Cogswell v. Second Nat. Bank

• Decision Date: 09 June 1905
• Citation: 60 A. 1059,78 Conn. 75
• Parties: COGSWELL et al. v. SECOND NAT. BANK.
• Court: Connecticut Supreme Court

60 A. 1059

78 Conn. 75

COGSWELL et al.

v. SECOND NAT. BANK.

Supreme Court of Errors of Connecticut.

June 9, 1905.

Appeal from Superior Court, New London County; Edwin B. Gager, Judge.

In the matter of the receivership of the Second National Bank. From an order and decree distributing the cash proceeds of certain assets which had been charged off upon a reduction of the capital stock of the bank, Charles P. Cogswell and others, claimants of said proceeds, appeal. Reversed.

See 76 Conn. 252, 56 Atl. 574.

Prank T. Brown, for appellants. Donald G. Perkins and William H. Shields, for appellees.

BALDWIN, J. This appeal respects the disposition of the special fund to which reference was made in Cogswell v. Second National Bank, 76 Conn. 252, 255, 261, 56 Atl. 574. It was held in that case that if that fund had been, as alleged, set apart by direction of the Comptroller of the Currency for the benefit of those who were shareholders of the bank at the time when its capital was reduced, a valid trust in their favor was thus created. The facts attending the transaction have now been fully found by the superior court. The directors, having voted to recommend a reduction of the capital stock of the bank from $300,000 to $200,000, were advised by the Comptroller of the Currency that it would be approved "provided so much of the amount as is necessary is used to charge off bad, doubtful, and unproductive assets, the difference only being paid to the shareholders in cash," and that "the shareholders of a national bank, upon a reduction in capital stock, are entitled to either receive the cash or the charged-off assets, and neither can be withheld without their consent." The comptroller also said to the president of the bank, in reference to the same matter, "The assets belong to the stockholders of record, and a trust fund must be created, so that those assets may be distributed among the stockholders of record, when your capital is reduced." The stockholders then, in May, 1900, voted to make the reduction, without any specification of the mode of accomplishing it; but the president, in asking the approval of this action by the comptroller, filed with him a written statement that "the whole amount of the reduction, viz., $100,000, will be used for the purpose of charging off bad, doubtful, and unproductive assets; no money to be paid to the shareholders unless realized from said assets, which are to be set aside and collected for the benefit of the shareholders of record at date of the issuance of the comptroller's certificate approving the reduction." It was understood that this statement was to be replaced by 'one from the directors, and on the faith of this understanding a certificate, on June 9th, was given by the comptroller approving the reduction, without any qualifications. The directors subsequently sent him a statement in conformity with the understanding, dating it back to June 9th. On June 27th a schedule of certain assets of the bank, each item being given a valuation, and the total valuations of all amounting to $100,307.86, was presented to the directors, who thereupon voted that the assets so scheduled, "which assets are considered either bad or doubtful, and on account of which the capital stock of the bank has been reduced from $300,000 to $200,000, be set aside from the other assets of the bank, and be held by it in trust for the stockholders of record on the 9th day of June, 1900; and that whatever may be realized from said assets be distributed from time to time, as may be reasonable, among said stockholders in proportion to their respective holdings on said date." Thereupon the account with capital stock on the books of the bank was credited with a reduction of $100,000, and the items named in the schedule above described were charged to the account of profit and loss at the valuation of $100,307.86. Some of the items were of real estate; the rest were not well secured; and all were those referred to in the directors' statement to the comptroller dated June 9th. This left the bank with good assets worth over $240,000. The bank thereafter, until its charter expired in 1903, kept a separate account relating to the assets included in the schedule, entitled "Stockholders Trust," in which were credited all collections and charged all expenditures arising in connection with endeavors to realize upon them. Two of the scheduled items represented claims for a larger amount, the valuation affixed to...