Wheelock v. Kost

• Decision Date: 31 January 1875
• Citation: 1875 WL 8309,77 Ill. 296
• Parties: OTIS L. WHEELOCKv.ELIAS KOST et al.
• Court: Illinois Supreme Court

77 Ill. 296

1875 WL 8309 (Ill.)

OTIS L. WHEELOCK

v.ELIAS KOST et al.

Supreme Court of Illinois.

January Term, 1875.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Macon county; the Hon. C. B. SMITH, Judge, presiding.

This was a creditors' bill, filed by Elias Kost and others, creditors of the First National Bank of Decatur, against Otis L. Wheelock and others, stockholders of such bank. The opinion of the court states the material facts of the case. Otis L. Wheelock alone appealed from the decree below.

Messrs. CREA & EWING, for the appellant.

Messrs. PARK & LEE, and Messrs. NELSON & ROBY, for the appellees.

Mr. JUSTICE SCOTT delivered the opinion of the Court:

This bill was to compel parties, alleged to be stockholders in the First National Bank of Decatur, to pay certain judgments previously obtained against the bank. On the 16th day of February, 1870, the bank ceased to do a general banking business, and, it is alleged, it became insolvent. Executions, issued on the several judgments obtained by the creditors of the bank, were returned nulla bona.

Whether appellant was a stockholder in the bank at the date it ceased to do business and became insolvent, is a question that lies at the foundation of the relief sought, and must be first determined.

Briefly, the facts are: that appellant made some loans of money to the bank, and made and delivered to it his promissory note, partly as an accommodation, to be held among its other assets. It was agreed that fifty shares of stock in the bank, equal in value to $5000, should be issued to appellant, as collateral security for the loans of money so made, and as indemnity against liability on his promissory note held by the bank. That number of shares was in fact issued, and delivered to appellant, and certificates to that effect given, upon which he received, at different times, semi-annual dividends.

Whatever relation appellant may have sustained to the corporators of the bank, it seems clear that, as to its creditors, he occupied the position of a stockholder, and must bear all the burdens that relation imposed. The stock had in fact been transferred to him; it stood in his name as owner, and he availed of the dividends it earned. Having voluntarily assumed the relation of stockholder, it makes no difference he may have done it with a view to assist the bank in its credit or otherwise. The legal title to the stock was in appellant by his own procurement, although the equitable title may have been in other parties; but it would be a singular doctrine to hold that the creditor should seek out the equitable owner against whom to enforce his claim. Primarily, he may proceed against the party in whom is the legal title to the stock. Where shares of stock in a banking incorporation have been hypothecated, and placed in the name of the transferree, he will be subjected to all the liabilities of ordinary owners. It is for the reason the property is in his name, and the legal ownership appears to be in him. Morse on Banking, 432; Adderly v. Storm, 6 Hill, 624; In re Empire City Bank, 18 N. Y. 199.

It being determined appellant is a stockholder, he can not be permitted to urge, as defense, that the bank was not legally incorporated under the general banking laws. Having participated in the acts of user of a corporation de facto, a stockholder therein will, by such acts, be estopped to insist the corporation was not legal, when it is sought to enforce any liability he may have incurred. By the receipt of dividends on the shares of stock held by him, appellant participated in the transactions of the corporation. Whether the bank...