Brunswick Terminal Co. v. National Bank - 192 U.S. 386 (1904)
U.S. Supreme Court
Brunswick Terminal Co. v. National Bank, 192 U.S. 386 (1904)
Brunswick Terminal Co. v. National Bank of Baltimore
Argued December 9-10, 1903
Decided February 23, 1904
192 U.S. 386
The additional liability of the shareholders of corporations depends on the terms of the statute creating it, and as such a statute is in derogation of the common law it cannot be extended beyond the words used.
Where the charter of a state bank provides for additional liability of the shareholders as sureties to the creditors of the bank for all contracts and debts to the extent of their stock therein at the par value thereof at the time the debt was created, a shareholder is not liable for a debt created after he has actually parted with his stock and the transfer has been regularly entered on the books of the bank.
Where the decisions of the highest court of a state show that it regarded the construction and application of a statute as open for review if another case arose, its prior determinations of the questions do not necessarily have to be adopted and applied by the federal courts in cases where the cause of action arose prior to any of the adjudications by the state court.
Section 1496 of the Georgia Code of 1882, requiring shareholders of banks to publish notice of transfer in order to exempt themselves from
liability, does not apply to shareholders who have transferred their stock prior to the inception of the debts at the time of the failure of the institution.
This was a bill filed January 14, 1898, in the Circuit Court of the United States for the District of Maryland by the Brunswick Terminal Company and others, creditors of the Brunswick State Bank, chartered by the State of Georgia, which failed and was declared insolvent in May, 1893, to enforce, in behalf of its creditors, against the National Bank of Baltimore, a statutory liability equal to the par value of certain shares of stock in the state bank at one time standing in the name of the Baltimore bank.
The case was first heard on demurrer to a plea of the Maryland statute of limitations. The demurrer was overruled, the defense sustained, and the bill dismissed. 88 F. 607. On appeal to the Circuit Court of Appeals for the Fourth Circuit, the decree was reversed and the cause remanded for further proceedings. 99 F. 635.
The cause was then heard on the pleadings and an agreed statement of facts, the parties reserving the right to refer to any pertinent laws or statutes of Georgia, as follows:
"That the Brunswick State Bank was a corporation chartered, organized, and existing under the laws of the State of Georgia, and was engaged in the general banking business in that state; that, on or about the 30th day of May, 1893, William M. Wiggins and others alleging themselves to be creditors of said Brunswick State Bank filed their petition in the Superior Court of Glynn County, Georgia, against said bank, alleging that it was insolvent, and praying for the appointment of a receiver to take possession of its assets, and administer them, and on the 29th day of June following, the court decreed that the bank was insolvent and appointed a permanent receiver for the purposes stated; that the State of Georgia and Glynn County were, under the laws of Georgia, preferred creditors, and the assets obtained by the receiver as the assets of the bank were exhausted in the payment of these preferred claims
and the costs of litigation, and nothing was left for the payment of other creditors of the bank; that the following persons are creditors of the said Brunswick State Bank in the amounts stated in connection with their names, and were originally parties plaintiff in said cause, or having become such subsequently, that is to say: [Here follow lists of creditors.]"
"That the defendant is a national bank, chartered, organized, and conducting a business of a bank at the City of Baltimore, in the State of Maryland, under the provisions of the statutes of the United States in relation to national banks and their operation."
"That in the month of August, 1890, the defendant discounted for one Lloyd a promissory note drawn by him, and F. E. Cunningham for the sum of ten thousand dollars ($10,000.00), indorsed by the copartnership firm of Lloyd & Adams, and by W. A. Cunningham, and received, together with the note, as the collateral security for its payment, one hundred and ten (110) shares of the capital stock of said Brunswick State Bank of the par value of one hundred dollars ($100.00) per share; that, in order to protect itself as pledgee, the defendant caused this stock to be transferred into its own name on the books of the Brunswick State Bank, on or about the 25th day of August, 1890; that the said note was paid to the defendant at the time of its maturity, and the defendant being under obligation to return the stock, the pledge being at an end and the pledgeor entitled to its return, retransferred the stock on the books of said Brunswick State Bank by direction of the pledgeor, and the said transfer was fully completed on the books of the said bank on or before the 20th day of October, 1890, but no notice by publication of the fact of said retransfer was given by the defendant; that the defendant never had or claimed any interest in said stock, save under the pledge aforesaid, but never notified the Brunswick State Bank, its stockholders or creditors, that it held said stock otherwise than as the absolute owner thereof."
"That the indebtedness of said Brunswick State Bank to
all of the plaintiffs in this cause accrued after the said 20th day of October, 1890, from transactions with said bank commenced after that date, and the plaintiffs had no knowledge in fact that the name of the defendant had appeared upon the books of said Brunswick State Bank as a stockholder."
"It is agreed that the court may draw inferences from any of the foregoing facts to the same extent as if the facts had been proven by means of witnesses."
The circuit court rendered a decree dismissing the bill. 112 F. 812.
An appeal to the circuit court of appeals was taken, and that court certified to this Court certain questions concerning which it desired instructions for the proper decision of the case. After full argument on the merits, this Court required the whole record and cause to be sent up for consideration.