As a general rule, the legal owner of stock in a national
banking association -- that is, the one in whose name stock stands
on the books of the association -- remains liable for an assessment
so long as the stock is allowed to stand in his name on the books,
and consequently, although the registered owner may have made a
transfer to another person, unless it has been accompanied by a
transfer on the books of registry of the association, such
registered owner remains liable for contributions in case of the
insolvency of the bank.
The exceptions to this general rule, so far as established by
decisions of this Court, are: (1) that where a transfer has been
fraudulently or collusively made to avoid an obligation to pay
assessments, such transfer will be disregarded, and the real owner
be held liable; (2) that where a transfer of stock is made and
delivered to officers of a bank, and such officials fail to make
entry of it, those acts will operate a transfer on the books, and
extinguish the liability, as stockholder, of the transferor; (3)
where stock was transferred in pledge, and the pledgee for the
purpose of protecting his contract caused the stock to be put in
his name as pledgee, and a registry did not amount to a transfer to
the pledgee as owner.
On October 31, 1864, Sumner W. Matteson became the owner of ten
shares of capital stock of the First National Bank of Decorah,
established in the City of Decorah, State of Iowa, and the shares
were duly registered on the books of the bank in his name. In July,
1895, Matteson, whilst the stock was yet owned by him and still
stood registered in his name, died intestate at St. Paul,
Minnesota, where he resided,
Page 176 U. S. 522
leaving surviving his widow and six children, two of whom were
minors. The probate court of Minnesota having jurisdiction over his
estate appointed an administrator, who filed an inventory in which
was embraced the shares of stock in question. In September, 1896, a
final account having been previously filed by the administrator, a
decree turning over the estate, including the ten shares of stock,
was entered. Under this decree, the widow and heirs took the ten
shares of stock in indivision in proportion to their interest in
the estate -- that is to say, the widow became the owner of an
undivided third interest in the stock and each of the children,
there being six, of a one-ninth interest therein, thus the widow
owned three-ninths of the ten shares and each of the six children
one-ninth. No notice of the death of Matteson or of the allotment
in question was conveyed to the bank, nor was any transfer of the
stock on the books of the bank operated at the time of the
allotment or subsequent thereto. Indeed, under the proportions of
undivided ownership of the stock in the widow and heirs, it was
impossible to have registered on the books of the bank in the name
of each owner separately according to their respective ownership in
the ten shares without some further partition of the undivided
ownership existing between them. It follows that the stock which
stood on the books of the bank in the name of Matteson during his
life continued to so stand after his death, so remained at the time
of the allotment, and was so registered at the time this suit was
brought. On November the 10th, 1896, the bank became insolvent and
was closed by the comptroller of the currency, who on the 24th of
November, 1896, appointed a receiver. In January, 1897, in order to
pay the debts of the bank, under the authority conferred on him by
law (Rev.Stat. § 5151), the comptroller made an assessment upon the
shareholders of one hundred dollars upon each share, and
proceedings for its enforcement were by him directed to be taken.
The assessment not having been paid, although due notice was given
to do so, the receiver sued in the state court of Ramsey County,
Minnesota, the widow and children of Matteson, as next of kin,
asking judgment for the amount
Page 176 U. S. 523
of said assessment. The suit was in conformity to the General
Statutes of 1894 of Minnesota, which, in sections 5918
et
seq., permitted an action to be brought against all or one or
more of the next of kin of a deceased person, by the creditor of an
estate, to recover the distributive shares received out of such
estate, or so much thereof as might be necessary to satisfy a debt
of the intestate or of his estate. Service was had only upon the
widow and one of the children. A general demurrer to the complaint
was filed and overruled, and the order so overruling the demurrer
was, upon appeal, affirmed by the supreme court of the state. 70
Minn. 519. Thereafter the demurring defendants answered, setting
forth in substance their nonliability to pay said assessment under
the statutes of the United States governing the winding up of
insolvent national banking associations. A motion for judgment upon
the pleadings was thereupon made and granted, and judgment was
entered in favor of the receiver against Louise M. Matteson and
Charles D. Matteson, and each of them, in the sum of one thousand
dollars with interest and costs. On appeal to the Supreme Court of
the State of Minnesota, that court affirmed the judgment. 73 Minn.
