Claus v. Farmers & Stockgrowers State Bank

• Court: Wyoming Supreme Court
• Writing for the Court: RINER, Justice.
• Citation: Claus v. Farmers & Stockgrowers State Bank, 51 Wyo. 45, 63 P.2d 781 (Wyo. 1936)
• Decision Date: 22 December 1936
• Docket Number: 1968
• Parties: CLAUS v. FARMERS & STOCKGROWERS STATE BANK, ET AL

63 P.2d 781

51 Wyo. 45

CLAUS v. FARMERS & STOCKGROWERS STATE BANK, ET AL

No. 1968

Supreme Court of Wyoming

December 22, 1936

APPEAL from the District Court; Uinta County; H. R. CHRISTMAS Judge.

Action by Pauline Hamblin Claus against the Farmers & Stockgrowers State Bank, a corporation, and others. From an adverse judgment, the plaintiff appeals.

Affirmed and reversed in part with instructions.

For the plaintiff and appellant, there was a brief and oral argument by W. A. Hilton of Salt Lake City, Utah, and J. A. Greenwood of Cheyenne, Wyoming.

I. The attempt of the Lyman Bank, in a state of insolvency during the entire year of 1932, to convey the L. R. Reed Contract an asset of said bank, to plaintiff in exchange for her accounts on deposit with it, was a nullity and utterly void. Sec. 10-502, R. S. 1931; Lamb v. Ulrich, 221 P. 741; Lewis v. Manning, 253 P. 281; C. J. Vol. 27, Sec 164; Bodley v. Bowman, 293 P. 740; Hessian v. Patten, 154 F. 829; R. C. L. Vol. 2, Sec. 274; Bank v. National Bank of Sedan, (Kans.) 157 P. 392; State Bank v. First National Bank of Williston, 215 N.W. 810; Jackman v. Newbold, 28 F.2d 107; McCallum v. Twiggs Bank, 74 A. L. R. 932; Nelson v. Jones, 224 P. 435; Browne v. Stronach, 7 F.2d 685; 13 C. J. 411, 420; Chapman v. Bank, 26 Wyo. 138. Devlin on Deeds, 3d Ed. Vol. 1, Sec. 271; Fonda v. Sage, 46 Barb. 109.

II. The Rock Springs Bank, having knowledge of the insolvent condition of the Lyman Bank at and prior to the time it took possession of the notes of the latter bank, can retain neither the notes of the Lyman Bank nor any of the proceeds received as payments thereon as against plaintiff as a creditor of the Lyman Bank. State Bank v. First National Bank, (Kan.) 157 P. 392; Penney v. Haugan, 63 N.W. 728; Mahoney v. Hale, 69 N.W. 334; Burrell v. Bennett, 56 P. 375; Grinstead v. Union Savings & Trust Co., 190 F. 546; Jennings v. Swartz, 149 P. 947; Waechter v. Wilde, 47 Wyo. 363, 38 P.2d 321; Weil v. Defenbach, 170 P. 103; Gantenbein v. Bowles, et al., 203 P. 614; Trust Co. v. Idaho-Oregon Fruit Growers' Ass'n., 256 P. 99.

III. An appellate court, asked to review the judgment of a lower trial court based only upon a general finding of facts, will require that the record shows, in support of such general finding and judgment, substantial evidence before it will be affirmed as against a contention that the judgment is contrary to law. In re Koprowski, 46 P.2d 61; Jones v. Wettlin, 39 Wyo. 331, 271 P. 217; Studebaker Corp. of America v. Hanson, 24 Wyo. 222, 157 P. 582; Benedict v. Citizens National Bank of Casper, 44 Wyo. 466; Waechter v. Wilde, 47 Wyo. 363, 38 P.2d 321; Bank v. Ford, 30 Wyo. 110, 216 P. 691.

For respondent, The Farmers and Stockgrowers State Bank of Lyman and its directors, there was a brief and oral argument by P. W. Spaulding of Evanston.

The abstract, contract, deed and charge slips, transmitted to plaintiff, February 26, 1932, had the effect of an assignment of the contract. 66 C. J. 1062. Plaintiff waived her right of rescission. 66 C. J. 838. Section 10-502 does not make all transactions of an insolvent bank unlawful as contended by plaintiff. Statutes relating to insolvency are for the protection of depositors and are not concerned with difficulties between stockholders and directors. Hays Co. v. Wilde, 57 P.2d 106; Wyoming Trust v. Montgomery, 267 P. 80. Directors have the right to handle the affairs of a failing and insolvent corporation. Smith v. Stone, 128 P. 617-9; Andrews v. Farmers State Bank, 246 N.W. 618. A purchaser of a corporation is not liable for its debts, in the absence of an agreement to assume such debts. Bank v. Lock, 237 P. 606. This is especially true where full value is paid for the assets. First National Bank v. Willis, (Kan.) 280 P. 782. See note in 88 A. L. R. 997. The sale was unconditional and binding. Bank v. Western Loan and Bldg. Co., (Wash.) 174 P. 1; Hawkins v. Stoffers, 276 P. 454. A bank is not bound by acts which are not within the apparent authority of the cashier and which it has neither authorized nor ratified. 7 C. J. 551. Wyoming Trust Co. v. Montgomery, supra. Plaintiff is precluded by accepting the deed and retaining it. 67 A. L. R. 1126; 15 A. L. R. 168; 66 C. J. 1480. Citizens State Bank v. Security Bank, 63 A. L. R. 984. In order to warrant rescission, there must be a breach of the entire contract. 13 C. J. 614. Bank v. Trust Company, 270 P. 166. Plaintiff is bound by the transaction of February 24 and by accepting the deed. 21 C. J. 180; Bentley v. Tibbals, 223 F. 247; Wieghman v. Killifer, 215 F. 289; Karton v. Little, (Ala.) 65 So. 951. The transaction was binding upon both parties. Com. v. Filiatreau, 170 S.W. 1182; 21 C. J. 187. All parties participating in an illegal act are equally guilty. Wettlin v. Jones, 234 P. 515. Individual defendants are entitled to be subrogated to the rights of the depositors and other creditors who were paid off through their efforts of December 28th. Love v. Robinson, 78 A. L. R. 609; 60 C. J. 713. The judgment should be for defendants. State v. Board, 7 Wyo. 161, 1 Bancroft Code Pleadings, 922. Plaintiff has been fairly dealt with. Fincannon v. First National Bank, 271 P. 641; Hays Co. v. Wilde, 57 P.2d 106.

