Shareholders who have complied, so far as steps required to be
done on their part are concerned, with the provisions of the Act of
July 12, 1882, 22 Stat. 162, c. 290, in regard to withdrawing from
a national banking association, two-thirds of the shareholders
whereof have asked for a renewal of the charter, cease to be
members of the association even if, through no fault of their own,
the final action is not taken, and such shareholders are not liable
for assessments subsequently made by the Comptroller of the
Currency under § 5151, Rev.Stat.
164 F. 830 and 199 Mass. 65 affirmed.
The facts, which involve the construction of § 5151, Rev.Stat.,
and the liability of shareholders in national banks thereunder, are
stated in the opinion.
Page 221 U. S. 515
MR. JUSTICE DAY delivered the opinion of the Court.
These cases are practically alike. No. 132 is a writ of error to
the United States Circuit Court of Appeals of the First Circuit;
No. 133 is a writ of error to the Superior Court of Massachusetts.
The suits were originally brought by Albert S. Apsey, receiver of
the First National Bank of Chelsea, Massachusetts, against George
E. Kimball and Anna G. Whittemore, respectively, under § 5151 of
the Revised Statutes of the United States, making the shareholders
of a national banking association individually responsible in a sum
equal to the amount of their stock therein at the par value
thereof, in addition to the amount invested in such shares.
In each of the cases, the courts whose judgments are here for
review reached the conclusion that the shareholder sued was not
liable to the receiver on account of such statutory obligation. In
the case from Massachusetts, while the final judgment was entered
in the superior court of that state, the decision was in the
Supreme Judicial Court of Massachusetts, and is reported in 199
Mass. 65.
As originally organized, national banks had a corporate
existence of twenty years. By the Act of July 12, 1882, 22 Stat. c.
290, p. 162, such banks were authorized to continue their corporate
existence for another twenty years. As pointed out in § 2 of the
act, such extension must be authorized by consent in writing of
shareholders owning not less than two-thirds of the capital stock
of the association. Before granting a certificate of approval of
such extension, the Comptroller of the Currency is required to
cause a special examination of the bank to be made, and
Page 221 U. S. 516
if, after such examination or otherwise, it appears to him that
the association is in a satisfactory condition, he is required to
grant his certificate of approval, or, if it appear that the
condition of the association is not satisfactory, he shall withhold
the same.
Section 5, which is the important one in this case,
provides:
"That when any national banking association has amended its
articles of association, as provided in this act, and the
Comptroller has granted his certificate of approval, any
shareholder not assenting to such amendment may give notice in
writing to the directors within thirty days from the date of the
certificate of approval, of his desire to withdraw from said
association, in which case he shall be entitled to receive from
said banking association the value of the shares so held by him, to
be ascertained by an appraisal made by a committee of three
persons, one to be selected by such shareholder, one by the
directors, and the third by the first two, and in case the value so
fixed shall not be satisfactory to any such shareholder, he may
appeal to the Comptroller of the Currency, who shall cause a
reappraisal to be made, which shall be final and binding, and if
said reappraisal shall exceed the value fixed by said committee,
the bank shall pay the expenses of said reappraisal, and otherwise
the appellant shall pay said expenses, and the value so ascertained
and determined shall be deemed to be a debt due, and be forthwith
paid, to said shareholder from said bank, and the shares so
surrendered and appraised shall, after due notice, be sold at
public sale, within thirty days after the final appraisal provided
in this section."
Except as to the number of shares held by the shareholders sued
in the two cases and the times at which the same were acquired, the
facts in both cases are essentially the same. Case No. 132 was
tried upon an agreed statement of facts, as follows:
Page 221 U. S. 517
"The First National Bank of Chelsea was, prior to August 16,
1906, a banking association duly organized and existing under the
provisions of the National Banking Act and amendments, with a
capital of $300,000 divided into 3,000 shares of the par value of
$100 each; that, on said August 16, 1906, the said bank closed its
doors and suspended business; that, on August 25, 1906, the
plaintiff was duly appointed by the Comptroller of the Currency,
receiver of said bank; that, on September 25, 1906, the Comptroller
of the Currency ordered an assessment of $100 per share on each
share of stock in said bank, payable by the stockholders, according
to their respective holdings, on or before October 25, 1906, and
ordered the plaintiff to collect and recover the same by proper
proceedings; that the defendant received from said receiver a copy
of said order of assessment and a separate notice and demand for
payment, all of which were in the following form:"
"
* * * *"
"The defendant, on November 18, 1901, became the owner of twenty
(20) shares of the capital stock of said bank, and on said date
received two certificates, each for ten (10) shares; on November
20, 1901, he became the owner of fifteen (15) shares and received a
certificate therefor, and on August 31, 1904, he became the owner
of five (5) shares, and received a certificate therefor. Said four
certificates were each and all in the following form,
mutatis
mutandis, and their numbers were respectively 1235, 1236,
1237, 1238."
