Brunswick Terminal Company v. National Bank of Baltimore

• Decision Date: 23 February 1904
• Docket Number: No. 88,88
• Citation: 48 L.Ed. 491,24 S.Ct. 314,192 U.S. 386
• Parties: BRUNSWICK TERMINAL COMPANY et al . v. NATIONAL BANK OF BALTIMORE
• Court: U.S. Supreme Court

192 U.S. 386

24 S.Ct. 314

48 L.Ed. 491

BRUNSWICK TERMINAL COMPANY et al.

v NATIONAL BANK OF BALTIMORE.

No. 88.

Argued December 9, 10, 1903.

Decided February 23, 1904.

This was a bill filed January 14, 1898, in the circuit court of the United States for the district of Maryland by the Brunswick Terminal Company and others, creditors of the Brunswick State Bank, chartered by the state of Georgia, which failed and was declared insolvent in May, 1893, to enforce, in behalf of its creditors, against the National Bank of Baltimore, a statutory liability equal to the par value of certain shares of stock in the state bank at one time standing in the name of the Baltimore bank.

The case was first heard on demurrer to a plea of the Maryland statute of limitations. The demurrer was overruled, the defense sustained, and the bill dismissed. 88 Fed. 607. On appeal to the circuit court of appeals for the fourth circuit, the decree was reversed and the cause remanded for further proceedings. 48 L. R. A. 625, 40 C. C. A. 22, 99 Fed. 635.

The cause was then heard on the pleadings, and an agreed statement of facts, the parties reserving the right to refer to any pertinent laws or statutes of Georgia, as follows:

'That the Brunswick State Bank was a corporation chartered, organized, and existing under the laws of the state of Georgia, and was engaged in the general banking business in that state; that on or about the 30th day of May, 1893, William M. Wiggins and others alleging themselves to be creditors of said Brunswick State Bank, filed their petition in the superior court of Glynn county, Georgia, against said bank, alleging that it was insolvent, and praying for the appointment of a receiver to take possession of its assets, and administer them, and on the 29th day of June following the court decreed that the bank was insolvent and appointed a permanent receiver for the purposes stated; that the state of Georgia and Glynn county were, under the laws of Georgia, preferred creditors, and the assets obtained by the receiver as the assets of the bank were exhausted in the payment of these preferred claims and the costs of litigation, and nothing was left for the payment of other creditors of the bank; that the following persons are creditors of the said Brunswick State Bank in the amounts stated in connection with their names, and were originally parties plaintiff in said cause, or having become such subsequently, that is to say: [Here follow lists of creditors.]

'That the defendant is a national bank, chartered, organized, and conducting a business of a bank at the city of Baltimore, in the state of Maryland, under the provisions of the statutes of the United States in relation to national banks and their operation.

'That in the month of August, 1890, the defendant discounted for one Lloyd a promissory note drawn by him, and F. E. Cunningham for the sum of ten thousand dollars ($10,000.00), indorsed by the copartnership firm of Lloyd & Adams, and by W. A. Cunningham, and received, together with the note, as the collateral security for its payment, one hundred and ten (110) shares of the capital stock of said Brunswick State Bank of the par value of one hundred dollars ($100.00) per share; that, in order to protect itself as pledgee, the defendant caused this stock to be transferred into its own name on the books of the Brunswick State Bank, on or about the 25th day of August, 1890; that the said note was paid to the defendant at the time of its maturity, and the defendant being under obligation to return the stock, the pledge being at an end and the pledgeor entitled to its return, retransferred the stock on the books of said Brunswick State Bank by direction of the pledgeor, and the said transfer was fully completed on the books of the said bank on or before the 20th day of October, 1890, but no notice by publication of the fact of said retransfer was given by the defendant; that the defendant never had or claimed any interest in said stock, save under the pledge aforesaid, but never notified the Brunswick State Bank, its stockholders or creditors, that it held said stock otherwise than as the absolute owner thereof.

