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Gift et al. v. Love

Supreme Court of Mississippi, Division B
Nov 21, 1932
164 Miss. 442 (Miss. 1932)

Summary

In Gift v. Love, 164 Miss. 442, 144 So. 562, the court held, in effect, that the statutory double liability of stockholders in a bank could not be gotten rid of by hook or crook; that such liability was rooted into and a part of the stockholder's contract for his stock subscription.

Summary of this case from Christensen v. Bank of Pascagoula

Opinion

No. 30169.

November 21, 1932.

1. BANKS AND BANKING. Bank stockholder's retransfer of stock to bank in satisfaction of a debt held not to release stockholder's double liability until next examination of bank ( Code 1930, section 3803).

This was so since word "another," within Code 1930, section 3803, providing that stockholder's liability on transfer to "another" shall not cease until next examination of bank, includes bank in which stock is held.

2. BANKS AND BANKING.

Statute imposing double liability on bank stockholders must be strictly construed (Code 1930, sections 3803, 3815).

3. STATUTES.

In construing statute, intent and purpose must be considered.

4. BANKS AND BANKING.

Superintendent of banks held unauthorized to approve settlement by going bank, whereby bank took stockholder's stock in satisfaction of debt and released claim against deceased stockholder's land.

5. ESTOPPEL.

State cannot be estopped by unauthorized acts of officers.

6. BANKS AND BANKING.

Superintendent of banks, seeking to enforce bank stockholder's double liability, held not estopped by unauthorized approval of bank's compromise settlement (Code 1930, section 3815).

7. BANKS AND BANKING.

When bank became insolvent and closed, deceased stockholder's double liability matured, standing in same class as other unsecured debts, and became charge on estate's entire personalty and realty (Code 1930, sections 1643, 3803).

8. DESCENT AND DISTRIBUTION.

Heirs hold legal title to land subject to charge of ancestor's debts, though indebtedness be not ascertained at death (Code 1930, section 1643).

9. DESCENT AND DISTRIBUTION. Where devise was void and deceased bank stockholder's heirs obtained judgment against testamentary trustee for proceeds of land sold, judgment claim held inferior to bank's double liability claim on stock, and heirs took remaining land subject to such liability ( Code 1930, sections 1643, 3815).

Fact that heirs obtained judgment against testamentary trustee for proceeds of land converted into money, which land heirs were entitled to by inheritance, did not put heirs in same class with debt due by estate to bank, growing out of subscription to stock of bank, since heirs' claim was based on their heirship, not on any obligation decedent had undertaken before his death.

10. BANKS AND BANKING.

Before bank went into liquidation, no compromise settlement could be made between bank, stockholder's heirs, and testamentary trustee, which would result in defeating bank's right to enforce double liability (Code 1930, sections 1643, 3815).

11. BANKS AND BANKING. Bank's quitclaim deed of deceased stockholder's and debtor's land to heirs in settlement transaction, whereby heirs took certain assets in satisfaction of their judgment against estate which was inferior to bank's claim, held not supported by consideration ( Code 1930, sections 1643, 3815).

There was no consideration for bank's quitclaim deed, although testamentary trustee transferred decedent's stock in bank to pay his indebtedness due bank for loaned money, since stock was already subject, with all the balance of decedent's estate, to payment of that indebtedness to bank, and to exclusion of judgment held by heirs for proceeds of real estate theretofore sold by trustee, and since all of such assets, including real estate quitclaimed, were subject to entire indebtedness due bank.

12. BANKS AND BANKING. That bank, without consideration, quitclaimed deceased bank stockholder's land to heirs, pursuant to compromise settlement, and took bank stock in satisfaction of bank's claim for loan held not to preclude superintendent of banks, after bank closed, from enforcing stockholder's double liability against land quitclaimed ( Code 1930, sections 1643, 3803, 3815).

Facts disclosed that decedent, at time of death, was indebted to bank for a certain loan; that decedent held a number of shares in the bank; that decedent's heirs recovered a judgment against testamentary trustee for proceeds of certain land sold under a void devise; that heirs agreed to accept proceeds of certain other stock and releases or quitclaims of remaining land from bank and from trustee in settlement of claim under heirs' judgment; that bank then executed quitclaim deed, and trustee also executed quitclaim deed; and that bank in payment of indebtedness of estate to bank, purchased shares of stock held by estate.

APPEAL from chancery court of Alcorn county. HON. JAS. A. FINLEY, Chancellor.

STATEMENT OF THE CASE.

