Hoehn v. Crews

al., six et et al. v. CREWS HOEHN other cases. 2870-2876.

Nos. Appeals, Tenth Circuit.

Circuit Court of

July Aug.

Rehearing Denied

Writ of Certiorari Nos. 2874 Denied and 2870 Nov. 1944.* 132, 135.

See Crews, granted * No.2873. Garber writ of certiorari Nov. 1944. See 65 S.Ct. 132. sold its business and transferred its assets Enid, to the First Okla- National Bank of $240,- homa. In the transaction it received 000 in cash from the First National of Enid. the- On November American stockholders and directors of the proceedings National Bank appropriate went 12' voluntary liquidation into under thereto, U.S.C.A. all known 181. Prior claims paid had been and the Bank had received from First National On distributed stockholders. January 20, to- a notice of intention Events, liquidate published in Enid was The County, newspaper published in Garber published A in- Oklahoma. notice was also Champlin, both Nathan Scarritt and E. S. News, newspaper published the Bond in Okl., Enid, in appellants of No. for City, New York The notice New York. Enid, Okl., Glasser, Harry for O. of published comply in the Enid Events did appellants in Nos. and with 12 U.S.C.A. in it was not published for two no- full months. Both McKnight, both L. E. P. C. Simons and published tices were the Dudley, distribution Okl'., Okla after Enid, B. of of and J. $240,000 of the The McKnight, to the stockholders. City, (Simons, Okl. homa appellant Enid, part directors had no in or Simons, McKnight, & Mitchell of knowledge handling wrongful of of the Okl., brief), appellant in No. on the way trust found their into funds which the Bank, American National and at the time McKnight, both E. P. C. Simons and L. $240,000 the of distribution of had no- the Simons, McKnight, Enid, (Simons, of Okl. knowledge that such a claim existed or Okl., Enid, McKnight, on Mitchell & of against would be asserted the bank. 2873 to brief), appellants Nos. the in 6 . 16, 1931, On appellees- 287 December the instituted an against action the American- Russell, Mattoon, (M. Christy Ill. F. of National Bank in the state courts of Okla- Okl., Priebe, Enid, brief), on the of homa judgment to recover for the escrowed 2876, inclusive. appellees in Nos. 2870 to way funds which had found their into that BRATTON, PHILLIPS, Before Judgment against was entered the HUXMAN, Judges. Circuit bank October appealed interest. case was to the- HUXMAN, Judge, delivered the Circuit Supreme Court of Oklahoma where the opinion the court. of judgment subsequently was affirmed. On 20, 1938, January and while the state case litigation genesis in an es- This had pending appeal was on in by the agreement appellees crow executed the Court, this against action was instituted the Refining Company. with the Garber Under stockholders and directors of the American proceeds pro- agreement this the from oil National Bank in the District of litigation placed in duction which were was the United States for the Northern District in in Bank escrow the Farmers State of of Oklahoma. Garber, Oklahoma, the to await outcome litigation. of of At termination In the first cause of action the litigation the escrowed funds be- sought liquidation to establish a trust in the property appellees. of the An came $240,000 paid dividend of to the stock- shortly investigation thereafter revealed holders, sought same, to recover the practically of the funds all escrowed paid by less amounts back some dissipated. embezzled had been In stockholders. a second cause of action shortly appellees also thereafter ascertained they sought to enforce the double a considerable amount of funds stockholders, a third cause way into the found American their they sought judgment against Enid, Bank National Oklahoma. members Board of Directors In the meantime in November, theory bank on National American liquidation of Enid had trustees proceedings statutory publish had been discharge their were derelict made George required In notice event. such duties such in the distribution as trustees Wallace, held $240,OCX) 135 F. was to the stockholders. bank which a suit insolvent cause Judgment on the first was entered liquidation gone en- voluntary into stockholders of action those specific force a to enforce and lien or jurisdiction for the whom court had previously judicially a trust administer liquidation dividend amount of the arising created contract second cause of On the had received. action, insolvency liquidation proceeding judgment entered arising suit of the United under the laws an amount sufficient stockholders for jurisdiction within the Federal States court, judgment satisfy remain- balance of the prescribed by In Rich- statute. ing the first unsatisfied on 27, 49, Irons, mond v. 121 U.S. cause of cause of the third action. On said: court L.Ed. action, against the judgment was rendered involuntary liquidation “In the case of $188,280, directors and interest. comptroller supervision under the on issue decreed that execution no currency, appointed the receiver appellees had exhausted until required, him is authorized and remedy rendered judgments apply proper collect and assets of action or and second causes of first debts, payment the bank to the of its but good shown so had failure to cause also, may necessary, so far as be to en- do. to control retained was Jurisdiction liability the force individual of the share- grounds. the issuance of execution on appears holders. It thus the enforce- cases, In judgment some was entered ment liability part liquida- of this is a of the against appellants all causes of three bank; least, of tion the of affairs the at so others, judgment In action. was entered closely connected as with it to constitute causes, against them on the second first When, one but continuous in transaction. some, judgment while in was entered on voluntary liquidation, the case of pro- the action, first and in the and third causes of ceeding by one or more instituted credi- judgment one instance was entered on the all, by the tors benefit of means main, third cause of In the action alone. jurisdiction equity, the of of a of court appeals present questions various the why be there seems to no reason the nature are common to the of action in which cause of the proceedings should be considered as judgment appeals the In some entered. was changed. congress intention of evi- The questions presented were which do not arise dently provide ample was to and effective questions in others. The that are the specified remedies all the cases for the common to the in which public protection payment of the of the arose will be treated reference without to creditors, by application the of the assets any particular appeal. Specific reference of the bank and the the enforcement of appeals to be made will those cases liability Admitting the of stockholders. special