Putnam v. Hutchison

• Decision Date: 01 June 1896
• Docket Number: 204
• Citation: 45 P. 931,4 Kan.App. 273
• Parties: C. E. PUTNAM v. W. C. HUTCHISON, as Receiver of the Bank of Richmond
• Court: Kansas Court of Appeals

45 P. 931

4 Kan.App. 273

C. E. PUTNAM v. W. C. HUTCHISON, as Receiver of the Bank of Richmond

No. 204

Court of Appeals of Kansas, Southern Department, Eastern Division

June 1, 1896

Opinion Filed July 13, 1896.

MEMORANDUM.-- Error from Franklin district court; A. W BENSON, judge. Action by W. C. Hutchison, as receiver of The Bank of Richmond, against C. E. Putnam on a contract of subscription. Judgment for plaintiff. Defendant brings the case to this court. Affirmed. The opinion herein was filed July 13, 1896.

The statement of the case, as made by DENNISON, J., is as follows:

This is an action brought in the district court of Franklin county Kansas, by W. C. Hutchison, as receiver of the Bank of Richmond, to recover from C. E. Putnam the amount claimed to be due from said Putnam as the unpaid portion of his subscription to the capital stock of said bank. The case was tried by the court without a jury, and the following findings of fact and conclusions of law were made'

"FINDINGS OF FACT.

"1. On July 11, 1890, C. E. Putnam, W. D. McFarlane, E. W. Spear J. A. Hutchison, M. L. Waldo, W. E. Gault, H. H. Staley, Peter Hastert and N. M. Spaulding organized themselves into a savings association, as provided by article 16, chapter 23, General Statutes of 1889. A charter was accordingly prepared, subscribed by the incorporators above named, duly acknowledged, and filed in the office of the secretary of state, as prescribed by article 1 of said chapter, wherein the name of the corporation is stated as The Bank of Richmond, its place of business, Richmond, Franklin county, Kansas, and its capital stock, $ 50,000, divided into 500 shares of $ 100 each.

"2. At the time of such organization, the defendant, C. E. Putnam, in writing, as set out in the petition, subscribed and agreed to take and pay for 10 shares of said capital stock, amounting to $ 1,000, and certificate No. 1 was duly issued to him therefor, a copy of which is attached to the petition, upon which he paid in cash 20 per cent, of their par value, to wit, $ 200, and has paid no more thereon. The other 490 shares were duly subscribed for, 20 per cent. paid thereon, and no more, and certificates duly issued to the several subscribers in the same form.

"3. On July 11, 1890, the stockholders, including all the subscribers to said charter, duly met and elected a board of directors, among others this defendant, and thereupon said board on the same day elected, the defendant president, and also elected a vice-president, and cashier, and secretary; and thereafter, on August 19, 1890, the president and secretary made, acknowledged and fled in the office of the register of deeds of this county the certificate required by section 264 of said chapter 23, General Statutes of 1889, in which the capital stock was stated to be $ 50,000; and the bank at once entered upon the business of banking, and continued such business at Richmond until on or about July 18, 1893.

"4. About September 15, 1891, but covering some time before and after said date, upon request of the cashier, who was actively managing said bank, and who owned a majority of the stock, the Various stockholders returned their certificates of stock upon which 20 per cent. had been paid as before stated, and received new certificates therefor in the same form, for the number of shares such 20 per cent. already paid in would fully pay for, except the holder of one certificate of 10-shares, which was not surrendered, and is still outstanding, although the holder consented to the arrangement. The defendant accordingly surrendered his certificate No. 1, for 10 shares, and in lieu of it received a new certificate, No. 55, for two shares, also signed by himself as president, and by the cashier, upon the back of which was written, 'fully paid up,' and signed 'A.D. Sowerby, cashier.' All the old certificates thus returned were reattached to the stubs from which they had been separated when issued, and above the face of each was written in the margin: ' Certificate No. -- issued in place of this, September 15, 1891,' the blank being filled in each case with the number of the new certificate issued in its place. In this manner all the old certificates upon which 20 per cent. had been paid were returned and reattached to the stubs in the book of blank certificates, each indorsed 'fully paid up,' issued for one-fifth the original number of shares, in their place.