Appellee, as superintendent of banks, filed his bill in the chancery court of Alcorn county against appellants, F.F. Anderson, trustee under the will of J.E. Gift, deceased, and the heirs at law of said J.E. Gift, to subject block 524 in the city of Corinth in said county, a part of the estate of said decedent, to the payment of his double liability on stock held by him in the Corinth Bank Trust Company which had closed and gone into liquidation. The cause was tried on bill, answer and proofs resulting in a final decree granting the relief prayed for. From that decree appellants brought this appeal.

The deceased J.E. Gift, died in December, 1927. At the time of his death he owned four hundred thirty-three shares of stock in the Corinth Bank Trust Company of the par value of forty-three thousand, three hundred dollars, he was the president of the bank and had been for some time. The bank closed on November 30, 1930. Appellee, as superintendent of banks, took charge of it under the law for liquidation. There was no conflict in the evidence as to the material facts.

For a further statement of the case we adopt the statement in appellants' brief which appears to be fairly accurate:

"Gift's only heirs were his first cousins, who are the defendants in this bill, and whose names and addresses are set out in the original bill. Mr. Gift made a will in which he made numerous bequests, none of which were to his blood relatives, except one to E.W. Parker, to whom he gave five thousand dollars. All of the remainder of his property he conveyed to trustees, J.L. Holley and F.F. Anderson, and provided therein that they should pay his debts and should dispose of his property, real and personal, as they saw fit, and use the proceeds thereof for the benefit of the public schools of Alcorn county, with the exception of the schools in the towns of Corinth, Rienzi and Kossuth.

"J.L. Holley, one of the trustees, died shortly after the death of Mr. Gift, and the other trustee, F.F. Anderson, was proceeding to carry out the terms of the will, and had disposed of all of the real estate, except the homeplace, block 524 of Anderson's addition to the city of Corinth, which is in controversy here. The real estate which had been disposed of brought twenty-three thousand, two hundred fifty dollars.

"When the first cousins of the said J.E. Gift filed their bill in the chancery court of Alcorn county, attacking the will in so far as the real estate is concerned and asking that the same be declared void and contrary to our Statute of Mortmain, the court entered its decree, holding that the will was void in so far as the real estate was concerned, and declaring that the same descended to the Gift heirs under the laws of descent and distribution, and awarded the Gift heirs, the defendants herein, a decree against F.F. Anderson, as trustee of the Gift estate, for twenty-three thousand, two hundred fifty dollars, being the amount which he had collected for the real estate of which he had made disposition. That case was appealed to this court by F.F. Anderson, trustee, and the cause was affirmed (see Anderson v. Gift et al., 156 Miss. 736, 126 So. 656), and mandate of this court, which appears in the transcript, was sent down. The total amount of the judgment, or decree, against the Gift estate, including interest and damages, was above twenty-five thousand dollars.

"The Gift estate owned four hundred thirty-three shares of stock of the Corinth Bank Trust Company, the value of which was then considered to be largely above par, and also owned ten thousand dollars of the stock of the Martin Grocery Company, which was of the value of twelve thousand, five hundred dollars. The mandate was filed in the court below in March, 1930, prior to the closing of the bank the following November; and the Gift heirs, in order to collect their judgment, were preparing to levy upon the stock of the Corinth Bank Trust Company and of the Martin Grocery Company and sell the same. Mr. F.F. Anderson, who was then president of the Corinth Bank Trust Company and also trustee of the Gift estate, was very anxious that this stock should not be levied upon and sold, as was Mr. W.D. Conn, who was the attorney both for the Corinth Bank Trust Company and the Gift estate. As the Gift estate owed the Corinth Bank Trust Company some forty thousand dollars, the bank threatened, if these stocks were levied upon under the judgment in favor of the Gift heirs, to file a bill to sell all of the stocks to pay the debt of the Corinth Bank Trust Company as well as this judgment. Mr. W.D. Conn, as attorney both for the Gift estate and the Corinth Bank Trust Company, then approached the attorney for the Gift heirs, who owned this judgment, in an endeavor to get the matter settled without any further litigation so that the stocks of the Corinth Bank Trust Company and the Martin Grocery Company would not have to be levied upon and sold for the purpose of paying off this judgment, or decree, amounting to above twenty-five thousand dollars. They suggested to the attorney for the Gift heirs, who owned the judgment, that they could dispose of the stock of the Martin Grocery Company for twelve thousand, five hundred dollars; and that, if the Gift heirs would accept this twelve thousand, five hundred dollars in full payment of the judgment which they held against the trustee, the Corinth Bank Trust Company would look alone to the bank stock, owned by the Gift estate, for its debt, and that it would release all claims that it might have against block 524, which was the J.E. Gift homestead, and that the Gift estate, by its trustee, would likewise release all claims that the estate had to the said homestead, in other words, they would each execute to the Gift heirs quitclaims to this property. The attorney for the Gift heirs then took up with his clients the proposition of settlement, explaining to them that, if the twelve thousand, five hundred dollars was accepted in full settlement of their judgment for twenty-five thousand dollars, both the bank and the Gift estate would execute to them a full release of all claims which they had to the Gift homestead, block 524 of Anderson's addition to the city of Corinth, and that they would receive good title thereto and all litigation with reference to this property would be ended. The result was that the Gift heirs agreed to accept the twelve thousand, five hundred dollars and the releases or quitclaims from the bank and from the trustee of the Gift estate to the said block 524. Pursuant to this agreement, the stock of the Martin Grocery Company was sold for twelve thousand, five hundred dollars, and the proceeds thereof turned over to the Gift heirs; and the Corinth Bank Trust Company then executed to the Gift heirs a quitclaim to the said Gift homestead. Then W.C. Sweat, as attorney for the Gift heirs, and F.F. Anderson, as trustee of the Gift estate, executed an agreement by which the Gift heirs, for the sum of twelve thousand, five hundred dollars released the twenty-five thousand dollar judgment, and the Gift estate, through F.F. Anderson, trustee, released or quitclaimed to the Gift heirs all interest which the Gift estate had in block 524, the Gift homestead, and the Gift heirs thereupon took charge of the said block 524.

