Frank v. Giesy

Decision Date27 January 1941
Docket NumberNo. 9429.,9429.
Citation117 F.2d 122
PartiesFRANK et al. v. GIESY et al. JENSEN et al. v. SAME. LORD et al. v. SAME.
CourtU.S. Court of Appeals — Ninth Circuit

Ralph H. King, of Portland, Or. (Joseph, Veatch & Bradshaw and McCamant, Thompson, King & Wood, all of Portland, Or., of counsel), for appellants Frank et al.

Latourette & Latourette and Lincoln S. Ferris, all of Portland, Or., for appellees.

Before WILBUR, GARRECHT, and HEALY, Circuit Judges.

HEALY, Circuit Judge.

Appellants, shareholders of the American National Bank of Portland, appeal from a judgment against them predicated on their shareholders' liability under 12 U.S.C.A. § 63.1

In 1923 appellees leased premises in Portland to the Broadway Bank, a state bank, for a term of 30 years. Later the Broadway Bank became a national bank under the name of Portland National, and still later, in 1929, it was consolidated with the American Exchange Bank, a state bank, to form the American National Bank, of which appellants are shareholders.

Upon the consolidation the leased premises ceased to be used as bank quarters. The lease was carried as an asset by the American National Bank until 1932, when the Comptroller of the Currency directed that it be disposed of. In obedience to the order the lease was assigned to affiliates of the American National. The assignment, made without the consent of the lessors, was in violation of a provision of the lease, but was later ratified by the lessors in consideration of the bank's promise "to remain bound and obligated" under the terms and conditions of the lease. Ultimately the capital of the American National became impaired and in consequence the bank on June 20, 1933, entered into a contract with the First National Bank of Portland whereby the latter agreed to accept the assets and assume the liabilities of the American National upon condition that the American National furnish an added sum in cash and provide guarantors to protect the First National against loss on certain of the assets accepted and on any liabilities not specifically assumed. The First National undertook no liability on account of the lease. As the means of raising the additional cash needed to effect the agreement the American National sold to Aaron Frank, one of the appellants, and others, certain doubtful assets not taken over by the First National, and these persons also furnished the requisite guaranty. After having disposed of its assets in this manner, the American National, in July, 1933, went into voluntary liquidation. 12 U.S.C.A. § 181.

The lease in question provided for the payment of graduated rentals ranging from $450 per month for the first five years to $600 for the last five, and the lessee was required to pay all taxes, assessments and insurance premiums. Right of reentry was reserved in the lessors in the event of default. There were no specific covenants for indemnity in such event, or for the payment of liquidated damages.

The American National paid the rent to the date of its assignment of the lease, and thereafter the rent was paid by the assignees until October, 1933, at which time the assignees abandoned the premises. The lessors promptly brought suit in the state court against the American National and the assignees to recover delinquent taxes plus the rentals for October and November, 1933, recovering judgment therefor in the sum of $10,163.54. Thereafter the lessors began action in the state court against the American National and the First National to impress a trust on the assets transferred to the latter for the discharge of this judgment and of rentals for intervening months. The trial court granted the relief sought, but on appeal it was held that the assets in the possession of the First National were subject to such claims only as were in existence at the time of the transfer. However, the judgment was affirmed in its entirety as to the American National. Giesy v. American National Bank, 152 Or. 516, 53 P.2d 20, certiorari denied 299 U.S. 547, 57 S.Ct. 10, 81 L.Ed. 402. This judgment, to the extent that it was binding on the assets, was ultimately paid by Frank and his co-guarantors.

Prior to the final disposition of the case mentioned the lessors commenced a third action in the state court to collect rents, taxes, and insurance premiums accruing after January, 1934. The suit was contested but resulted in the rendition of judgment against the American National for $31,004, which included all amounts delinquent under the lease to May 1, 1937, less sums obtained from occasional tenants. As of the latter date the lessors elected to terminate the lease.

