Wagner v. South Chicago Sav. Bank

• Citation: 146 F.2d 686
• Decision Date: 13 February 1945
• Docket Number: No. 8561.,8561.
• Parties: WAGNER, for Use of MOLNER, v. SOUTH CHICAGO SAV. BANK.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

146 F.2d 686 (1944)

WAGNER, for Use of MOLNER, v. SOUTH CHICAGO SAV. BANK.

No. 8561.

Circuit Court of Appeals, Seventh Circuit.

December 16, 1944.

Rehearing Denied February 13, 1945.

Elmer J. Schnackenberg, of Chicago, Ill., for appellant.

Maurice Weissman, of Chicago, Ill., for appellee.

Before EVANS, MAJOR, and MINTON, Circuit Judges.

EVANS, Circuit Judge.

A national bank receiver sold and assigned to appellee a $10,860 judgment which he obtained against appellant, based on the statutory bank stockholder's liability. Appellant challenges the validity of such sale and assignment, contending that the statutory power of the receiver to "enforce the personal liability of the shareholders"¹ does not include the power to sell and assign, this claim. Appellee, the assignee, purchased the bank's assets (including stockholders' liability judgments) in the receiver's hands for $1,230. He instituted the instant garnishment proceedings against sixteen shares of bank stock of the par value of $1,000, the property of appellant, which stock was in the hands of the garnishee, South Chicago Bank, as statutory security of Wagner's fidelity as director of that bank. The bank and appellant were both named defendants.

Heretofore² we held this claim was not exempt from garnishment simply because of the character of its deposit, and also held it was error to discharge the garnishee on that ground. Upon that appeal counsel for the stockholder did not question the authority of the receiver to sell the judgment, or the validity of such sale. The case was returned to the trial court "for further proceedings in accord with the views here expressed." Upon the return of the case to the trial court, Wagner filed a petition, the gist of which denied liability because of the invalidity of said assignment.

The court "ordered leave be given to * * * file the petition" of Wagner. Later, after due consideration it struck said petition from the record. Later the court entered judgment in favor of appellee, the assignee. Wagner appeals from that judgment.

The pertinent statutes provide (Title 12 U.S.C.A.):

Secs. 63 and 64. "The stockholders of every national banking association shall be held individually responsible for all contracts, debts, and engagements of such association, each to the amount of his stock therein, at the par value thereof * * *." (1913).

Sec. 65. "When any national banking association shall have gone into liquidation * * * the individual liability of the shareholders * * * may be enforced by any creditor of such association, by bill in equity * * *." (1876).

Sec. 67 (enacted Feb. 25, 1930). "Any receiver of a national banking association is authorized, with the approval of the Comptroller of the Currency and upon the order of a court of record of competent jurisdiction, to compromise, either before or after judgment, the individual liability of any shareholder of such association." (1930).

Sec. 191. "Whenever any national banking association shall be dissolved * * * or whenever the comptroller shall become satisfied of the insolvency of a national banking association, he may, after due examination of its affairs, * * * appoint a receiver who shall proceed to close up such association, and enforce the personal liability of the shareholders, as provided in section 192." (1876).

Sec. 192. "On becoming satisfied * * * that any association * * * is in default, the Comptroller of the Currency may forthwith appoint a receiver, and require of him such bond * * *. Such receiver, under the direction of the comptroller, shall take possession of the books, records, and assets of every description of such association, collect all debts, dues, and claims belonging to it, and, upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on a like order, may sell all the real and personal property of such association, on such terms as the court shall direct; and may, if necessary to pay the debts of such association, enforce the individual liability of the stockholders." (1916, amended 1935).

In the instant case the receiver's judgment for $10,860 against appellant was obtained, December 22, 1936. Execution was issued on the judgment and returned "no property found." On January 14, 1942, the District Court, in an equity proceeding, entered an order authorizing the receiver to "sell, transfer and assign to * * * (Molner, the assignee, appellee here) for the sum of $1,230 in cash, all of the assets of the receivership estate and salable stock assessment liabilities particularly described and set forth in an exhibit attached to said order" one of which items in the exhibit was the judgment here involved.