"
Massachusetts"
"
The First National Bank of Chelsea"
"
No. 1235 10 Shares"
"This certifies that George E. Kimball of Boston, Mass. is the
proprietor of ten (10) shares of the capital stock of the First
National Bank of Chelsea, transferable only on the books of the
bank in person or by attorney, on the surrender of this
certificate. 'No transfer of the stock of
Page 221 U. S. 518
this association shall be made without the consent of the board
of directors by any stockholder who shall be liable to the
association either as principal debtor or otherwise.'"
"Chelsea, Nov. 18, 1901."
"S. B. HINKLEY, President"
"WALTER WHITTLESEY,
Cashier"
"Shares $100 each"
"The defendant held said certificates from the respective dates
of their issuance, as above specified, down to and after the date
of the suspension of the bank, and he had them in his possession
and produced them at the trial."
"The twenty-year period of succession of said bank under the
provisions of the National Bank Act expired on September 5, 1904,
and on or before said date proper proceedings were taken under the
Act of July 12, 1882 (one of the amendments to the National Bank
Act), to amend the articles of association so as to extend the
period of succession for a period of twenty years from said
September 5, 1904, and said articles were so amended."
"The defendant did not assent to said amendment, but, acting in
pursuance of the provisions of Section 5 of said Act of July 12,
1882, and within the time therein named, he gave to the bank
directors due notice of his desire to withdraw from the
association, and afterwards appointed one William R. Dresser as one
member of the appraisal committee under said Section 5, and gave
due notice of such appointment to the directors of the bank, and
said directors appointed Sylvester B. Hinckley as a second member
of said committee of appraisal, but these two never appointed the
third member, and no appraisal was ever made. The said Sylvester B.
Hinckley was at said time a director of said bank, its president,
and a large stockholder therein."
"The defendant, after waiting some months subsequent to the
appointment of said Dresser and Hinckley, during which time he made
all reasonable efforts in good faith to
Page 221 U. S. 519
have said third member appointed, but without result, in
September, 1905, retained an attorney, who at once communicated
with said Hinckley, urging him to join in the making of such
appointment, and the said Hinckley, or the bank, also retained
counsel, and the two counsel conducted a correspondence on the
question of such appointment, which correspondence, however, failed
to result in such appointment."
"On January 1, 1905, at the time of declaring its regular
semiannual dividend, the bank declared a regular dividend of three
(3) percent to the defendant on said forty (40) shares and sent him
a dividend check therefor, which the defendant promptly returned,
declaring that he was not a stockholder in the bank, and declining
to accept or to use the check. Further regular dividends were
declared to him by the bank on July 1, 1905, January 1, 1906, and
July 1, 1906, the latter being the last dividend declared by the
bank prior to the suspension."
"None of the said last mentioned dividends were sent to or
received by the defendant. The defendant was also credited on the
bank's ledger with said forty (40) shares. The bank never refused
the defendant or withheld from him any of the rights or privileges
of a stockholder, but the defendant never used or asserted any of
said rights or privileges of a stockholder after September 5, 1904.
The following extract from the bank's bylaws was introduced in
evidence:"
"SECTION 15. The stock of this bank shall be assignable only on
the books of this bank, subject to the restrictions and provisions
of the act, and a transfer book shall be kept in which all
assignments and transfer of stock of this association shall be made
without the consent of the board of directors by any stockholder
who shall be liable to the association, either as principal debtor
or otherwise, and certificates of stock shall contain upon them
notice of this provision.
Page 221 U. S. 520
Transfers of stock shall not be suspended preparatory to a
declaration of dividends, and except in cases of agreement to the
contrary expressed in the assignments, dividends shall be paid to
the stockholder in whose name the stock shall stand on the day on
which the dividends are declared."
"SECTION 16. Certificates of stock, signed by the president and
cashier, may be issued to stockholders, and the certificate shall
state upon the face thereof that the stock is transferable only
upon the books of the bank, and when stock is transferred, the
certificates thereof shall be returned to the bank and cancelled
and new certificates issued."
The question, then, is did the shareholders, defendants in
error, cease to be such, or were they still shareholders when the
bank failed, and liable to assessment for the benefit of creditors?
It is the contention of the plaintiff in error that they did not
cease to be shareholders until, under § 5 of the act, an appraisal
of the value of the stock had been made and the certificates of
stock duly surrendered. Upon the other hand, the defendants in
error contend that, upon complying with the steps required of them,
in giving notice, appointing an appraiser, and using diligence to
have an appraisal, they ceased to be shareholders, and were no
longer liable to pay the assessment made.
The First National Bank of Chelsea was originally incorporated,
under the statute, for a period of twenty years, and while that was
its span of corporate life, the defendants in error became
shareholders therein, received certificates of shares, and were
duly registered as shareholders. As twenty years was the life of
the corporation, the shareholders had not bound themselves to
remain such after the expiration of that definite period of time.