"These negotiations and this settlement were duly approved and ratified by resolution of the board of directors of the Corinth Bank Trust Company; and J.S. Love, as superintendent of banks, was duly informed of the proposed settlement and approved the same by letter. written to the board of directors of the Corinth Bank Trust Company, which was in the following words:

"`I acknowledge receipt of your letter, outlining the matter of settlement as between the trustee of the Gift estate and the bank in regard to the bank taking the stock, which settlement I think should have and ought to have been made.'

"It also appears that the Corinth Bank Trust Company, in payment of the indebtedness of the Gift estate to the said bank, had purchased four hundred thirteen shares of the stock of the Gift estate in the bank, though the Gift heirs had nothing to do with this.

"The record discloses, and the president of the bank so testified, that the stock of the Corinth Bank Trust Company, at the time this settlement was made with the Gift heirs, was worth above par, and that, if the same had been levied upon to pay the judgment of the Gift heirs, the bank would have started the bidding at par for the stock. There was at that time no question in the minds of the president of the bank, or of the Gift heirs, but that the bank was perfectly solvent and that the stock was worth above par.

"In the latter part of November, thereafter, the bank closed its doors and went into liquidation, and the superintendent of banks took charge thereof. Under the orders of the court, block 524 had been sold for a partition among the Gift heirs, but the sale had not yet been confirmed by the court; and J.S. Love, as superintendent of banks, in charge of the liquidation of the Corinth Bank Trust Company, brought this suit, enjoining the sale of said block 524 and alleging that this was the only property owned by the Gift estate, and that the Gift estate was liable for a stock assessment for one hundred dollars per share on four hundred thirty-three shares of stock, amounting to forty-three thousand, three hundred dollars, and alleging, further, that this block 524 was, in fact, the property of the Gift estate and was liable for the payment of the said stock assessment. The Gift heirs and F.F. Anderson, trustee, were made parties defendant to this bill.

"The Gift heirs and Anderson, trustee, answered this bill and denied that block 524 was the property of the Gift estate, and set up the fact that the Gift heirs had recovered this judgment against Anderson, as trustee of the Gift estate, and that they were preparing to levy upon the stock of the Gift estate in the Corinth Bank Trust Company and have the same sold to satisfy the said judgment, when the settlement, hereinabove detailed, was effected between the Corinth Bank Trust Company and the Gift estate, on the one hand, and the Gift heirs, on the other, and the same was approved by the superintendent of banks, who was estopped to claim that this property should be subjected to the payment of the alleged stock liability; and that the Corinth Bank Trust Company and F.F. Anderson, as trustee of the Gift estate, had each conveyed all of their interest in block 524 to the Gift heirs, for value. It was further alleged that W.C. Sweat, as attorney for the Gift heirs, and his associates, in fact owned an undivided one-third interest in block 524, and they set up, as an exhibit to their answer the contract between the Gift heirs and W.C. Sweat, by which he was to have one-third of the recovery which he made by the suit filed by him for the Gift heirs against Anderson, trustee, for his services in contesting the will of the said J.E. Gift; that the said W.C. Sweat had, in fact, made recovery of block 524 from the said F.F. Anderson, trustee of the Gift estate, it being provided by the terms of the will that he should dispose of this property and distribute the proceeds to the public schools.