The aim of the present suit against the shareholders is to obtain satisfaction of this judgment. The suit is in the nature of a general creditors' bill. Judgment is sought against all of the shareholders in the full amount of their holdings. In their answer appellants alleged as their primary defense that "neither said judgment nor any part thereof is founded on any debt, contract or engagement of said American National Bank duly made in the exercise of its corporate powers or in the due course of its business."

The court made findings substantially in line with the foregoing summary and concluded that the plaintiffs were entitled to judgment against each defendant individually to the extent of the par value of his stock, provided that the judgment against any one stockholder, and the aggregate satisfaction to be derived from all, should not exceed the amount owing with interest. Judgment was entered accordingly.

Preliminarily, there is disagreement here as to the scope of certain admissions of appellants recited in a pre-trial order. In a measure these recitals are inconsistent and we will not attempt to resolve the dispute concerning the effect of the order but will for the most part give appellants the benefit of the doubt.

(1) They contend first that the court had no jurisdiction to treat the suit as one for the recovery of a definite sum due the plaintiffs. They say that such an action must be at law, and that the sole province of the court in equity was to ascertain the total indebtedness of the American National and assess the shareholders in the amounts sufficient to satisfy the debt, the money thus collected to constitute a trust fund for all creditors proving claims.

We think, in the present circumstances, there was substantial compliance with the statute. It provides that "when any National Banking Association shall have gone into liquidation under the provisions of section 181 of this title, the individual liability of the shareholders provided for by section 63 of this title may be enforced by any creditor of such association, by bill in equity, in the nature of a creditor's bill, brought by such creditor on behalf of himself and of all other creditors of the association, against the shareholders thereof, in any court of the United States having original jurisdiction in equity for the district in which such association may have been located or established." Act of June 30, 1876, 19 Stat. 63, 12 U.S.C.A. § 65. In such suit the appointment of a receiver is not essential. Richmond v. Irons, 121 U.S. 27, 7 S.Ct. 788, 30 L.Ed. 864; Braun v. Limerick National Bank, D.C., 9 F.Supp. 816, 817.

Here the bill alleges that it is brought by the plaintiffs "on behalf of themselves and all other creditors of the bank." The record does not disclose that notice was given for the presentation of claims nor did any creditors appear by intervention or otherwise. But the complaint alleges, the answer admits, and the court found that all the liabilities of the bank with the exception of the lease were assumed by the First National. Presumably these liabilities have been discharged. Indeed, the trial appears to have been had upon the general assumption that the plaintiffs were the sole remaining creditors. But it is claimed here, for the first time, that appellant Frank and his co-guarantors, who satisfied the previous judgment recovered by appellees, are themselves creditors. The argument proceeds upon the theory of subrogation and on the authority of Scott v. Norton Hardware Co., 4 Cir., 54 F.2d 1047; Hall v. Ballard, 4 Cir., 90 F.2d 939.

The suggestion that these persons are creditors is an obvious afterthought. Frank, although a party to the case, made no claim below that he is a creditor. We do not know who the other supposed guarantors are. It may well be that they, too, are stock-holders of the American National and parties to the suit. In any event the issue is injected too late to be of service to appellants.

(2) It is next argued that the statutory liability of the shareholders is ratable or proportional, and that the court erred in entering judgment against certain shareholders in the full amount of their stock while letting others go free.

The vissicitudes of the statutes imposing double liability on the shareholders of national banks is reviewed in American Trust Co. v. Grut, 9 Cir., 80 F.2d 155, and the ground need not be gone over again. Prior to the adoption of the applicable statute, in 1913, the shareholders were "held individually responsible, equally and ratably, and not one for another." Act of June 3, 1864, 13 Stat. 102. In United States ex rel. Citizens' Nat. Bank v. Knox, 102 U.S. 422, 26 L.Ed. 216, it was held that the liability imposed was several and proportional. The court noted the obvious and striking difference between the language of the 1864 act and that of the previous act of February 25, 1863, 12 Stat. 668, which provided simply that each shareholder should "be liable to the amount, at their par value, of the shares held by him."

Equally obvious and striking is the difference between the wording of the 1913 statute and the act it supplanted. The governing statute provides that the shareholders "shall be held...

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