James Curran, Plaintiff In Error v. the State of Arkansas, the Bank of the State of Arkansas, John Ross, Financial Receiver, and David Carrol, Bank Attorney

Decision Date01 December 1853
Citation56 U.S. 304,14 L.Ed. 705,15 How. 304
PartiesJAMES N. CURRAN, PLAINTIFF IN ERROR, v. THE STATE OF ARKANSAS, THE BANK OF THE STATE OF ARKANSAS, JOHN M. ROSS, FINANCIAL RECEIVER, AND DAVID W. CARROL, BANK ATTORNEY
CourtU.S. Supreme Court

56 U.S. 304
15 How. 304
14 L.Ed. 705
JAMES N. CURRAN, PLAINTIFF IN ERROR,
v.
THE STATE OF ARKANSAS, THE BANK OF THE STATE OF
ARKANSAS, JOHN M. ROSS, FINANCIAL RECEIVER, AND
DAVID W. CARROL, BANK ATTORNEY.
December Term, 1853

THIS case was brought up from the Supreme Court of Arkansas, by a writ of error issued under the 25th section of the judiciary act.

Page 305

It was argued by Mr. Lawrence and Mr. Pike, for the plaintiff in error, and by Mr. Sebastian, filing a brief prepared by Mr. Hempstead, for the defendants in error.

The arguments of counsel upon both sides were in such an unbroken train of reasoning, that the reporter cannot compress them into a mere report; and as, together, they made upwards of sixty pages of print, he cannot publish them entire. The reader who desires to examine into the case thoroughly, can consult the opinion of the Supreme Court of Arkansas, delivered in November, 1851. In that opinion the court maintains its doctrines with great earnestness.

Mr. Justice CURTIS delivered the opinion of the court.

This is a writ of error to the Supreme Court of the State of Arkansas.

The plaintiff in error filed his bill in equity in the Circuit Court of that State for the county of Pulaski, against the State of Arkansas, the State Banks of Arkansas, and the financial receiver and the attorney of the bank; and the defendants having demurred thereto, the Circuit Court overruled the demurrers, and, as the defendants elected to rest thereon, the court made a decree in favor of the complainant. The defendants appealed to the Supreme Court, where the demurrers were sustained, and the bill ordered to be dismissed. This decree the plaintiff has brought here for re examination, under the 25th section of the judiciary act.

As the questions to be determined arise on a demurrer to the bill, the substance of the case, therein made and confessed by the demurrer, must be stated, to exhibit the grounds on which our decision rests.

The bill shows that the Bank of the State of Arkansas was incorporated by the legislature of that State in 1836, with the usual banking powers of discount, deposit, and circulation, and that the State in fact was, and was designed by the charter to be, its sole stockholder. That the capital stock of the bank consisted of $1,146,000, raised by the sale of bonds of the State, together with certain other sums paid in by the State as part of the capital stock, amounting in the aggregate to the sum of $350,753, being in the whole $1,496,753; all which was in specie, or specie funds. That the bank was required by its charter to have on hand at all times sufficient specie to pay its bills on demand. That the plaintiff, being the owner and bearer of bills of this bank, amounting to upwards of $9,000, which the bank had refused to pay, instituted suits and recovered judgments thereon at law, upon which executions, running against the goods, chattels, and lands of the bank, have been duly returned

Page 306

wholly unsatisfied. The general scope of the bill, therefore, is to obtain the aid of a court of equity to reach such assets of the bank as ought to be appropriated to satisfy this judgment debt. The parties in whose hands it is alleged these assets are, are the State of Arkansas and two other defendants, who are alleged to have charge of certain effects of the bank, in behalf, and under the authority of the State.

To make a case against these parties, and show that they hold property, which in equity belongs to its creditors, and ought to be appropriated to pay their debts, the bill states, that the bank having gone into operation, and issued bills to a large amount, which were then in circulation, gave public notice, on the 7th day of November, 1839, that the payment of specie was definitely and finally suspended; and thenceforward, with some comparatively trifling exceptions, has refused to redeem any of its bills.

