Kennedy v. Gibson
Annotate this Case
75 U.S. 498 (1869)
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U.S. Supreme Court
Kennedy v. Gibson, 75 U.S. 8 Wall. 498 498 (1869)
Kennedy v. Gibson
75 U.S. (8 Wall.) 498
1. The 50th section of the National Bank Act of June 3, 1864, 13 Stat. at Large 116, which provides that suits under it in which officers or agents of the United States are parties shall be conducted by the district attorney of the district is insofar but directory that it cannot be set up by stockholders to defeat a suit brought against them by a receiver under the act, which receiver, with the approval of the Treasury Department, and after the matter had been submitted to the Solicitor of the Treasury, had employed private counsel, by whom alone suit was conducted.
2. Upon a bill filed under the 50th section of that act by a receiver against the stockholders where the bank fails to pay its notes, it is indispensable that action on the part of the Comptroller of the Currency touching the personal liability of the stockholders precede the institution of any suit by the receiver, and the fact must be averred in the bill.
3. It is no objection to such a bill properly filed against stockholders within the jurisdiction of the court that stockholders named in the bill and averred in it to be without the jurisdiction are not made co-defendants.
4. Creditors of the bank are not proper parties to such a bill. The receiver is the proper party to bring suit, whether at law or in equity.
5. Suits may be brought under the 57th section of the act by any association as well as against it though the word "by" be omitted in the text of the section. Reading the section by the light of another section of
a prior act on the same general subject, the omission is to be regarded as an accidental one.
The Act of June 3, 1864, [Footnote 1] "to provide a national currency &c.," and which establishes those associations for carrying on the business of banking, now known as our "national banks," provides by its 12th section that the shareholders
"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 their stock therein, at the par value thereof, in addition to the amount invested in such shares, except"
Subsequent sections provide for the Comptroller of the Currency's making examination into the truth of an allegation that a banking association has made default in paying its circulating notes, and authorize him, upon being satisfied that the association has refused, and is in default, to sell its securities pledged to the United States, and to pay the notes from the proceeds.
The 50th section enacts:
"That on becoming satisfied, as specified in the act, that any association has refused to pay its circulating notes, and is in default, the Comptroller of the Currency may, forthwith, appoint a receiver, who, under direction of the Comptroller, shall take possession of the books, records, and assets of every description of the association, collect all debts, dues, and claims belonging to such association, and upon the order of a court of record of competent jurisdiction, may sell or compound all bad or doubtful debts, and, on like order, sell the real and personal property of such association, on such terms as the court may direct, and may, if necessary to pay the debts of such association, enforce the individual liability provided for by the 12th section of this act, and such receiver shall pay over all money so made to the Treasurer of the United States, subject to the order of the Comptroller of the Currency, and also make report to the Comptroller of all his proceedings."
The same section proceeds:
"The Comptroller shall thereupon cause notice to be given by advertisement, in such newspapers as he may direct, for three consecutive months, calling on all persons who may have claims against such association, to present the same, and to make legal proof thereof. And from time to time the Comptroller, after full provision shall have been first made for refunding to the United States any such deficiency in redeeming the notes of such association as is mentioned in this act, shall make a ratable dividend of the money so paid over to him by such receiver, on all such claims as may have been proved to his satisfaction or adjudicated in a court of competent jurisdiction, and from time to time, as the proceeds of the assets of such association shall be paid over to him, he shall make further dividends as aforesaid, on all claims previously proved or adjudicated, and
the remainder of such proceeds, if any, shall be paid over to the shareholders of such association or their legal representatives in proportion to the stock by them respectively held."
The 56th and 57th sections enact:
"That all suits and proceedings, arising out of the provisions of this act in which the United States or its officers or agents shall be parties shall be conducted by the district attorneys of the several districts under the direction and supervision of the Solicitor of the Treasury."
"That suits, actions, and proceedings AGAINST any association under this act, may be had in any circuit, district, or territorial court of the United States held within the district in which such association may be established, or in any state, county, or municipal court in the county or city in which said association is located, having jurisdiction in similar cases."
