In re Western Bank & Trust Co.

• Decision Date: 20 June 1908
• Docket Number: 716.
• Citation: 163 F. 713
• Parties: In re WESTERN BANK & TRUST CO. et al.
• Court: U.S. District Court — Northern District of Texas

163 F. 713

In re WESTERN BANK & TRUST CO. et al.

No. 716.

United States District Court, N.D. Texas.

June 20, 1908

Etheridge & McCormick, for petitioning creditors.

Davis &amp Meador, for intervening creditors.

M. M Crane, Locke & Locke, Coke, Miller & Coke, Murphy Townsend W. A. Kemp, Henry Jackson, U. F. Short, W. J. McKie, Gregory Batts & Brooks, Hogg, Gill & Jones, M. B. Templeton, Terry, Cavin & Mills, C. K. Bell, Finley, Knight & Harris, Whitehurst & Whitehurst, W. W. Wilkinson, and John Spellman, for respondents.

MEEK District Judge.

It is sought in this involuntary proceeding to have the Western Bank & Trust Company decreed a partnership, and as such to have it and the members thereof adjudged bankrupt.

This concern, as a corporation, has been engaged in a general banking business at Dallas, Tex. In the exercise of corporate functions it issued and there is now outstanding all of the shares of the capital stock of $500,000. Shares of this stock were held by approximately 70 persons, whose residences are scattered throughout the United states. It is sought to have these shareholders held to be members and copartners in the business of the Western Bank & Trust Company and to fix upon them a partnership liability for the debts and obligations of that concern.

In the first week of May, I listened to able and exhaustive arguments on the part of the attorneys, both for the petitioning creditors and the respondents, and have since given close attention to learned briefs submitted by them. I may say no case has ever been more thoroughly developed before me either in oral argument or by printed brief. There were involved so many questions demanding investigation preliminary to the conclusions reached that I will not undertake to set forth in extenso the reasons upon which I rest the decision of the case, nor to review conflicting authorities. To do so would be a wearisome elaboration. I will not do more than discuss the points deemed by me to be vital and controlling.

1. On April 11, 1873, the Legislature of the state of Texas, by special act, granted a charter to the City Bank of Sherman. This charter included more than one purpose as the object of incorporation. It vested the corporation with banking privileges as well as with certain trading privileges. It is admitted by petitioning creditors that the charter thus granted was duly accepted and acted upon by the incorporators, and that in pursuance thereof the City Bank of Sherman was created and established at Sherman, Tex. Those who in 1902 were instrumental in promoting and establishing the Western Bank & Trust Company, as such, in the banking business at Dallas, had for that purpose theretofore secured control of the charter and rights of the City Bank of Sherman by purchase of nearly the whole of the outstanding shares of its capital stock. To change the name and location of the bank it became necessary to amend its charter. There was no warrant of authority for such amendment unless it could be found in the general laws of Texas. Resort was had to the provisions of article 647 of title 21 of the Revised Statutes of Texas of 1895, relating to corporations.

Under the provisions of section 19 of the final title of the Revised Statutes of 1879 (page 719), as well as under the provisions of the same section and title of the Revised Statutes of 1895, it is necessary to construe article 647 as a continuation of section 10 of article 2 of the incorporation act of 1874 (Laws 1874, p. 122, c. 97). Article 647 differs somewhat in phraseology from that part of section 10 of the original act now incorporated in article 647. As the language used in the original section 10 is controlling, I quote that part of it now covered by article 647:

'Any corporation organized under the provisions of this act, or any private corporation or company incorporated by special act of the Legislature, which said company or corporation would have been authorized to incorporate itself under the provisions of this act, any such company or association or corporation may amend or change their articles of incorporation in the same manner that this act requires for the original organization of a body corporate, to-wit:

By filing, authenticated, as by this act required, the amendments or changes to the original charter with the Secretary of State; and in case of a corporation created by special act of the Legislature, said corporation shall cause the changes or amendments to their charter to be authenticated as required by this act, and filed with the Secretary of State, together with their original charter, or such amendments as have been made by special act; which shall be recorded by the Secretary of State, followed by the proposed changes or amendments to same; such changes or amendments shall take effect and be in force from the date of filing with the Secretary of State.'