"On the trial of this case, the evidence on the part of F.F. Anderson, as trustee, and W.C. Sweat, as attorney for the Gift heirs, sustained the allegations of the defendants' answer. The court, after hearing the matter, entered a decree, holding that the said block 524 was subject to be sold and the proceeds thereof applied to the payment of the alleged stock liability of the said J.E. Gift, deceased, except that, by virtue of his contract, W.C. Sweat, who had recovered the same from the trustee and from the public schools of Alcorn county, was the owner of a one-third interest therein. From this decree, the Gift heirs are prosecuting an appeal to this court."

Between the time of the transfer by Anderson, as trustee, of the Gift stock in the Corinth Bank Trust Company to that bank and the closing of the bank, no regular or special examination of the bank had taken place by the superintendent of banks, or any of his staff. Section 3803, Code of 1930, provides, among other things, that the liability of a stockholder in a bank upon transferring his stock in such bank to another shall not cease until the next regular or special examination of the bank following the date of the transfer of the stock, and not then unless such examination shows the bank to be solvent. In the purchase of the Gift stock by the Corinth Bank Trust Company the stock was taken in full payment of the indebtedness then due the bank by the Gift estate. The double liability on the stock had not developed and was not considered in this settlement.

W.C. Sweat, of Corinth, for appellant.

A bank may buy its own stock when taken for the payment of a debt, provided the debt is paid in full.

Section 3802, Code of 1930.

The liability of any stockholder in a bank upon transferring his stock in such bank to another, shall not cease until the next regular or special examination.

Section 3803, Code of 1930.

The provision is made where the sale of the stock in such bank to another certainly does not refer to the bank issuing the stock, but means, when transferred to some person or corporation, other than the bank which issued the stock.

It was not contemplated by the lawmaker that, when stock is transferred to a bank in payment of the stockholder's debt to the bank, thereafter an assessment would be made against that particular stock in the event the bank became insolvent before another examination was made.

The law imposing liability on stockholders of insolvent banks must be strictly construed.

Mellott v. Love, 152 Miss. 860, 119 So. 913.

The compromise of a disputed claim binds both parties.

State v. Story, 57 Miss. 738.

The acceptance from the maker by the payee of a note of a sum less than the amount due, with an agreement that it is received in full satisfaction, accompanied with the surrender of the note, extinguishes the entire debt.

Clayton v. Clark, 74 Miss. 499.

The rule is applicable as well in equity as in courts of common law that money paid with full knowledge of the facts, but through ignorance of the law, is not recoverable, if there is nothing unconscientious in retaining it.

Tiffany v. Johnson, 27 Miss. 227.

There passes to the receiver the property and the rights of the one whom he takes, precisely on the same condition and subject to the same equities as before his appointment, and any defense good against the original party is good against the receiver.

Bank of Greenville v. Kretchmar, 92 Miss. 608, 44 So. 930.

The doctrine of equitable estoppel is frequently applied to transactions in which it is found that it would be unconscionable to permit a person to maintain a position inconsistent with one in which he has acquiesced, or of which he has accepted any benefit. In order to raise an estoppel by acquiescence, the party estopped must have been aware of his own rights and have perceived that the other party was acting on a mistaken notion of his rights. But it seems that the acquiescence need not involve anything in the nature of a positive affirmation, as the rule is well recognized that when a party with full knowledge, or with sufficient notice or means of knowledge, of his rights and of all the material facts, remains inactive for a considerable time, or abstains from impeaching the transaction, so that the other party is induced to suppose that it is recognized, this is asquiescence, and the transactions, although originally impeachable, becomes unimpeachable.

10 R.C.L. 694, sec. 22.

Under the circumstances, to allow this complainant, as Superintendent of Banks, to approve a settlement of this kind, and in that settlement, in order to endeavor to obtain a good title to a piece of property, to permit these people to release a more than twelve thousand, five hundred dollar judgment, which, as the proof shows, they could, in all probability, have recovered, and also in order to prevent further litigation; and then, afterwards, to allow the complainant to attempt to set aside that settlement and conveyance of property would be most unconscionable indeed.

Executor, administrators, guardians or trustees shall not be personally liable, as stockholders, but the assets and funds in their hands shall be liable.

Section 3815, Code of 1930.

Under a power in a will to sell real estate to pay debts, even though the claim be a controverted one, if there is a probability that it will be established against the estate, the executor may discharge it by a conveyance of land.

Stokes v. Stokes, 66 Miss. 9, 458, 6 So. 155.

When a will so directs, an executor is usually recognized as having authority to make a sale of the testator's real and personal property. The power of sale may be conferred on the executor, not in his capacity as executor but as trustee.

11 R.C.L., sec. 478, p. 397.

The primary effect of an administrator's deed is to convey to the purchaser the title of the deceased, in substantially the same manner as if it were the deed of the decedent himself, given immediately before his death.

