Pauly v. State Loan Trust Co

• Citation: 41 L.Ed. 844,165 U.S. 606,17 S.Ct. 465
• Decision Date: 01 March 1897
• Docket Number: No. 201,201
• Parties: PAULY v. STATE LOAN & TRUST CO
• Court: United States Supreme Court

165 U.S. 606

17 S.Ct. 465

41 L.Ed. 844

PAULY

v STATE LOAN & TRUST CO.

No. 201.

March 1, 1897.

Edward Winslow Paige, for plaintiff in error.

W. P. Gardiner, for defendant in error.

Mr. Justice HARLAN delivered the opinion of the court.

This was an action to recover the amount of an assessment made on the shareholders of a national banking association in the hands of a receiver.

Is the defendant in error, the Srate Loan & Trust Company, a 'shareholder' of the California National Bank of San Diego, within the meaning of the statute relating to national banking associations? That is the sole question presented by the pleadings.

By the Revised Statutes of the United States it is provided:

'Sec. 5139. The capital stock of each association shall be divided into shares of one hundred dollars each, and be deemed personal property, and transferable on the books of the association in such manner as may be prescribed in the by-laws or articles of association. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares; and no change shall be made in the articles of association by which the rights, remedies, or security of the existing creditors of the association shall be impaired.'

'Sec. 5151. The shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. * * *

'5152. Persons holding stock as executors, administrators, guardians or trustees shall not be personally subject to any liabilities as stockholders; but the estates and funds in their hands shall be liable in like manner and to the same extent as the testator, intestate, ward or person interested in such funds would be, if living and competent to act and hold the stock in his own name.'

'Sec. 5210. The president and cashier of every national banking association shall cause to be kept at all times a full and correct list of the names and residences of all the shareholders in the association, and the number of shares held by each, in the office where its business is transacted. Such list shall be subject to the inspection of all the shareholders and creditors of the association, and the officers authorized to assess taxes under state authority, during business hours of each day in which business may be legally transacted. A copy of such list, on the first Monday of July of each year verified by the oath of such president or cashier, shall be transmitted to the comptroller of the currency.'

The comptroller of the currency appointed the plaintiff in error receiver of the California National Bank of San Diego, Cal. Rev. St. § 5234. He gave bond as required by law, and thereafter entered upon the discharge of the duties of his trust.

In virtue of the authority conferred upon him by law, the comptroller made an assessment on the shareholders of the bank for $500,000, to be paid by them on or before the 18th day of June, 1892. The assessment was equally and ratably upon shareholders to the amount of 100 per centum of the par value of the shares of the capital stock of the bank held and owned by them respectively at the time of its failure or suspension, and the receiver was required by an order of the comptroller to institute suits to enforce against each shareholder his personal liability to that extent.

The receiver gave due notice of the assess ment, in writing, to the State Loan & Trust Company, which is a corporation of California, having its principal place of business at the city of Los Angeles, in that state, and made demand upon it therefor, but the company did not pay the same, or any part thereof.

The facts upon which the claim against the defendant company is based are these: S. G. Havermale and J. W. Collins, owners and holders respectively of certificates numbered 286 and 297, issued to them for 100 shares, each, of the capital stock of the California National Bank of San Diego, were indebted to the State Loan & Trust Company upon their promissory note for $12,500, besides interest. These certificates, having been indorsed by the respective holders by writing their names across the back thereof, were transferred and delivered to the State Loan & Trust Company as collateral security for the payment of the above note, and, so indorsed, were, in ordinary course of mail, transmitted and surrendered to the California National Bank of San Diego. New certificates, numbered 308 and 309, respectively, were thereupon issued to the State Loan & Trust Company of Los Angeles as 'pledgee,' in lieu of certificates 286 and 297.

Each of the new certificates showed upon its face that it was issued to the 'State Loan & Trust Company of Los Angeles, Pledgee,' and each purported to be for 100 shares of the capital stock of the California National Bank of San Diego.

The defendant, after receiving certificates 308 and 309, held them 'as pledgee, and as collateral security for the payment of said note, and for the unpaid balance of the debt thereby represented.'

Otherwise than as just stated, the State Loan & Trust Company of Los Angeles never had, owned, or held any shares of the capital stock of the California National Bank of San Diego, and never was entitled to hold the usual stock certificate as such shareholder to the amount of 200 shares, or to any other amount.

Except as pledgee of the stock represented by certificates 308 and 309, respectively, the name of the State Loan & Trust Company never appeared upon or in the stock or other corporate books of the California National Bank of San Diego as a shareholder. The entries in the books of the bank showed that the new certificates were issued to the State Loan & Trust Company as pledgee, and not otherwise.

A jury having been waived by the parties in writing, the case was tried in the circuit court, and judgment was rendered for the defendant. 56 Fed. 430. Upon appeal to the circuit court of appeals that judgment was affirmed. 15 U. S. App. 259, 7 C. C. A. 422, and 58 Fed. 666.

Is one who does not appear upon the official list of the names and residences of the shareholders of a national banking association otherwise than as 'pledgee' of a given number of shares of the capital stock of such association—nothing else appearing—liable as a 'shareholder' of such association, under section 5151 of the Revised Statutes of the United States, declaring that 'the shareholders of every national banking association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such association, to the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares'?

As both sides contend that their respective positions are in harmony with decisions heretofore rendered in this court, it will be necessary to refer to some of the cases cited by counsel.

In Pullman v. Upton, 96 U. S. 328, 330, which was an action by the assignee in bankruptcy of an insurance company to compel a holder of shares of its stock to pay the balance due thereon, the court said: 'The only question remaining is whether an assignee of corporate stock, who has caused it to be transferred to himself on the books of the company, and holds it as collateral security for a debt due from his assignor, is liable for unpaid balances thereon to the company, or to the creditors of the company, after it has become bankrupt. That the original holders and the transferees of the stock are thus liable we held in Upton v. Tribilcock, 91 U. S. 45, Sanger v. Upton, Id. 56, and Webster v. Upton, Id. 65; and the reasons that controlled our judgment in those cases are of equal force in the present. The creditors of the bankrupt company are entitled to the whole capital of the bankrupt, as a fund for the payment of the debts due them. This they cannot have if the transferee of the shares is not responsible for whatever remains unpaid upon his shares, for by the transfer on the books of the corporation the former owner is discharged. It makes no difference that the legal owner—that is, the one in whose name the stock stands on the books of the corporation—is in fact only, as between himself and his debtor, a holder for security of the debt, or even that he has no beneficial interest therein.'

In Bank v. Case, 99 U. S. 628, 631, 632,—which was an action to make the Germania National Bank of New Orleans liable as a shareholder holder of another national bank that had become insolvent,—it appeared that Phelps, McCullough Cullough & Co. borrowed money from the defendant bank, and to secure the payment of the loan, evidenced by note, pledged 100 shares of the stock of the Crescent City National Bank, with power, on nonpayment of the sum borrowed, to dispose of the stock for cash without recourse to legal proceedings, and to that end to make transfers on the books of the latter corporation. The note not having been paid, the stock was transferred on the books of the Crescent City National Bank to the Germania National Bank. The latter subsequently caused the stock to be transferred on the books of the former to one of its clerks, who acquired no beneficial interest in it, and between whom and the officers of his bank it was understood that he would retransfer the stock at their request. This court, observing that, notwithstanding the transfer to the clerk, the stock remained subject to the bank's control, and that the transfer to him was made to evade the liability of the true owners, said: 'It is thoroughly established that one to whom stock has been transferred in pledge or as collateral security for money loaned, and who appears on the books of the corporation as the owner of the stock,...