In September, 1881, A held thirty shares of stock in a national
bank whose capital was $500,000, with a right to increase it to
$1,000,000. In that month, the directors voted to increase the
capital to $1,000,000, the persons then holding stock to have the
right to take new stock at par in equal
Page 118 U. S. 635
amounts to that then held by them. A then subscribed for thirty
additional shares, paid for it three days later, and subsequently
took out a certificate of stock for it. The amount of increased
capital subscribed and paid for was $401,300, instead of $500,000,
but A had no knowledge of this deficiency until after the payment
of said subscription, and of the assessment hereinafter referred
to. On the 18th November, 1881, the bank became insolvent, and an
examiner was placed in charge of it by the Comptroller of the
Currency. In December, 1881, the directors cancelled the increase
of stock above said sum of $461,300, and requested the Comptroller
to issue a certificate for the increase as so reduced, which he
did. No vote of the stockholders was taken either on the increase
or decrease. The Comptroller then, under § 5205 Rev.Stat., called
upon the bank for an assessment of 100 percent on the holders of
stock, to pay the deficiency in the capital stock. In January,
1882, the annual meeting of the stockholders was held at which it
was voted to levy the assessment so called for, whereupon the
Comptroller permitted the directors to resume control of the bank.
A, being notified of this assessment, paid the amount assessed upon
his sixty shares, upon being assured by one of the directors of the
bank that there would be no other assessment. On the twentieth day
of the following May, the bank ceased to do business, and the
directors thereupon voted to go into liquidation. The Comptroller
then appointed a receiver of the bank. In November, 1882, the
Comptroller, under Rev.Stat. § 5151, made an assessment on the
shareholders of 100 percent of the stock held by them respectively,
A declining to pay, the receiver brought an action at law against
him to recover that amount on the sixty shares standing in his
name. A thereupon filed a bill in equity to restrain the
prosecution of the action.
Held:
(1) That the increase of the capital stock of the company to
$961,300 was valid.
(2) That this increase was binding on A to the extent to which
he paid for and received certificates of increased stock.
(3) That the payments made in January, 1882, could not be
applied, either at law or in equity, to the discharge of the
assessments made by the Comptroller in the final liquidation of the
bank.
(4) That the payment was not made by A under a mistake against
which equity can relieve him.
The following is the case, as stated by the court.
The first of these cases was an action at law brought in the
Circuit Court of the United States for the District of
Massachusetts by Linus M. Price, as receiver of the Pacific
National Bank of Boston, for whom Peter Butler has been
substituted, against John P. Delano, a citizen of Bath, Maine, to
enforce the personal liability of the defendant, under
Rev.Stat.
Page 118 U. S. 636
§ 5151, upon an assessment of 100 percent of the par value of
sixty shares of the capital stock of the Pacific National Bank
alleged to be held and owned by said Delano at the time of the
insolvency and suspension of said bank.
The Pacific National Bank was duly organized and authorized to
do business as a national bank under the provisions embraced in
Title 62 of the Revised Statutes of the United States, and located
in Boston, in October, 1877. Its capital stock was fixed at
$500,000, paid in cash, with a right to increase it to $1,000,000.
It continued business on this basis until September 13, 1881, when,
as appears by the records of a meeting of the directors held in
Boston, it was
"voted that the capital of this bank be increased to one million
dollars, and that stockholders of this date have the right to take
the new stock at par in equal amounts to that now hold by
them."
On the same date, a copy of the following notice was sent by the
cashier to each stockholder of the bank:
"A. I. Benyon, President J. M. Pettingill, Cashier"
"PACIFIC NATIONAL BANK, 105 DEVONSHIRE STREET"
"BOSTON, Sept. 13, 1881"
"At a meeting of the directors of this bank held this day, it
was"
" Voted that the capital of this bank be increased to one
million dollars, and that stockholders of this date have the right
to take the new stock at par in equal amounts to that now held by
them."
"Subscription to the new stock will be payable October 1st.
Parties desiring to anticipate payment will be allowed interest to
that date at four percent per annum."
