Hall v. Ballard

• Decision Date: 14 June 1937
• Docket Number: No. 4161.,4161.
• Citation: 90 F.2d 939
• Parties: HALL v. BALLARD.
• Court: U.S. Court of Appeals — Fourth Circuit

90 F.2d 939 (1937)

HALL v. BALLARD.

No. 4161.

Circuit Court of Appeals, Fourth Circuit.

June 14, 1937.

Robert L. Pennington, of Bristol, Va., and Harriet L. French, of Bluefield, W. Va., for appellant.

Albert S. Kemper, Jr., and George Richardson, Jr., both of Bluefield, W. Va. (Wm. T. Hancock and Richardson & Kemper, all of Bluefield, W. Va., on the brief), for appellee.

Before PARKER and NORTHCOTT, Circuit Judges, and WYCHE, District Judge.

WYCHE, District Judge.

This is an appeal from a judgment of the District Court for the Southern District of West Virginia, sustaining a plea of the statute of limitations interposed by appellee to an action by appellant for stockholders' liability on stock held and owned by appellee in the Peoples National Bank of Abingdon, Va.

One phase of the cause has heretofore been before the Circuit Court of Appeals of this Circuit in the case of Scott et al. v. Norton Hardware Company et al., reported in 54 F.(2d) 1047. The opinion and transcript of record in that case are made a part of the record in this appeal, and it appears therefrom that at a meeting of the directors of the Peoples National Bank of Abingdon, Va., held on April 2, 1926, upon the urgent advice of the National Bank Examiner, a contract was made with the First National Bank of Abingdon, under which the Peoples National transferred all of its assets to the First National, which agreed to pay in full the claims of the depositors and certain other indebtedness, and after reimbursing itself for the payments so made and the expenses incident thereto, to return the remaining of the assets, if any, to the Peoples National, or its liquidating agent. The contract further provided that the Peoples National should deliver to the First National a bond in the sum of $100,000, executed by nine of its directors and conditioned to indemnify the First National against any loss under the contract, which bond was duly executed and delivered. That contract obviated the necessity of a receivership and an immediate stock assessment, and which, in addition to protecting depositors and other creditors, was expected to result in salvaging something from its assets for the benefit of stockholders, the opinion having been expressed by the National Bank Examiner on the date of the agreement that there were ample assets to pay all the obligations of the bank, if handled by the First National Bank as a going concern. Thereafter, at a meeting of its stockholders held on May 20, 1926, it was decided by a vote of the required number of stockholders, to place the Peoples National in voluntary liquidation, and liquidating agents were appointed for that purpose under the provisions of 12 U.S.C.A. § 181 and note. On the 24th day of May, 1929, final judgments in favor of Norton Hardware Company and Norton Grocery Company were rendered against the Peoples National in the sum of approximately $4000. Executions were duly issued upon said judgments and returned unsatisfied on August 22, 1929. On November 4, 1929, H. H. Scott and G. A. Maiden, two of the directors of the Peoples National, who, along with seven other directors, had signed the bond to indemnify the First National against loss under the contract, were called upon by the First National to pay upon the bond the loss which that bank had sustained under the contract; and they were required to pay, and did pay to the First National the sum of $65,335.92. The First National had already collected $30,000 from another of the bondsmen; and this amount, together with the $65,335.92, paid by Scott and Maiden, reimbursed it for the loss which it had sustained under the contract. There then remained in its hands uncollected notes and other assets of the Peoples National of a face value of approximately $105,000, which, under the contract, belonged to the Peoples National, or its liquidating agent.

