Hamilton v. Offutt

• Decision Date: 03 June 1935
• Docket Number: No. 6436.,6436.
• Citation: 64 App. DC 385,78 F.2d 735
• Parties: HAMILTON v. OFFUTT et al.
• Court: U.S. Court of Appeals — District of Columbia Circuit

64 App. DC 385, 78 F.2d 735 (1935)

HAMILTON v. OFFUTT et al.^*

No. 6436.

United States Court of Appeals for the District of Columbia.

Argued May 13, 1935.

Decided June 3, 1935.

Angus W. McLean and Charles E. Wainwright, both of Washington, D. C., for appellant.

Charles V. Imlay and Ross H. Snyder, both of Washington, D. C., for appellees.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

GRONER, Associate Justice.

This appeal involves the single question: Is a stockholder of the Potomac Savings Bank of Georgetown, D. C., an insolvent Virginia banking corporation, subject to double assessment under the District of Columbia laws?

The bank was incorporated in Virginia in 1903 "to conduct a savings bank in the city of Washington." It established a banking house in Washington and nowhere else. Its liabilities, contracts, debts, and engagements were incurred there, and its assets are located there.

It is agreed that neither the articles of incorporation, the by-laws, nor any provision of the Constitution, statutes, or laws of the commonwealth of Virginia, create a liability on stockholders of a Virginia banking corporation for an assessment on full-paid shares of the capital stock owned or held by them.

After the President's Proclamation of March 6, 1933 (12 USCA § 95 note), the bank was not licensed to open and never thereafter conducted a banking business. On March 14, 1933, a conservator was appointed, and on January 18, 1934, appellant was appointed by the Comptroller of the Currency as receiver and since has been in charge of the bank's affairs in the process of liquidation.

When the bank closed, appellees were holders and record owners, as trustees, of 2,044 shares of the capital stock of the bank of a par value of $20 per share. On July 5, 1934, the Comptroller, having officially found the bank to be insolvent, levied a 100 per cent. assessment on all stockholders.

This action was brought by the receiver to collect the assessment on the stock owned and held by appellees.

The trial court held against the receiver, and this appeal was taken.

We have lately had occasion in two cases to pass on the right of a receiver of a bank created by one of the United States, and doing a banking business exclusively in the District of Columbia, to recover the double liability of a stockholder of the bank where the law of the state of incorporation expressly imposed such liability.

The first of these cases is Washington Loan & Trust Co. v. Allman, 63 App. D. C. 116, 70 F.(2d) 282, 284. There the bank was incorporated under the laws of Arizona. It established a banking house in Washington — as its charter allowed — and did business there and nowhere else. The Comptroller, having determined it was insolvent, took possession, appointed a receiver, and made an assessment on the shareholders. Suit was brought by the receiver to recover the amount of the assessment. The defense was that, though the charter of incorporation and the constitution of Arizona imposed double liability, the right to sue was governed by a statute of that state forbidding a receiver appointed outside of Arizona to enforce the liability. We answered this by saying that title 5, § 298, of the D. C. Code of 1929, gave authority to the Comptroller to take possession of an insolvent state bank having a banking house in the District of Columbia and to enforce the stockholder liability to the same extent as if it were a national bank. But we were careful to point out that the Allman Case did not involve the right of Congress to impose double liability on the shareholder of a foreign corporation. The question we were called on to decide was the narrower one — whether a receiver appointed by the laws of the place in which the corporation is doing business, and where its property is located, may, in order to pay its debts, enforce an acknowledged liability. As to this, we said the Arizona law and the charter of the bank "created a contract on the part of the shareholders which followed them wherever they might go, and, in the event of the bank's insolvency, made them liable to respond at the instance of a receiver lawfully appointed at the place where the business was done, as completely and as fully as if the appointment had been made in Arizona."

In the case of Harper v. Moran, Receiver, 64 App. D. C. 210, 76 F.(2d) 980, 981, decided March 4, 1935, the bank, as in the Allman Case, was an Arizona corporation. Its charter provided that its principal place of business should be in the city of Washington, and it did maintain a banking house in Washington and did conduct a banking business there. A stockholder was sued on an assessment by the Comptroller, and it was attempted to escape the rule announced in the Allman Case on the ground that, under the Arizona statutes as construed by the highest court of that state, there is no obligation upon a stockholder to pay anything until the precise amount he is liable to pay has been determined by a court of competent jurisdiction. And so it was insisted that no action could be maintained by a receiver appointed by the Comptroller, unless the amount was first determined in a proper proceeding for that purpose.

We denied this contention and held that the determination of the Comptroller constituted a judicial ascertainment of the extent of insolvency and the pro rata amounts due by stockholders. In deciding the question, we said: "The answer, as we think, turns upon the provisions of the District of Columbia laws. When the bank obtained a charter of incorporation in Arizona for the express purpose of doing business exclusively in the District of Columbia, it contracted with reference to the laws of the District, and this is true, as well, as to the contracts of the stockholders between themselves. This, as we think, is the rule laid down by the Supreme Court in Pinney v. Nelson, 183 U. S. 144, 22 S. Ct. 52, 55, 46 L. Ed. 125." And then, referring to title 5, § 298, D. C. Code of 1929, we said: "The provision in question is notice to every banking organization incorporated under the laws of one of the states that, in coming into the District of Columbia to do business, it submits itself to the supervision and control, both in operation and in insolvency, of the Comptroller to the same extent as if it were a national bank."

The effect of these two cases is to hold that wherever the double liability of a stockholder is created by charter or the law of the state of incorporation, and the corporation engages in business in the District of Columbia, the liability may be enforced in the District by a receiver appointed by the Comptroller, in a suit against the stockholder.

From what has been said, it is clear that the question on which the present case turns is not controlled by anything decided in the Allman and Harper Cases. Here there is neither by-law nor corporate authority for exacting the double assessment and so, as we said in the outset, the real question is whether the laws of the District of Columbia create the liability.

The particular statute on which the receiver relies is title 5, § 298, of the D. C. Code of 1929.¹ By reference to that statute it will be seen that the Comptroller is given power, when in his opinion it is necessary, to take possession of any bank "for the reasons and in the manner and to the same extent as are provided in the laws of the United States with respect to national banks." It is clear that the words "for the reasons" will include insolvency of the bank, impairment of its capital stock (section 5203, R. S. 12 USCA § 87), nonmaintenance of its reserve (section 5191, R. S. 12 USCA § 143), forfeiture of its franchise (Act June 30, 1876, § 1 12 USCA § 191), and many other grounds which Congress has named as sufficient to authorize taking possession of a national bank; and it is equally clear that the words "in the manner and to the same extent" include the right to appoint a receiver, to collect the debts, sell the property, and likewise to take all necessary steps in the liquidation of the affairs of the bank; and — as we held in the Allman and Harper Cases — the enforcement of the personal liability of shareholders where there is such personal liability. But it is also true that there is nothing in the statute itself which expressly creates such liability, and so, admittedly, only by reading R. S. § 5151, as amended,² into the act can such liability be found.

We think there is no warrant for this. It is fundamental that the liability of a stockholder is determined by the charter of incorporation and the laws of the state in which incorporation is had. In Morawetz on Corporations (2d Ed.) § 874, it is said the rule is, if the constitution to which a corporator has agreed does not provide for individual liability to creditors, he cannot be charged with individual liability anywhere. But, while this is true as a general proposition, it is also true, as is stated by Mr. Justice Brewer in Pinney v. Nelson, supra, the parties in making a contract...