Wheelock v. Kost.

WHEELOCK Y. Kost.

(77 Illinois, 296.)

Shareholder in National bank, what constitutes-Estopped from questioning incorporation-Evidence of insolvency.

Shares of stock in a National bank were issued to defendant as collateral security for money loaned the bank, and the dividends thereon were paid to him. Held, that defendant thereupon became a shareholder as to creditors and liable as such.*

A stockholder in a de facto National bank, who has participated in its transactions as such and received dividends, is estopped from denying the legality of its incorporation.

A return of nulla bona made by a sheriff upon execution issued against a National bank is sufficient evidence of its insolvency.

HIS was a creditors' bill, filed by Elias Kost and others, creditors of the First National Bank of Decatur, against Otis L. Wheelock and others, stockholders of such bank. court states the material facts of the case. appealed from the decree below.

Crea & Ewing, for appellant.

The opinion of the Otis L. Wheelock alone

Park & Lee, and Nelson & Roby, for appellees.

Mr. Justice SCOTT delivered the opinion of the court. This bill was to compel parties, alleged to be stockholders in the First National Bank of Decatur, to pay certain judgments previously obtained against the bank. On the 16th day of February, 1870, the bank ceased to do a general banking business, and, it is alleged, it became insolvent. Executions, issued on the several judgments obtained by the creditors of the bank, were returned nulla bona.

Whether appellant was a stockholder in the bank at the date it ceased to do business and became insolvent, is a question that lies at the foundation of the relief sought, and must be first determined.

Briefly, the facts are: the appellant made some loans of money

*See Hale v. Walker, post; Magruder v. Colston, post.

Wheelock v. Kost.

to the bank, and made and delivered to it his promissory note, partly as an accommodation, to be held among its other assets. It was agreed that fifty shares of stock in the bank, equal in value to $5,000, should be issued to appellant, as collateral security for the loans of money so made, and as indemnity against liability on his promissory note held by the bank. That number of shares was in fact issued, and delivered to appellant, and certificates to that effect given, upon which he received, at different times, semi-annual dividends.

Whatever relation appellant may have sustained to the corporators of the bank, it seems clear that, as to its creditors, he occupied the position of a stockholder, and must bear all the burdens that relation imposed. The stock had in fact been transferred to him; it stood in his name as owner, and he availed of the dividends it earned. Having voluntarily assumed the relation of stockholder, it makes no difference he may have done it with a view to assist the bank in its credit or otherwise. The legal title to the stock was in appellant by his own procurement, although the equitable title may have been in other parties; but it would be a singular doctrine to hold that the creditor should seek out the equitable owner against whom to enforce his claim. Primarily, he may proceed against the party in whom is the legal title to the stock. Where shares of stock in a banking incorporation have been hypothecated, and placed in the name of the transferee, he will be subjected to all the liabilities of the ordinary owners. It is for the reason the property is in his name, and the legal ownership appears to be in him. Morse on Banking, 432; Adderly v. Storm, 6 Hill, 624; In re Empire City Bank, 18 N. Y. 199.

It being determined appellant is a stockholder, he cannot be permitted to urge, as defense, that the bank was not legally incorporated under the general banking laws. Having participated in the acts of user of a corporation de facto, a stockholder therein will, by such acts, be estopped to insist the corporation was not legal, when it is sought to enforce any liability he may have incurred. By the receipt of dividends on the shares of stock held by him, appellant participated in the transactions of the corporation. Whether the bank had been regularly organized, is not a defense that can be availed of by a stockholder as against a bona fide creditor, if it appears there was a corporation de facto, and that such stockholder was concerned in its transactions.

Wheelock v. Kost.

The allegation in the bill is, the bank was insolvent. Assuming it was obligatory upon complainants to make proof of this fact, no better evidence need be produced than a return of nulla bona, made by the sheriff upon the several executions issued against the property of the bank. This was done in this case, and it is sufficient to authorize proceedings by a creditor of the bank against an individual stockholder. Morse on Banks, 434.

Our conclusion being that appellant is liable as a stockholder in the bank, one other question remains to be considered, viz.: was the decree against him for too large a sum?

It is alleged, the several parties made defendants each owned a certain number of shares in the bank, of the par value of $100 each. The total number of shares, comprising the entire stock of the bank, is conceded to be one thousand. Of this number, it is charged appellant owned fifty shares. That is the number of shares hypothecated to him, and that stood in his name, as we

have seen.

By the 12th section of the National Currency Act, the shareholders are “individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements, to the extent of their stock therein, at the par value thereof, in addition to the amount invested in such shares." Act of June 3, 1864.