"J. M. PETTINGILL,
Cashier"
The whole amount of the increase of capital voted was not taken
and paid in, nor was notice ever transmitted to the Comptroller of
the Currency that all of such increase had been paid in; nor was
that official's certificate of the increase to
Page 118 U. S. 637
$1,000,000, with his approval thereof, ever issued. But $461,300
of the proposed increase to $500,000 was actually subscribed for
and paid in as capital stock prior to November 18, 1881, and was
used in the general business of the bank. On November 18, 1881, the
bank became insolvent, suspended payment, and closed its doors. On
the same day, Daniel Needham, an examiner of national banks, was
placed by the Comptroller of the Currency in charge of the assets
of the bank for the purpose of ascertaining its condition, where he
remained until March 18, 1882.
The directors of the bank met on December 13, 1881, during the
period of suspension, and passed a vote that, as $38,700 of the
increase of capital voted on September 13, 1881, had not been taken
and paid in, that amount be cancelled and deducted from the capital
stock of $1,000,000, and the paid-up capital stock fixed at
$961,300, and that the Comptroller of the Currency be notified of
the increase of $461,300, which had been paid in, and requested to
issue a certificate of such increase according to law. Thereupon
the Comptroller of the Currency, under date of December 16, 1881,
made and issued the following certificate:
"TREASURY DEPARTMENT"
"OFFICE OF COMPTROLLER OF THE CURRENCY"
"WASHINGTON, December 16, 1881"
"Whereas satisfactory notice has been transmitted to the
Comptroller of the Currency that the capital stock of the 'Pacific
National Bank of Boston, Mass.' has been increased in the sum of
four hundred and sixty-one thousand three hundred dollars, in
accordance with the provisions of its articles of association, and
that the whole amount of such increase has been paid in:"
"Now it is hereby certified that the capital stock of the
'Pacific National Bank of Boston, Mass.' aforesaid, has been
increased as aforesaid, in the sum of four hundred and sixty-one
thousand three hundred dollars; that said increase of capital has
been paid into said bank as a part of the capital
Page 118 U. S. 638
stock thereof, and that the said increase of capital is approved
by the Comptroller of the Currency."
"In witness whereof I hereunto affix my official signature."
"[Seal] JOHN J. KNOX,
Comptroller"
No vote of the stockholders was taken relating to the increase
or decrease of the capital stock of the bank.
Under date of December 16, 1881, the Comptroller of the Currency
addressed the following letter to the bank:
"WASHINGTON, December 16, 1881"
"The Pacific National Bank of Boston, Massachusetts:"
"The entire capital stock of the Pacific National Bank of
Boston, Massachusetts, amounting to nine hundred and sixty-one
thousand three hundred (961,300) dollars having been lost, notice
is hereby given to said bank, under the provisions of § 5205 of the
Revised Statutes of the United States, to pay the deficiency in its
capital stock by an assessment of one hundred (100) percent upon
its shareholders
pro rata for the amount of capital stock
held by each, and that 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 may 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 hereto 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 sixteenth day of December, A.D. 1881."
"[Seal] JOHN JAY KNOX"
"
Comptroller of the Currency"
On January 10, 1882, during the suspension of the bank, the
stockholders held their annual meeting (it being the first held
since January 11, 1881) pursuant to the following notice duly
published in the Boston Daily Advertiser:
Page 118 U. S. 639
"
Pacific National Bank"
"The annual meeting of the stockholders of this bank for choice
of directors, and for any other business that may legally come
before them, will be held at their banking rooms, 105 Devonshire
Street, on Tuesday, January 10, 1882 at 11 o'clock A.M."
"J. M. PETTINGILL,
Cashier"
At this meeting, after discussing the general condition of the
affairs of the bank, the foregoing call of the Comptroller of the
Currency for an assessment of 100 percent on the capital stock of
the bank was read. Thereupon the following was offered:
"Voted, in accordance with the notice of the Comptroller of the
Currency, dated December 16, 1881, there be, and hereby is, laid an
assessment of one hundred percent upon the shareholders of the
Pacific National Bank, of Boston, Mass.
pro rata for the
amount of capital stock of said bank held by each shareholder."
