Bowden v. Johnson

• Decision Date: 05 March 1883
• Citation: 107 U.S. 251,2 S.Ct. 246,27 L.Ed. 386
• Parties: BOWDEN, Receiver, etc., v. JOHNSON and another
• Court: U.S. Supreme Court

107 U.S. 251

2 S.Ct. 246

27 L.Ed. 386

BOWDEN, Receiver, etc., v. JOHNSON and another.

March 5, 1883.

J. A. J. Creswell, for appellant.

Thos. N. McCarter, for appellee.

BLATCHFORD, J.

George E. Bowden, as receiver of the First National Bank of Norfolk, Virginia, brought this suit in equity against Jacob C. Johnson and Mrs. B. Valentine, alleging, in the bill, that Johnson, owning 130 shares of the capital stock of the bank, of $100 each, in order to exonerate himself from liability to the creditors of the bank, transferred said shares to Mrs. B. Valentine, on the books of the bank; that the transfer was made without legal consideration, and with a view to such exoneration; that Mrs. B. Valentine is, and was known by Johnson, at the time of the transfer, to be, utterly insolvent; that the transfer was made with a view of defrauding the creditors of the bank, and therefore was and is void; and that the plaintiff had been appointed, by the comptroller of the currency, receiver of the bank, and had been directed by said comptroller to proceed to enforce the personal liability of all persons owning the capital stock of the bank on the twenty-sixth day of May, 1874, the day on which the bank failed to redeem one of its circulating notes, and was in default in the payment of its circulating notes generally. The bill alleges that Johnson visited Norfolk for the purpose of examining into the condition of the affairs of the bank, and, becoming satisfied from such examination, and from other information in relation to the bank, that its affairs were in a critical condition, as in fact they were, and that a suspension of the bank was inevitable, returned to New York and immediately thereafter made said transfer. The prayer of the bill is that Johnson and Mrs. B. Valentine answer it on oath; that the transfer of the stock be set aside; and that Johnson be decreed to pay to the plaintiff, as such receiver, the par value of the 130 shares.

The joint answer of the defendants admits that Johnson became the owner of the 130 shares in 1869. It avers that Johnson visited Norfolk in November, 1873, but not for the purpose of examining into the condition and affairs of the bank. It denied that Johnson, on said visit, became satisfied that the affairs of the bank were in a critical condition, and that a suspension of the bank was inevitable. It avers that Johnson went to Norfolk, at that time, to inspect a farm which it was proposed to exchange with him for said stock. It denies that Johnson 'then, during that visit, or at any other time, saw anything in the condition of the said bank,' except that William Lamb, who was at that time the president of the said bank, and who went with Johnson to inspect said farm, at the same time proposed that Johnson should lend to the bank $25,000, and proposed to secure the loan by mortgage on the real estate of the bank, which loan Johnson declined to make. Johnson admits that he, on December 5, 1873, sent his said stock to the bank, with too power and direction to have the same transterred to Mrs. Valantine, but he denies expressly that such transfer was madern order to oxonerate himself from liability to the creditors of the bank. The answer avers that the actual transfer of the stock, on the books of the bank, was delayed for some time, without the knowledge and against the will of the defendants. It denies that the transfer of the stock was made without legal consideration, or with any view to exonerate Johnson from liability as stockholder. It denies that the defendant Valentine is, or was, at the time of said transfer, known by Johnson 'to be utterly insolvent, or that such transfer was made with a view of detrauding the creditors' of the bank. It avers that it is not true that Mrs. Valentine was, at the time of said transfer, insolvent, or that said transfer was made for any such purpose as is alleged in the bill, but avers that it was made in good faith and for a valuable and lawful consideration.

The principal question in this case is as to the circumstances attending the transfer of the stock to Mrs. Valentine. This question divides itself into two branches: (1) The information which Johnson had in regard to the affairs of the bank; (2) the real nature of the transaction between Johnson and Mrs. Valentine.

