Hightower v. American Nat Bank of Macon

• Decision Date: 03 December 1923
• Docket Number: No. 25,25
• Citation: 68 L.Ed. 334,263 U.S. 351,44 S.Ct. 123
• Parties: HIGHTOWER et al. v. AMERICAN NAT. BANK OF MACON
• Court: U.S. Supreme Court

263 U.S. 351

44 S.Ct. 123

68 L.Ed. 334

HIGHTOWER et al.

v AMERICAN NAT. BANK OF MACON.

No. 25.

Argued Jan. 25, 1923.

Decided Dec. 3, 1923.

Messrs. John E. Hall, Charles Akerman, and Augustus O. B. Sparks, all of Macon, Ga., for appellants.

Messrs. Orville A. Park and George S. Jones, both of Macon, Ga., for appellee.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

This is a suit in equity, in the nature of a creditor's bill, against a national bank and its shareholders, to enforce the liability of the shareholders for the bank's debts. The plaintiff is another national bank, and sues on behalf of all creditors, although insisting it is the only one. The District Court dismissed the bill as not stating a cause of action (246 Fed. 721 and 248 Fed. 187); but the Circuit Court of Appeals thought the bill good and reversed that decree (254 Fed. 249, 165 C. C. A. 537). The defendants answered; the evidence was taken before a master and reported with advisory findings, and a decree was entered by the District Court establishing the plaintiff's claim as a debt—the only unsettled obligation—of the defendant bank, and awarding recoveries from the several shareholders in sums conforming to their holdings. That decree was affirmed by the Circuit Court of Appeals (276 Fed. 371), and the defendants appealed to this

The record is a large one, and shows that the parties brought out everything of an evidential character bearing on the issues. On all questions of fact the master and the two courts below were in full accord, and there was ample evidence to sustain their findings.

Both banks were located at Macon, Ga., the plaintiff being known as the American National, and the other as the Commercial National. In the summer of 1914 they entered into a contract looking to a winding up of the affairs of the Commercial National, and providing for a transfer of its assets to the American National, and the assumption and payment of its liabilities by the latter. When the suit was brought, all that was to be done under the contract was practically completed, save that the obligation, if there was such, to reimburse the American National for advancing moneys to pay the Commercial National's liabilities had not been fulfilled.

The questions presented to us for decision turn largely on the construction and legal effect of the contract, and are, first, whether the transfer of the Commercial National's assets was made by way of an outright sale, or by way of giving security for the repayment of the moneys advanced by the American National under the contract, and secondly, if repayment was required, whether that is a debt or engagement for which the Commercial National's shareholders are liable.

The statutes in connection with which the contract and these questions must be examined are as follows:

'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.' Rev. Stst. § 5151; Act Dec. 23, 1913, c. 6, § 23, 38 Stat. 273 (Comp. St. § 9689).

'Any [national banking] association may go into liquidation and be closed by the vote of its shareholders owning two-thirds of its stock.' Rev. Stat. § 5220 (Comp. St. § 9806).

'When any national banking association shall have gone into liquidation under the provisions of section 5220, * * * the individual liability of the shareholders provided for by section 5151 * * * may be enforced by any creditor of such association, by bill in equity, in the nature of a creditor's bill,' etc. Act June 30, 1876, c. 156, § 2, 19 Stat. 63 (Comp. St. § 9807).

The contract was made in pursuance of resolutions passed by the directors of both banks, and was ratified and approved by a resolution of the Commercial National's shareholders. These resolutions and the contract are all set forth at length in the opinion of the Circuit Court of Appeals delivered on the first appeal to that court (254 Fed. 249, 165 C. C. A. 537), and need not be reproduced here.

The primary purpose in what was done was to relieve the Commercial National from an existing embarrassment, to conserve its assets, and to subserve the interests of its creditors and stockholders. That bank, although having assets thought at the time to be in excess of its liabilities, was in need of very substantial assistance. It had made excessive and improvident loans, had borrowed beyond an admissible limit, had permitted its available cash to fall below a reasonable minimum, had been criticized by the Comptroller for these departures, had become the subject of disturbing rumors and was not in condition to withstand a run by depositors. It had sought assistance from the American National, and the latter had manifested a disposition to help within prudent limits. Various courses had been informally suggested without receiving definite approval, among them being a voluntary liquidation of the Commercial National under the statute before cited, a consolidation of the two banks, an outright sale of the Commercial National's assets to the American National at an agreed or fixed valuation, and a transfer of the assets, or a large part of them, to the American National as collateral to secure repayment to it of moneys to be advanced by it to meet the Commercial National's needs. All of these proceeded on the theory that the depositors and other creditors of that bank should be paid as and when payment was demanded, that money in large amounts would be required for the purpose, and that the money should be provided or obtained in a way which would permit an orderly and advantageous realization on the Commerical National's assets and not involve any sacrifice of their real value.

The resolution of the directors of the Commercial National, as also that of the directors of the American National, was passed August 1, 1914; the contract was signed August 11, and the ratifying resolution of the Commercial National's shareholders was passed September 30.

The resolution of the Commercial National's directors left the questions of voluntary liquidation and consolidation to the consideration and action of the shareholders, but expressly authorized the bank's officers to transfer all of its assets to the American National 'as cash' (meaning at an agreed or fixed cash valuation) or 'as collateral' to secure that bank for moneys 'advanced' to pay liabilities of the Commercial National; 'the details' being committed 'to the discretion' of such officers and they being empowered to enter into any necessary or appropriate contract. The resolution of the American National's directors said nothing about consolidation and only incidentally referred to voluntary liquidation, but expressly assented to the assumption and payment by that bank of the liabilities of the Commercial National 'upon...