"Voted that the board of directors notify each shareholder of
said assessment, and collect the same forth with."
On the question of the adoption of the above, a stock vote was
ordered; the total number of votes cast was 5,549, representing
5,549 shares, of which 5,494 were in the affirmative, and 55 in the
negative.
The amount paid in by the stockholders on this assessment was
$742,800 prior to May 20, 1882.
The following notice to depositors was issued by the bank on
March 16, 1882:
"THE PACIFIC NATIONAL BANK"
"BOSTON,
March 16, 1882"
"To our Depositors:"
"By vote of the directors, and the approval of the Comptroller
of the Currency, the bank will reopen for business on Saturday, the
18th. Every effort has been made to put the bank again into a sound
and solvent condition, and the stockholders have been called upon
to pay an assessment of 100 percent on their stock, thus making the
depositors' balances secure
Page 118 U. S. 640
and available. The bank will be run on strict business
principles and in the interest of its customers and stockholders,
and, while thanking you for past favors, we solicit your confidence
and support for the future."
"LEWIS COLEMAN,
President"
"E. C. WHITNEY,
Cashier"
Pursuant thereto, the directors resumed active control of the
bank and its assets on March 18, 1882, and again conducted a
general banking business until May 20, 1882, when the bank ceased
business, and the directors voted to go into liquidation. Thereupon
Linus M. Price was appointed receiver by the Comptroller of the
Currency under Rev.Stat. § 5234, and took charge of the assets and
records of the bank.
During the period between March 18, 1882, and May 20, 1882,
while the bank was carrying on business in its own name, the amount
due depositors was reduced from $4,101,365.91 on the former date,
to $2,052,957.82 on the latter, $62,693.40 being due to new
depositors. The amount of deposits made between the dates named was
$2,338,617.21. New liabilities were contracted subsequent to March
18, 1882, amounting to $200,000, including the $62,693.40 due to
new depositors.
The plaintiff in error owned thirty shares of stock in said bank
prior to the vote of September 13, 1881, to increase the stock to
$1,000,000. After that vote, he received from the cashier of the
bank a printed copy of the notice dated September 13, 1881 at the
bottom of which he wrote a subscription for thirty shares of the
increase of stock, and returned it to the bank. Three days after
the passage of the vote, he paid $3,000 for the thirty shares so
subscribed, and received a receipt for $3,000 "on account of
subscription to new stock," signed by the cashier of the bank. In
October, he returned the receipt to the bank and received for it
certificate No. 780 for thirty shares of the new stock, dated
October 1, 1881. Plaintiff in error supposed at that time that the
whole $500,000 increase of capital had been taken and paid in, and
believed that the increase to $1,000,000 had been regularly and
legally made. He did not attend the stockholders' meeting
Page 118 U. S. 641
of January 10, 1882, and received no other notice thereof than
seeing the call published in the Boston Advertiser. On January 12th
or 13th, he received notice of the assessment of 100 percent upon
the stock of the bank, and, after consultation, was assured by
another shareholder and a director of the bank that if this was
paid, there could be no further assessment made on his stock, in
consequence of which assurances he paid the assessment of $3,000 on
January 20th, and $3,000 on January 23d which were endorsed on the
certificates under the dates of payment, being 100 percent on sixty
shares of the stock.
Upon the trial, the intervention of a jury was waived by consent
of parties and the cause submitted to the court, which found the
foregoing facts and rendered judgment September 8, 1885, in favor
of the receiver for the amount claimed. On June 8, 1885, the
appellant, Delano, filed a bill in equity in the Circuit Court of
the United States for the District of Massachusetts against Linus
M. Price, receiver of the Pacific National Bank, the object and
prayer of which were to enjoin the further prosecution of the
pending action at law, brought by the said receiver against him for
the purpose of enforcing the alleged liability of the appellant on
account of the assessment upon his said stock on the ground that
upon the facts as heretofore stated the voluntary payment made by
the appellant of the 100 percent assessed to restore the lost
capital of $961,300, and which had been applied to the payment of
the creditors of the bank, constituted in equity, if not at law, a
complete defense to the claim of the receiver as an extinguishment
of his liability upon the assessment sued on.