It is appellant's contention that a national bank stockholder's liability is unique — not an asset of the bank, but a right accruable to a creditor to enforce, or the receiver to enforce upon authorization of the Comptroller, and, once enforced, the proceeds constitute a trust fund for the benefit of the creditors, and the surplus belongs to the stockholder or stockholders. He denies authority of the receiver to assign such liability or a judgment based thereon. He points out that although a receiver had previously had the power to compound "all bad or doubtful debts" such power did not include the power to compromise stockholder liability debts, and it was necessary in 1930 to secure a specific statutory authorization permitting the receiver to "compromise" stockholder's statutory liability. The power of the receiver "to enforce the individual liability of the stockholders" must be narrowly construed, so he argues, and so construed, excludes the power to assign.

No Federal case directly in point has been cited, construing the right of a national bank receiver to assign a stockholder's liability, either before or after judgment. There have been several state court cases on the subject, some of them involving national banks.³

Appellee also challenges the appellant's right to assail the validity of the assignment in this allegedly collateral proceeding. Answering this puzzler, appellant contends that the order directing the assignment was in reality an administrative proceeding and so this is an original attack, and not collateral, upon the validity of the assignment.

The law of the case is also advanced, based on our opinion in the prior appeal, where we held that the garnisheed stock in the hands of the defendant bank was property subject to garnishment in an action brought by the assignee of the judgment in favor of the receiver.

Assignability of Stockholder's Liability by Receiver. Coming at once to the meat of this controversy, the assignability by a receiver of national bank stockholder's liability, we find much contrariety of opinion. As stated in American Jurisprudence, "Banks," § 137:

"On the one hand, there is authority to the effect that the right of the receiver of an insolvent banking corporation to enforce an assessment under a statute providing that stockholders shall be liable to creditors to an amount equal to their respective shares is not an asset of the bank, and therefore can be enforced by the receiver's transferee of such right only to the extent to which the consideration paid by him can be shown to have been distributed to creditors. There is, however, authority to the contrary effect — that is, that the claim of the receiver against stockholders of the insolvent bank is one that he can assign or transfer."

In 82 A.L.R. 1285, 1286, it is said:

"Upon the question whether the statutory superadded liability of a shareholder in an insolvent corporation may be assigned or sold by its receiver, the cases are about evenly divided."

Vol. 9, C.J.S., Banks and Banking, § 604, p. 1143, aligns itself on the side of the salability of such a claim basing its conclusion on the New York case of Waldron v. Alling, 73 App.Div. 86, 76 N.Y.S. 250. Iowa seems to have furnished the leading decisions supporting the appellant's position. Roe v. King, 217 Iowa 213, 251 N.W. 81; Andrew v. Bank of Swea City, 214 Iowa 1339, 242 N.W. 62, 82 A.L.R. 1280. This lead has been followed by other respectable authorities.

The Illinois Supreme Court, in the recent case of Decker v. Domoney, 1944, 387 Ill. 524, 56 N.E.2d 750, squarely held that in the case of a state bank (Illinois), judgments based on stockholder's statutory liability, could be validly assigned. It is worthy of note that here the court stresses the fact that the liability has been reduced to judgment, and a judgment is less vulnerable to the attack which appellant makes, than was the naked liability before judgment.

In our search we have found but one Federal case, Fisher v. Lefferts, 3 Cir., 105 F. 711, decided in 1901. We quote from that opinion:

"This case arises upon the following facts: In May, 1891, B. F. Fisher, the legal plaintiff in this suit, was appointed receiver of the Spring Garden National Bank, and entered upon the duties of his appointment. Not long afterwards an assessment was made by the comptroller of the currency to enforce the additional liability of the shareholders under the act of congress, and this suit was brought to recover the assessment due from the defendant. A judgment was recovered in June, 1892, for the full amount of the claim, but * * * it was never paid. In April, 1899 * * * the court thereupon entered a decree giving the power to sell. Sale was accordingly made, this judgment being included, and the receiver's return was duly confirmed by the court. * * * not long afterwards * * * plaintiff issued execution and levied upon the defendant's property. * * *

"There are two reasons why this rule must be discharged. In the first place, in its present form, the petition is a collateral attack upon the decree ordering the sale, and therefore cannot be entertained. * * *

"But, even if the petition were before the court in the proper proceeding, I should dismiss it because,...