170. A writ of error was allowed, and the judgment of affirmance is
now here for review.
MR. JUSTICE WHITE, after making the foregoing statement,
delivered the opinion of the Court.
The questions arising on this record involve a consideration of
sections 5918
et seq. of the General Statutes of the State
of Minnesota and of the sections of the Revised Statutes of the
United States which are in the margin.
*
Page 176 U. S. 524
Leaving out of view for the moment the legal effect of the
allotment of the ten shares of stock to the next of kin of
Matteson, let us consider what, if any, liability rested upon his
estate to pay the assessment on the ten shares of stock which stood
at his death in his name, and so remained up to the time of the
allotment. Because the insolvency of the bank took place after the
death of Matteson, did it result that the assessment, which was
predicated upon the insolvency, was not a debt of his estate? To so
decide, the statute must be construed as imposing the liability on
the shareholder for the amount of his subscription when necessary
to pay debts only in case insolvency arises during the lifetime of
the shareholder. In other words, that all liability of shareholders
to contribute
Page 176 U. S. 525
to pay debts ceases by death. This construction, however, would
be manifestly unsound. The obligation of a subscriber to stock to
contribute to the amount of his subscription for the purpose of the
payment of debts is contractual, and arises from the subscription
to the stock. True, whether there is to be a call for the
performance of this obligation depends on whether it becomes
necessary to do so in consequence of the happening of insolvency.
But the obligation to respond is engendered by and relates to the
contract from which it arises. This contract obligation, existing
during life, is not extinguished by death, but, like other contract
obligations, survives and is enforceable against the estate of the
stockholder. The principle controlling the subject was quite
clearly stated by Shipman, J., in
Davis v. Weed, 44 Conn.
569. There, stock of a national bank stood in the name of a person
who died in January, 1871. Nearly one year afterwards, on December
12, 1871, the bank became insolvent, and more than five years
thereafter several assessments were made by order of the
Comptroller of the Currency, and an action was instituted against
the administrator to enforce payment. Two defenses were interposed
by the administrator, as follows: 1, that the estate of the
decedent had been settled according to law, prior to the
assessments, and that as there were no assets in the hands of the
administrator at the time of the demand, and he had fully
administered the estate and had received no assets since the
demand, no judgment could be rendered against him, and 2, that
inasmuch as the insolvency of the bank occurred after the death of
the intestate, when the title of the stock became vested in the
administrator, no debt or liability existed at any time against the
estate; that the liability, if any, was against the administrator,
who, by section 5152 of the Revised Statutes, was freed from
personal liability, and was only liable to the extent of the trust
estate and funds in his hands at the time of the demand.
The first contention was held untenable upon a consideration of
the statutes of Connecticut in regard to the settlement of estates,
and the presentation, allowance, and payment of claims against the
estates of solvent deceased persons. In disposing of the second
contention the court said:
Page 176 U. S. 526
"The original liability of the intestate to pay the assessments
which may be ordered by the Comptroller was a voluntary agreement,
evidenced by his subscription or by his becoming a stockholder. It
is not imposed by way of forfeiture or penalty. It is imposed by
the statute, but it also exists by virtue of the contract which the
intestate catered into when he became a stockholder. When the
stockholder dies, his estate becomes burdened with the same
contract or agreement which the dead man had assumed, and so long
as it, through the executor or administrator, holds the stock as
the property of the estate, and the stock has not been transferred
on the books of the bank, and the liability has not been discharged
by some act which shows that the new stockholder has taken the
place of the old one, the contract liability still adheres to the
estate. This liability is not the result of any new contract, for
the administrator did not voluntarily become the owner of the
stock; it came to him as the dispenser of the goods of the dead,
and the liability rested upon the stock, and was a part of the
contingent liability of the estate at least until it was
transferred to some other person by a transfer free from
fraud."
The question was settled in
Richmond v. Irons,
121 U. S. 27, where
the Court said (pp.