This cause was heard upon the facts as heretofore stated, and a
decree rendered dismissing the bill for want of equity, from which
the present appeal was taken and is prosecuted.
Page 118 U. S. 646
MR. JUSTICE MATTHEWS, after stating the case as above reported,
delivered the opinion of the Court.
Section 5151 of the Revised Statutes provides that
"The shareholders of every national banking association shall be
held individually responsible, equally and ratably, and not one for
another, for all contracts, debts, and engagements of such
association, to the extent of the amount of their stock therein at
the par value thereof, in addition to the amount invested in such
shares."
The object of the action at law brought by the receiver of the
Pacific National Bank of Boston, in which judgment was rendered
against the defendant, the plaintiff in error, was to enforce his
liability under that section of the statute. The object of the suit
in equity, in which Delano was the complainant, was to restrain the
prosecution of the action at law on the ground that, if his legal
defenses failed, he had in equity performed and extinguished his
obligation.
The questions arising upon the records of these cases in various
forms, upon the facts already stated, may be reduced to three,
which will be considered and disposed of in their order.
Page 118 U. S. 647
The plaintiff in error in the action at law contends, as grounds
for reversing the judgment against him,
"1st. That he was not at the time of the appointment of the
receiver, or at any time, the holder of sixty shares of the stock
of the Pacific National Bank, but was, in fact and in law, a holder
of only thirty shares thereof. He contends that the attempt on the
part of the directors and the Comptroller of the Currency in
December, 1881, to fix the capital stock of the bank at $961,300
was contrary to law and void; that the alleged thirty shares of new
stock on account of which he is sued never had any legal existence,
and that he, by virtue of his subscription in September, 1881, for
thirty shares in the then proposed increase of capital from
$500,000 to $1,000,000, and by his other acts, never became liable,
on account of the debts of the Pacific National Bank, beyond his
liability as the holder of thirty shares of valid stock."
"2d. That by his contribution in January, 1882, of an amount
equal to the par value of all the stock ever held by him toward the
fund, which was all used in the payment of the debts of the bank,
the bank then being insolvent, he in law discharged his liability
as a stockholder in said bank, and should therefore have judgment
in his favor."
"3d. As appellant in the suit in equity, Delano alleges as
ground for reversing the decree dismissing his bill that the
contribution made by him on January 23, 1882, of an amount equal to
the par value of the stock held by him to wards a fund which was
actually used in the payment of the debts of the bank, the bank
then being insolvent, constituted in equity a satisfaction and
extinguishment of his liability as a stockholder for the debts of
the bank, if not at law."
It is further contended by him as an additional ground for
equitable relief that by the payment of the $3,000 upon the thirty
shares of alleged new stock, which he claimed never had any legal
existence, and on which therefore he never incurred any liability,
he really contributed toward a fund actually used for the payment
of the debts of the bank an amount equal to 200 percent of the
stock held by him, which payment, if not available in his favor as
a satisfaction
Page 118 U. S. 648
of his statutory liability technically at law, nevertheless must
be regarded in equity as a substantial equivalent, exonerating him
from further liability.
The first question to be considered is whether there was a valid
increase of the capital stock of the Pacific National Bank, of
which the plaintiff in error became the owner of thirty shares, so
as to be charged with liability thereon as a stockholder. The
articles of association of the bank provide that "the capital may
be increased, according to the provisions of section 5142 of the
Revised Statutes, to any sum not exceeding ten hundred thousand
dollars."
