Scott v. Latimer
| Decision Date | 03 October 1898 |
| Docket Number | 1,026. |
| Citation | 89 F. 843 |
| Parties | SCOTT v. LATIMER. |
| Court | U.S. Court of Appeals — Eighth Circuit |
This action was brought in the United States circuit court for the Western district of Missouri, by W. A. Latimer, receiver of the First National Bank of Sedalia, to recover from George H Scott an assessment made by the comptroller of the currency upon the capital stock of the named bank, it being claimed that Scott owned and held 50 shares of the stock. In the answer filed it was admitted that the bank had been duly incorporated in 1865; that it closed its doors and was put in liquidation in May, 1894, the plaintiff, Latimer, being appointed receiver on May 10, 1894; that the comptroller had determined that it was necessary to enforce the individual liability of the stockholders in favor of the creditors, and to that end had made an assessment of 75 per cent. upon the stock held in the bank, and that payment thereof had been demanded of the defendant, Scott. As matters of defense it was averred in the answer that on September 6, 1890, the bank, by a vote of the owners of two-thirds of the capital stock, voted to increase the capital from $100,000 to $250,000; that said bank notified the comptroller that the whole amount of said increase had been paid in, and on January 17, 1891, the comptroller, basing his action wholly upon the notification from the bank, issued his certificate stating that the amount of the increase was $150,000, and that the same was paid in, and was approved by him as comptroller. It is further averred that in September, 1890 the officers of the bank represented to the defendant, Scott that the bank proposed to increase its capital stock by the addition thereto of $150,000; that this increase was made desirable on account of the increasing and flourishing condition of the business of the bank, which was earning large dividends, and had a surplus then earned which would make the shares, including the proposed increase, worth $108 per share; that, relying upon these representations, the defendant subscribed for 50 shares of the proposed increase, and in October, 1890, deposited in the bank the sum of $5,400, it being then and there the understanding between defendant and the bank that said sum, so deposited, was to be held by the bank, and applied in payment of defendant's subscription for 50 shares, when all the proposed increase was subscribed and paid for; that about October 25, 1890, the bank, with intent to deceive defendant, falsely represented that the whole amount of the proposed increase of the capital stock had been subscribed and paid in, and thereupon issued to defendant a certificate for the 50 shares of stock by him subscribed for; that defendant, relying upon these representations, accepted the certificate, and held and claimed the same as owner until after the closing of the bank, and in the years 1891 and 1892 received and retained alleged dividends amounting to 18 per cent.; that as a matter of fact in September, 1890, and for many months prior thereto and ever afterwards the bank was insolvent, its liabilities exceeding its assets; that only about two-thirds of the proposed increase of the capital stock was ever paid in; that the officers of the bank made false entries on the books for the purpose of showing an apparent surplus, and declared a dividend thereon, turning in the same in pretended payment of a large part of said increased stock; that the whole transaction was a sham and fraud, of which the defendant had no knowledge until after the bank closed its doors, in May, 1894; that the books of the bank were so kept that the defendant could not, by the utmost diligence, ascertain the true condition of the bank; and that, as soon as defendant discovered that the increase of stock was not fully paid in, he disclaimed that he was or ever had been, a stockholder in the bank. Upon the filing of this answer, the plaintiff, Latimer, moved for judgment in his favor on the pleadings on the ground that the answer admitted all the facts necessary to sustain his action in the first instance, and that the matters set up as a defense were insufficient to defeat the claim sued on. The court held the motion to be well taken, and gave judgment accordingly, and thereupon the case was brought to this court by writ of error, it being contended by the plaintiff in error that the facts averred in the answer showed that there had not been a valid increase of the capital stock, because the whole amount of the proposed increase of $150,000 had not been paid in; and, further, that the facts averred in the answer entitled the defendant, upon discovery thereof, to rescind the contract of subscription on the ground of false and fraudulent representations made to him by the officers of the bank.
H. F. Stevens (John D. O'Brien, Haydn S. Cole, and Armand Albrecht, on the brief), for plaintiff in error.
William S. Shirk, for the defendant in error.
Before SANBORN and THAYER, Circuit Judges, and SHIRAS, District Judge.
SHIRAS District Judge, after stating the case as above, .
From the foregoing statement of facts it appears that the plaintiff in error relies upon two distinct grounds of defense to the claim asserted by the receiver; the one being that the plaintiff in error never was a stockholder in the bank, because the whole amount of the proposed increase of the capital stock was not in fact paid in to the bank, and the other being that the plaintiff in error is entitled to rescind the contract by which he became a purchaser of stock in the bank for two reasons: First, because his subscription was conditioned upon the payment in full of all the proposed increase of stock; and, second, because he was induced to purchase the stock through fraudulent representations as to the pecuniary condition of the bank.
In support of the first defense it is contended that the 50 shares of stock subscribed for by the plaintiff in error were not valid shares, because some of the shares subscribed for by other parties were not in fact paid for. This contention is based upon the provisions of section 5142, Rev.St., which are as follows:
The theory of the plaintiff in error is that under the provisions of this section no share of a proposed increase of the capital stock can become a valid share unless all the shares of the proposed increase are subscribed for and are paid up in full, or, in other words, if the shareholders should determine, with the approval of the comptroller of the currency, to increase the capital stock by the sum of $100,000, or 1,000 shares of $100 each, and the entire number should be subscribed for, and all the shares except 1 should be fully paid for, and certificates should be duly issued therefor, the holders of such full-paid shares cannot be held to be stockholders, because another person has failed to pay up one share by him subscribed for. It cannot be denied that if the words, 'and no increase of capital shall be valid until the whole amount of such increase is paid in,' found in section 5142, are construed literally, support would be given to the contention of counsel for plaintiff in error; but it is an accepted and fundamental rule in the construction of statutes that the several clauses thereof are not to be viewed as separate enunciations of the legislative will, to be literally construed without reference to other parts of the act, but, on the contrary, each part must be construed with reference to the language and purpose of the entire act, so as to make parts harmonize, and conduce to the carrying out the general purpose of the statute, and a literal construction of particular clauses will not be adopted if the effect thereof would be to operate unjustly or to cause an absurd result.
Thus,in U.S. v. Kirby, 7 Wall. 482, it is said:
In Heydenfeldt v. Mining Co., 93 U.S. 634, it was ruled:
'If a literal interpretation of any part of it would operate unjustly, or lead to absurd results, or be contrary to the evident meaning of the act taken as a whole, it should be rejected.'
In Kohlsaat v. Murphy, 96 U.S. 153, it is declared that:
'In the exposition of statutes, the established rule is that the intention of the lawmaker is to be deduced from a view of the whole statute, and every material part of the same.'
In Church of Holy Trinity v. U.S., 143 U.S. 457, 12 Sup.Ct. 511, it is said:
Under the doctrine of these cases it is clear...
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