Montgomery Bank & Trust Co. v. Walker

• Decision Date: 15 April 1913
• Citation: 61 So. 951,181 Ala. 368
• Court: Alabama Supreme Court
• Parties: MONTGOMERY BANK & TRUST CO. v. WALKER, Superintendent of Banks.

61 So. 951

181 Ala. 368

MONTGOMERY BANK & TRUST CO. v. WALKER, Superintendent of Banks.

Supreme Court of Alabama

April 15, 1913

Rehearing Denied May 8, 1913

Appeal from Chancery Court, Covington County; L.D. Gardner Chancellor.

Bill by A.E. Walker, as Superintendent of Banks, against the Montgomery Bank & Trust Company to collect and preserve the assets of the Bank of Geneva, of which he had taken charge by virtue of his office. From a decree overruling demurrers to the bill, respondent appeals. Affirmed.

The bill alleges, among other things, that the Bank of Geneva was, prior to June, 1912, engaged in the banking business of Geneva, Ala., and was organized and incorporated under the laws of this state; that it did a general banking business and had a capital stock of $50,000; that J.R. Clark was elected president of said bank, and he assumed the duties thereof and acted as such continually until June 3, 1912; and that a board of directors, consisting of five persons, whose names are set out, were elected to and did serve as directors of said bank.

In the fourth paragraph it is alleged that within two or three years after its organization the bank became insolvent, and that such condition remained and grew worse, and further alleges that the bank is now insolvent.

In the fifth paragraph it is alleged that during the active existence of the bank it became connected in a business way with the Montgomery Bank & Trust Company, the respondent below, and that at times the Montgomery Bank & Trust Company made loans to the Bank of Geneva and extended it credit. In the same paragraph it is alleged that J. Lee Holloway was a stockholder and director in both banks, and was related to J.R. Clark, president of the Bank of Geneva; that said Holloway and other officers and directors of the Montgomery Bank & Trust Company had opportunity to know, and did know the financial condition of the Bank of Geneva at the times set out later in the bill; that Clark had confidence in the Montgomery Bank & Trust Company and in T.E. Lovejoy, its president; and that the relations between the two banks were cordial and friendly until a short time prior to June 3 1912.

In the sixth paragraph it is alleged that the Montgomery Bank &amp Trust Company claimed that the Bank of Geneva was indebted to it in the sum of $25,753.24, maturing and coming due some four or five years prior to this date; that in fact the greater portion of the amount arose prior to the organization of the Bank of Geneva, being due and owing by the First National Bank of Geneva, and alleges that he does not know the nature of the claim, but he does allege that it was not in the form of a bill receivable; and that the Montgomery Bank & Trust Company held no written obligation of the Bank of Geneva to pay the same until the spring of the year 1912, and shortly prior to June 3, 1912. He alleges also in the paragraph that the Bank of Geneva did not owe the alleged claim or demand, and was in no wise connected with it, and that the Bank of Geneva never entered the same upon its books as a liability or bills payable, and that the Bank of Geneva denied and disputed said alleged claim or demand, which fact was known to the Montgomery Bank & Trust Company prior to June 3, 1912.

In the seventh paragraph he alleges that T.E. Lovejoy, president of the Montgomery Bank & Trust Company, knew that the Bank of Geneva was hopelessly insolvent, and with that knowledge on his part, and through him on the part of the Montgomery Bank & Trust Company, and with the purpose and intent and the ultimate design of securing the alleged indebtedness of $25,753.24, caused many wrongs to be committed against the Bank of Geneva and its creditors, and obtained physical possession, in the way of collateral security, of much of its assets to which it was not and is not entitled; that during the winter or spring of 1912, the Bank of Geneva being in desperate straits and being almost forced to cease business on account of insufficient funds, a fact which the bill alleges was known by the Montgomery Bank & Trust Company, for speedy and immediate relief in the way of borrowing from it a certain sum of money, the Montgomery Bank & Trust Company, being afraid to loan the Bank of Geneva money, required the Bank of Geneva to put up collateral to secure a loan of from $5,000 to $7,000. And in the same paragraph the bill alleges that the Montgomery Bank & Trust Company, in acquiring and taking over the collateral for said loan and to secure the same, and with the purpose and intent on their part to secure its alleged claim against the Bank of Geneva, and for the purpose of securing a preference for said alleged indebtedness, and in fraud of the rights of the creditors of the Bank of Geneva, required Clark, president of the Bank of Geneva, to assign, pledge, and turn over to said Montgomery Bank & Trust Company a large amount of securities owned and held by the Bank of Geneva, to wit, $60,000, and of the value of $42,000; in accordance with such requirement the said Clark turned over and delivered to Montgomery Bank & Trust Company said collateral.

In the eighth paragraph the bill alleges that the Bank of Geneva was cited to appear before the State Banking Board at Montgomery on, to wit, June 3, 1912, to show cause why said Bank of Geneva should not cease as a going concern and its business and affairs be wound up and liquidated by said board; that on that day no cause being shown, and, in fact, consent being given, the affairs and business of said Bank of Geneva were taken over by said Banking Board and process of liquidation commenced by A.E. Walker, as Superintendent of Banks; that the property, assets, and affairs of the Bank of Geneva are held by A.E. Walker, as Superintendent of Banks, for the purpose of liquidation and the collection of its debts and payment of its liabilities; and he alleges that the assets are not sufficient to pay the liabilities, setting out the amounts; and in the same paragraph charges that Lovejoy, and probably others connected with the Montgomery Bank & Trust Company, knew that the Bank of Geneva had been cited to appear before the said Banking Board and knew, or honestly believed, that said Bank of Geneva would cease business and its affairs would be wound up through the Banking Board; that in anticipation of such course, and in furtherance of the design, intent, and scheme of the Montgomery Bank & Trust Company to collect the alleged debt and to appropriate for that purpose a substantial portion of the assets of the Bank of Geneva, and in fraud of the rights of the creditors, the Montgomery Bank & Trust Company on, to wit, June 2, 1912, sold, or pretended to sell, collateral held by it, or substantially all of it, and claims to have purchased it at and for the sum of $7,500, leaving thereby a large balance due on said alleged debt. And it is further averred and charged that the Banking Board, or the Superintendent of Banks, had no knowledge of the alleged sale until two or three weeks thereafter, and that, if notice was given, it was done by insertion in some newspaper of small circulation; and it further alleges that the Montgomery Bank & Trust Company is now holding the collateral and asserting rights to all of it and refuses to surrender it to the Superintendent of Banks.

In the tenth paragraph the bill charges that the pledge of said collateral to the Montgomery Bank & Trust Company was and is absolutely void for that J.R. Clark, as president of the Bank of Geneva, had no authority, as president or otherwise, to pledge of dispose of the assets of the Bank of Geneva in that manner.

In the eleventh paragraph he says that, if he is mistaken in that, then he charges that the contract or agreement whereby the Montgomery Bank & Trust Company acquired said collateral was and is wholly void for that the Bank of Geneva had no authority or right to pledge said property without authority of its board of directors, and no such authority was given as required by law.

In the twelfth paragraph he says that, if he is further mistaken, he then charges that the pledge of said collateral was and is wholly void for that the same was acquired by the Montgomery Bank & Trust Company with the intent to have itself preferred and with intent to hinder, delay, and defraud creditors of the Bank of Geneva from their lawful and just demands and claims.

In the thirteenth paragraph he says that, if he is mistaken in all that he has heretofore alleged, then the bill alleges that the transfer and pledge of said collateral to the extent of the excess of the amount claimed by Montgomery Bank & Trust Company over and above the $7,000 borrowed and admitted is void as to any other...