The 11th section of the bylaws of the bank provides as
follows:
"Whenever an increase of stock shall be determined upon, it
shall be the duty of the board to notify all the stockholders of
the same, and cause a subscription to be opened for such increase,
and each stockholder shall have the privilege of subscribing for
such number of shares of new stock as he may be entitled to
subscribe for, in proportion to his existing stock in the bank. If
any stockholder should fail to subscribe for the amount of stock to
which he may be entitled, within a reasonable time, which shall be
stated in the notice, the directors may determine what disposition
shall be made of the privilege of subscribing for the new
stock."
Section 5142 of the Revised Statutes is as follows:
"Any association formed under this title may, by its articles of
association, provide for an increase of its capital from time to
time as may be deemed expedient, subject to the limitations of this
title. But the maximum of such increase, to be provided in the
articles of association, shall be determined by the Comptroller of
the Currency, and no increase of capital shall be valid until the
whole amount of such increase is paid in, and notice thereof has
been transmitted to the Comptroller of the Currency, and his
certificate obtained specifying the amount of such increase of
capital stock, with his approval thereof, and that it has been duly
paid in as part of the capital of such association."
It is urged on behalf of the plaintiff in error that no
increase
Page 118 U. S. 649
of the capital stock of the bank was ever proposed by the
directors or assented to by the subscribers except an increase of
the full sum of $500,000; that no such increase as that was ever
fully paid in, as required by the statute, and that no such
increase was approved by the certificate of the Comptroller of the
Currency; that his agreement of subscription was to take thirty
shares of a new stock out of the whole sum of $500,000; that that
agreement has never been carried into effect, and that he has never
consented to any modification of it, and that consequently whatever
effect would be attributable to the acts of the directors or
stockholders of the bank in conjunction with the Comptroller of the
Currency, they are
res inter alios acta, and not binding
on him.
On looking at the terms of § 5142 of the Revised Statutes, it
appears that three things must concur to constitute a valid
increase of the capital stock of a national banking association:
1st, that the association, in the mode pointed out in its articles,
and not in excess of the maximum provided for by them, shall assent
to an increased amount; 2d, that the whole amount of the proposed
increase shall be paid in as part of the capital of such
association, and 3d, that the Comptroller of the Currency, by his
certificate specifying the amount of such increase of capital
stock, shall approve thereof, and certify to the fact of its
payment.
In the present case, the association did in fact finally assent
to an increase of the capital stock, limited to $461,300; that
amount was paid in as capital, and the Comptroller of the Currency,
by his certificate, approved of the increase, and certified to its
payment; so that there seems little room to question the validity
of the proceedings resulting in such increase. All the requisitions
of the statute were complied with. The circumstance that the
original proposal was for an increase of $500,000, subsequently
reduced to the amount actually paid in, does not seem to affect the
question, for the amount of the increase within the maximum was
always subject to the discretionary power of the association
itself, exerted in accordance with its articles of association, and
to the approval and confirmation of the Comptroller of the
Currency.
Page 118 U. S. 650
The question therefore seems to be converted into this: whether
the subscription of the plaintiff in error to a proposed increase
of $500,000, and his payment thereof, can be held to be a binding
agreement to accept thirty shares out of the reduced amount.
It will be observed that, without waiting to see what the future
action of the association and the Comptroller of the Currency might
be on the question of the ultimate amount of the increased stock,
the plaintiff in error paid for his shares and accepted his
certificate. This he did, in legal contemplation, with knowledge of
the law, which authorized the association and the Comptroller of
the Currency to reduce the amount of the proposed increase to a
less sum than that fixed in the original proposal of the directors,
and such payment, and acceptance of certificates in accordance
therewith, might amount, under such circumstances, on his part to a
waiver of the right to insist that he should not be bound unless
the whole amount of the proposed increase should be subscribed for
and paid in. But without insisting upon that point or deciding it,
we think that the subsequent conduct of the plaintiff in error
amounts to a ratification, on his part, of the action of the
association and of the Comptroller of the Currency in fixing the
amount of the increased stock at the less sum.