11 R.C.L., p. 387, sec. 464.

Since the executors had lawful authority to dispose of the bank shares, assets as they were of the estate, so long as the transfer is permitted to stand unassailed directly the title to them is in the trustees and the estate is not liable to the receiver for the assessment claim. If the estate is not liable the defendant, as legatee and distributee, is not liable, and the claim in suit, obviously without natural equity, is therefore without technical merit.

Williams v. Cobb, 242 U.S. 307, 61 L.Ed. 325.

If, at the time of the closing of the bank, this stock had actually been owned by the estate of J.E. Gift, and had then been standing on the books of the bank in his name, a different case would have been presented.

Long before the bank closed, these appellants actually paid value for this property and were therefore bona fide holders for value, having had no notice whatever that there was any probability that the bank would close.

E.C. Sharp, Creekmore Creekmore, and Flowers, Brown Hester, all of Jackson, for appellee.

The liability of any stockholder in a bank upon transferring his stock in such bank to another shall not cease until the next regular or special examination of said bank following the date of transfer of said stock, and not then unless such examination shows the bank to be solvent.

Section 3803, Code of 1930.

The stockholders of every bank shall be individually liable, actually and ratably, and not for one another, for the benefit of the depositors in said bank to the amount of their stock at the par value thereof, in addition to said stock; but persons holding stock as executors, administrators, guardians, or trustees, shall not be personally liable as stockholders, but the assets and funds in their hands constituting the trust shall be liable to the same extent as the testator, intestate, ward, or person interested in such trust fund would be, if living or competent to act; such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by the Superintendent of Banks or other officer succeeding to the legal rights of said bank.

Section 3815, Code of 1930.

The estate of a deceased person is liable upon stock held and owned by the decedent in the same way and to the same extent that the stockholder was liable in his lifetime. Accordingly, an executor or administrator of the estate of a deceased stockholder is chargeable upon the shares of the decedent to the extent of the property that comes into his hands as the personal representative of the deceased. The cause of action against a stock holder, arising from his statutory liability, is not defeated by his death. The action may proceed against his estate.

Douglas v. Loftus, 85 Kan. 720, 119 P. 74, L.R.A. 1915B 797.

The doctrine accordingly is generally asserted, that where a statute imposed upon stockholders an individual liability for corporate debts, whether to a limited or unlimited extent, this liability enters into the contract of subscription by each stockholder, and forms a part of the security of the creditors of the corporation when the debts are contracted, as fully as if it had been incorporated in the contract, and had been signed by the several subscribers for, or transferrees of such stock.

McDonnell v. Alabama Gold Life Insurance Company, 85 Ala. 401, 5 So. 120.

Under that act (the National Banking Act) the individual liability of the stockholders is an essential element in the contract by which the stockholder becomes 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.

Richmond v. Irons, 30 L.Ed. 864, 176 U.S. 522, 44 L.Ed. 571.

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 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 of the stock. True, whether there is 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.

Matteson v. Dent, 176 U.S. 522, 44 L.Ed. 571; Davis v. Weed, 44 Conn. 569, Fed. Cas. No. 3,658; Bailey v. Hollister, 26 N.Y. 112.

Under the early common law the realty could not be subjected to the payment of the ancestor's debts unless expressly charged therewith. Later, by statute 3 and 4 William and Mary, lands became assets to pay debts by simple contract as well as those by specialty, and the heir was made subject to suit for the same in equity, creditors by specialty having preference. In this country the realty as well as the personalty is now subject to the payment of the debts of the decedent, regardless of whether such debts arise out of simple contracts or otherwise. The debts are generally regarded as liens on the real estate, which can be removed only by payment or by lapse of time. No part of the estate can regularly go to the heirs until after the debts have been paid.

9 R.C.L., page 92.

While the heirs take by descent, the administrator's lien is created by the act of the ancestor in creating a debt, and therefore by virtue of prior contract, for when one contracts a debt he creates a contingent lien which, on his death, attaches to all his property. In other words, when the contract is made it is implied that not only the parties thereto but their respective estates shall be bound thereby.

9 R.C.L. 95.

The fact that the real property has been partitioned among the heirs does not affect the lien thereon for the payment of debts or the right to sell it therefor.

9 R.C.L. 96; O'Keefe v. Behrens, 8 L.R.A. (N.S.) 354, 73 Kan. 469, 85 P. 555; Sample v. Sample, 34 Kan. 73, 8 P. 284.

It is true the legal title descends to the heir, who is entitled to enjoy the estate until the contingency arise when the land may be required to be appropriated to the payment of the debts. But he holds it subject to the charge of the debts of the ancestors, which may be enforced whenever it is found that the personal assets are insufficient to pay the debts. This charge is affixed to the lands by law, at the time of the testator's death, though it may not be enforced until the deficiency of the personalty be ascertained; and the heir holds the legal title, in the interim, subject to this charge, whenever it shall be made to appear that the necessity for enforcing it has arisen. It is a case of a charge on the lands, and not that of a title held on condition subsequent.