"5. The surrender and reissue was done because of the enactment of the banking law of 1891, being chapter 43, Session Laws of 1891, and to make it appear that the capital stock of the bank was fully paid in, and it was so done upon the advice and request, of the cashier and upon informal and casual conversations between various stockholders and officers as they chanced to meet. No meeting of stockholders or directors was ever called or held to consider the matter, and no action whatever taken by the board of directors thereon nor by the stockholders, except acting individually in surrendering the old and taking the new certificates as stated. No resolutions, motion, vote or other action was presented to, considered or passed by the directors or stockholders to reduce the capital stock or to authorize such surrender or reissue, or to release the stockholders from further payments.

"6. No action was ever taken by the directors or stockholders ratifying such surrender and reissue unless the following is to be so considered: Just before January 28, 1892, this defendant and the vice-president assigned their respective certificates of such reissued stock so indorsed 'fully paid up,' and thereupon the board of directors met upon proper call, and the object of the meeting was stated by the cashier, as follows: 'That the president, C. E. Putnam, and the vice-president, W. D. McFarlane, having sold their respective stock in this bank, and thereby becoming disqualified to hold office, it is necessary to fill the vacancies. Thereupon the board proceeded to do so by electing their successors, who entered at once upon their respective duties.

"7. On the 16th day of February, 1892, the bank commissioner issued to said bank, under his hand and seal, a certificate, a copy whereof is attached to the answer herein.

"State of Kansas. Office of Bank Commissioner. I, Chas. F. Johnson, bank commissioner of the state of Kansas, do hereby certify that the Bank of Richmond, county of Franklin, state of Kansas, has the sum of $ 10,000 capital paid in, and is authorized to transact a general banking business, as provided by an act of the legislature of the state of Kansas entitled 'An act providing for the organization and regulation of banks, and prescribing penalty for violations of the provisions of this act.' In testimony whereof, I have hereunto subscribed my name and affixed my official se al.

"Done at Topeka, Kan., this 16th day of February, A. D. 1892.

CHAS. F. JOHNSON, Bank Commissioner."

(This certificate was framed and hung up in the front part of the bank, where it was visible to the customers, and to everybody that came into the bank to do business, from the time it was received until the failure.)

"8. The assignment by the defendant of said reissued certificate No. 55, for two (2) shares of the capital stock of the bank referred to in finding No. 6 above, was made under the following circumstances' He became dissatisfied with the cashier, because of the latter's drunkenness, also because he believed some loans made by the cashier were not safe. At one time he found the cashier too drunk to sign a draft which he was endeavoring to draw, and he then determined to sell out, and so informed the cashier, and threatened to apply for a receiver unless his stock was purchased. Thereupon the cashier agreed to and did purchase said stock for $ 180. The certificate was assigned by writing on the back, signed by the defendant, and delivered to the cashier, who reattached it to the stub, in the book of blank certificates, where it yet remains. On February 4, 1892 however, Sowerby, the cashier, sold his stock (two shares) to J. A. Hutchison, then recently elected president, and certificate No. 99 was issued accordingly therefor. On the stub, on the blank book of certificates, is this statement: ' Issued in lieu of certificate No. 55.' The defendant promised the cashier when he made such assignment to say nothing about it. He made the assignment because he feared financial loss if he continued to hold to it, believing that the bank was unsafe because of the misconduct of the cashier.

"9. The bank continued business until the 18th day of July, 1893, when, upon an examination made shortly before that by the bank commissioner, it was found to be insolvent, and that officer took charge of the bank, its property and effects, and notified the attorney general of his actions therein, who thereupon instituted proper proceedings in this court, and upon such proceedings the plaintiff was appointed receiver, to take charge of the bank and wind up its affairs and business as provided by law. The plaintiff thereupon qualified, and has ever since acted as such receiver.' The defendant was a member of the board of directors and president of the bank, and so acted from its organization continuously until January 28, 1892.

"10. The bank was, on July 19, 1893, insolvent, and wholly unable to carry on its affairs, and had been so insolvent for some time, and is still insolvent. Its liabilities, exclusive of capital stock, are over $ 14,000, and its available assets do not exceed $ 6,000, not including dues from stockholders, if any, and their individual liability. The receiver is without means to pay the debts of the bank, and will be unable to do so unless funds therefor may be recovered from the...