George v. Wallace

• Decision Date: 08 December 1904
• Docket Number: 1,954-1,959.
• Parties: GEORGE et al. v. WALLACE et al. BROWNLEE et al. v. SAME. MORSMAN v. SAME. POPPLETON v. SAME. MORTON et al. v. SAME. McCAGUE INV. CO. et al. v. SAME.
• Court: U.S. Court of Appeals — Eighth Circuit

135 F. 286

GEORGE et al. v. WALLACE et al. BROWNLEE et al. v. SAME. MORSMAN v. SAME. POPPLETON v. SAME. MORTON et al. v. SAME. McCAGUE INV. CO. et al. v. SAME.

Nos. 1,954-1,959.

United States Court of Appeals, Eighth Circuit.

December 8, 1904

[Copyrighted Material Omitted]

These are appeals from a decree of the Circuit Court of the United States for the District of Nebraska enforcing the liability of the appellants as shareholders of the American National Bank of Omaha. In December, 1895, the managing officers of that bank anticipated the withdrawal, about the first of the following year, of a large amount of deposits. The condition of the bank was such that it had not available funds sufficient to meet the expected demands and to thereafter continue in business and comply with the requirements of the national banking act. Consequently on December 21, 1895, a contract was entered into with the Union National Bank of the same city, the terms of which, so far as need be recited, are as follows: The Union National assumed the payment of the liabilities of the American National to its depositors and on account of bills payable, and in return was to receive its cash, cash items, and such bills receivable as the former was willing to accept at par and without recourse. The difference between the aggregate of the amounts so received and the gross amount of liabilities assumed was to be represented by three nonnegotiable promissory notes of the American National, the payment of which was to be secured by a pledge of all of its remaining assets to Thomas L. Kimball as trustee. This contract was carried out. The Union National moved into and took possession of the quarters of the retiring bank. It was ascertained that the total indebtedness of the American National on account of deposits, demand and time certificates and bills payable, which were assumed by the Union National, amounted to $289,097.30; that the cash cash items, and bills receivable taken without recourse by the Union National aggregated $88,097.30; that a balance of $201,000 remained. To evidence this balance the president and cashier of the American National executed to the Union National three nonnegotiable promissory notes, each for $67,000, payable, respectively, in one, two, and three years from their date, December 23, 1895. In accordance with the contract the remaining assets of the American National were placed in the hands of Thomas L. Kimball, the president of the American National, as trustee for the contracting parties and for the protection of their respective rights under the contract. Kimball as trustee retained possession and controlled the collection of them until his death, which occurred during the pendency of the complainant's suit when his successor, James Burness, was appointed and thereafter continued in the performance of the trust duties. The assets which were pledged to the Union National, although of large amount in face value, were found to be of little actual worth. The execution of the contract of December 21, 1895, by the president and cashier of the American National, was directed by resolution of the board of directors of that bank. On January 14, 1896, an annual meeting of the shareholders of that bank was held, at which were represented 1,665 3/4 shares out of a total of 2,000. At this meeting a resolution was adopted instructing the directors to take action looking to the liquidation of the bank. On February 25, 1896, another meeting of the shareholders was held, at which were represented 1,696 shares, and at which a resolution for the voluntary liquidation of the bank was adopted by an affirmative vote of 1,639 3/4 shares. Thomas L. Kimball, theretofore appointed as trustee of the remaining assets of the bank, by the contract of December 21, 1895, was designated in the resolution as the agent and trustee of the shareholders in the liquidation proceedings. All of the subsequent proceedings provided by National fulfilled its obligations under the contract, having taken up the liabilities assumed by it. It being found that the trustee was meeting with little success in the collection of the assets, and that the principal of the note first maturing had been but slightly reduced, this suit was instituted August 8, 1898, by Sumner Wallace, a citizen of New Hampshire, as the assignee of the note, against the Union National, Thomas L. Kimball, trustee, and the amended bill the complainant sought, on behalf of himself and all of the other creditors of the American National, the winding up of the affairs of that bank, the determination of the amount due him upon his note, the subjection of the remaining assets to the payment of his claim, the ascertainment of all the creditors and the amounts of their claims, and the enforcement of the liability of the stockholders. The complainant had not reduced his note to judgment prior to the institution of the suit. During the progress of the suit the uncollected assets were sold by order of the court and the proceeds accounted for. Upon final hearing a decree was entered ascertaining the amounts due the complainant and the Union National after the application of all credits, the number of shares of stock held by each shareholder of the American National, and against each defendant shareholder for $97.23 per share of stock held by him. The amount of the recovery was appropriately apportioned between the two creditors. From this decree the appeals were prosecuted.