Evans v. Fisher, 40 Miss. 643; Lee v. Gardiner, 26 Miss. 541, 542; Stigler v. Porter, 42 Miss. 449.

The Corinth Bank Trust Company had no right by any agreement or contract to release the Gift estate from liability or relieve the property in question from the claim of the bank for the contingent liability of Mr. J.E. Gift.

Vick v. LaRochelle, 57 Miss. 602.

The goods, chattels, personal estate, choses in action, and money of the deceased, or which may have accrued to his estate after his death from the sale of property, real or personal, or otherwise, and the rent of lands accruing during the year of his death, whether he died testate or intestate, shall be assets, and shall stand chargeable with all the just debts and funeral expenses of the deceased, and the expenses of settling the estate; and the lands of the testator or intestate shall also stand chargeable for the debts and such expenses over and above that the personal estate may be sufficient to pay, and may be subjected thereto in the manner hereinafter directed.

Section 1643, Code of 1930.


Section 3815, Code of 1930, provides as follows: "The stockholders of every bank shall be individually liable, actually and ratably, and not for one another, for the benefit of the depositors in said bank to the amount of their stock at the par value thereof, in addition to said stock; but persons holding stock as executors, administrators, guardians, or trustees shall not be personally liable as stockholders, but the assets and funds in their hands constituting the trust shall be liable to the same extent as the testator, intestate, ward or person interested in such trust fund would be, if living or competent to act; and persons holding stock as collateral security shall not be personally liable as stockholders, but the person pledging such stock shall be deemed the stockholder and liable under this section. Such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by the superintendent of banks, or other officer succeeding to the legal rights of said bank."

Section 3803, Code of 1930, is in this language: "A book shall be provided and kept by every bank, in which shall be entered the names and residences of the stockholders thereof, the number of shares held by each, the time when such person became a stockholder, and also all transfers of stock, stating the time when made, the number of shares and by whom transferred. In all actions, suits and proceedings, such book shall be prima facie evidence of the facts therein stated. The liability of any stockholder in a bank upon transferring his stock in such bank to another shall not cease until the next regular or special examination of said bank following the date of transfer of said stock and not then unless such examination shows the bank to be solvent; but the purchaser's liability shall begin after the next ensuing examination showing the bank to be solvent."

Section 3802 of the Code of 1930, provides, among other things, that a bank may buy its own stock when taken in payment of a debt due it provided the debt is paid in full.

Appellants contend that the word "another" in section 3803 does not include the bank in which the stock is held, but refers to some other corporation, person, or partnership than such bank. If appellant's contention be sound, a stockholder in a bank may pay his debt to the bank with his stock and escape double liability thereon, although the bank closes for liquidation after such transfer and before any regular or special examination by the banking department. We think that is too narrow a construction of the statute, notwithstanding the statute imposing double liability is to be strictly construed, as held in Mellott v. Love, 152 Miss. 860, 119 So. 913, 64 A.L.R. 968. In construing a statute its intent and purpose must not be left out of sight. If appellants' construction of the statute be correct, a condition could be imagined which would result in the purpose of the statute being entirely defeated. For illustration, take a bank with fifty thousand dollars capital stock divided equally between ten stockholders; each stockholder is indebted to the bank in an amount equal to or more than the value of his stock; by agreement with the bank all the stockholders transfer their stock to the bank in payment in full of their indebtedness; after this is done and before the bank has been examined by the banking department, it closes for liquidation; it is largely insolvent, unless the stockholders are still subject to double liability on their stock. In such case the managing officers of the bank and the stockholders could get together in anticipation of the bank's failure and defeat the rights of the creditors and depositors of the bank. We do not think the statute bears such a construction.

Appellants contend that appellee, being a party to the settlement which took place during the progress of the administration of the Gift estate between that estate and the bank and the Gift heirs, is bound by it; that he is now thereby estopped to attack and attempt to set it aside; that by releasing their judgment against the trustee of the Gift estate, part of which was the bank stock, and taking from him and the bank a quitclaim deed to the property here involved, the Gift heirs became bona fide purchasers of the property, and by reason thereof the property is not subject to the stock liability claim of the bank against the Gift estate.