The 59th section of a previous Act of February 25, 1863, on the same general subject, had provided that
"All suits, actions, and proceedings BY OR AGAINST any association, under the act may be had in any circuit, district, or territorial court of the United States held within the district where such association was established."
With these different enactments upon the statute book, Kennedy, of New York, filed a bill in the Circuit Court for Maryland, against Gibson, Barry, and several other persons, all citizens of Maryland, setting forth that he, Kennedy, was receiver of the Merchants' National Bank of Washington (having a capital of $200,000), duly appointed and qualified under the already-quoted act of Congress of 1864; that the bank had failed to redeem its circulating notes; that the Comptroller of the Currency thereupon appointed him the said receiver, who then took possession of the books, papers, and assets of said bank and was, at the time of filing the bill, engaged in collecting the debts due the bank and in discharging the other duties devolved on him by law. The bill then stated that the receiver had already ascertained that the assets and credits of the said bank were wholly insufficient
to pay its debts and liabilities, and that it would be necessary to the complete and entire administration of his trust that recourse should be had to the personal liability imposed on the stockholders by the already-mentioned acts of 1863 and 1864.
The bill further stated that 2,000 shares of stock were duly issued by said bank, and the complainant averred his belief, and on it charged that it would be necessary for the payment of the liabilities of this bank to obtain from its stockholders an amount of money equal to the full amount of the stock so issued, according to its par value -- that is, $200,000. He therefore insisted that he was entitled to have an account taken, as against the said stockholders, of the liabilities and available assets and credits of said bank, and to recover from each of them, individually, a proportionate contribution for the purpose of making good any deficiency which might remain after applying all the said assets and credits to the discharge of its liabilities, which deficiency, he charged, would largely exceed the said sum of $200,000, the par value of the whole capital stock.
The bill, after charging that at the failure of the bank, certain defendants named in an exhibit to the bill were shareholders of its stock to the amount stated in the exhibit, but that other stockholders named in the exhibit were citizens some of New York and some of the District of Columbia, and could not be made parties because, being out of the jurisdiction of the court, being joined as defendants would oust the jurisdiction of the court, and it prayed that the cause might proceed without making them parties.
Then followed a prayer for an account and for a decree directing each of the defendants to pay their pro rata of such balance of debt of the bank as might remain after the application of its assets, and for further relief.
The bill, it will be observed by the reader, while sufficiently setting forth the facts necessary to warrant the appointment of a receiver, contained no averment of any action by the Comptroller touching the personal liability of the stockholders.
In addition was the independent fact that the suit had not been conducted by the District Attorney for Maryland as the already quoted 56th section of the act of 1864 directs that suits like it should be, nor was the bill even signed by him. But with the approval of the Treasury Department, after the matter had been submitted to the solicitor, and "under particular circumstances in the case," Messrs. Brent and Merrick, private counsel, had been employed, and by one or both of these gentlemen, the suit had been brought and conducted.
The defendants demurred, and the demurrer being sustained and the case coming here, the following questions arose:
1. Whether the provision in the 56th section of the act of 1864 about suits' being conducted by district attorneys of the United States was of essential obligation in all cases, or whether it was directory rather.
2. Whether the omission of the bill to aver action by the Comptroller touching the personal liability of the stockholders precedently to suit being brought by the receiver was fatal to the bill, this being the principal question in the case, and the affirmative resolution of which by the court below was apparently the chief ground on which the demurrer there was sustained.
3. Whether the stockholders named in the bill and therein alleged to be nonresidents of the State of Maryland were necessary parties to any suit brought against the other stockholders touching the matters of equity charged in the bill.
4. Whether the alleged creditors of the bank were necessary parties to any suit brought against the stockholders, touching those matters last mentioned.
5. Whether, in view of the omission in the 57th section of the act of 1864 (literally read), of the word "BY," the bill could be sustained in the court where brought.