121 U. S.
55-56):
"Under that [the national banking] act, the individual liability
of the stockholders is an essential element in the contract by
which the stockholders became members of the corporation. It is
voluntarily entered into by subscribing for and accepting shares of
stock. Its obligation becomes a part of every contract, debt, and
engagement of the bank itself, as much so as if they were made
directly by the stockholder, instead of by the corporation. There
is nothing in the statute to indicate that the obligation arising
upon these undertakings and promises should not have the same force
and effect, and be as binding in all respects, as any other
contracts of the individual stockholder. We hold, therefore, that
the obligation of the stockholder survives as against his personal
representatives.
Flash v. Conn, 109 U. S.
371;
Hobart v. Johnson, 1 19 Blatchford 359. In
Massachusetts, it was held, in
Grew v. Breed, 10 Met.
Page 176 U. S. 527
569, that administrators of deceased stockholders were
chargeable in equity, as for other debts of their intestate, in
their representative capacity."
And a similar determination as to the nature of a responsibility
like the one in question has been arrived at by state courts in
decisions on kindred statutes, and indeed its correctness is not
controverted by any authority to which we have been referred or
which we have been able to examine. The accepted doctrine finds
nowhere a more lucid statement than in the courts of New York.
Thus, in
Bailey v. Hollister, 26 N.Y. 112, judgment having
been recovered against a manufacturing company upon indebtedness
which arose in the years 1849, 1850, 1851, 1852, and 1853, an
action was brought, after return of execution unsatisfied, to
recover the same debt from the personal representatives of the
estate of one Kirkpatrick, on the ground that, when such
indebtedness was contracted, the estate of Kirkpatrick was a
stockholder, and as such personally liable under the charter of the
company. Kirkpatrick had died intestate in 1832, and the stock
stood on the books of the company in his name until 1844, when it
was entered in a new stock ledger in the name of the estate, which
thereafter received dividends. The facts of this transfer and the
payment of dividends were not, however, in the opinion of the court
treated as material factors in the decision. The court, in an
opinion delivered by Gould, J., said (p. 116):
"It will be conceded that when a stockholder in any corporation
dies, his estate succeeds him in the title to, and the rights in,
the stock he held. Of necessity, it must take that title and those
rights subject to any liability then existing upon them, and so
long as the estate is, by operation of law, the holder of such
stock, the estate must become responsible for any obligations
accruing during that time which the law may impose upon any holder
of the stock as such. Such liability proceeds not from any new
contract made by or on behalf of the estate, but it is inherent in
the property itself. To avoid it, the estate must part from the
property; must cease to be the holder of the stock. Or, calling it
a contract liability, it arises out of a contract made by the
stockholder,
Page 176 U. S. 528
and binding his personal representatives, as it bound him, as
long as the relation of stockholder existed."
And, it may be added, the law presumes, in the absence of
express words, that the parties to a contract intend to bind not
only themselves, but their personal representatives.
Kernochan
v. Murray, 111 N.Y. 306.
The doctrine enunciated in
Bailey v. Hollister as above
stated was later applied in
Cochran v. Wiechers, 119 N.Y.
399, 403, where the court held that liability imposed by statute
upon stockholders in limited liability companies to respond for the
debts of the company, "to an amount equal to the amount of stock
held by them respectively," was in the nature of a contract
obligation which survived the death of the stockholder. The court,
after approvingly quoting a portion of the opinion of Gould, J.,
above excerpted, added (p. 404):
"The liability of the estate of the deceased stockholder under
the statute is so well established, upon principle and authority,
that further discussion is unnecessary.
Chase v. Lord, 77
N.Y. 1;
Flash v. Conn, 109 U. S. 371;
Richmond v.
Irons, 121 U. S. 27."