On the 22d day of November, 1929, Norton Hardware Company and Norton Grocery Company applied to the Comptroller of the Currency, under the provisions of 12 U.S.C.A. § 191, to appoint a receiver to take charge of the Peoples National, and to enforce the personal liability of its shareholders, said application being accompanied by the certificate of the Clerk of court of Wise county, Va., required by the foregoing statute, which application was denied by the Comptroller of the Currency on May 7, 1930, for the reason, as stated by him, that he felt that applicants should resort to their remedy of a bill in equity. Subsequently, on August 16, 1930, Norton Hardware Company and Norton Grocery Company filed a suit in equity in the District Court for the Western District of Virginia, in the nature of a creditor's bill, presumably under the Act of June 30, 1876, c. 156, § 2, 19 Stat. 63, 12 U.S.C.A. § 65, against the Peoples National Bank and its stockholders to enforce the personal liability of the stockholders of the Peoples National Bank, appellee not being served with process, but being classified in said suit as a nonresident stockholder. On September 12, 1930, H. H. Scott and G. A. Maiden filed an intervening petition in that proceeding, also in the nature of a creditor's bill, presumably under the foregoing statute, and asserted against the Peoples National and its shareholders their claim in the total amount of $65,335.92. In that intervening petition Scott and Maiden claimed the right of subrogation and asked that the assets of the Peoples National be placed in the hands of a receiver to be administered for their benefit, and that the statutory liability of the stockholders of the Peoples National be enforced so far as might be necessary for their reimbursement. The petition of Scott and Maiden was dismissed on January 21, 1931, by the District Judge, which order of dismissal was subsequently reversed by this court. 54 F.(2d) 1047.

The Circuit Court of this Circuit decided in that appeal that Scott and Maiden by reason of their payments under the bond occupied the position of creditors of the Peoples National, that they were entitled to subrogation to the rights of the First National as against the remaining assets of the Peoples National, and that they had the right either as creditors of the Peoples National, or by virtue of subrogation to the rights of the First National to enforce the statutory liability against the shareholders of the Peoples National. That cause was remanded for further proceedings in conformity with the opinion therein. Thereafter the issues were accordingly tried and resulted on July 17, 1934, in judgment being rendered against the Peoples National in favor of H. H. Scott for $25,334.31, and G. A. Maiden for $17,284, respectively, and adjudging the shareholders of the Peoples National to be liable to the extent of $100 for each share owned by them with interest from July 17, 1934, and appointing Leonard R. Hall receiver and giving judgment in his favor as such receiver for the benefit of Scott and Maiden against each of the shareholders who had been served with process in the cause and making an assessment against such of the other shareholders as were not served with process in the suit who were nonresidents of the state, and directing the receiver to collect enough money to discharge the judgments and costs of the proceedings from the shareholders not to exceed $100 for each share owned.

Thereafter, on July 25, 1935, Leonard R. Hall, as receiver of the Peoples National, filed a motion for judgment under section 5523, West Virginia Code of 1932 (which motion under the West Virginia statutes serves the double purpose of process and pleading), in the United States District Court for the Southern District of West Virginia, against E. S. Ballard, a resident of said district for the sum of $1,000, with interest, notifying Ballard in said motion for judgment that the said indebtedness was upon a stock assessment on ten shares of said stock held and owned by him in the Peoples National Bank of Abingdon, and notifying him of the proceedings that had been taken in the suit in equity filed by Norton Hardware Company and Norton Grocery Company and H. H. Scott and G. A. Maiden in the District Court for the Western District of Virginia. Ballard duly appeared, and, among other pleas, filed the plea of statute of limitations of the state of West Virginia. The District Court sustained this plea and dismissed the action.

The individual liability of shareholders in national banks was imposed by the provisions of the Act of June 3, 1864, c. 106, 12 U.S.C.A. §§ 63 and 64, under the provisions of which the Comptroller of the Currency was empowered to appoint receivers and enforce the liability of shareholders in the following cases: (1) Where the bank had refused to pay its circulating notes; (2) where it failed to maintain its capital at the minimum; (3) where it failed to maintain its reserve; (4) where it failed to redeem its circulating notes, or to select a place at which it would redeem them; (5) where it failed to dispose of its stock taken as security within six months; and (6) where it failed to pay up its capital stock and refused to go into liquidation. This act also authorized the closing and voluntary liquidation of national banks by the vote of its shareholders owning two-thirds of its stock. Act of June 3, 1864, c. 106, § 42, 13 Stat. 112, Rev. Stat. § 5220, 12 U.S.C.A. § 181 and note.

In 1876, Congress passed "an act authorizing the appointment of receivers of national banks, and for other purposes." Approved June 30, 1876, c. 156, 19 Stat. 63, 12 U.S.C.A. §§ 65 and 191.

Section 1 of that act empowered the Comptroller of the Currency, after due examination of the affairs of the bank, to appoint a receiver to proceed to close up the association and enforce the personal liability of its shareholders in the following cases: (1) When any national bank was dissolved and its charter forfeited, as prescribed in section 5239 of the Revised Statutes (12 U.S.C.A. § 93); (2) when...