As the statute originally stood, the venture would necessarily
terminate at the end of that time.
Congress recognized that it might be proper to continue
Page 221 U. S. 521
the organization, that at least a part of the shareholders might
desire to do so, and therefore the Act of July 12, 1882, provided
for the extension of the corporate existence of the bank. It was
also recognized that a part of the shareholders might wish to
retire from the venture, and it was therefore provided that
two-thirds of the shareholders must acquiesce to continue the
bank's existence, and must certify such desire to the Comptroller
of the Currency, who must approve of the extension of the corporate
existence.
It is provided in § 5, above quoted, that each nonconsenting
shareholder shall give notice in writing to the directors of the
association, within thirty days of the date of the certificate of
approval by the Comptroller, of his desire to withdraw from the
association, and further that he thereupon shall be entitled to
receive from the association the value of the shares held by him,
such value to be ascertained by an appraisal by a committee of
three, one to be selected by the shareholder, one by the directors
of the association, and the third by the first two thus selected,
the value ascertained and determined is to be deemed a debt of the
bank and forthwith paid, and the surrendered shares to be sold
after due notice at public sale, after thirty days from the final
appraisement provided for in the section.
The agreed facts show that the shareholders here involved
strictly complied with the statute in giving the required notice
and in the selection of their appraiser. The bank also selected its
appraiser, and the facts show that the shareholders urged action,
employed counsel, and endeavored to bring about the appraisal.
Apparently the delay was caused by the bank's representative; at
least this was the possible inference suggested by the Supreme
Judicial Court of Massachusetts. 199 Mass. 68.
We agree with the courts below that the defendants
Page 221 U. S. 522
ceased to be shareholders after thus complying with the statute.
Section 5151 of the statute makes shareholders liable to the
assessment. The statute makes specific provision for the manner in
which the shareholder may sever his connection with the
corporation. These necessary steps were taken, as the agreed facts
show. The shareholders had a right to end their connection with the
association at the termination of the period of original
incorporation, or, if they so desired, they might go on with the
association in its renewed life.
Section five provides for the manner of manifesting such
determination to terminate their relations with the corporation at
the expiration of its original life. True, other things were to be
done to ascertain the amounts to be paid the retiring shareholders;
that they were not done in these cases is no fault of the retiring
shareholders. We cannot agree with the contention of the plaintiff
in error that they ceased to be shareholders only when the
appraisal had been made and the certificate of shares
surrendered.
It is said that the shareholders, when the bank's representative
did not act in the matter of the appraisal, might have brought suit
to compel further proceedings or to cancel their stock on the books
of the company. Again we answer that they did all that the statute
required them to do.
But, it is urged, in not getting their names off the books,
whatever might be their relations with the bank, these shareholders
continued to be registered shareholders, and, as such, liable to
creditors. Cases are cited which hold that, where one permits his
name to be registered on the books of the bank as a shareholder, or
where he fails to obtain a transfer of the shares to another name,
although he has in fact parted with his stock, such shareholder
remains liable to the creditors.
See National Bank v.
Case, 176 U. S. 521.
Page 221 U. S. 523
But those are not cases where shareholders have done all that
the law required in order to end their relation to the bank and to
get their names off the books.
Where the shareholder has performed every duty which the law
imposes upon him in order to secure a transfer of the stock, the
fact that it is not transferred on the register of the bank does
not continue his liability as such shareholder.
Whitney v.
Butler, 118 U. S. 655;
Earle v. Carson, 188 U. S. 42. The
facts of the cases at bar bring them within this principle. These
shareholders had done all that the law required of them. Any
further action to evidence the changed relation of the shareholders
to the bank upon its books was not a matter within the control of
the shareholders.
It is argued that the construction we have given the statute may
amount to a reduction of the capital stock to the detriment of
creditors. The corporation in which these shares were held expired
in twenty years. The creditors after that time had no right to hold
these shareholders in face of the law, of which all must take
notice, permitting the retirement of nonassenting shareholders. If
this results in the diminution of outstanding shares of the bank
assessable for creditors, it was the very thing made possible by
the amended statute. New shareholders are to be brought in by the
sale of the stock, as provided in § 5. It is true that these
defendants retained their certificates, but they were not obliged
to surrender them except upon payment for their shares.
It is said, had the corporation made a large gain, instead of
failing after the action of these shareholders in giving notice and
naming their appraiser, they might have withdrawn their notice and
obtained the benefit of such increase, but this depends upon the
construction of the statute. As we view it, when the shareholders
made their election to retire at the end of the first twenty-year
period of corporate organization, and took the steps required
Page 221 U. S. 524
in § 5, by giving notice and appointing an appraiser to obtain a
valuation of and payment for their shares of stock, they thereby
ceased to be shareholders beyond the original twenty-year term of
the life of the corporation, and they could neither share its
profits nor be compelled to bear its burdens.
The views here expressed require the affirmance of the judgments
in both cases.
Affirmed.