For the respondent, First Security Bank of Rock Springs, there was a brief by Lewis H. Brown of Rock Springs, Wyoming, and Thatcher & Young of Ogden, Utah, and oral argument by Mr. Brown.

The transfer of the Lyman Bank's assets to its directors was not in violation of any statute of Wyoming, for it was not made with a view to prevent the application of the bank's assets in the manner provided by law, nor with a view to the preference of one creditor to another. Section 10-502, R. S. 1931. The bank had the right in good faith to sell its notes. Sec. 10-140-1, R. S. 1931; Andrew v. Farmers State Bank, 246 N.W. 618. A sale by a corporation to its directors, made in good faith and for an adequate consideration, is valid. Nicholson v. Kingery, 37 Wyo. 299, 261 P. 122; 3 Fletcher Cyc. Corporations, paragraph 931; 4 Zollman, Banks and Banking, Sections 1932 and 2267; 3 Michie on Banks and Banking 14; Cory Mann George Corporation v. Old, 23 F.2d 803; Kershaw v. Julian, 72 F.2d 528; Note, 88 A. L. R. 997; Booth v. Wells, 42 F. 11. Fraud to be availed of must be pleaded and proved. 3 Fletcher Cyc. Corporations, 290. The authorities cited by plaintiff do not sustain her position. The Rock Springs Bank acted in good faith throughout. The case cited in 37 Wyo. 299, 261 P. 122, we believe, determines our problem.

Two directors, Kingery and Gray, were interested in the transaction as purchasers. Plaintiffs were minority stockholders and sought to set aside the sale. Plaintiff made no effort to establish that fraud was involved in the sale, or that there was any inadequacy of price, she relied upon her alleged position as an unpaid depositor, and on the fact that the sale resulted in all other creditors being paid in full. The rights and liabilities of the defendant were fixed before any creditor was paid. If plaintiff succeeds in establishing her position as a creditor of the Lyman Bank, she becomes a common creditor, and the First Security Bank of Rock Springs is not liable to her. Kershaw v. Julien, 72 F.2d 528, (C. C. A. Tenth). The proposition is ably discussed in a note to 88 A. L. R. 997, where the case of Booth v. Welles, 42 F. 11, is cited.

RINER, Justice. KIMBALL, Ch. J., and BLUME, J., concur.

OPINION

RINER, Justice.

The record in this case is brought here by direct appeal proceedings to review a judgment of the district court of Uinta County in an action wherein Pauline Hamblin Claus was plaintiff and The Farmers and Stockgrowers State Bank, a corporation, First Security Bank of Rock Springs, a corporation, A. E. Wilde, State Examiner of the State of Wyoming, Robert Hickey, Cal Hickey, Joe Hickey, J. W. Slade, L. R. Blackner and Edward Stadmiller, Jr., were defendants. Before trial the State Examiner was by the plaintiff voluntarily dismissed from the case. For brevity and convenience in statement Pauline Hamblin Claus may hereinafter be mentioned as the "plaintiff" or "Mrs. Claus" and the corporate defendants in the order named above will be designated as "the Lyman Bank" and "the Rock Springs Bank." The other individual defendants were directors and officers of the Lyman Bank during the period of time the events occurred which are connected with this litigation. They will generally be so mentioned and particularly Robert Hickey as president, J. W. Slade as vice-president and Edward Stadmiller, Jr., as cashier of that institution.

The facts to be considered on this appeal are in substance these: The Lyman Bank during the year 1932 and for some years prior thereto was a corporation holding its charter from the State of Wyoming and doing a banking business in the town of Lyman located in the southwestern part of this state. Its capital stock was $ 10,000, with one hundred shares of stock of the par value of $ 100.00 per share, of which the individual defendants above named held, Robert E. Hickey 19 1/2 shares, Cal Hickey, Joe Hickey, J. W. Slade, L. R. Blackner 5 shares each, and Edward Stadmiller, Jr., 43 1/2 shares. Mrs. Claus also was a stockholder to the extent of 5 shares. This bank was authorized to conduct both a commercial and savings bank business.

On February 25, 1932, Mrs. Claus had on deposit with said bank the following accounts in its commercial department, viz.: $ 61.53 listed on the bank's books in her own name and $ 440.93 in the name of "H. & R. Root Beer." She also had in its savings department in her own name the sum of $ 3836.01. On the date last mentioned and all the time during the year 1932 this bank was insolvent. Knowing this condition prevailed in...