The debt then being one due by the estate of Matteson, if the
allotment of the shares in indivision be not considered, the
question then is, taking the allotment into view, what was its
effect? The arguments is that the next of kin to whom the allotment
was made can only be held responsible to the extent of the interest
which they took in the stock, and therefore there was error
committed in enforcing the whole amount of assessment against the
next of kin who were served, to the extent of the distributive
share of the property of the estate received by them. But this
contention directly conflicts with the interpretation of the
statutes of Minnesota by the court of last resort of that state in
this case. It is clear that, by necessary implication, it was
decided that, by the statutes of Minnesota under which the
allotment in indivision was made, the heirs or next of kin
remained, by operation of law, to the extent to which they received
the property of the estate, subject to be sued and to respond to
the debts of the estate existing at the time the allotment took
place. But the rights arising
Page 176 U. S. 529
from the allotment, under the statutes of Minnesota, cannot be
greater than those which the statutes in question conferred. The
contention therefore amounts to this -- that insofar as the
statutes of Minnesota operated in favor of the participants in the
allotment, the statutes are to be respected, but to the extent that
they imposed obligations upon the allottees, they are not bound
thereby. It is argued, however, that, as by law of Minnesota, the
liability to be called upon to pay a debt of the estate to the
extent of the distributive share received depended solely upon
whether there was such debt existing at the time the allotment was
made, and as there was no such debt in the present instance, no
duty to respond arose. This is predicated upon the assumption that
because the insolvency happened after the allotment, therefore
there was no debt at the time of the allotment. This assumes that
whether there was a debt depended upon the date of the insolvency.
In effect, this is but to argue that the estate was never liable at
all. Such, clearly, is the essence of the proposition, for if it be
that whether there was a debt is to be alone ascertained by the
happening of insolvency, and not by referring to the date of the
subscription, then where insolvency occurred after the death of the
stockholder, there would be no responsibility. The unsoundness of
this view has been already demonstrated. Moreover, the Supreme
Court of Minnesota, in effect, in this case has held that the
statute of that state making the allottees liable, each to the
amount of their distributive share, for the debt of the estate,
embraced a contract liability to pay an assessment contingent on
the happening of insolvency, although that event had not taken
place at the time of the allotment.
The contention is next made that, conceding there was a debt of
the estate and granting that the statute embraced a preexisting
contract obligation which had not ripened into an actual demand
because insolvency had not taken place, nevertheless the court
below erred because, by the effect of the allotment, the estate had
ceased to exist and all its property had passed to the allottees.
This but reiterates the misconception already disposed of. Whether
the effect of the allotment
Page 176 U. S. 530
was to extinguish the estate was wholly dependent on the
Minnesota law. That law, as construed by the courts of Minnesota in
this case, in substance provides (for the purpose of the
enforcement of the debts of the estate then actually existing or
resting in contract, and liable to arise from events to take place
in the future) that the estate should, in legal effect, continue to
exist, to the extent provided, for the purpose of enforcing the
debts in question.
These considerations would dispose of the case, since they
demonstrate that no substantial federal question was involved, but
for the fact that it is claimed that, as under the statute of the
United States, each stockholder in a national bank can only be
liable to the extent of the amount of his stock therein at the par
value thereof, in addition to the amount invested in such shares,
therefore the enforcement of the liability for the whole amount
against one of the allottees deprives him of the benefit of the
federal statute and involves a misconstruction of its provisions.
This contention was considered and adversely decided below. It is
conceded that no notice of the allotment was ever given to the
bank, and that the stock in question was never registered in the
name of the allottees. But the settled doctrine is that, as a
general rule, the legal owner of stock of a national banking
association -- that is, the one in whose name stock stands on the
books of the association -- remains liable for an assessment so
long as the stock is allowed to stand in his name on the books, and
consequently that although the registered owner may have made a
transfer to another person, unless it has been accompanied by a
transfer on the books of registry of the association, such
registered owner remains liable.
Upton v. Tribilcock,
91 U. S. 45;
Sanger v. Upton, 91 U. S. 56;
Webster v. Upton, 91 U. S. 65;
Pullman v. Upton, 96 U. S. 328;
Anderson v. Philadelphia Warehouse Co., 111 U.
S. 479, and
Richmond v. Irons, 121 U. S.
