Leach v. Arthur Sav. Bank
| Decision Date | 10 May 1927 |
| Docket Number | No. 37777.,37777. |
| Parties | LEACH, STATE SUPERINTENDENT OF BANKING, v. ARTHUR SAV. BANK ET AL. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Ida County; J. A. Henderson, Judge.
Action to recover from the stockholders of the Arthur Savings Bank on a liability created by statute. From decree in favor of the plaintiff, three of the defendant stockholders appeal. Affirmed.Clark & Clark, of Ida Grove, for appellants.
Snell Bros., of Ida Grove, for appellee.
On the 23d day of April, 1924, Leach, as superintendent of banking, was appointed receiver of the Arthur Savings Bank of Arthur, Iowa. On that date he qualified and assumed his office as such and proceeded to liquidate the assets of said bank. On the 5th day of August, 1924, such receiver filed his petition, making all stockholders parties defendant, alleging the insolvency of the bank and the insufficiency of the assets to pay the claims, and asked that he have judgment against each of the named stockholders (some 26 in number) for an amount equal to 100 per cent. on each share of the stock held by the respective stockholders. As indicated above, the court gave judgment according to the prayer of plaintiff's petition, and three of the stockholders, Smith, Clifford, and Hartong, appeal therefrom. They filed separate answers in the trial, and plead that on or about the 9th day of October, 1923, they were advised that in the assets of said bank was something like $23,000 of worthless paper, and that it must be immediately charged off the books of the bank. This conclusion was reached after a conference between a representative of the office of the superintendent of banking and a number of the officers and stockholders of the bank, among whom were the three parties, appellants herein. It seems to have been agreed between them that the paper above referred to was worthless. It was then arranged that $23,000 should be raised in cash and an equal amount of bad paper taken out of the bank, which was done. To this sum of $23,000 they contributed as follows: Smith, $7,233; Clifford, $5,641.74; Hartong, $1,157. There is little dispute in the testimony, and what conflict there is, as we view the case, is of no materiality. Briefly stated, in addition to the above facts, it appears that in the early part of April, 1923, this bank was examined by one of the employés of the superintendent of banking; that, when this worthless paper was discovered, the banking department insisted that it be removed from the assets of the bank. An inquiry was then made by the parties interested as to how it should be done. The examiner suggested that there were two ways the matter could be taken care of--there could be a general assessment on all of the stock, or the directors could assess their own stock, taking out the bad paper and replacing the same with cash. The inference, however, was that, if this matter were not taken care of, the bank would be closed. It was suggested by the examiner that the first plan proposed of assessing all of the stockholders was unwise, in view of the general financial situation in the state. He told them to use their best judgment as to which plan they would follow, but advised that they put in the money and not make a general assessment on the stockholders.
The result of the conference was that the board of directors decided that they would share in raising this $23,000 in cash in proportion to the stock held by them, and this was done. A letter was addressed to the superintendent of banking at Des Moines, Iowa, signed by the active board of directors and one D. H. Hedrick, a heavy stockholder, in which it was recited, among other things: That the bank was in such condition that it needed immediate attention and adjustment, and that there was $22,369.70 of worthless paper, and doubtful paper to the amount of $11,007.65. That, owing to the large number of stockholders (over 60 in number), an assessment of all of the stockholders might be greatly detrimental to the institution. That the board of directors and Hedrick
This letter is signed by Hedrick and the acting directors, among which are the names of the appellants herein. It was written on October 4th, a few days before the money (the $23,000) was paid in as above set out. The times when these transactions occurred only become material by reason of a contention made by appellants herein. This money was paid in about the 9th of October, 1923, and the receiver was appointed on the 23d day of April, 1924. The defenses made by these respective appellants were that the amounts of money paid in by them at this time in October, 1923, should be offset against their statutory liability which the receiver is here seeking to enforce. It is their claim that they were coerced by the banking department into making these payments, and that the bank was at all times insolvent, and that these payments were not required to be made in good faith, but simply for the purpose of increasing the amount of money in the bank for liquidation purposes. Or, to put it another way, it is claimed that the action of the state department, in inducing these parties to pay in this money, was not in good faith, but that the state department at all times had an intention to liquidate the bank, and that this was simply a means of augmenting its assets for that purpose.
Whether such matters, if proven, would constitute a defense or would entitle the stockholders to an offset against the superadded liability provided by statute is a matter of which we express no opinion, as there is no evidence in the record to support this contention.
[1] Both briefs refer to and discuss section 9, art. 8, of the Constitution of this state, which section provides for the superadded liability of the stockholder to the creditors of the bank. With this section of the Constitution we have no concern, as the former decisions of this court are that this constitutional provision refers only to banks of issue of which we have none in the state at the present time. Allen v. Clayton, 63 Iowa, 11, 18 N. W. 663, 50 Am. Rep. 716;State ex rel Stone v. Union Stockyards State Bank, 103 Iowa, 549, 70 N. W. 752, 72 N. W. 1076. To determine the liability, therefore, of the stockholders of these banking corporations, we must resort to the Code provisions. Section 1882, Code of 1897, reads as follows:
“All stockholders of savings and state banks shall be individually liable to the creditors of such corporation of which they are stockholders over and above the amount of stock by them held therein and any amount paid thereon, to an amount equal to their respective shares, for all its liabilities accruing while they remained such stockholders; and should any such association or corporation become insolvent, its stockholders may be severally compelled to pay such deficiency in proportion to the amount of stock owned by each, not to exceed the extent of the additional liability hereby created. * * *”
[2] It is conceded in this case that the assets of the bank in the hands of the receiver are insufficient to pay its outstanding liabilities, and that the payment in full by each of the stockholders of an amount equal to the par value of the stock held by him, added to the present assets of the bank, would not be sufficient to make such payment. Under the above section of the statute, in the liquidation of these insolvent banks, when it is found that the assets of the bank are not sufficient to pay its liabilities, recourse is to be had to...
To continue reading
Request your trial