Stufflebeam v. De Lashmutt

• Decision Date: 27 April 1900
• Docket Number: 2,409.
• Citation: 101 F. 367
• Parties: STUFFLEBEAM v. DE LASHMUTT.
• Court: U.S. District Court — District of Oregon

101 F. 367

STUFFLEBEAM v. DE LASHMUTT.

No. 2,409.

United States Circuit Court, D. Oregon.

April 27, 1900

Wm. H Effinger, for plaintiff.

R. & E B. Williams, for defendant.

BELLINGER District Judge.

This is a demurrer to two separate defenses in the amended answer to the complaint of the receiver in an action brought to recover an assessment upon national bank stock held by the defendant. The defense in the original answer was that the defendant was induced by the fraudulent representations of one Browne president of the bank, and Brune, it secretary, to purchase shares in the bank belonging to Browne. It appears from the allegations of the answer that Browne and Brune made various fraudulent representations in respect to the condition of the bank, to the effect that the bank was in solvent condition and that it had assets above its liabilities; that its surplus capital amounted to $30,000; that the capital stock of said bank was worth 20 per cent. over and above its face value; that its was not indebted to any one except regular depositors and $10,000 loaned money; that it had loans and discounts that were good and collectible, amounting to above $122,000; that it owned stocks and securities of the reasonable value of above $15,000, and that there was due the bank from solvent state banks and bankers more than $8,000; that the bank had sufficient assets to pay all of its liabilities of every kind and nature, and both its time and stock deposits, and then leave over and above after such payments cash sufficient to pay all the capital stock of the bank and 40 per cent. premium thereon; and it was further represented that the bank was doing a lawful business, and had complied with the laws of the United States and the state of Idaho, and had good credit and standing. It was alleged that these representations were made for the purpose of deceiving and defrauding the defendant out of a certain tract of land owned by him and situated in the state of Oregon, which land, it was proposed, should be exchanged for the stock in question, and was thereafter so exchanged, and a conveyance therefor executed to said Browne, who subsequently conveyed to Brune. All these representations are alleged to have been false and fraudulent, and the facts showing the false and fraudulent character thereof are set forth in the answer. A demurrer to this original answer was overruled by the court upon the ground that the liability of the defendant, if any upon the facts as alleged, was upon the principle of an estoppel, and that there could be no recovery, under the circumstances, unless it appeared, or there was ground for the presumption, that creditors for the payment of whose debt the assessment sued on was levied had become such after the transfer to the defendant of the stock upon which he is sought to be charged. 83 F. 449. In the amended answer, in addition to the matters hereinbefore recited, the defendant pleads a decree in his favor in circuit court of the state of Oregon, for the county of Washington, in the suit of himself and Inez De Lashmutt against Browne and the receiver, brought to rescind the contract of subscription and to compel a reconveyance of the land transferred to Browne as the purchase price of the stock in question. Plaintiff demurs, as before to the defense that the defendant was induced by the fraudulent contrivances of Browne and Brune to become a stockholder in the Moscow Bank, and also to that part of the answer which sets up the suit and decree in the state court.

It is held that contracts by which a party becomes a stockholder under circumstances such as are set forth in this complaint are not void, but voidable. Upon that doctrine the defendant became a stockholder in the Moscow Bank, and was such at the time the receiver took charge; and, under the rule adopted in some of the cases, the utmost diligence in rescinding the voidable contract will not relieve the unfortunate stockholder if he does not discover the fraud practiced upon him until after proceedings are begun to liquidate the bank's affairs, and if any 'considerable amount of corporate indebtedness' has been created in the meantime. Bank v. Newbegin, 20 C.C.A. 339, 74 F. 140, 33 L.R.A. 727. And so in the earlier case of Upton v Englehart, 3 Dill. 496, Fed. Cas. No. 16,800, it is said that, 'if a person has accepted a certificate of stock, and become, to all external appearances, a stockholder, persons may have become creditors of the company on the faith of his membership, and in law are presumed to do so; and, as they cannot know the manner in which he was induced to become a stockholder, there is ground to maintain that as to them the manner is immaterial. ' In a recent case, where a stockholder in a national bank sought to avoid liability on the ground that his subscription was induced by fraud, the court says that it is immaterial whether there was creditors of the bank who became such a reliance on the fact that the defendant had become of it shareholders, since the creditors of a bankrupt company 'are entitled to nothing less than its whole outstanding capital stock as fund for the payment of their claims and because all persons are in law presumed to extend credit to corporations, and especially to national banks, whose shares are subject to a double assessment, in reliance upon the amount of their issued capital stock, although they do not know accurately by whom...