27,
121 U. S. 58.
This principle thus settled as to the stockholders in national
banks is in entire accord with the rule established by state courts
in construing statutes containing substantially similar provisions.
In
Shellington v. Howland, 53 N.Y. 376, it was said:
Page 176 U. S. 531
"There may have been a transfer by the defendant of his stock to
the corporation in 1869, valid as between the parties to the
transaction, and sufficient to vest the equitable title in the
transferee, but the transfer was not consummated in the form
required by statute, so as to affect the rights of strangers or to
relieve the defendant from his legal liability to third persons for
the debts of the corporation. . . . The transfer of stock,
quoad the public, is not complete until entered on the
book designated by statute. An entry upon the books of registry of
stockholders is required for the protection of the company and its
creditors, and each may hold the stockholders to their liability as
such until they have divested themselves of the title to their
shares by a completed transfer, as prescribed by law. No secret
transfer will avail to release the stockholder from his obligations
or deprive the creditors of the corporation of the right to look to
him as the responsible party liable for the debts of the
corporation."
Indeed, this doctrine is so universally settled that it is
treated as elementary.
See Thompson on Corporations,
sections 3283, 3284.
True it is that exceptions have been engrafted upon this
doctrine as to national bank stockholders by decisions of this
Court, but none of them is germane to the matter now considered.
Cases enunciating certain of the exceptions referred to are cited
in the following summary:
1. Where a transfer has been fraudulently or collusively made to
avoid an obligation to pay assessments, such transfer will be
disregarded and the real owner be held liable.
Germania
National Bank v. Case, 99 U. S. 628,
99 U. S.
631-632;
Bowden v. Johnson, 107 U.
S. 251,
107 U. S.
261.
2. Where a transfer of stock is made and delivered to officers
of a bank and such officials fail to make entry of it, the acts
referred to will operate a transfer on the books and extinguish the
liability as stockholder of the transferor.
Whitney v.
Butler, 118 U. S. 655. In
the case just cited, in applying the exception, the Court very
carefully and accurately restated the general rule.
3. Where stock was transferred in pledge, and the pledgee,
Page 176 U. S. 532
for the purpose of protecting his contract, caused the stock to
be put in his name on the books as pledgee, it has been held that
such a registry did not amount to a transfer to the pledgee as
owner, and that he therefore was not liable, although the pledgeor
might continue to be so.
Pauly v. State Loan & Trust
Co., 165 U. S. 606.
These and other cases unnecessary to be referred to do not
impair, but, on the contrary, serve to prove, the general rule. As
in the case now before us the stock remained on the books in the
name of Matteson, continued as a liability of the estate, and was
never transferred under the allotment, it follows that the
allottees have no right to complain because the receiver has
availed himself of the provisions of the Minnesota statute.
Judgment affirmed.
*
"SEC. 5139. The capital stock of each association shall be
divided into shares of one hundred dollars each, and be deemed
personal property, and transferable on the books of the association
in such manner as may be prescribed in the bylaws or articles of
association. 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, and no change shall
be made in the articles of association by which the rights,
remedies, or security of the existing creditors of the association
shall be impaired."
"
* * * *"
"SEC. 5151. 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; except that shareholders of any
banking association now existing under state laws, having not less
than five millions of dollars of capital actually paid in, and a
surplus of twenty percentum on hand, both to be determined by the
Comptroller of the Currency, shall be liable only to the amount
invested in their shares, and such surplus of twenty percentum
shall be kept undiminished, and be in addition to the surplus
provided for in this title, and if at any time there is a
deficiency in such surplus of twenty percentum, such association
shall not pay any dividends to its shareholders until the
deficiency is made good, and in case of such deficiency, the
Comptroller of the Currency may compel the association to close its
business and wind up its affairs under the provisions of chapter
four of this title."
"SEC. 5152. Persons holding stock as executors, administrators,
guardians, or trustees shall not be personally subject to any
liabilities as stockholders; but the estates and funds in their
hands shall be liable in like manner and to the same extent as the
testator, intestate, ward, or person interested in such trust funds
would be, if living and competent to act and hold the stock in his
own name."