Young v. McKay
| Decision Date | 18 April 1892 |
| Citation | 50 F. 394 |
| Court | U.S. District Court — Northern District of California |
| Parties | YOUNG v. McKAY. |
A. R Cotton, for plaintiff.
Edward R. Taylor and John R. Jarboe, for defendant.
This is an action brought by the receiver of the California National Bank of San Francisco to recover the amount of an assessment levied by the comptroller of the currency at Washington upon 50 shares of stock alleged to be owned by the defendant. On the 20th day of October, 1886, the defendant subscribed for 100 shares of stock. On the 4th day of November he paid the first installment of $2,500 on 50 shares. The other 50 shares were then transferred by him upon the books of the bank to R P. Thomas, the president of the bank. On January 6, 1887, he paid the second installment on 50 shares, and on April 18th he paid the final installment of $500, making in all the sum of $5,000, the par value of the stock. He held and owned the certificate for this 50 shares of stock until the 1st of January, 1888, when he sold it to S. R. Noyes for $6,000. At the time of the sale the bank was solvent, doing a good business, and its stock was above par, selling in the open market at a premium of $20 per share. The defendant, in detailing the facts concerning this sale of his stock, said that Mr. Noyes, a broker, came to his office and asked him if he had any shares of stock for sale; that he replied that he had, and asked $120 per share for it; that Mr. Noyes bought the 50 shares of him, and paid him $6,000 therefor; that he then indorsed the certificate, and handed it to Noyes, and said that he would go with him to the bank, and have the certificate transferred; that Noyes said that it was unnecessary to take that trouble; that he would attend to it himself, and have it transferred; that defendant then requested Noyes to inform the cashier of the bank that he had no longer any interest in the stock, and to be sure and have the certificate transferred. Mr. Noyes' testimony as to what occurred at the time of the sale is the same as given by the defendant. He further testified that he took the certificate to the bank, and informed the cashier that it was McKay's stock; that McKay requested that the certificate be transferred; that the cashier took the certificate, and said that he would attend to it,-- that it was all right. In purchasing the stock, Mr. Noyes acted as broker for an undisclosed principal. His connection with the transaction can be briefly stated. Mr. Ramsden, who was the cashier of the bank, met him on the street, and requested him to get the stock from McKay, and assured him that, if the stock was procured, he could make a brokerage on it. Ramsden gave him the money to purchase the stock, and requested him to bring the certificate to the bank, which he did. Ramsden also confidentially told him that the stock was for R. P. Thomas the president of the bank. On December 17, 1888, 11 months after the transaction, the bank suspended. The certificate for the 50 shares of stock was canceled on the 5th of January, 1889, 19 days after the failure of the bank. On the 14th of January, 1889, S. P. Young was appointed receiver of the bank by J. D. Abrams, deputy and acting comptroller of the currency. On the 18th of January, the comptroller of the currency levied an assessment of $37.50 upon each share of the capital stock, and directed the receiver to enforce to that extent the individual liability of the shareholders.
Upon the facts above stated, is defendant, McKay, liable as a shareholder for the assessment upon said 50 shares of stock? The United States statute provides that the capital stock of each banking association shall be deemed personal property, and shall be transferable on the books of the association in such manner as may be prescribed by the by-laws of the association, and that every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all the rights and liabilities of the prior holder of such shares. Rev. St. Sec. 5139. It is also provided that the shareholders shall be held individually responsible, equally and ratably, for all contracts, debts, and engagements of the association, to the extent of the amount of their stock therein. Section 5151. The by-laws of the California National Bank declare that--
As a general rule, deducible from all the authorities bearing directly upon the question under consideration, it may be safely stated that, in all cases between the creditors of a bank and the person standing on the books of the bank as a shareholder, the person who allows his name to remain on the books of the bank as a shareholder is estopped from denying that he is a shareholder, and that his individual liability to the creditors continues after he has made a bona fide sale of his stock until the transfer of the stock is entered on the books of the bank, and that such transfer cannot be made, as against creditors, after the bank is known to be insolvent.
In Richmond v. Irons, 7 Sup.Ct.Rep. 788, 121 U.S. 27, the supreme court of the United States said:
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