Baird v. Eidsvig

• Decision Date: 26 April 1930
• Docket Number: No. 5759.,5759.
• Citation: 59 N.D. 484,230 N.W. 721
• Parties: BAIRD v. EIDSVIG et al.
• Court: North Dakota Supreme Court

59 N.D. 484

230 N.W. 721

BAIRD

v.EIDSVIG et al.

No. 5759.

Supreme Court of North Dakota.

April 26, 1930.

Appeal from District Court, Barnes County; M. J. Englert, Judge.

Action by L. R. Baird, as receiver of the Farmers' State Bank of Kathryn, against Ole J. Eidsvig and others. Judgment for defendants, and plaintiff appeals and demands trial de novo.

Reversed and rendered.

Conmy, Young & Burnett, of Fargo, for appellant.

Kvello & Adams, of Lisbon, for respondents.

BURKE, C. J.

On December 10, 1923, the Farmers' State Bank of Kathryn closed, and one Jensen, who was cashier of the bank, was placed in charge as special deputy bank examiner.

On the 28th of January, 1924, the plaintiff, L. R. Baird, as receiver petitioned the district court of Burleigh county for a blanket order levying an assessment against the Farmers' State Bank of Kathryn, together with thirty-seven other banks, and on the 29th day of January, 1924, Judge Charles M. Cooley signed such order for the assessment for the full amount of the added statutory shareholders' liability to be levied on the capital stock of said bank, and that said receiver was authorized to fix the date when such assessment should be paid, and was required to give notice of said assessment to each of said stockholders.

In August, 1924, the directors of said bank made an application to the depositors' guaranty fund commission to reopen the bank, and on August 9, 1924, the depositors' guaranty fund commission authorized the reopening of the bank upon certain conditions, which in effect required the officers of said bank to remove all doubtful paper, to restore the impaired capital and surplus, to collect and remove all cash items and overdrafts, obtain agreements from all depositors, and where possible, other creditors, to defer the time of payment of their claims; in fact, to put the bank in a solvent condition, acceptable to the commission. Some time thereafter the guaranty fund commission sent one Desmond as a representative of the said commission to Kathryn to investigate and determine whether the officers of the bank had complied with the conditions imposed by the commission.

About the 1st of November, 1924, Jensen, who was still in charge of the bank as a special deputy bank examiner, called up A. E. Jones, district manager of closed banks, by phone at Lisbon, N. D., and requested him to come to Kathryn, as they wanted to reopen the bank. Jones testified that at that time he did not know of the order of Judge Cooley for an assessment, but he went to Kathryn and represented the receiver of the bank. All the stockholders were at the meeting which Jones and Desmond attended, and Jones testified that, “Desmond said, ‘we will get the stock liability, these men are willing to pay it in, and they were all there.’ I was there helping the banking department, that was the capacity I was there in. I was interested in opening the bank to this extent, that if I thought it was a good thing for the stockholders I did not want to hinder them as receiver. I collected $17,500 the total amount of stockholders' liability, outside of the Jensen stock which amounted to $7,500. Mr. Desmond wrote the receipt and I signed it as receiver.” The Jensens could not pay their assessment, and it was agreed at the meeting that, if the stockholders would pay the assessment of the Jensen stock, 50 per cent. in cash and 50 per cent. by indorsement upon certificates of deposit, it would be accepted in settlement. Later $3,750 in cash was paid to Mr. Stortroen, who later became cashier, and $3,750 was indorsed on certificates of deposit owned by the stockholders who paid for and took over the Jensen stock. Desmond remained in the bank representing the banking department or the guaranty fund commission, and Mr. Jones sent over Mr. Krick and Mr. Eldridge to assist.

Preparatory to the opening of the bank, the stockholders were required to take out or make good bad paper of the face value of a little more than $50,000. They entered into an agreement with the stockholders by which the stockholders were to accept 35 per cent. discount on the face of their certificates of deposits, and for repayment to the stockholders from profits to be made by the said bank in the future. When the bank had complied with all of the conditions necessary for the opening of the bank, an application was made by the guaranty fund commission to the court to discharge the receiver, and on the 16th day of December, 1924, the court, on the application of the guaranty fund commission, and on the motion of the receiver of said bank, ordered that further proceedings in insolvency against said bank be discontinued, and that said receiver be discharged, and that said bank be readmitted under the guaranty fund.

