Commercial National Bank v. Weinhard - 192 U.S. 243 (1904)
U.S. Supreme Court
Commercial National Bank v. Weinhard, 192 U.S. 243 (1904)
Commercial National Bank v. Weinhard
Argued December 17, 1903
Decided January 18, 1904
192 U.S. 243
Section 5205, Rev.Stat., is intended to, and does, confer upon a national banking association the privilege of declining to make the assessment to make good a deficiency in the capital after notice by the Comptroller of the Currency so to do, and to elect instead to wind up the bank under § 5220. The shareholders, and not the directors, have the right to decide which course shall be pursued, and an assessment made upon the shares by the directors without action by stockholders is void.
These actions were brought in the Circuit Court of the State of Oregon for Multnomah County upon separate demands to recover the value of stock severally held by Weinhard and Williams in the Commercial National Bank of Portland, Oregon, Williams owning sixty shares of the par value of $6,000 and Weinhard one hundred shares of the par value of $10,000. By stipulation, the cases were heard together in the circuit court; a jury being waived and a trial had to the court. The cases were considered together as one appeal in the Supreme Court of Oregon, which affirmed the judgment of the lower court, 41 Ore. 359, assessing the value of the stock and giving
judgment in favor of the plaintiffs, now defendants in error. The same facts and questions are involved in the cases, and they will be considered together. The one question arises from a motion on the part of the bank for nonsuit on the ground that the plaintiffs below had introduced no testimony as a part of the case in chief tending to show the value of the stock for which a recovery was sought. As appears in the record, much testimony was taken, and the Oregon Supreme Court regarding the stock as of some value; at least, it was held that, if there was any error in overruling the motion for nonsuit, it was cured by the subsequent action in submitting testimony as to the value of the stock. In any event, this feature of the case does not present a federal question, and upon writ of error from the judgment of a state court, we are to consider in the first instance only the federal questions involved. If those were correctly decided. the judgment must be affirmed. Murdock v. Memphis, 20 Wall. 590. The plaintiffs below recovered judgment for the value of the stock upon the theory that there had been a conversion thereof because the board of directors and the stockholders directed the assessment resulting in the sale of the stock of the plaintiffs below in satisfaction thereof.
The Commercial National Bank of Portland was duly organized under the National Banking Act, and carried on business in the City of Portland, Oregon. It appeared that the capital of the bank had become impaired, and thereupon such proceedings were had that, on December 5, 1896, the Comptroller issued the following notice to the bank:
"Office of Comptroller of the Currency"
"Washington, D.C., Dec. 5, 1896"
"Whereas it appears to the satisfaction of the Comptroller of the Currency that the capital stock of the Commercial National Bank, Portland, Oregon, has become impaired to an extent which makes necessary an assessment of two hundred
and fifty thousand dollars ($250,000) upon the shareholders of said association to make good such deficiency,"
"Now therefore notice is hereby given to said association, under the provisions of section 5205 of the Revised Statutes of the United States, to pay the said deficiency in its capital stock by assessment upon its shareholders, pro rata, for the amount of the capital stock held by each, and if such deficiency shall not be paid, and said bank shall refuse to go into liquidation, as provided by law, for three months after this notice shall have been received by it, a receiver will be appointed to close up the business of the association according to the provisions of section 5234 of the Revised Statutes of the United States ."
"In testimony whereof, I have hereunto subscribed my name, and caused my seal of office to be affixed to these presents at the Treasury Department, in the City of Washington, and District of Columbia, this 5th day of December, A.D. 1896."
"James H. Eckels"
"Comptroller of the Currency"
"To the Commercial National Bank, Portland, Oregon."
After receipt of this notice, upon December 12, 1896, the board of directors passed this resolution:
"Resolved, That in accordance with the notice served upon this association by the Comptroller of the Currency, under date of December 5, 1896, and received by this bank on the 11th day of December, 1896, an assessment is hereby levied upon the shareholders of this bank of 50 percent or $50 per share, payable at this bank on or before March 11, 1897."
"And resolved, That the cashier of this bank be, and he hereby is, authorized and instructed to serve upon each shareholder of the bank a legal notice of the above assessment by sending such notice to each shareholder's address by registered mail."
Upon December 17, 1896, notice of this assessment was served upon each of the stockholders of the bank. The defendants in error having failed to pay this assessment, on
March 18, 1897, the board of directors passed a resolution directing the sale of the delinquent's stock to be made at public auction on May 5, 1897. In pursuance of this order, and on the day named, the stock was sold for the amount of the assessment. The federal question is whether the board of directors, in thus assessing and selling the stock of the defendants in error, exceeded their powers under the National Banking Act, it being claimed that a valid assessment could only be made by the action of the stockholders, and that the sale by the directors upon this assessment was unlawful, and amounted to a conversion of the stock.