or uncollectible, including doubtful assets and those which ordinarily must be realized on by sale (e.g., real estate), the assets classified as collectible to become the absolute property of the transferee and the others to be collateral for the transferring bank's note for the difference between the liabilities and the collectible assets, such sum to constitute the maximum liability of the transferring bank. To protect transferee to some extent from errors of judgment in classifying, it may exchange items in one class for items of an equal amount in the other. The face value of the assets classed as collectible shall be applied at once to extinguish pro tanto any liability of the transferring bank to the transferee for the assumption of liabilities, the proceeds of all other assets shall be applied when and as realized to payment of the note and all expenses and costs of liquidation and the balance, if any, paid to the stockholders of the transferring bank. For any balance remaining due on the note after complete liquidation the transferee may resort to the statutory double liability of the stockholders of the transferring bank.

15. BANKS AND BANKING — Contract for Liquidation of Bank — Classification of Assets as Collectible or Uncollectible — What Assets Are Properly Termed Collectible — Case at Bar. — In the instant case defendant bank entered into a contract with another bank whereby the latter transferred all its assets to defendant bank which assumed all liabilities of the transferring bank, except to stockholders. The contract provided that defendant bank should classify the assets into two classes, collectible and uncollectible, and that the transferring bank should execute its note for the difference between the collectible assets and the liabilities assumed. The first requisite for an asset "deemed collectible" is that it be an asset to which the term "collectible" is properly applicable. Money and promises to pay, matured or maturing in a reasonably short time, are properly spoken of as being collectible or uncollectible. Real estate, tangible personal property, and stocks are not properly described as collectible assets. They must be sold to realize upon them. They cannot be collected. When the term "collectible assets" is used in connection with the liquidation of the assets of a business, long-term bonds which in the ordinary course of the liquidation of a business should be realized upon by sale, instead of waiting to collect them at maturity, are more properly classified as salable than as collectible.

16. BANKS AND BANKING — Contract for Liquidation of Bank — Classification of Assets as Collectible or Uncollectible — Provision for Exchange of Asset Classified as Collectible for One Classified as Uncollectible — Case at Bar. — In the instant case a contract, by which one national bank transferred all its assets to another which assumed all liabilities of the transferring bank, provided that the transferee should classify all assets transferred as collectible or...

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