1. Lamb, the president of the bank, gives the following testimony In the latter part of 1873, Lamb, owing to the straitened condition of the bank, was anxious to make a loan on its real estate, and wrote to Mr. Cole, the former president, then living in New York, to assist him in doing so. Cole wrote to Lamb that he had a friend, Johnson, who he thought was able to make the loan, and would do so if proper representation could be made to him, and that he would bring Johnson down to Norfolk. Some time in November, 1873, Johnson went to Norfolk with Cole, when Lamb endeavored to get Johnson to make a loan on the banking building of the bank. Lamb told Johnson that the need of a loan was urgent; that he thought the security was good; and he appealed to Johnson as a stockholder to make the loan. Johnson promised, when he returned, to look into his affairs, and to make the loan if he could conveniently do so. Lamb says.

'I cannot remember any of the details of the conversation, nor the full extent given him by me as to the condition of the bank, but my impression is that I called attention to the fact that our capital had been seriously impaired by the Elkton suit, and other litigation, and that the panic had caused us to lose business and be very hard up, and the necessity of having ready money to retain our business and to recover our position. I think I asked for a loan of $25,000 on the building. My conversation was of such a confidential character as I would have only had with one largely interested in the bank. * * * I don't remember whether he examined the books and papers of the bank.'

Lamb says that the Elkton suit was one in which a bank obtained a judgment against his bank, after long and expensive litigation, for $30,000; and that the result destroyed about one-half of the capital stock of his bank, which was $100,000.

Chamberlain, who was cashier of the bank, says that Johnson visited Norfolk the latter part of November or about the first of December, 1873.

Hunter, who was bookkeeper of the bank and remembers Johnson being at the bank, says that he believes the reports and statements showing the condition of the bank, made up by the witness as bookkeeper, were taken into the president's room which John on was in it, but he cannot state whether they were exhibited to Johnson.

The foregoing is all the direct evidence there is as to Johnson's knowledge of the condition of the bank at the time he returned from Norfolk. Within a very few days after his return he wrote a letter to Lamb, dated December 5, 1873, saying:

'I regret to say that I will be unable to comply with your wishes in letting the First National Bank have $25,000. I cannot raise the money. I was depending for the greater part of it on my folks in San Francisco, and they send me word that they cannot let me have the money, as they need all they can lay their hands on to get through the winter. The bulk of my means is in real estate and cannot readily be converted into cash. I have disposed of my stock in the First National Bank of Norfork, and inclose certificate of my shares, with power of attorney etc., to transfer. Please have the stock transferred to Mrs. B. Valentine, and send the certificate to her at Belleville, Essex county, New Jersey.'

This letter contained the certificate of stock, with the power of attorney to transfer it

Lamb, instead of transferring the stock, wrote as follows to Cole, inclosing Johnson's letter:

'I send you the inclosed to show you Mr. Johnson. Please let me know who Mrs. B. Valentine is. I shall make an assessment on our stockholders of 50 per cent. If she is not able to pay it I will not transfer the stock. Please return this letter.'

Cole replied:

'Mrs. Valentine is the sister of Johnson, the wife of a poor man that Johnson employs on his farm. I would not transfe the stock, but notify him at once that you have made an assessment of 50 per cent.'

These letters were written, Lamb says, in December, 1873. Lamb also says that he was not satisfied from Cole's reply, but found, after obtaining legal advice, that he had no right to refuse the transfer, and therefore he made it, on January 15, 1874.

On the fourteenth of February, 1874, Lamb wrote as follows to Johnson:

'I find the inclosed certificate has not been forwarded to Mrs. Valentine, although issued a month ago; please hand it to her. I regret not hearing from you in regard to the proposition made by the directors. Something must be done at once. The bank cannot go on as affairs are now, and if I surrender it to a receiver I know our stock will be worthless; the margin is too small. If I could have gotten the refusal of all the stock I might have induced some capitalists to come in, but I am afraid it is too late now. With $4,000 cash I could have infused new life into our stock and built it right up. Please let me hear from you, as I suppose you must feel an interest in Mrs. Valentine's stock.'

Johnson did not offer himself as a witness.

2. Mrs. Valentine was called as a witness by the plaintiff. Her deceased daughter was the wife of Johnson. She herself was divorced from her husband, and he was not dead that she knew of. Johnson had no children. Her daughter died in 1864. She herself lived in California with her husband for 13 years. She came from California in 1865 or 1866, and went to live at Mr. Johnson's house in Kearney township, New Jersey, in 1871. She was examined as a witness in August, 1877. She endeavors to make out a consideration for the transfer of the stock to her, in this way:

'Mr. Johnson owed me for services rendered after we came to live where we are. He was to pay me $1,000 a...