Stuart v. Hayden Gruetter v. Stuart

• Citation: 169 U.S. 1,42 L.Ed. 639,18 S.Ct. 274
• Decision Date: 10 January 1898
• Docket Number: Nos. 151 and 160,s. 151 and 160
• Parties: STUART v. HAYDEN et al. GRUETTER et al. v. STUART et al
• Court: United States Supreme Court

169 U.S. 1

18 S.Ct. 274

42 L.Ed. 639

STUART

v HAYDEN et al.

GRUETTER et al.

v. STUART et al.

Nos. 151 and 160.

January 10, 1898.

C. C. Flausburg, for Ambrose P. S. Stuart.

G. M. Lambertson, for Kent K. Hayden. John N. Ames, for Gruetter & Joers.

Mr. Justice HARLAN, after stating the facts in the foregoing language, delivered the opinion of the court.

On the 6th day of February, 1893, the comptroller of the currency appointed a receiver of the Capital National Bank of Lincoln, Neb., which had a nominal capital of $300,000. The bank had shortly before suspended business, and upon due examination had been found to be insolvent.

Subsequently, June 10, 1893, that officer (having first determined that, in order to pay the debts of the bank, it was necessary to enforce the individual liability of shareholders, as prescribed in sections 5151 and 5234 of the Revised Statutes), made an assessment for $300,000, to be paid by shareholders equally and ratably on or before July 10, 1893. Of this assessment and requisition Stuart had proper notice.

In execution of this order, the receiver brought the present action against Stuart.

Stuart became the owner of 100 shares of the stock of the Capital National Bank in 1884, and of 50 additional shares in 1886. Substantially from the time of becoming a shareholder, he was one of the directors of the bank, and a member of its finance committee, and acted in both capacities until about December 16, 1892. On the last-named day, Gruetter & Joers, dealers in furniture at Lincoln, sold to Stuart certain real property in that city, for $67,500, upon which there was at the time a mortgage for $30,000, bearing interest at the rate of 6 per cent. per annum. The terms of the contract were that Stuart should assume the mortgage debt, deliver to Gruetter & Joers his stock in the Capital National Bank, as of the value of $18,000, meet the taxes on the property which then amounted to $250, and pay the balance of the price in cash; Gruetter & Joers to take a lease of the real estate for 10 years, at $6,000 per year. At the time of this agreement, Stuart paid $1,000 to bind the bargain. On the 22d day of December, 1892, Gruetter & Joers made their deed to Stuart for the real estate; and Stuart delivered to them his certificates of shares of stock, having signed the blank forms of powers of attorney indorsed thereon, and paid the balance of the agreed price in cash, the taxes on the property, and the interest that had accrued on the mortgage.

On the 3d day of January, 1893, the certificates of stock, with the blank powers of attorney indorsed thereon, were returned to the bank, and new certificates were issued to Gruetter & Joers.

The bank closed its doors within less than three weeks after the stock was transferred on its books to Gruetter & Joers, its total assets being about $900,000, and total liabilities $1,463,013.17. Its bills receivable on hand were $519,600, of which $58,596.82 were good, $141,393.27 were doubtful, and $319,611.90 were worthless. Its bills receivable not on hand amounted to $141,000, of which only $10,000 were worth anything.

The original bill was against Stuart alone. But a demurrer for want of parties having been sustained, an amended bill was filed against Stuart, Gruetter, and Joers.

The amended bill alleged, in substance, that, at the time of the transaction between Stuart and Gruetter & Joers, the former was fully advised of the failing condition and insolvency of the bank, and transferred his stock to them in anticipation of its early failure and the necessary enforcement of the liability of shareholders for the benefit of creditors, and with the intent to evade such liability, and to defraud the creditors of the bank. The relief sought was a decree setting aside the transfers of stock, and adjudging that Stuart was liable as a shareholder of the bank under the assessment made by the comptroller of the currency. It was further alleged by the receiver that Gruetter & Joers were, at the time of the transfer to them of Stuart's stock, pecuniarily irresponsible persons, from whom the amount of § ch assessment upon each share of the stock so owned and held by Stuart could not be made by legal process or otherwise.