W. W. Morsman, Howard B. Smith, and Richard S. Horton, for appellants.

R. S. Hall (J. H. McCulloch and James H. Macomber, on the brief), for appellees.

Before SANBORN, THAYER, and HOOK, Circuit Judges.

HOOK Circuit Judge, after stating the case as above, .

The complainant, a citizen of New Hampshire, sued as the assignee of a nonnegotiable promissory note. His assignor, the payee of the note, is a national bank located in the state of Nebraska, and is therefore to be deemed a citizen of that state so far as concerns the question of jurisdiction. Most of the appellants are also citizens of Nebraska. This being so, some ground of federal jurisdiction other than diversity of citizenship must be found to exist to justify the maintenance of the suit against them. May it be found in the provisions of the acts of Congress relating to cases for the winding up of the affairs of national banking associations and to enforce the liability of shareholders of such associations as may have gone into voluntary liquidation? It is obvious that any case of such a character would be one arising under the laws of the United States of which, in the absence of some specific limitation of the general grant of jurisdiction, a Circuit Court would have cognizance irrespective of the citizenship of the parties.

The statutes which are pertinent to this question are as follows:

'Any (national banking) association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock. ' Section 5220 Rev.St. (U.S.Comp.St. 1901, p. 3503).

'That when any national banking association shall have gone into liquidation under the provisions of section five thousand two hundred and twenty of said statutes, the individual liability of the shareholders provided for by section fifty-one hundred and fifty-one of said statutes 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, c. 156, Sec. 2, 19 Stat. 63 (U.S.Comp.St. 1901, p.3509).

'That the jurisdiction for suits hereafter brought by or against any association established under any law providing for national banking associations, except suits between them and the United States, or its officers and agents, shall be the same as, and not other than, the jurisdiction for suits by or against banks not organized under any law of the United States which do or might do banking business where such national banking association may be doing business when such suits may be begun: and all laws and parts of laws of the United States inconsistent with this proviso be, and the same are hereby, repealed. ' Proviso to section 4, Act of July 12, 1882, c. 290, 22 Stat. 163 (U.S.Comp.St. 1901, p. 3458).

'That all national banking associations established under the laws of the United States shall, for the purpose of all actions by or against them, real, personal, or mixed, and all suits in equity, be deemed citizens of the states in which they are respectively located; and in such cases the circuit and district court shall not have jurisdiction other than such as they would have in cases between individual citizens of the same state. The provisions of this section shall not be held to affect the jurisdiction of the courts of the United States in cases commenced by the United States or by direction of any officer thereof, or cases for winding up the affairs of any such bank. ' Act of Aug. 13, 1888, c. 866, Sec. 4, 25 Stat. 436 (U.S.Comp.St. 1901, p. 514).

Section 2 of the act of June 30, 1876, was not repealed either by the act of July 12, 1882, or by the judiciary act of August 13 1888. The former authorizes suits against shareholders for the enforcement of their statutory liability, while the two latter relate exclusively to suits by or against the banking associations themselves. These subject-matters, while closely related, are in a legal sense quite different. But even if the later acts could be said to cover in a general way the purpose of...