Somerset Nat. Banking Co.'s Receiver v. Adams

• Decision Date: 20 March 1903
• Citation: 72 S.W. 1125
• Parties: SOMERSET NAT. BANKING CO.'S RECEIVER et al. v. ADAMS.
• Court: Kentucky Court of Appeals

72 S.W. 1125

SOMERSET NAT. BANKING CO.'S RECEIVER et al. v. ADAMS.

Court of Appeals of Kentucky.

March 20, 1903

Appeal from Circuit Court, Pulaski County.

"Not to be officially reported."

Action by Napier Adams against Christopher L. Williams, as receiver of the Somerset National Banking Company, and another. From a judgment for plaintiff, defendants appeal. Reversed.

O. H Waddle, and F. F. Oldham, for appellants.

J. N Sharp, V. P. Smith, and W. A. Morrow, for appellee.

BARKER J.

This action was instituted by the appellee, Napier Adams, who was the plaintiff below, against the appellants, Christopher L Williams, receiver of the Somerset National Banking Company and the Somerset National Banking Company, to recover the sum of $500, alleged to have been deposited by him in the bank and never repaid.

In the spring of 1900 the stockholders of the Somerset Banking Company, a corporation doing a banking business in Somerset, Ky. concluded that it would be to their interest to change their bank, which was a state institution, into a national bank; and to that end, at a stockholders' meeting, in which a large majority of the stock was represented, a resolution was passed authorizing the directors to place the Somerset Banking Company in liquidation, for the purpose of organizing a national bank, and further authorizing them to fix such time as they might deem best for such liquidation to go into effect, and to take all necessary steps to perfect the liquidation, and to organize a national bank, to be called the Somerset National Banking Company, the capital stock of which was to be $50,000; the stockholders of the old bank to have the privilege of taking stock in the new bank in an amount equal to fifty per cent. of their holdings in the old. Afterwards the board of directors of the Somerset Banking Company met, and elected the following board of directors for the new institution: L. D. S. Patton, Will C. Curd, George W. Wait, M. D. Huffaker, and Samuel Tate--who were to serve until the next annual election, to be held on the second Tuesday in January, 1901. At a subsequent meeting the board of directors of the Somerset Banking Company fixed the 30th day of June, 1900, as the time at which it should go into liquidation. On the 11th day of June, 1900, the directors of the Somerset National Banking Company held a meeting, at which they elected George W. Wait, president; Will C. Curd, vice president; and R. G. Hale, cashier. On motion it was ordered that the president, George W. Wait, and the cashier, R. G. Hale, "be, and they are hereby, authorized to proceed with the organization of this banking company, to purchase the required books and stationery, procure the issue of the currency, and, if possible, get matters in shape to begin business on the 2d day of July, 1900 [the 1st coming on Sunday], and inasmuch as the proposed stockholders are scattered over the country, and in order to facilitate the organization, it is further ordered that the capital stock be taken and subscribed for by a limited number of stockholders, who will, after the organization is completed, apportion the same on a basis of fifty per cent. to the stockholders in the Somerset Banking Company desiring the same; however, subject to the law requiring the directors of this banking company to hold a certain number of shares so as to qualify and make themselves eligible to hold said offices as directors." In pursuance of this authority, application was made to the United States Comptroller of the Currency for the organization of the Somerset National Banking Company. In order to comply with the national bank act, and the rules and regulations of the Comptroller of the Currency, formal application papers were made out; and, in pursuance of the agreement that a limited number of persons should subscribe for all the stock, L. S.D. Patton, Samuel Tate, M. D. Huffaker, George W. Wait, R. G. Hale, Will C. Curd, James Denton, A. M.

Girdler, H. Clay Newell, and B. G. Newell, all residing in Somerset, Ky. subscribed for the whole capital stock of the proposed bank, each taking 50 shares, whereupon the Somerset National Banking Company was duly and legally organized under the national bank act, and empowered to carry on a banking business at Somerset, Ky. The subscriptions of the 10 persons mentioned were only intended to effect the organization of the bank expeditiously, and to facilitate the arrangement by which the stockholders in the Somerset Banking Company should have the privilege of subscribing for the new stock to the extent of 50 per cent. of their holdings of stock in the old bank, and also that at least $10,000 worth of the stock in the new bank should, if possible, be sold to new subscribers, for the purpose of interesting them in the proposed bank. It was never intended that these subscriptions should be anything more than formal, the subscribers being practically trustees for the proposed new subscribers.

The new bank, being thus organized, was started in business. Among its depositors was appellee, Napier Adams, who entered into negotiations with the officers of the bank for the purchase of five shares of stock. He having agreed to subscribe for this number, it was paid for by charging his deposit account with the sum of $500, and crediting him on the stock ledger with that sum; and in pursuance of this subscription a certificate of stock was made out to him for the five shares of stock, and, in the expectation that he would call for it, was laid aside in the bank for him, but was never delivered. The new bank seems to have had an exceedingly short career. It commenced business on the 2d day of July, 1900, and was placed in the hands of a receiver by the Comptroller of the Currency on the 17th day of August, 1900--for what reason, does not definitely appear, but presumably because it assumed the payment of the deposits of the old bank, which must have been insolvent. It having been found necessary by the Comptroller of the Currency, in order to pay the indebtedness of the appellant bank, to make an assessment upon all the stockholders, this was done; and in default of payment an action was instituted by the receiver in the United States District Court for the Eastern District of Kentucky against a large number of stockholders, among whom was the appellee, whereupon the appellee instituted this action in the circuit court of Pulaski county in order to test the question in the state court as to whether or not his subscription to the stock of the defunct bank was valid. To this action the receiver filed an answer containing four paragraphs, in which he respectively denies the indebtedness as set out in the petition, pleads the subscription by appellee of the stock, the application of the $500 deposited by appellee in the bank in payment therefor, the pendency of this action in the federal court as a bar to this, and that the plaintiff is estopped to deny that he was a subscriber.

The burden of proof was upon the defendant. An examination of all the pleadings shows that the money sued for was placed on deposit in the bank, and the plea that it was used in paying appellee's stock subscription is a plea of payment; nor do we think that the fact that plaintiff proved his deposit account before the receiver, without including the $500 in question, or the fact that he...