That in January, 1843, the bank still continuing insolvent, an act was passed by the legislature to liquidate and settle its affairs. That the assets of the bank then amounted to $1,832,120, of which the sum of $1,000,000, was good and collectible; and that it had then on hand the sum of $90,301 in specie. This act expressly continued the corporate existence of the bank; its affairs were subjected to the management of a financial receiver and an attorney, who were to apply the moneys collected by them to redeem the outstanding circulation of the bank; but, at the same time, bonds of the State, held by the bank, for money borrowed by the State, amounting to at least $200,000, were required by this act to be given up and cancelled, and their amount to be credited to the bank against a part of the capital stock put in by the State. The bill further shows, that by another act passed at the same February session, in 1843, the officers of the bank were required to transfer to the State the sum of $15,000 in specie, which was appropriated by the act to pay the members of that legislature. That on the 4th day of January, 1845, another act was passed, authorizing the officers of the bank to compromise its debts receivable, and take specific property in payment, and requiring those officers to receive in payment the bonds of the State, issued to raise capital stock for the bank, notwithstanding the bills of the bank might not have been taken up.

That on the 10th day of January, 1845, another act was passed, depriving the bank of all its specie and par funds, and appropriating the specie, first, to pay the members of that legislature, and declaring that certain funds which had been placed in the bank, and made by the charter to form a part of its capital stock, should be deemed to be deposited there to the credit of the State, subject to be drawn out by appropriations.

Page 307

That by another act, passed on the 23d day of December, 1846, the title to all real estate and property of every kind, purchased by said bank, or taken in payment of debts due to it, was declared to be vested in the State, and titles to property received on account of debts due to the bank were required to be thereafter taken in the name of the State; and the bill avers, that many different parcels of land specifically mentioned and described, have been conveyed to the State, under this law, by debtors of the bank, in satisfaction of their indebtedness.

The bill further states, that, by another act, passed on the 9th day of January, 1849, the officers of the bank were required to receive in payment of its debts, bonds of the State, issued to raise capital for the Real Estate Bank of Arkansas, and other banking corporations theretofore chartered by the General Assembly, and then insolvent; which last-mentioned bonds amounted to at least $2,000,000.

The bill prays, among other things, for satisfaction of the plaintiff's judgment debt out of the assets of the bank thus shown to have come into the custody, or to stand in the name, or to have gone to the use of the State by force of the laws above-mentioned; and the jurisdiction of this court, under this writ of error, is invoked, upon the ground that these laws, or some of them, impair the obligation of a contract, and that the highest court of the State has held them valid, and by reason of such decision, dismissed the complainant's bill.

It follows, that there are three questions for our consideration.

1. What would have been the rights of the complainant under the contracts shown by his bill, if uncontrolled by the particular laws of which he complains?

2. Do those laws, or either of them, impair the obligation of any contract with the complains?

3. Does it appear, by the record, that the Supreme Court of Arkansas held these laws to be valid, and by reason thereof made a final decree against the complainant.

The first of these questions may be answered without much difficulty. The plaintiff is a creditor of an insolvent banking corporation. The assets of such a corporation are a fund for the payment of its debts. If they are held by the corporation itself, and so invested as to be subject to legal process, they may be levied on by such process. If they have been distributed among stockholders, or gone into the hands of others than bon a fide creditors or purchasers, leaving debts of the corporation unpaid, such holders take the property charged with the trust in favor of creditors, which a court of equity will enforce, and compel the application of the property to the satisfaction of their debts.

Page 308

This has been often decided, and rests upon plain principles. In 2 Story's Eq. Jur. § 1252, it is said, 'Perhaps, to this same head of implied trusts upon presumed intention, (although it might equally well be deemed to fall under the head of implied trusts by operation of law,) we may refer that class of cases where the stock and other property of private corporations is deemed a trust fund for the payment of the debts of the corporation; so that the creditors have a lien, or right of priority of payment on it, in preference to any of the stockholders of the corporation. Thus, for example: 'The capital stock of an incorporated bank is deemed a trust fund for all the debts of the corporation: and no stockholder can entitle himself to any dividend or share of such capital stock, until all the debts are paid, and if the capital stock should be divided, leaving any debts unpaid, every stockholder, receiving his share of the capital stock, would, in equity, be held liable pro rat a to contribute to the lischarge of such debts out of the fund in his own hands.' In conformity with this is the doctrine held by this court in Mumma v. The Potomac Company, 8 Peters, 281.

The cases of Wood v. Dummer, 3 Mason, 308; Wright v. Petrie, 1 Smedes & Marsh. 319; Nevitt v. Bank of Port Gibson, 6 Id. 513; Hightower v. Thornton et al. 8 Georgia R. 493; Nathan v. Whitlock, 3 Edwards, C. R. 215, affirmed by the chancellor, (9 Paige, 152,)...

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