King v. Pomeroy

• Decision Date: 09 March 1903
• Docket Number: 1,798.
• Citation: 121 F. 287
• Parties: KING v. POMEROY.
• Court: U.S. Court of Appeals — Eighth Circuit

121 F. 287

KING v. POMEROY.

No. 1,798.

United States Court of Appeals, Eighth Circuit.

March 9, 1903

Syllabus by the Court.

Under the act of June 3, 1864, c. 106 (13 Stat. 99), authorizing the formation of national banks, a federal court sitting in equity had jurisdiction in a proper case to appoint a receiver to liquidate its obligations, and to authorize him to collect and to enforce by action the liability of the shareholders of the bank under section 12 of the act (section 5151, Rev. St. (U.S. Comp. St. 1901, p. 3465)).

In the absence of restrictive legislation, a receiver in liquidation proceedings may ordinarily enforce the rights of creditors as well as the rights of the debtor.

While a remedy given by the act creating the right is ordinarily exclusive, a new remedy provided in a case in which the right and an appropriate remedy already existed is merely cumulative, and the injured party is at liberty to pursue either.

The remedy of a creditor's suit to enforce the liability of shareholders of national banks in voluntary liquidation provided by section 2 of the act of June 30, 1876, c. 156 (19 Stat. 63 (U.S. Comp. St. 1901, p. 3509)), is cumulative and not exclusive.

In cases in which a court of equity appoints a receiver to liquidate the debts of national banks in voluntary liquidation no action of the comptroller is requisite to empower the court's receiver to enforce the liability of the shareholders. The court has plenary power to ascertain the necessity of enforcing the liability, and to direct its receiver to collect it.

The statute of limitations does not run against an action to enforce the liability of a shareholder of a national bank during the time while proper liquidation proceedings are pending in a court of equity.

The liability of a shareholder of a national bank whose affairs are in course of judicial administration in a court of equity does not mature until the court ascertains the necessity of enforcing it, determines the amount which the shareholder must pay, and fixes the time of payment; and the cause of action of the receiver of the court to enforce the liability does not accrue until the liability thus matures.

General expressions in the opinions of courts are not authoritative beyond the question which they were considering and deciding when they used them.

W. W Guthrie and W. F. Guthrie, for plaintiff in error.

B. P Wagner, for defendant in error.

The writ of error in this case challenges a judgment which sustains a demurrer to a complaint made by Albert S. King, as receiver of the First National Bank of Frankfort, in the state of Kansas, against J. P. Pomeroy, a shareholder of that bank. These are the material facts which the bill discloses: The First National Bank of Frankfort was located at that town, in the state of Kansas, on April 13, 1891, and the defendant, Pomeroy, owned 70 shares of its stock, of the par value of $100 per share. That bank went into voluntary liquidation under section 5220 et seq. of the Revised Statutes (U.S. Comp. St. 1901, p. 3503) on April 6, 1891. It was insolvent, and the Comptroller of the Currency was requested to appoint a receiver of its property, and he refused to do so on the ground that he had no jurisdiction over the affairs of a bank in voluntary liquidation. Thereupon, on April 13, 1891, a creditor of this bank, a citizen of the state of Missouri, filed a bill against it in the United States Circuit Court for the District of Kansas, wherein, for reasons it is unnecessary to state, it prayed for the appointment of a receiver of the assets and credits of the bank and the liabilities incident thereto, to the end that he might convert them into money and liquidate its liabilities. The bank appeared in the court, and consented to the appointment of a receiver, and he entered upon the discharge of his duties. He gathered the tangible assets of the bank, converted them into money, and distributed the proceeds, until, in December, 1898, he reported that these assets were all disposed of except $665.14 in cash, that the unpaid liabilities of the bank were still $36,301.74, and he prayed for directions regarding the enforcement of the liabilities of the shareholders. On September 5, 1899, H. D. Stone, a creditor who had proved his claim against the estate of the bank intervened in this suit, pleaded his claim, the cash in the receiver's hands, the disposition of all the tangible assets of the bank except this, the indebtedness of the bank, the names and addresses of its stockholders, and prayed that the court would ascertain the necessity of the enforcement of the liability of the shareholders, that it would make an assessment upon them, and that it would appoint a receiver to collect this assessment. On February 12, 1900, the court made an interlocutory decree, in which it found the facts set forth in the intervening petition to be true, that the amount of the assessment necessary to pay the debts of the bank was 38.84 per cent. of the par value of the stock, that an assessment of that amount be made, and that the amounts of this assessment should be paid by the respective shareholders to the receiver who had theretofore been appointed in the suit within 60 days from the date of the order. The assessment upon the stock of the defendant, Pomeroy, under this order was $2,716.80. It is for this amount, upon this state of facts, that the receiver of the Circuit Court has brought the action now before us. The court below held that these facts stated no cause of action, and dismissed the case.

