Moss v. Whitzel

• Decision Date: 06 May 1901
• Parties: MOSS v. WHITZEL.
• Court: U.S. District Court — Western District of Missouri

108 F. 579

MOSS v. WHITZEL.

United States Circuit Court, W.D. Missouri, Western Division.

May 6, 1901

Altshuler & Leese, for plaintiff.

John D Milliken, for defendant.

PHILIPS District Judge.

This is an action at law instituted by plaintiff, as receiver for the First National Bank of McPherson, Kan., to recover of the defendant, as a stockholder in an insolvent national bank placed by the comptroller of the currency in charge of the plaintiff as receiver. The second ground of defense to this action is that the liability of the insolvent bank, which recovery from the stockholders is sought to meet, is predicated of a judgment rendered in the state court of Kansas against said national bank in favor of one Bradley receiver of the First State Bank of McPherson, for the sum of $19,346.75, of which $14,000 remains unpaid. Said judgment is assailed for invalidity on the ground that the transaction or contract on which the judgment was based was made by the officers of said First National Bank after it had gone into voluntary liquidation, and after it had ceased to do any and all business, of whatever kind, except the winding up and settlement of its affairs, and that said liability so attempted to be contracted by said bank officers was without the knowledge or consent of the stockholders of the bank. The answer alleges collusion between the officers of the two banks, who were practically the same, by which said obligation was obtained, that the stockholders were unable to interpose to defend said action, for the reason that the president and cashier of said respective banks, for corrupt reasons, refused to defend said First National Bank against the action of the receiver of said First State Bank, but, on the contrary, aided and abetted and assisted said receiver in recovering judgment against the First National Bank. The answer further alleges that at the time said action was brought against the said First National Bank the statute of limitations had run against the cause of action; and the answer further alleges that said contract between the two banks upon which said judgment was obtained was without the basis of liability on the part of the First National Bank and that these stockholders have a good and valid defense to said alleged cause of action.

The demurrer raises two questions: First, that the stockholders of the First National Bank of McPherson are concluded by said judgment in favor of said State Bank; and, second, that the action of the comptroller in making the assessment upon the defendant stockholders is conclusive of the validity of said judgment debt. The contention of defendant's counsel is that the defense presented excepts the defendant from the operation of the general rule that a judgment against a corporation concludes the stockholders.

In Richmond v. Irons, 121 U.S. 27, 7 Sup.Ct. 788, 30 L.Ed. 864, it was ruled by the supreme court that when a national bank goes into liquidation it ceases to do business,-- 'after that there was no authority on the part of the officers of the bank to transact any business in the name of the bank, so as to bind its shareholders, except that which is implied in the duty of liquidation, unless such authority had been expressly conferred by the stockholders,'-- and that as no such express authority appeared in the case, the action of the bank officers in creating the liability of the bank imposed no obligation binding upon the stockholders, and that an adjudication on such liability against the bank did not conclude the stockholders from defending the action on the ground of the invalidity of such liability. This is reaffirmed in the case of Schrader v. Bank, 133 U.S. 67, 10 Sup.Ct. 238, 33 L.Ed. 564. That suit instituted in the foregoing cases was by the creditors of the insolvent bank to subject the stockholders to a double liability under the national banking act, so that the only difference in fact between the two cases is that of a suit instituted by the creditors of the bank to reach this fund in the hands of the stockholders, and the suit at bar, instituted by the receiver under direction of the comptroller of the currency. Both methods of procedure are expressly provided for by statute (Act June 30, 1876; 1 Supp.Rev. St.p.216). When a suit is instituted by a creditor of the bank against a stockholder, the court, in the exercise of its equity powers, proceeds to ascertain what sum, within the limits of the stockholder's liability, is due and owing by the bank, and how much the stockholder should be required to contribute. As said by Mr. Justice Matthews, speaking for the court, in Richmond v. Irons, 121 U.S. 48, 7 Sup.Ct. 788, 30 L.Ed. 864: 'As all the shareholders are bound in that way to all the creditors, any proceeding to enforce this liability must be such as from its nature would enable the court to ascertain for what the stockholders ought to be made liable, to whom, and in what proportion as respects each other.'

And inasmuch as the stockholder in resistance of a suit by a creditor is permitted to show that the judgment against the bank which the stockholder is thus called on to pay is based on an assumption by the officers of the bank after the bank had gone into voluntary liquidation, and therefore the consideration for the judgment was invalid, and that the judgment thereon between the creditor and the bank does not conclude the stockholder, it is hard to comprehend why the same measure of protection, under like conditions, should not be accorded to the stockholder when sued by the receiver acting under the comptroller. The distinction made by plaintiff's counsel is based upon the language of Mr Justice Swayne in Kennedy v. Gibson, 8 Wall. 498-505, 19 L.Ed. 476, which is the leading case first discussed by the supreme...