Under the construction given the incorporation act of 1874 by the Supreme Court of Texas, a corporation could not incorporate thereunder for two or more distinct purposes; such purposes being designated in different subdivisions of the article specifying the various purposes for which incorporations may be organized. Ramsey v. Tod, 95 Tex. 614, 69 S.W. 133, 93 Am.St.Rep. 875. In my opinion section 10, when construed alone, extends the right to amend only to a corporation incorporated by special act of the Legislature which would have been authorized to incorporate itself under the provisions of the act of 1874. It follows that in 1902 article 647 extended the right to amend only to a corporation incorporated by special act of the Legislature which would have been authorized to incorporate itself under the provisions of title 21 as they then existed. As above stated, the City Bank of Sherman was incorporated for more than one purpose; its charter conferring certain trading privileges as well as banking privileges. In the year 1902 it could not have incorporated under this title with banking privileges, nor could it even have incorporated thereunder for two legitimate and specific purposes, if the same were designated in different subdivisions of article 642. It was therefore not privileged to avail itself of article 647 for the purpose of amendment, unless through some additional provision of the law the privilege of amendment accorded certain corporations by article 647 was extended so as to include it. Article 664 of title 21 of the Revised Statutes of 1895 is as follows:

'Art. 664. Any corporation heretofore organized and now in existence under any general or special law of the republic or state of Texas may, by a vote of its board of directors, accept any or all of the provisions of this title, and have and exercise all of the rights, power and privileges conferred by this title, by filing a copy of their acceptance with the Secretary of State; whereupon that portion of its charter inconsistent with this title, or the portion accepted, shall cease to be applicable to such corporation; and it shall have the exclusive right to carry out the objects of said corporation, as described in its act of incorporation, or certificate, filed with the Secretary of State, if acting under a general law within the limits or boundaries described in said act of incorporation, or certificate, as the case may be, without any limitation as to time, and shall possess all the privileges and franchises conferred by its act of incorporation or certificate filed with the Secretary of State, not abandoned in the copy of acceptance of any or all of the provisions of this title.'

The above article is the same as section 22 of the incorporation act of 1874, and has been carried forward through the revisions of the statutes in the identical language in which it was originally passed.

Article 647 of the title unquestionably for the amendment of corporate charters, and the right to amend was one of the privileges conferred by the title. A fair construction of the language of 664 'extends this privilege to any corporation heretofore organized and now in existence under any general or special law of the republic or state of Texas' upon compliance with its terms and upon conditions stated. The City Bank of Sherman was such a corporation, and therefore upon compliance with the terms and conditions of article 664 it would have been permitted to amend its charter under article 647.

All the requisite and necessary steps were taken under article 647 to change the name of the bank from 'City Bank of Sherman' to 'Western Bank & Trust Company,' and to change its home office from Sherman, Tex., to Dallas, Tex. None of the steps prescribed in article 664 as necessary to avail the corporation of the privileges therein conferred was taken. There was no vote of the board of directors by which 'any or all of the provisions of the title ' were accepted. Consequently there was no copy of acceptance filed with the Secretary of State.

It is admitted by petitioning creditors that at the time action was taken looking to the amendment of the charter, which was on October 7, 1902, the charter of the City Bank of Sherman was valid and subsisting. It is also admitted that the amendment whereby the name and domicile were changed was a valid amendment. But it is contended that the amendment could not be legally had under the provisions of article 647, and therefore must impliedly be held to have been had under or through the provisions of article 664; that thereby the corporation availed itself of a privilege conferred by title 21 and must be held impliedly to have assented to and accepted the consequences flowing therefrom, one of which it is contended was the striking down of its banking privileges.

The charter of the City Bank of Sherman granted in 1873...