There was no authority in appellee as superintendent of banks to approve that compromise settlement. The superintendent of banks is a public officer — a state officer. The state cannot be estopped by the unauthorized acts of its officers. Eastman Oil Mills v. State ex rel. Roberson, 130 Miss. 63, 93 So. 484; Meridian Waterworks Co. v. Meridian, 85 Miss. 515, 37 So. 927; Edwards Hotel City St. R.R. Co. v. Jackson, 96 Miss. 547, 51 So. 802.

In considering the effect to be given the compromise settlement between the trustee of the Gift estate and the bank and the Gift heirs the nature and character of the double liability of stockholders in banks should be understood and kept in mind. The National Bank Act, which in all substantial respects appears to be identical with our statute on the subject, was construed by the Supreme Court in Richmond v. Irons, 121 U.S. 27, 7 S.Ct. 788, 30 L.Ed. 864. The court held in that case that the individual liability of a stockholder in a national bank was an essential element in the contract by which the stockholder became a member of the corporation; that the contract was voluntarily entered into by subscribing for and accepting the shares of stock; that the statute imposing double liability became a part of the contract between the bank and the stockholder; and that the double liability of the stockholder survived as against his estate. Matteson v. Dent, 176 U.S. 521, 20 S.Ct. 419, 420, 44 L.Ed. 571, was a case of this characters Matteson became the owner of ten shares of the capital stock of a national bank, which were duly registered on the books of the bank in his name. He died intestate while the stock still so stood, leaving surviving him his widow and six children. A final account of the administration of his estate had been filed by the administrator, and a decree entered therein turning over the estate, including the ten shares of stock in the bank, to his heirs. Under this decree his heirs acquired title to the ten shares of stock. Afterwards the bank became insolvent and was closed by the comptroller of the currency, and a receiver was appointed to wind up its affairs. The comptroller made an assessment upon the shares of stock held by Matteson of one hundred dollars per share, and instituted a proceeding to enforce such liability against his heirs. The court used this language in deciding the case: "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 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."

To the same effect are Davis v. Weed, 44 Conn. 569, Fed. Cas. No. 3,658; Bailey v. Hollister, 26 N.Y. 112.

It is true that when Gift died his stock double liability had not matured; it was inchoate until the bank became insolvent, nevertheless it originated during his lifetime. It was rooted into and was a part of his contract of subscription to the stock. When the bank became insolvent and closed, the liability became fixed and ascertainable and was just as much a debt of his estate as any other debt he owed, originating during his lifetime.

Appellants refer to Williams v. Cobb, 242 U.S. 307, 37 S.Ct. 115, 61 L.Ed. 325. The court held in that case that a transfer of a decedent's national bank stock by his executors to themselves as trustees, in the bona fide discharge of their duty under the will to invest a specified sum in interest-bearing securities and pay the income thereof to a designated person, was not void but only voidable, and that, so long as the transfer was permitted to stand without a direct attack, the title should be deemed to have passed, so as to relieve both the estate and the legatee, made liable by statute, after distribution, for debts of the estate from any liability for a subsequent assessment upon the stock for the benefit of the creditors.

We do not understand that case to be in point. Stress seems to be laid on the fact that the proceeding there was not a direct attack on the transfer of the stock by the executors to themselves as trustees. The bill in the case at bar is necessarily a direct attack on the compromise settlement made between the bank, the trustee of the Gift estate, and the Gift heirs.

It follows from what we have already stated that when the bank closed for liquidation Gift's estate became indebted to it in a sum equal to the par value of the stock he held in the bank. This indebtednes did not arise after his death. It is true it matured after his death, but it originated before his death and stood in the same class as any of his other unsecured debts and became a charge upon his entire estate, both real and personal. The real estate went to his heirs, and his personal estate, with the exception of five thousand dollars, went elsewhere, but all of it, both realty and personalty, remained subject to his debts, including the double liability on his bank stock.

Section 1643, Code of 1930, provides as follows: "The goods, chattels, personal estate, choses in action, and money of the deceased, or which may have accrued to his estate after his death from the sale of property, real or personal, or otherwise, and the rent of lands accruing during the year of his death, whether he died testate or intestate, shall be assets, and shall stand chargeable with all the just debts and funeral expenses of the deceased, and the expenses of settling the estate; and the lands of the testator or intestate shall also stand chargeable for the debts and such expenses over and above what the personal estate may be sufficient to pay, and may be subjected thereto in the manner hereinafter directed."

Under our statute the lands, as well as the personalty, of the deceased are liable to the payment of his debts. The only difference is that the latter is to be first exhausted. It is true the legal title to lands descends to the heirs, who are entitled to enjoy them until the contingency arises when they may be required to pay debts but the heir holds them subject to the charge of the ancestor's debts. The charge is fixed by law at the time of the ancestor's death, though the indebtedness may not be then ascertained. In the interim the heirs hold the legal title subject to this charge. Evans v. Fisher, 40 Miss. 643; Lee v. Gardiner, 26 Miss. 541, 542; Stigler v. Porter, 42 Miss. 449.

