Federal Deposit Ins. Corp. v. Levorsen

• Decision Date: 06 October 1943
• Docket Number: 6900.
• Citation: 11 N.W.2d 448,73 N.D. 118
• Court: North Dakota Supreme Court

11 N.W.2d 448

73 N.D. 118

FEDERAL DEPOSIT INS. CORPORATION v. LEVORSEN.

No. 6900.

Supreme Court of North Dakota

October 6, 1943

Rehearing Denied Nov. 5, 1943.

Syllabus by the Court.

1. The record is examined and it is held that no actual fraud is shown in the transaction wherein the defendant transferred to a former owner certain shares of stock in a state bank which the defendant had acquired for the purpose of enabling him to qualify as a director.

2. Where an act amends a section of the statute "to read as follows" and sets forth the entire section as amended it is to be construed as introduced into the place of the original section and operates as a repeal of anything contained in the old section and omitted from the amendment.

3. Chapter 95, Sess.Laws N.D.1937, which amended chapter 96 sec. 22, Sess.Laws N.D.1931, omitted the provision that "Such individual liability shall continue for one year after the recording on the books of the association of any transfer or sale of stock by any stockholder or stockholders" and by such omission repealed the provision for the continuation of the superadded liability of a bank stockholder after a recorded bona fide transfer of his stock contained in the former act.

4. A receiver of an insolvent state bank who brings an action to recover superadded liability on bank stock represents creditors of the defunct bank with rights no greater than the creditors he represents.

5. Creditors who became such after a statutory provision continuing liability of bank stockholders after transfer of their stock was repealed may not assert any liability against the former stockholders based on the repealed provision.

J. K. Murray, of Bismarck, and H. P. Jacobsen, of Mott, for appellant and defendant.

Halvor L. Halvorson, of Minot, for plaintiff and respondent.

MORRIS, Chief Justice.

This is an action to recover the statutory superadded liability on ten shares of bank stock. It is brought by the receiver of the Farmers and Merchants Bank of Elgin, a state bank. The bank was taken in charge by the State Examiner on October 30, 1937, judgment was entered declaring it to be insolvent on November 30, 1937, and the plaintiff thereafter was named as receiver by the district court.

The defendant was a former owner of ten shares of stock in the defunct bank which he transferred to one J. G. Sept on August 13, 1937. The defendant appeals from the judgment of the district court finding him liable for the superadded liability on the stock.

The history of the stock in question and the transactions surrounding its transfer disclose that it was acquired by the defendant on January 22, 1936. Prior to that date it was owned by Sept who had been cashier of the bank. Sept had resigned and the defendant was appointed cashier in August 1935. It was deemed desirable that the defendant become a director. The law required that every director must own in his own right, free from hypothecation, pledge or debt, at least ten shares of stock of the banking association of which he became director. It also provided that he take an oath which included among other things the statement "that he is a bona fide owner of the number of shares of stock required by this Act to become a director, standing in his own name on the books of the association, and that said stock is in his possession and control or in the possession of the State Examiner and is not hypothecated or in any way pledged as security for any debt." Chapter 96, sec. 26, Sess.Laws N.D.1931.

Sept testified that when the stock was assigned to the defendant, it was just turned over to him for the purpose of putting the defendant in a position to qualify as a director and officer of the bank and that the stock was neither sold nor given to the defendant. He further stated that: "Both of us knew at the time that he had to have 10 shares to act in the capacity that he was going into, and that he had talked to one or two of the other directors. They said they had (no) extra shares, so I told him he could have mine with the possibility that at a later date I probably could make a deal with him to sell it to him, but we never had any price."

The defendant's testimony agrees with that of the plaintiff on these points except as to the possibility of purchase.

After the defendant became a director he also served as president for a time. The certificate of stock was filed with the State Examiner and remained in his office until about August 16, 1937. The minutes of the bank show that at a director's meeting held on Friday the 13th of August, 1937, the defendant's resignation as president was accepted and that "J. G. Sept's oath of office as director was taken and forwarded to the State Examiner together with his qualifying stock certificate." These minutes also show the adoption of the following resolution:

"Whereas, the bank has among its assets various items of an undesirable nature of less than book which seriously impairs its capital, and

"Whereas, the stockholders are unable to replace the capital impairment with cash and all efforts toward the assumption of the deposit liability by some other bank having failed, now

"Therefore, be it resolved by the Board of Directors that the bank shall discontinue its operations; that it be turned over to the State Banking Department for liquidation, and that the Cashier be instructed to ask the State Examiner to take charge of its affairs on a date to be fixed by the Officers of the bank on or before November 1, 1937."

The bank continued to operate until October 30, 1937, and the defendant continued in his capacity as cashier.

Sept was not present at the director's meeting above described. He states that he does not remember seeing the certificate for the qualifying shares which were turned back to him by the defendant, but he does remember signing a receipt therefor. Neither does he remember signing the oath as director, referred to in the minutes, although he admits that his signature thereon is genuine. Moreover he states that he did not know of the resolution to liquidate the bank.

The defendant testifies that Sept actually received the stock certificate and that he told Sept about qualifying as a member of the Board of Directors and obtained Sept's oath of office.

The plaintiff's first contention is that the transfer of the stock by the defendant to Sept was fraudulent as to creditors of the bank and as to them the defendant continued to be the owner of the stock and is therefore liable for the superadded liability. The trial court found that there was no proof of actual fraud and such fraud as may have been perpetrated is based upon constructive fraud or estoppel. Our examination of the record leads us also to the conclusion that there was no actual fraud perpetrated by the defendant in returning the stock to Sept. Whether Sept knew he was being qualified as a director to take the place of the defendant on the Board is immaterial. The conclusion is inescapable; that Sept knew that the stock was being assigned to him. He accepted it and signed a receipt for it. It represented the same shares of stock which he had turned over to the defendant by a transaction which he himself says was neither a sale nor a gift. While the first transaction may have been questionable, the return of the stock to Sept bears no indication of fraud. It cannot be said that the defendant continued to be the owner.

The trial court based its determination on a theory of estoppel and found "that the defendant, was the record owner of said stock when said bank became insolvent, August 13th, 1937, at which time he had knowledge of its financial condition and transferred his stock with that knowledge and by reason of the matters and things hereinbefore set forth, is now estopped from denying such ownership, and liability for assessment." The consideration of this point involves the statutes fixing the liability of stockholders and former stockholders. There being no...