George Scott v. Parry Deweese

• Decision Date: 15 April 1901
• Docket Number: No. 148,148
• Citation: 181 U.S. 202,21 S.Ct. 585,45 L.Ed. 822
• Parties: GEORGE H. SCOTT, Plff. in Err. , v. PARRY L. DEWEESE (substituted for W. A. Latimer), Receiver of the First National Bank of Sedalia, Missouri
• Court: U.S. Supreme Court

181 U.S. 202

21 S.Ct. 585

45 L.Ed. 822

GEORGE H. SCOTT, Plff. in Err.,

v PARRY L. DEWEESE (substituted for W. A. Latimer), Receiver of the First National Bank of Sedalia, Missouri.

No. 148.

Argued January 24, 25, 1901.

Decided April 15, 1901.

Mr. Hiram F. Stevens for plaintiff in error.

Mr. William S. Shirk for defendant in error.

Mr. Justice Harlan delivered the opinion of the court:

This case went off in the circuit court upon a motion for a judgment in favor of the plaintiff upon the pleadings. The motion was sustained and judgment was entered in accordance with the prayer of the petition. That judgment was affirmed in the circuit court of appeals, Judge Sanborn dissenting. 33 C. C. A. 1, 14, 60 U. S. App. 720, 743, 89 Fed. Rep. 843, 856. The case is here upon writ of error sued out by the defendant Scott.

The case made by the petition is substantially as follows:

The First National Bank of Sedalia, Missouri, was organized on the 30th of October, 1865, with a capital stock of $100,000 and thereafter, until the 24th day of October, 1885, continued to do a banking business.

On the day last named the bank, pursuant to the provisions of the act of Congress approved July 12th, 1882 (22 Stat. at L. 162, chap. 290), extended the period of its succession for a term of twenty years from and after the 30th of October, 1885; and on the 24th of October, 1885, the Comptroller of the Currency issued his certificate stating that the bank had complied with the provisions of the act of Congress in thus extending the period of its existence, and was authorized to have succession until the close of business on the 30th of October, 1905.

On the 6th of September, 1890, the bank increased its capital stock in the sum of $150,000; and on the 17th of January, 1891, the Comptroller of the Currency certified that it had increased its stock to the above extent in accordance with the provisions of the act of May 1st, 1886 (24 Stat. at L. 18, chap. 73), and that such increase was approved; also, that the increase had been duly paid in as part of the capital stock of the company.

The bank continued to do a banking business upon the basis of a capital stock of $250,000 until the 4th day of May, 1894, on which day it became insolvent, closed its doors, and ceased to do business.

On the 10th of May, 1894, the original plaintiff, W. A. Latimer, was duly appointed receiver of the bank by the Comptroller of the Currency under the laws relating to national banking associations. The defendant in error, Deweese, was after that date substituted in his place as receiver.

In winding up and settling the affairs of the bank the Comptroller of the Currency determined that it was necessary to enforce the individual liability of stockholders and to collect from them an amount equal to 75 per cent of their stock at par value; and on the 13th day of April, 1895, that officer made an assessment and requisition upon shareholders for the sum of $187,500, to be paid by them ratably on or before the 15th day of May, 1895, and made demand upon the defendant Scott for $75 upon every share of the capital stock of the bank held or owned by him at the time of the failure of the bank as above stated, payable on or before the 15th day of May, 1895. The receiver was directed to enforce against shareholders the payment of the amounts assessed against them.

At the time of the failure and suspension of the bank the defendant Scott was the owner and holder of fifty shares of its capital stock of the par value of $100 each. The amount ratably due by him as such shareholder under the above assessment was $3,750.

On the 17th day of April, 1895, the receiver of the bank notified the defendant of the assessment and requisition and demanded payment of the same; but he did not pay that sum or any part thereof. Hence this action.

Judgment was asked for the sum of $3,750, with interest from May 15th, 1895, as well as for costs of suit.

The defendant in his answer admitted the organization of the bank and the extension of the period of its incorporation as alleged; also that the bank continued to do a banking business as set out in the petition, and that it had become insolvent and closed its doors. He also admitted the appointment and qualification of the receiver and the allegations of the petition as to the order of the Comptroller of the Currency.

