O'Connor v. Witherby

California Supreme Court Mar 11, 1896 No. L. A. No. 13Published

Before: McFarland

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Holding. The court held that a bank comptroller's assessment of shareholder liability is conclusive and cannot be challenged by shareholders, and that a shareholder who knowingly holds stock and acts as a bank officer cannot avoid liability by claiming they were defrauded by their own agent.

Issues

Whether a complaint must explicitly aver the necessity of an assessment by the comptroller to be sufficient against a general demurrer.
Whether a shareholder may challenge the comptroller's assessment by alleging the bank's assets were sufficient to pay liabilities.
Whether a directed verdict is appropriate when there is no substantial conflict of evidence regarding stock ownership.

Disposition. affirmed

Quotations verified verbatim against the opinion

“As to the creditors of the bank appellant was the owner of the stock; with secret transactions between him and Howard they are not concerned.”

Synopsis

Insolvent National Bank—Assessment by Comptroller of Currency — Liability of Stockholders— Action by Receiver — Pleading— Averment of Nonpayment.—In an action by a receiver of an insolvent national bank, appointed under the laws of Congress by the comptroller of the currency, against one of its stockholders, to enforce an assessment made by the comptroller, the complaint sufficiently alleges nonpayment of the assessment at the time of the commencement of the action, as against a general demurrer, by an averment that “ the defendant, though demanded, has failed and refused to pay said assessment, or any part thereof. ”

Id.—Averment of Necessity of Assessment — Direction of Suit by Comptroller.—An averment that the comptroller made the assessment against the s! ockholders, and directed the action to be brought, is a sufficient averment, as against a general demurrer, that he had determined the necessity of such action, and that lie had decided when he made the assessment that it was necessary to enforce the personal liability of stockholders to pay the debts of the bank.

Id.—Conclusiveness of Comptroller's Action—Striking Out Improper Defense. —The action of the comptroller in making an assessment upon the stockholders of an insolvent national bank is conclusive upon the stockholders, and cannot be controverted in a suit against a stockholder to enforce the assessment; and an averment in an answer in such suit that the comptroller in making the assessment acted without due information of the assets and liabilities of the bank, and that an assessment one-half as great would have been sufficient, sets forth no defense, and is properly stricken out.

Id.—Stock Held Subject to Law.—The owner of stock in a national bank holds it in view of and subject to the provisions of the law under which the bank is organized.

Id.—Instructions—Direction to Find for Plaintiff.—Where there is no substantially conflicting evidence as to .facts determinative of tile case, or such facts are admitted, the judgment will not be reversed on account of an instruction to the jury to find for the plaintiff; though such practice is hazardous, and can be sanctioned only in the clearest cases.

Id.-—Transfer of Stock—Knowledqe of Transferee—Indorsement of Certificates.—Although a man cannot he made liable to the creditors of a bank, where stock is transferred to his name on the books without his authority or knowledge, yet where stock is transferred from the name of the wife of the president of a bank to the name of its vice-president, who ought to know of his relations to the bank, and who upheld its credit, and indorsed the certificates thus transferred to him by signature of his name in his own handwriting, he is conclusively chargeable with knowledge that the certificates were issued to him.

McFarland, J. The “Consolidated National Bank,” organized under the laws of Congress, failed on June 21» [526189]3, and on June 23,1893, the United States comptroller of the currency appointed the plaintiff herein, O’Connor, receiver of said bank. On October 25, 1893, the said comptroller made an assessment for two hundred and fifty thousand dollars equally and ratably upon the shareholders, to the amount of one hundred per cent of the par value of the shares of the capital stock of said bank; and on November 25,1893, he made an order directing the plaintiff, as such receiver, to institute suit to enforce against each shareholder his personal liability under such assessment, and under that order this action was brought. It is averred in the complaint that at the time of the failure of said bank defendant, Witherby, was a shareholder to the amount of one hundred shares, represented by certificate No. 211 for twenty-five shares, and by certificate No. 212 for seventy-five shares. Defendant denied the ownership of said shares. There was a jury empaneled in the case; but at the close of the evidence the court instructed the jury to find a verdict for plaintiff, which was done, and judgment was accordingly rendered for plaintiff. Defendant appeals from the judgment and from an order denying a new trial. We have given due consideration to the able and elaborate briefs of respective counsel; but in stating our conclusions we do not deem it necessary to discuss the points made at any great length.

The main contentions of appellant are that the complaint is insufficient, and that the court erred in instructing the jury to find for plaintiff.

1. The contention that the complaint does not contain a sufficient averment of nonpayment cannot be maintained. It is averred that “the defendant, though demanded, has failed and refused to pay said assessment or any part thereof”; and this is a sufficient averment of nonpayment at the time of the commencement of the action. There was only a general demurrer.

The law provides that the comptroller may enforce the individual liability of the stockholders if necessary to pay the debts of the bank; and the main contention [527]of appellant, as to the insufficiency of the complaint, is that it does not aver such necessity, nor that the comptroller determined that there was such necessity. Appellant relies mainly on Kennedy v. Gibson, 8 Wall. 498, to support this contention. But in that case the complaint showed that the receiver had broug'lit the action of his own motion, without any order of the comptroller to do so, and without any action of the comptroller toward enforcing the individual liability of stockholders; while the court held that the receiver was the mere instrument and creature of the comptroller, and that the latter must decide when it is necessary to institute proceedings against the stockholders, and for what amount. And it is as to this general action of the comptroller that the court say, “The fact must be distinctly averred in all such cases.” But an averment that the comptroller made the assessment and directed the action to be brought is a sufficient averment—as against a general demurrer at least—that he had determined the necessity of such action. This was expressly decided by Justice Shiras in Welles v. Stout, 88 Fed. Rep. 67, where the complaint was like the one in the case at bar. He refers to Kennedy v. Gibson, supra, and says: “Certainly the comptroller would not have made this assessment unless he had decided that it was necessary to enforce the personal liability of the stockholders. The evidence that he had reached the conclusion that it was necessary to resort to the liability of the stockholders is found in the fact averred—that he made this assessment and ordered it paid.” The contention of the appellant that the complaint is insufficient in this respect cannot, therefore, be maintained.

O'Connor v. Witherby

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