Sheafe v. Larimer

• Decision Date: 09 April 1897
• Citation: 79 F. 921
• Parties: SHEAFE v. LARIMER.
• Court: U.S. District Court — Northern District of Iowa

79 F. 921

SHEAFE v. LARIMER.

United States Circuit Court, N.D. Iowa, Western Division.

April 9, 1897

Strong & Owen, for plaintiff.

F McNulty, for defendant.

SHIRAS District Judge.

From the averments in the petition filed in this case it appears that the Washington Savings Bank is a banking corporation created under the provisions of the laws of the state of Washington; that in January, 1894, proceedings in liquidation were brought against the bank in the superior court of Kings county, in said state, and C. M. Sheafe was appointed receiver of the bank, with authority to collect the assets of the corporation, and apply the same in payment of the debts due therefrom; that on the 31st day of August, 1895, the superior court in said Kings county, upon the petition of the receiver, made an order authorizing an assessment upon the capital stock of said bank, in an amount equal to the face value thereof, to be payable to said receiver within 30 days from the date of the order; that the defendant herein is a stockholder in said bank, having purchased on the 1st day of October, 1891, 100 shares of stock, of the par value of $100 per share; that the defendant refuses to pay said assessment and therefrom judgment for the sum of $10,000 is prayed against him. To this petition the defendant files an answer and counterclaim, averring therein that he is a resident of Iowa; that he never was in the state of Washington, and never took part in the management of the bank; that he was not a party to the proceedings in liquidation, and had no notice of the application to the court for an order authorizing the assessment upon the capital stock of the bank; that, when the bank was placed in liquidation, the assets amounted to the sum of $233,214, and the liabilities to the sum of $143,717 that, when the bank was first organized, it had a capital stock of $50,000; that afterwards it was proposed to increase the capital stock to $100,000, and that the president of the bank represented to him about October 1, 1891, that 400 shares of the proposed increase had been subscribed and paid for, at the rate of $105 per share, and thereby the defendant was induced to purchase 100 shares, paying therefor the sum of $10,500; that in fact only $24,980 of such increase had been subscribed and paid for; that he (the said defendant herein) did not know or learn of the fraud thus practiced on him until some time after the receiver herein had been appointed, when he offered to return the stock to him; and he now prays judgment for the damages caused him, in the sum of $10,500, against the receiver and the named bank. To this answer and counterclaim, the plaintiff demurs on several grounds, the first point being that the defendant cannot, in this court and in this proceeding, attack the action had in the superior court of Kings county authorizing an assessment upon the capital stock of the corporation. The position taken by defendant is that he was not within the territorial jurisdiction of the court making the order; that he was not notified of the proceeding; that it was purely ex parte; and that the stockholder is entitled to his day in court, or, in other words, he is not bound by the assessment order unless he had personal notice of the application therefor.

The provision of the statutes of the state of Washington creating a liability on stockholders for an amount equal to the face value of the stock held by them is identical with that found in the act of congress known as the 'National Bank Act.' In the case of Wilson v. Book, 43 P. 939, the supreme court of Washington held that the statutory liability thus imposed upon stockholders can be enforced by a receiver of the corporation, and it thus appears that the superior court of Kings county had the right to entertain the application of the receiver for an order directing the making of an assessment upon the shareholders of the bank. This application was made in the case pending in that court, wherein the bank was a party; and it was not necessary to give notice to the individual stockholders in order to confer jurisdiction upon the court to make the assessment order.

This exact question was before the supreme court in Hawkins v. Glenn, 131 U.S. 319, 9 Sup.Ct. 739, and it was therein said:

'Sued after such an order of court, the defendant does not deny the existence of any one of the facts upon which the order was made, but contends that there has been no call as to him, because he was not a party to the cause between the creditor and corporation. We understand the rule to be otherwise and that the stockholder is bound by a decree of a court of equity against the corporation in enforcement of a corporate duty, although not a party as an individual, but only through representation by the company. A stockholder is so far as integral part of the corporation that, in view of the law, he is privy to the proceedings touching the body of which he is a member. Sanger v. Upton, 91 U.S. 56, in which case it is also said: 'It was not necessary that the stockholders should be before the court when it (the order) was made, any more than that they should have been there when the decree of bankruptcy was pronounced. That decree gave the jurisdiction and authority to make the order. The plaintiff in error could not in this action question the validity of the decree; and, for the same reasons, she could not draw into question the validity of the order.'

The same doctrine is announced in Glenn v. Liggett, 135 U.S. 533, 10 Sup.Ct. 867, and Priest v. Glenn, 2 C.C.A. 305, 51 F. 400.

Under the rule as given in these cases, it must be held that the stockholders in the Washington Savings Bank are bound by the assessment order granted by the superior court of Kings county, and that the validity thereof cannot be questioned in this collateral proceeding in this court, upon any of the grounds set forth in the answer of the defendant. If it be true that no real necessity for calling upon the...