Further answering, he alleged, that on September 6th, 1890, the bank, by a vote of the owners of two thirds of its capital stock, voted to increase that stock in the sum of $150,000; that it notified the Comptroller that the whole amount of such increase had been paid in; that on January 17th, 1891, that officer—then knowing that more than the entire capital of the bank was loaned, directly and indirectly, to its president, and that the amount so loaned had been steadily increased for several years up to the date just named by adding the interest which was not paid to the notes evidencing the loans or the renewals thereof, and who based his action wholly upon the notification from the bank—issued a certificate stating that the amount of the increase of capital was $150,000, that the same was paid in, and that such increase was approved; that thereafter, until May 24th, 1894, the bank continued to do business with a pretended capital of $250,000.

That 'in September, 1890, the officers of said bank informed and represented to defendant as follows: That said bank contemplated increasing its capital stock from $100,000 to $250,000; that said intended increase of capital was made desirable on account of the increasing business of said bank; that said bank was in a flourishing condition and earning large dividends upon its capital stock, and then had a surplus of $50,000 over and above its capital stock and all liabilities; that from said surplus such dividends would be declared as would make each of the 2,500 shares of stock worth the sum of $108.'

That relying upon such representations the defendant—never having held or owned any stock in the bank—subscribed for fifty shares of the proposed increase of $150,000, and in October, 1890, deposited in the bank the sum of $5,400.

That it was the understanding between the defendant and the bank that that sum was to be held by it and applied in payment of defendant's subscription for fifty shares, when all of the proposed increase was subscribed and the money therefor paid into the bank, 'and the issues of the shares of said increase could be legally made.'

That the bank gave to the defendant a receipt for said sum of $5,400, and about October 25th, 1890, delivered to him a certificate for fifty shares of 'its said pretended increase of capital;' and——

That the 'bank then, falsely and fraudulently and with intent to deceive defendant, represented to defendant that the said increase of capital had been lawfully made, and that the full amount thereof had been subscribed for and paid in in full, and defendant, deceived by said representations, and relying thereon, accepted and retained said certificate, and that defendant held and claimed as owner said certificate thereafter and until the closing of said bank, and in the years 1891 and 1892 received and retained alleged dividends aggregating 18 per cent of the par value of said certificate; that said alleged dividends were paid out of the money paid as aforesaid by defendant to said bank.'

The defendant further alleged that in September, 1890, and for many months prior thereto and afterwards, the bank was in fact wholly insolvent, had no surplus whatever, and at the time of the increase of the stock all of its capital had been lost,—its liabilities irrespective of its capital stock and alleged surplus exceeding its assets,—and it was earning no dividends upon its capital;

That said pretended increase of stock was never of any value or validity whatever; that only about two thirds of the increased stock was ever paid; that the officers of the bank made false entries in its books and records for the purpose of showing an apparent surplus, and declaring a dividend to themselves therefrom, turning the dividends into the bank in pretended payment for a large part of the increased stock;

That the whole transaction was a sham for the purpose of bolstering up an insolvent institution by obtaining large sums of money from the subscribers for the increased stock, and for the further purpose of 'watering' its capital stock and permitting its officers to appropriate to themselves, without paying anything therefor, a large part of such pretended increase, of all of which defendant had no knowledge whatever until long after the bank had closed its doors on May 4th, 1894, nor had defendant any information whatever that could in any way have created a suspicion thereof;

That the books and records of the bank during all the time after October 25th, 1890, had shown, and it had been made by them to appear, that all of the pretended increase of capital was paid in; and that from a time prior to the last-named date until the bank closed its books and records were systematically, skilfully, and cunningly falsified by its officers, and so kept that the defendant could not by the utmost diligence have ascertained the true condition of the bank; and,

That as soon as he discovered that the increased stock was not fully paid in, defendant disclaimed and denied that he was or ever had been a stockholder of the bank.

Such being the case made by the pleadings, we are to inquire whether there was error in giving judgment against the defendant.

By § 5151 of the Revised Statutes, 'the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.'

Within the meaning of that section,...