On the 15th day of December, 1924, L. R. Baird made his report, in which he alleged that the said bank made application to the guaranty fund commission for leave to organize and remedy its condition and be readmitted under the guaranty fund; that said commission prescribed conditions as to assets, payment of liabilities, and the character and competency of the managing officers to be placed in charge of the affairs of the said bank, and such other requirements as in its judgment is necessary and proper. This final and only report of the receiver relates exclusively to the reopening of the bank. There is not a word in it relating to any assessment or any action of the receiver which in any way related to the liquidation of the bank.

The bank was reopened for business on the 16th day of December, 1924, and the money collected by the receiver, together with other collections amounting to $26,574.27, were paid into the bank as an asset of the bank by the receiver, and the bank continued to operate as a going institution for a little more than three years, and was closed again on December 28, 1927.

It is agreed that the bank was insolvent at the time, that its assets were not worth probably $60,000, and that the assets without the stockholders' double liability would not pay the debt.

The plaintiff was again appointed receiver, and on March 3, 1928, an order was made by Hon. Thomas H. Pugh, judge of the district court, having jurisdiction of the receivership levying and assessing against the stockholders an assessment of $100 on each of their shares. It is agreed that at all times the Farmers' State Bank of Kathryn was operating under its original charter, that there was no change in the name, or in the corporation, and that the same bank was closed in December, 1927, also closed in December, 1923, and that all the stockholders who were such at the time the bank first closed in December, 1923, and, when it closed in December, 1927, held the same original capital stock certificates, except that new certificates were issued for the Jensen stock to those who paid the stock liability, and no other assessments were ordered or made, save and except the order of Judge Cooley in January, 1924, and that ordered by Judge Pugh in March, 1928. The stockholders refused to pay the last assessment, and this action is for the recovery of such assessment.

From a judgment in favor of the defendants the plaintiff appeals and demands a trial anew in this court.

It is the contention of respondent that the stockholders paid one assessment, and that they cannot be made to pay again. It is true that an assessment made for the liquidation of the bank, paid by the stockholders for and used to liquidate the bank, ends the stockholders' liability; but the evidence in this case clearly shows that the payment made by the stockholders was not a payment for the liquidation of the bank, but was paid for the purpose of enabling the bank to reopen.

Jones, the district manager of closed banks, was called up by the special deputy bank examiner at Kathryn, and asked to come over to Kathryn, as they wanted to reopen the bank. When he got there, Desmond, a representative of the guaranty fund commission, said, “We will get the stock liability they are willing to pay it.” This was at a meeting of the stockholders called for what purpose? The liquidation of the bank? No, the opening of the bank; and, while they got the stock assessment, it was not for the liquidation of the bank but to enable the bank to reopen.

Mr. A. Johnson, testifying, said:

“Jensen couldn't pay his assessment and I suppose all the stock assessments had to be paid before the bank could be opened.

Q. So that the money you were paying in was for the purpose of reopening the bank wasn't it? A. Well really it must most likely have been for that.

Q. You were not interested in paying any money if the bank was going to stay closed were you? A. No I wouldn't.

Q. You were going to pay this money in to help reopen the bank and put it on its feet so as to save your deposit. A. Yes sir.”

Mr. Johnson also testified: “Desmond was telling us that we should reopen, that they had collected part of the stock assessment and we should pay some of Jensens' stock and save our deposits. ‘If the receiver liquidated,’ he said, ‘it all seems to disappear’ and he finally got us to subscribe. We didn't want to take that stock on account of being liable for another assessment if they should reopen and close again. He said, ‘we would not be liable for another assessment, this is a compulsory assessment,’ he says, ‘and if it closes again you are not liable for another assessment.”’ It was stipulated that Eugene Johnson would testify to the same effect.

Jones further testified:

“I think I got the bank about November 8, 1924, it was run by the department for a year.

Q. You did collect some stock liability? A. Yes.

Q. And that was under and by virtue of this order of Judge Cooley's was it not, Exhibit 1? A. I wouldn't say so. They requested me...