Stuart, in his answer, insisted that the sale to Gruetter & Joers was an ordinary business transaction, and denied that he had, at the time of his purchase from Gruetter & Joers, any knowledge whatever of the condition of the bank, or that he knew that the bank was then insolvent, or that he expected it to fail; that, on the contrary, he believed it to be perfectly solvent, sold and transferred his stock without any thought of the enforcement of his liability as a shareholder, and without any intention to evade such liability or to defraud the bank's creditors.

Gruetter and Joers answered, and averred that Stuart made the transfer of stock to them with full knowledge of the failing condition and insolvency of the bank, in anticipation of its approaching suspension, and with the intent to defraud the bank, its depositors and creditors, of the security afforded to such depositors and creditors by law, and render it impossible to enforce his liability as a shareholder; also, that Stuart, with the knowledge and intent stated, represented and warranted to them that the bank was in a safe and solvent condition, and that its stock was reasonably worth $125 per share, or $18,000 in all. They also filed a cross bill against the receiver and Stuart, in which the relief sought was a decree declaring the transfer of the stock standing in the name of Stuart to be fraudulent and void as against them, as well as against the receiver and the creditors of the bank, and adjudging that Stuart make full restitution to them of the amount at which such stock was received on the contract for the purchase of the real property sold and conveyed to him.

The decree in the circuit court recited (though not in the form of a finding of facts) that on and prior to January 3, 1893, Stuart was the owner of and had standing in his name upon the books of the bank the shares of stock above mentioned; that on or about December 16, 1892, and for more than eight years prior to that date, he was a member of the board of directors and of the finance committee of the bank; that, on both of the above dates, he had knowledge of its then existing insolvency; that, at the time of the transfer of the stock, he represented to Gruetter & Joers that the bank was in a solvent and prosperous condition, and that such representation was made for the purpose of inducing them to purchase the stock, and of evading and escaping his liability as a shareholder for an assessment thereon. It was then ordered, adjudged, and decreed that the sale, assignment, and transfer of the 150 shares of stock of the Capital National Bank was wholly void as against the receiver and Gruetter & Joers; that the sale, assignment, and transfer be set aside, canceled, and held for naught; that the stock be reinstated upon the books of the bank in the name of Stuart, who was declared to be the holder and owner thereof; that Stuart within 20 days from the date of the decree, pay to the receiver the full amount of the assessment against the stock; and that the receiver recover from him the sum of $15,000, together with interest at the rate of 7 per cent. per annum, from the 10th day of July, 1893, being in the aggregate the sum of $16,875.42; that Stuart, within 20 days from the date of the decree, make full restitution and payment to Gruetter & Joers of the amount of the purchase price of the stock, to wit, the sum of $18,000, together with interest thereon at the rate of 7 per cent. per annum, from the 3d day of January, 1893, being in the aggregate the sum of $20,905; that Gruetter & Joers be relieved from all liability to the receiver for and on account of any assessment on the stock; and in case Stuart neglected to pay each of the aforesaid sums of money, together with the costs of the suit, to be taxed by the clerk, that execution should issue therefor.

Upon appeal to the circuit court of appeals the decree was reversed, w thout costs to either party, and the cause was remanded, with instructions to enter a decree declaring the transfer of stock from Stuart to Gruetter & Joers to be fraudulent and voidable as to the receiver of the bank; that the receiver recover of Stuart the assessment made upon him, with costs; and that Gruetter & Joers were not entitled to relief against Stuart in this suit, and their cross bill should be dismissed, with costs to Stuart. 36 U. S. App. 462, 18 C. C. A. 618, and 72 Fed. 402. In the opinion of that court it is stated that the evidence justified the conclusion reached by the circuit court as to the facts.

From the decree of the circuit court of appeals the present appeals have been prosecuted.

The shares of the capital stock of a national bank are transferable on its books in such manner as may be prescribed by the by-laws or articles of the association, and every one becoming a shareholder by such transfer succeeds, in proportion to his shares, to all the rights and liabilities of the prior holder. Rev. St. § 5139.

It is also provided by statute 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 extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.' Rev. St. § 5151.

The principal inquiry in this case is whether Stuart transferred his stock to Gruetter & Joers in order to escape the liability imposed by statute upon shareholders of national banking associations. His contention is that if the transfer was absolute, and to persons who were at the time solvent and able to respond to an assessment upon the shares, the motive with which the transfer was...