After he paid his subscription and received his certificates of
stock, he was called upon, as a stockholder, alleged to be the
owner of sixty shares of the capital stock, to pay an assessment
voluntarily imposed upon themselves by the stockholders at a
regular meeting at which the transaction of such business was not
only legitimate but necessary as a condition on compliance with
which alone the association was to be permitted to resume and
continue its business as a bank. The bank was in a condition of
open and notorious insolvency. It was in the actual control of an
examiner appointed by the Comptroller of the Currency, so far as
lawful, for the express purpose of ascertaining its true condition
in order to determine the question whether it might be permitted on
any conditions to resume business or whether it should be required
to go into liquidation by the appointment of a receiver to wind up
its affairs. These facts were certainly
Page 118 U. S. 651
known to the plaintiff in error, or at any rate were so
notorious that he cannot be permitted to allege ignorance of them.
A regular meeting of the stockholders was called by public notice,
given in the usual form, for the election of directors and the
transaction of any other business that might be brought before
them. At this meeting, official communication was made that
according to the determination of the association and of the
Comptroller of the Currency, the increased and paid-up capital
stock of the bank had been fixed at $961,300, and that the whole
amount of it had been lost; that it was necessary to replace it by
an assessment of 100 percent on the par value of all the shares in
order to enable it to resume and carry on its business, and that
otherwise it would be placed in the hands of a receiver and
required to go into liquidation.
Section 5205 of the Revised Statutes provides that
"Every association which shall have failed to pay up its capital
stock, as required by law, and every association whose capital
stock shall have become impaired by losses or otherwise, shall,
within three mouths after receiving notice thereof from the
Comptroller of the Currency, pay the deficiency in the capital
stock by assessment upon the shareholders
pro rata for the
amount of capital stock held by each. . . . If any such association
shall fail to pay up its capital stock and shall refuse to go into
liquidation, as provided by law, for three months after receiving
notice from the Comptroller, a receiver may be appointed to close
up the business of the association according to the provisions of
section fifty-two hundred and thirty-four."
It was in pursuance of these provisions of the law that notice
was given by the Comptroller of the Currency to the stockholders of
the bank at this, their regular annual meeting, that they must
either assess themselves and pay in the whole amount of 100 percent
upon their capital stock, fixed at the sum of $961,300, or, in the
alternative, go into liquidation. In pursuance of this notice, in
full view of the facts, and with a presumed knowledge of the law,
the stockholders, by a vote that was almost unanimous, assented to
the first branch of the alternative, and, as a condition for being
permitted to resume business, voluntarily voted the required
assessment. The
Page 118 U. S. 652
plaintiff in error, it is true, was not present at this meeting,
but he had notice of its proceedings and, in pursuance of its vote,
paid the full amount of the assessment imposed upon him as the
holder of sixty shares of the capital stock of the company.
In our opinion, it is not open to him now to say that he made
this payment in ignorance of the facts, or in ignorance of the
legal right which he now seeks to assert to avoid the obligation.
His payment was voluntary; it was made either with actual knowledge
of the facts or with such opportunity and means of knowledge as, by
the exercise of common diligence, would have made him acquainted
with the facts, and the payment made by him, in conjunction with
his co-stockholders, was made upon a distinct consideration whereby
the bank in which he was interested was enabled to undertake anew
its regular and active business. Such a course of action on his
part must be construed to constitute a complete acquiescence in and
ratification of the previous action of the association and the
Comptroller of the Currency in reference to the increase of the
capital stock, and he cannot be permitted now to deny that he
thereby became, and has continued to be, an owner of sixty shares
of the capital stock of the bank fixed at the increased sum.
This conclusion is not weakened by the suggestion made in
argument that these proceedings of the bank took place during the
period when its affairs were under the supervision of the
Comptroller of the Currency, acting through the examiner.
Notwithstanding the suspension of its business while under his
control, the association continued its corporate existence and was
competent to exercise corporate functions. The increase of its
capital, the vote of the assessment for the purpose of restoring
what had been lost, and the acceptance of the alternative proposed
by the Comptroller of the Currency to avoid going into liquidation
were all exertions of corporate powers which, under the
circumstances, the statute expressly contemplated and authorized.