The twenty-five thousand dollar judgment of the Gift heirs against the trustee of his estate was not in the same class as the indebtedness of Gift's estate to the bank growing out of his stock double liability. In fact, it was no indebtedness whatever of the Gift estate to his heirs, instead it represented their claim to a part of his estate by inheritance. Gift owed his heirs nothing when he died. The fact that the trustee in Gift's will had converted lands into money, which lands his heirs were entitled to by inheritance, did not put them in the same class with the debt due by the estate to the bank growing out of his subscription to the stock of the bank. Their claim was based on their heirship, not on any obligation Gift had undertaken before his death. Therefore when the bank went into liquidation the matter stood thus: Gift's assets consisted of four hundred thirty-three shares of stock in the Corinth Bank Trust Company of the par value of forty-three thousand, three hundred dollars; his stock in the Martin Grocery Company of the par value worth ten thousand dollars; and perhaps other personal property and choses in action, and, in addition, lands, including his home, the land here in controversy. In addition to the forty odd thousand dollars he owed the bank for borrowed money, he owed it, under the statute, forty-three thousand, three hundred dollars, the par value of his stock, or so much thereof as was necessary to liquidate the bank in the manner provided by law. He owed his heirs and legatees nothing. His heirs took the real estate by inheritance subject to his indebtedness to the bank, including the double liability on his stock in the bank; and that is also true of those to whom the personal property went under the provisions of the will.

Under the law no compromise settlement could be made, before the bank went into liquidation between the bank and Gift heirs and the trustee under Gift's will, which would result in the defeat of the bank's right to enforce its double liability claim. The managing officers of the bank, while it was a going concern, were trustees for the creditors and depositors of the bank. There was no consideration passing to the bank for its quitclaim deed to the Gift heirs to the homestead, the property involved. The bank received nothing in return for the deed. The transfer by Gift's trustee and his heirs of his stock in the bank to pay his indebtedness due it for loaned money was no consideration for the quitclaim deed. His stock was already subject, with all the balance of his estate, to the payment of that indebtedness to the bank, and to the exclusion of the judgment held by the heirs for the proceeds of real estate theretofore sold by the trustee. In other words, that which the bank got by virtue of the compromise settlement, as well as that to which it gave the Gift heirs a quitclaim deed (the property here involved), was subject to the entire indebtedness due the bank by the Gift estate, including the stock double liability claim. The bank got nothing by the compromise and surrendered nothing.

The case of Vick v. La Rochelle, 57 Miss. 602, has more or less bearing on this question. The statute in force when that case was decided provided that each stockholder should be individually liable for the debts of the corporation contracted during his ownership of stock for the amount or the balance remaining due and unpaid for the stock subscribed for by him, and might be sued by any creditor of the corporation therefor, and that such liability should continue for one year after the sale or transfer of his stock. That was a suit of a creditor of a corporation against a stockholder. Before the suit was brought the corporation had released the stockholder from his subscription upon his payment for part of the stock and his surrender of the remainder to the corporation. In deciding the case the court used the following language in part: "The subscriptions for stock constitute the means of the company, on the faith of which credit is given, and each subscriber for stock is liable for all debts contracted during his ownership of stock, and for one year after he has transferred it to another to the amount of his subscription not paid according to its terms. A release by the corporation, without payment of the amount of the subscription does not affect the right of the creditor to hold the stockholder to his statutory liability. A failure of the corporation to call for payment of stock subscriptions, or any concession by it to the stockholder who has not paid his subscription, does not affect the right of the creditor to collect his debt from the stockholder to the extent of the amount of his subscription for stock which remains unpaid. Actually unpaid, whatever may have occurred between the subscriber and the corporation, is what the statute means."

Affirmed.


Summaries of

Gift et al. v. Love

Supreme Court of Mississippi, Division B
Nov 21, 1932
164 Miss. 442 (Miss. 1932)

In Gift v. Love, 164 Miss. 442, 144 So. 562, the court held, in effect, that the statutory double liability of stockholders in a bank could not be gotten rid of by hook or crook; that such liability was rooted into and a part of the stockholder's contract for his stock subscription.

Summary of this case from Christensen v. Bank of Pascagoula
Case details for

Gift et al. v. Love

Case Details

Full title:GIFT et al. v. LOVE, SUPERINTENDENT OF BANKS

Court:Supreme Court of Mississippi, Division B

Date published: Nov 21, 1932

Citations

164 Miss. 442 (Miss. 1932)
144 So. 562

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