Hayden v. Thompson

• Citation: 67 F. 273
• Parties: HAYDEN v. THOMPSON et al.
• Decision Date: 23 April 1895
• Court: U.S. District Court — District of Nebraska

67 F. 273

HAYDEN v. THOMPSON et al.

United States Circuit Court, D. Nebraska.

April 23, 1895

Mr Lamberson and Mr. Harvey, for plaintiff.

Mr Flansburg, Mr. Ames, Mr. Hall, Mr. Magoon, and Mr. Deweese for defendants.

Before DUNDY and RINER, District Judges.

RINER District Judge.

The bill in this case is filed by the receiver of the Capital National Bank of Lincoln against the stockholders of the bank to recover dividends paid by the bank to the stockholders at different times from its organization until the bank became insolvent, in January, 1893.

The principal allegations of the bill, briefly summarized, are that from the date of its organization up to the date of its failure the bank did a large business, and received large sums of money on deposit; that its expense account was large and from the date of the organization to the date of the failure it met with and sustained great losses in business, and that by reason of these losses the capital stock became and was greatly impaired; that at no time since its organization had there been any earnings or profits in any given year; that notwithstanding the fact that there were no net earnings or profits from which a dividend could be declared, the directors, for the years the bank was transacting business, unlawfully and fraudulently, and with the intent to further impair the capital of the bank, and to defraud its creditors, declared certain dividends in various amounts, which are each set out in the bill pro rata to the stock held by the respective stockholders, defendants in this case; that the stockholders accepted and retained the dividends so declared, and that the bank was insolvent at each and all of the times when these dividends were declared and paid. The bill then proceeds to set out in detail a history of the transactions of the bank in declaring and paying the dividends to shareholders unlawful and fraudulent, and that the stockholders to be ordered to return and pay back the dividends to the receiver, to be paid out and apportioned among the creditors of the bank. To this bill a number of the defendants have demurred; others have answered, pleading the statute of limitations, and the right to set off the amount of their deposits in the bank against any claim that the court may find due from them to the bank upon these dividends.

Several very interesting questions were urged and were fully discussed at the argument. We do not find it necessary however, in disposing of the case, to consider all of the questions presented. It is contended by the defendants that in some instances all of the dividends paid to them as stockholders of the bank, and in other cases a part of the dividends, are barred by the statute of limitations of this state, and, in this last-mentioned class, that, where dividends are not barred, the parties have the right to set off their liability, if any, for these dividends, against the indebtedness due them from the bank upon their deposits in the bank at the date of its failure. The bill seeks to charge the defendants with this liability upon the ground that in each instance when they accepted the dividend it was accepted and received by them impressed and charged with a trust in favor of the bank and its creditors, and that, therefore, although the defendants are not charged with any participation in the alleged fraud of the directors, they are, nevertheless, liable to the extent of these dividends, for the reason that the effect of their payment was to diminish the capital stock. The rule is well settled that express trusts are not within the statute of limitations, for the reason that the possession of the trustee is the possession of his cestui que trust. This rule, however, is subject to this qualification: that the time begins to run against a trust as soon as it is openly disavowed by the trustee insisting upon an adverse right and interest, which is clearly and unequivocally made known to the cestui que trust. Hence it follows that, in the case of an implied or constructive trust, unless there has been a fraudulent concealment of the cause of action, lapse of time is a complete bar, both in equity and at law. Recognizing this rule, it was contended by counsel for the plaintiff at the argument that the allegations of the fraudulent action of the directors in declaring these dividends charged the dividends with a trust in the nature of an express trust, and that, because of the fraud of the of the directors in declaring the dividends, they bring themselves within the twelfth section of the statute, and the time, therefore, did not begin to run until after the discovery of the fraud by the receiver, who represents the creditors of the bank. To this proposition we cannot assent. These stockholders are not charged with any fraudulent act in connection with declaring these dividends. The only allegations of fraud in the bill are against the directors as officers of the bank. These dividends were paid to the stockholders, accepted and retained by them openly and notoriously as their own from the...