It is therefore not at all to the point that its assets and affairs
were subject to the supervision of the bank examiner. Nor is the
conclusion affected by the other
Page 118 U. S. 653
consideration, also urged in argument, that the attempt to
revive the business of the bank by means of the assessment proved
unsuccessful and abortive. The association, through its directors
and stockholders, undertook the task and entered upon its
accomplishment, and in doing so materially changed its relations to
its creditors. The failure to prosecute its business successfully
certainly cannot have the operation now claimed for it of making
illegal all that was done in the prosecution of the experiment. The
hazard of failure must be presumed to have been in the
contemplation of the stockholders when they consented to the risk,
and the consequences of failure cannot now be shifted from
themselves to their creditors.
The second ground of defense to the action at law is, in our
opinion, equally untenable. The assessment imposed upon the
stockholders by their own vote, for the purpose of restoring their
lost capital, as a consideration for the privilege of continuing
business, and to avoid liquidation under § 5205 of the Revised
Statutes, is not the assessment contemplated by § 5151, by which
the shareholders of every national banking association may be
compelled to discharge their individual responsibility for the
contracts, debts, and engagements of the association. The
assessment as made under § 5205 is voluntary, made by the
stockholders themselves, paid into the general funds of the bank as
a further investment in the capital stock, and disposed of by its
officers in the ordinary course of its business. It may or may not
be applied by them to the payment of creditors, and in the ordinary
course of business certainly would not be applied, as in cases of
liquidation, to the payment of creditors ratably, whereas under §
5151 the individual liability does not arise except in case of
liquidation and for the purpose of winding up the affairs of the
bank. The assessment under that section is made by authority of the
Comptroller of the Currency, is not voluntary, and can be applied
only to the satisfaction of the creditors equally and ratably. If
the claim in the present case were allowed, it would follow that in
every case, payments made by stockholders for the purpose of
restoring the impaired capital
Page 118 U. S. 654
would be considered as credits on the ultimate individual
responsibility of shareholders, and the whole efficiency of the
provisions of § 5151 for the protection of the creditors of the
company at the time of liquidation would be destroyed. The
obligations of the shareholders under the two §§ are entirely
diverse, and payments made under § 5205 cannot be applied to the
satisfaction of the individual responsibility secured by § 5151.
Scoville v. Thayer, 105 U. S. 143.
But it is said, in the third place, as the ground of relief
under the bill in equity, that while this may be the result of a
strict application of technical law, there remains to the
complainant an equity which entitles him, by some process of
substitution, to apply the payment which he has made under § 5205
to extinguish his liability under § 5151. So far as can be gathered
from the allegations of the bill, the facts found, and the argument
of counsel, this equity is supposed to rest upon the facts that the
money paid by the stockholders under the assessment was in fact
applied to the satisfaction of the debts of the bank; that such
application was intended by the appellant when the assessment was
paid, and that he paid it in the belief that it would exonerate him
from further liability as a stockholder, induced by representations
made to him to that effect by others interested in the affairs of
the bank. Whatever hardship there may be in the circumstances of
the case, we are unable to discover any ground of equitable relief.
If the assessment was applied by the officers of the bank to the
satisfaction of its debts, there is nothing to show that it was
done ratably, as required by § 5151. The assessment was not paid by
the stockholders for the purpose of effecting a liquidation of the
affairs of the bank, but was understood to be the price paid for
the privilege of continuing its business in the hope of saving
their investment. If it was paid under a mistaken supposition that,
in the event of future failure, nothing more could be required of
them, there is nothing to show that the shareholders were led into
the mistake by any misrepresentations, either of fact or of law, on
the part of the creditors for whose benefit the receiver is now
acting. The mistake, if any, is one for which each shareholder is
alone responsible.
Page 118 U. S. 655
On the whole, we are constrained to conclude that the defenses
at law and the alleged ground of relief in equity are alike
insufficient, and that the judgment and the decree of the circuit
court must be affirmed, and it is accordingly so ordered.
Affirmed.