The bill seems to have been dismissed as to the heirs of some of the deceased shareholders. The court found the number of shares held by the remaining defendants was nine hundred and sixty, which, added to the number owned by parties dismissed out of the case, makes a total of one thousand shares. As we understand the decree, the assessment was made upon the basis the entire stock of the bank consisted of one thousand shares. Appellant was treated as being the owner of fifty shares, in ascertaining the amount of the decree to be rendered against him. The inode adopted would only charge him with his just proportion of the debts of the bank, in proportion to the number of shares of stock standing in his name. It seems the mode adopted for making the assessments against the individual shareholders leaves out of view the fact that some of the share owners were insolvent, and other shares were owned by unknown heirs, against whom complainants did not choose to proceed.

Under the law, each individual shareholder is bound equally and ratably for the contracts, debts and engagements of the bank, in

Nickerson v. Kimball.

proportion to the par value of his stock, in addition to the amount invested in such shares, but no liability rests upon him for his fellow shareholders.

So far as the decree affects appellant, we do not understand it is different from what it would have been had the decree passed against all of the shareholders, whether solvent or not, and each adjudged to pay his ratable proportion.

The case of Pollard v. Bailey, 20 Wall. 520, is analogous to the one at bar, and is authority for the view of the law we have adopted. No error appearing in the record, the decree of the Circuit Court will be affirmed.

Decree affirmed.

Mr. Chief Justice WALKER and Mr. Justice CRAIG: We are unable to concur in the decision reached in this case by the majority of the court.

NICKERSON V. KIMBALL.

(1 Chicago Law Journal, 42.)

Taxation of National banks ·Construction of statute - Equalization — Notice of complaint that bank shares were assessed too low ·Deduction of real estate.

The statute of Illinois provided that the stockholders in banks, whether State or National, should be assessed on the value of their shares in the county, town, district, village or city, where the bank was located, whether such stockholder resided there or not; but not at a greater rate than was assessed on other moneyed capital where such bank was located; that each bank should keep a list of the names, residences, and number of shares of each shareholder, which should be open to the inspection of the revenue officers; that the assessors should ascertain and report to the county clerk a correct list of the names and residences of all stockholders, with the number and assessed value of their shares; that the county clerk should enter the assessed valuation of such shares in the tax list, and compute and extend the taxes thereon; that such tax should be a lien on the shares and that the bank officers should retain the dividends on such stock until the tax was paid. Held constitutional.

Under the statutes of Illinois any one may complain to the board of equalization, that another is assessed too low, but such complaint is not to be acted upon until the person so assessed or his agent has been notified of such

Nickerson v. Kimball.

complaint, if a resident of the county; and no error or formality in the proeedings of any of the officers connected with the assessment, levying or collecting of the taxes, not affecting the substantial justice of the tax itself, shall vitiate, or in any manner affect, the tax or the assessment thereof. Held, (1) that notice of the complaint to the person assessed was not essential to give the board jurisdiction; (2) that the bank was the agent of the share holders, and service of notice on the officers of the bank was sufficient; (3) that the complaint need not specify each person claimed to be assessed too low, but a description of them as shareholders in" a particular bank was sufficient.

"

A National bank alleged that it had been assessed on both its shares of stock and its real estate, and that the value of the real estate was not deducted from the gross value of the stock. It appeared that the aggregate assessed valuation of both the stock and the real estate was less than half their real value. Held, that the bank had no cause to complain.

BILL

ILL in chancery for an injunction to restrain the collection of a tax assessed on shares in National banks, on the ground that such assessment had been unlawfully increased by the board of equalization.

Charles Hitchcock, Wirt Dexter, Sidney Smith, Melvin W. Fuller and George W. Kretzmeyer, for plaintiffs.

Elliott Anthony and John M. Roundtree, for defendants.

Mr. Justice MOORE delivered the opinion of the court, May 9, 1877. The Constitution of the State provides for raising revenue by levying taxes, by or according to "valuation" of the property to be taxed; every one shall be taxed and pay in proportion to the value of his property. This rule is extended to persons and corporations owning or using franchises and privileges. Taxes must be "uniform" in respect to persons and property; every law that imposes a tax must regard every man alike. Vide Constitution, art. 9, §§ 1, 9, 10; Hurd's Rev. Stat., pp. 74, 75.

The law must not discriminate for or against any one. It must be uniform. The law enacted under the Constitution must be enforced by men who may err in judgment, and therefore burdens may fall unequally. This will result from the different views that different men may take of values and the like, and does not show that the law imposing a tax is wanting in the principle of uniformity. This principle of uniformity must extend to every person and to every corporation.