Fitzpatrick's Gdn. v. 1ST Nat. Bk. Whitesburg's Rec.
| Citation | 256 Ky. 93 |
| Parties | Fitzpatrick's Guardian v. First National Bank of Whitesburg's Receiver. |
| Decision Date | 30 October 1934 |
| Court | United States State Supreme Court (Kentucky) |
1. Banks and Banking. — Bank stockholders' liability is contractual in nature, though provisional obligation for assessment of stock is imposed by law and controlled by statute, and agreement to respond contingently is implied by purchase of stock and is as obligatory as original liability to pay for it.
2. Banks and Banking. — To exonerate bank shareholder from individual liability for stock assessment, transfer of stock must be made to one who can succeed to such liability and become legally bound to meet assessments.
3. Banks and Banking. — To exonerate bank shareholder from individual liability for stock assessment, assent or agreement is element of transfer of stock and hence infant as transferee does not become personally liable for assessment, since infant does not have necessary legal capacity to bind himself for such contingent liability.
4. Banks and Banking. — Where bank stock is bequeathed or descends to infant, guardian may accept it and hold title, although there arises no personal liability either on part of infant or guardian for assessment in case of bank's insolvency (Ky. Stats., sec. 4706; 12 USCA sec. 66).
5. Banks and Banking. — Distribution and transfer of national bank stock of deceased stockholder to guardians of his heirs was valid, so that deceased's estate did not remain liable for stock assessment, though estates of legatees who were stockholders through guardians at time of insolvency may be liable.
6. Banks and Banking. — Where deceased father's national bank stock was inherited by children and subsequently stock assessment was levied, undivided interest of one infant child in land inherited from father was not liable for assessment against stock distributed to brothers and sisters.
7. Banks and Banking. — Ordinarily, as to bank and its creditors, transfer of stock on books is necessary to make transferee a stockholder and to relieve record owner of liability for assessment.
8 Banks and Banking. — Liability of record owner of bank stock for stock assessment does not terminate with his death, even though estate was settled and distributed prior to insolvency of bank.
9. Banks and Banking. — Estate of deceased record owner of bank stock may be followed into hands of distributees and amount of stock assessment enforced to extent of estate so reaching distributees.
10. Banks and Banking. — Where stock assessment against national bank stock inherited by infant child from father had been paid, her undivided interest in land inherited from father was not liable for stock assessment against stock formerly held by father, except as to stock still held in deceased father's name.
Appeal from Letcher Circuit Court.
ASTOR HOGG for appellant.
HARRY L. MOORE for appellee.
OPINION OF THE COURT BY STANLEY, COMMISSIONER.Reversing.
When J.D. Fitzpatrick died in August, 1927, he owned fifty-five shares of stock of the First National Bank of Whitesburg. He was survived by his widow and five minor children, but his widow died shortly afterward. Pursuant to an order of court made in September, 1930, in a suit settling the estate, fifty-three shares of the stock were distributed among the guardians of the respective children as heirs, including twelve shares to the guardian of Pauline Fitzpatrick. This stock was accordingly reissued and promptly transferred on the bank's register of stockholders to the guardians. The remaining two shares continued to be registered in the name of the decedent. In January, 1931, Pauline's guardian sold her twelve shares to S.L. Bastin and they were duly transferred to him on the books of the bank. Thus was the stock registered when the bank was closed for insolvency and placed in the hands of a receiver for liquidation in June, 1932. In a short time an assessment and requisition of 100 per cent. was made by the comptroller of the currency on the stockholders.
This suit was instituted by the receiver against Fitzpatrick's administrator and his children and their guardians to recover of the administrator $4,300 on account of the assessment against forty-three shares of stock. The petition further asked that a sufficiency of certain real estate owned by the decedent at the time of his death and which descended to his children be sold to satisfy the claim. It will be observed that this was twelve shares less than the number originally held, which is represented by the stock transferred to Pauline's guardian and by him to Bastin eighteen months before the bank became insolvent. The effect of the suit, however, is to subject her inheritance to the satisfaction not only of the two shares of stock remaining in the name of her deceased father, but of the forty-one shares which had long before been transferred to her brothers and sisters. It is further stated in the petition that the administrator was claiming to have fully administered the estate and had nothing in his hands as such fiduciary.
The separate answer of Pauline's guardian set up the foregoing facts in greater detail than that of the petition, and furthermore alleged that Bastin had fully paid and satisfied the assessment against the twelve shares once owned by her. It is also shown that at the death of Fitzpatrick and at the time of the distribution and transfer of the stock the bank was a solvent and going concern. A demurrer to the answer was sustained and, upon a failure to plead further, it was dismissed. The appeal is from that judgment.
The argument of the appellee and the ground upon which the judgment rests, as we understand, is: (1) The obligation of a stockholder in a bank to respond to an assessment in consequence of insolvency is contractual and is not extinguished by his death, but like other obligations survives and is enforceable against his estate and any property which may have been distributed to his heirs or devisees; (2) that such stock must be transferred to a person not only legally capable of holding it, but legally bound to respond when assessments are made and who is not at liberty to repudiate the obligation; (3) that the transfer or distribution of the stock in this case to the infants was ineffectual to relieve the estate since they were incapable of assenting and were without legal capacity to assume the liability that attached to the stock; (4) hence the decedent's estate and its assets or that part which descended to his heirs are subject to appropriation for the satisfaction of the entire obligation.
Though the provisional obligation for an assessment of stock is imposed by law and controlled by the terms of the statute, yet the liability is regarded as contractual in its nature. The agreement to respond contingently is implied by the purchase of the stock and is just as obligatory as the original liability to pay for it. Michie on Banks & Banking, vol. 2, page 108, sec. 22; Richmond v. Irons, 121 U.S. 27, 7 S. Ct. 788, 30 L. Ed. 864; First National Bank v. Hawkins, 174 U.S. 364, 19 S. Ct. 739, 43 L. Ed. 1007; McDonald v. Thompson, 184 U.S. 71, 22 S. Ct. 297, 46 L. Ed. 437; Austin v. Strong, 117 Tex. 263, 1 S.W. (2d) 872, 3 S.W. (2d) 425, 79 A. L.R. 1528.
Therefore, it is a sound conclusion that to exonerate a shareholder from his individual liability, the transfer of the stock must be made to one who can succeed to such liability and become legally bound to meet the assessments. Assent or agreement is an element to the transfer. It has been held that where the mere transfer of the stock of a national banking association on its books to one without his knowledge or consent, he cannot be held to have assumed or incurred the liability and may repudiate the transfer. Michie on Banks & Banking, vol. 2, page 170, sec. 132, page 186, sec. 448; Keyser v. Hitz, 133 U.S. 138, 10 S. Ct. 290, 33 L. Ed. 531; Finn v. Brown, 142 U.S. 56, 12 S. Ct. 136, 35 L. Ed. 936; Austin v. Strong, supra. And, accordingly, since an infant does not have the necessary legal capacity to bind himself for this contingent liability as a stockholder in a national bank, either by his own volition or by having it thrust upon him by a direct transfer, he does not become personally liable for the assessment. Clark v. Ogilvie 111 Ky. 181, 63 S.W. 429, 23 Ky. Law Rep. 552; Aldrich v. Bingham (D.C.) 131 F. 363; Foster v. Chase (C. C.) 75 F. 797; Kerr v. Urie, 86 Md. 72, 37 A. 789, 38 L. R.A. 119, 63 Am. St. Rep. 494;...
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