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

SANBORN Circuit Judge, after stating the case as above.

When a corporation becomes insolvent, all its property and all the liabilities of the guarantors of its obligations constitute a trust fund pledged to the payment of its debts. And in cases where through fraud or maladministration this fund is being diverted from those who are entitled to receive it, the power is vested in, and the duty is imposed upon, courts of equity to appoint a receiver, to direct him to convert these trust funds into money, and to distribute the proceeds among the creditors. Sawyer v. Hoag, 17 Wall. 611, 622, 21 L.Ed. 731; Hayden v. Thompson, 71 F. 60, 66, 17 C.C.A. 592, 598. Such a suit falls within the jurisdiction of a court of equity because it is a suit to execute a trust, because it avoids a multiplicity of suits by each of many creditors, and because the creditors have no adequate remedy at law.

The receiver appointed in such a proceeding is the hand of the court to gather and distribute the trust funds, and in the execution of its orders he has the power and the authority of the court, so that when it is said that the receiver in the action now in hand is without authority or power to maintain this suit, the real contention is that the Circuit Court of the district in which this insolvent bank was located had no jurisdiction to enforce the liability of its shareholders in the proceeding before it. There is nothing in the suggestion that the court may have a power to enforce the liability of the shareholders with which it cannot invest its receiver. If the court has the jurisdiction to enforce this liability, the receiver whom it appoints and directs to do so has all the power of the court to receive the money and to maintain actions to recover it. Receivers of courts of equity appointed in the judicial administration of the affairs of insolvents are, in the absence of restrictive statutes, empowered to enforce the rights of the creditors as well as the rights of the debtor, and there is no restrictive legislation in this case limiting the power of the receiver to maintain this action.

It is conceded in this case that the court below lawfully appointed the receiver, and that by his agency it rightfully collected the debts due to the bank, converted its tangible assets into money, and distributed its proceeds to the creditors. But the contention of counsel for the defendant in error is that the Circuit Court had no power by the hands of its receiver to collect the amount lawfully owing from the shareholders to the creditors, because the latter did not proceed to enforce this liability by the particular suit in equity pointed out by the provisions of section 2 of the act of June 30, 1876, c. 156 (19 Stat. 63 (U.S. Comp. St. 1901, p. 3509)), and because the Comptroller of the Currency has never authorized or directed the institution of this action against the shareholder.

A brief reference in chronological order to the legislation which conditions the soundness of this position will best present the questions it raises. The jurisdiction of the court below sitting in equity to appoint a receiver, and through him to administer the affairs of an insolvent corporation, to collect the trust fund pledged to its creditors, and to liquidate its debts, vested in that court when it was established. It existed long before the act of 1864, which authorized the formation of national banks, and the act if 1876, which granted the new remedy upon which counsel now insists, were enacted, and it still exists. It was general and comprehensive. It included all cases of fraudulent diversion or maladministration in which controversies arose between citizens of different states, and it is conceded that this was such a case. This jurisdiction required no special act of Congress to give it effect, but it attached to and embraced every corporation as it came into existence, unless by some act of Congress its extent was curtailed or diminished.

By the act of June 3, 1864, 13 Stat. 99, Congress authorized the formation of national banks, made certain provisions for the supervision and the liquidation of their debts, and then declared...