'That the indebtedness of said Brunswick State Bank to all of the plaintiffs in this cause accrued after the said 20th day of October, 1890, from transactions with said bank commenced after that date, and the plaintiffs had no knowledge in fact that the name of the defendant had appeared upon the books of said Brunswick State Bank as a stockholder.

'It is agreed that the court may draw inferences from any of the foregoing facts to the same extent as if the facts had been proven by means of witnesses.'

The circuit court rendered a decree dismissing the bill. 112 Fed. 812.

An appeal to the circuit court of appeals was taken and that court certified to this court certain questions concerning which it desired instructions for the proper decision of the case. After full argument on the merits this court required the whole record and cause to be sent up for consideration.

Messrs. Henry W. Williams, C. P. Goodyear, W. E. Kay, H. Winslow Williams, and William S. Thomas, for appellants.

Messrs. Frank Gosnell, William L. Marbury, and Allan McLane for appellees.

Statement by Mr. Chief Justice Fuller:

Mr. Chief Justice Fuller delivered the opinion of the court:

The Baltimore bank was a national bank, and was not authorized to permanently invest any portion of its capital in the stock of other corporations, nor did it attempt to do so in this instance. The shares of stock of the Brunswick bank were merely accepted as collateral to a note discounted by the Baltimore bank. They stood, it is true, for a few weeks in the name of the Baltimore bank on the registry of the Brunswick bank, but they were then retransferred to the pledgeor as appeared on the registry, the note having been paid. Complainants became creditors long after the transaction, and were chargeable with notice so far as the Baltimore bank was con- cerned. But notwithstanding the latter bank only held the shares as collateral, and had returned the pledge in due course on the payment of the loan, the contention is that the bank is under a statutory liability to these subsequent creditors, to the full amount of the shares it had temporarily held as security.

This additional liability of a stockholder depends on the terms of the statute creating it, and as it is in derogation of the common law, the statute cannot be extended beyond the words used.

As to stockholders of the Brunswick bank, such a liability was imposed by the 9th section of the charter, granted in 1889, which provided 'that said corporation shall be responsible to its creditors to the extent of its property and assets, and the stockholders, in addition thereto, shall be individually liable equally and ratably, and not one for another, as sureties to the creditors of such corporation for all contracts and debts of said corporation, to the extent of the amount of their stock therein, at the par value thereof, respectively, at the time the debt was created, in addition to the amount invested in such shares.'

Tested by the language of this section, the Baltimore bank was never under liability to these creditors. For if this national bank could have been regarded as the owner of these shares from August 25 to October 20, 1890, notwithstanding the actual facts and the limitations on its powers, it was not such stockholder, in fact or in appearance, at the time complainants' debts were created. It acquired the stock as pledgee, August 25, 1890, and the note to which it was collateral, having been paid, retransferred it October 20, 1890, the retransfer being regularly entered on the books of the bank. It was after this that the transactions commenced from which the indebtedness to complainants arose, and no element of estoppel was involved.

Nevertheless complainants contend that the Baltimore bank remained liable as a stockholder because it did not give notice of the retransfer under § 1496 of the Georgia Code of 1882, reading as follows:

'When a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability unless he receives a written notice from a creditor within six months after such transfer, of his intention to hold him liable; provided, he shall give notice once a month, for six months, of such transfer, immediately thereafter, in two newspapers in or nearest the place where such institution shall keep its principal office.'

This section was obviously not intended to impose a liability, but to exempt from an existing liability. If any debt had been created from August 25 to October 20, and perhaps as to any debt outstanding on August 25, the Baltimore bank, treating it as a stockholder from August 25 to October 20, might have been held liable because it did not give the statutory notice, but no such case is presented. On the face of this record it is immaterial whether there were any creditors during the six months after the retransfer to give or to receive notice or whether there was any indebtedness incurred prior to August 25, or during the period from August 25 to October...