questions presented. are liability strictly that this is not of asset bank, the because it could be enforced Jurisdiction. corporation its benefit a as nor in its jurisdiction The of the court to name, yet a is treated as means of entertain the and third causes of action first fund, creating applied a and in to challenged by appellants. various There of the assets aid of the bank towards diversity citizenship, is no of so that federal obligations. the satisfaction The two its jurisdiction must based on other subjects applying assets of the bank the grounds. jurisdiction the court The enforcing liability of the stock- part invoked under of 28 U.S.C.A. § holders, distinct, by however otherwise are “ * * * 41(16) which reads as follows: parts statute made connected of the up winding cases for the affairs of series of transactions which whole consti- any such bank.” proceeding Is this a liquidation affairs of of the tute up wind a national affairs of bank? bank.” Our conclusion is that the answer must O’Keefe, Brown v. In inbe The affirmative. bank had sold 543, 547, 81 L.Ed. functioning assets and had ceased that: held By banking appropriate a institution. reso liquidation liquidate bank is course lution “If the voted to and had liability voluntary liquidator, appointed agent. by a a liquidating attempt An creditors, suing unliquidated damages or for claim is for a a enforcible creditor or similarly simple debt, others contract a creditor for themselves and for equity maintain until a creditor’s bill in situated.” has claim reduced his he liability to the stockholders for in a court of law. The facts Swan received, their liquidation they had dividend Frank, Land & 603, Co. v. 148 U.S. Cattle stock, on their for assessment L.Ed. S.Ct. directors, any, if very similar to in this case. The the facts duty, all liabilities dereliction corporation as- there all its had distributed benefit of primarily bank for the due sets to its ceased stockholders and had appointed Had a creditors. to receiver doing held business. The bank, he could up of the wind affairs unliquidated that a who had an creditor rights have enforced classes all three against claim corporation could not the benefit creditors maintain an action in nature of The action bill against creditor’s who stockholders rights nature of a bill to énforce creditor’s subject had received assets them corporation benefit belonging to for the claim, without the satisfaction of their first corporation part of creditors. The action was having reduced claim process up winding the affairs of judgment. court said: jurisdiction bank. The of all court clearly under 28 U.S.C.A. opinion three causes of action “We are that the the also 41(16). sustaining court below was correct upon ground Laches. demurrer to the bill the other assigned, complainant had not and third —that urged It is next the first previously reduced its demand barred laches. causes of action were corporations judgment. vendor That National American The action purely legal, involving claim was trial 16, 1931. instituted December Bank was jury. at law before a Until reduced to January begun until This action not law, at it could not be made years than thereafter. more six equity.” in basis relief applicable of limita- The Oklahoma statutes See, contracts, also, upon provide Hollins v. tions that actions Brierfield Coal & in express implied, writing, Co., or Iron 150 not 37 by upon created statute actions L.Ed. 1113.1 penalty, must a or a other than forfeiture But even if be it conceded that years; an begun within three that action be appellees joined appellants could in have property, injuring personal detaining or original against the National action American -the injury rights of an action for others, to the Bank, they may nevertheless not contract, arising an action prevail point. disposition on this The brought fraud, must be ground of on the question by is not this of limitations of Oklahoma. controlled statute years, for relief two and that actions within must be It brought provided must otherwise upon principle decided A of laches. O.S.1941, years. 12 five within equity by court of is not bound the statute if statutes provisions control These limitations, ordinarily although it will ap- law are under Oklahoma of limitations give many by effect thereto in situations plicable. analogy to the statute of limitations.2 Appellants appellees contend that being been in- Laches has defined as joined delay the stockholders and the asserting have right; could excusable a an against original action delay during directors in the asserting rights unexcused so, That, more having done period rights of time in which adverse a they having elapsed before years acquired than five have been that under circumstances action, inequitable displace think is barred. We such instituted the make contrary rights is for the benefit of those who weight authority to this adverse by delay. It has general rule is where are that bound said contention. 2 497; Jur., Equity, 1 §§ this rule. See 19 Am. Oklahoma adheres v. 160; Winget Rockwood, Cir., Rott, 69 F.2d 243 P. Okl. Porter of Roswell v. Mountain States 326; City Colcord, 1 Okl. 32 P. Chandler v. 379; 330; Melone, & 78 F.2d & 11 Okl. Tel. Tel. Miller Co. Co., Cir., 620; & Tel. Indian Land West v. Tel. American 56 L.R.A. 67 P. ; C.J.S., Equity, Owen, 347 F.2d & 63 Okl. Trust Co. v. P. 818. laches differs limitations this would that have resulted evidenced fact they limitations are concerned with the fact that when instituted this action delay, appellants immediately laches concerns itself with after while delay.3 effect obtained their in the Dis- Court, trict appellants promptly moved laid No absolute rule can be stay a of this case from obtained down what consti to determine the trial litigation court until tutes Each laches or of demand. staleness Supreme finally Court was determined. according case must be its determined How, then, can it be said all fairness peculiar own laches circumstances. Since injured wise equitable doctrine, application is an appellees’ failure institute by equitable It controlled considerations. secondary them on their justice cannot be invoked to defeat appellees until money judg- at least had a applied will only defense where ment in the state court? Under right enforcement of would the asserted facts, it only inequitable would not not be injustice.4 work apply laches, refuse to doctrine of but equity It has been held will inequitable would be most to do so. delay not consider as laches due to bona Unclean Hands. law, right fide effort to assert at the fail really right ure which established the urged appellees go equity;5 delay pending into other were prevail not entitled to because proceedings is excusable not where the came equity court of into with unclean proceedings termination of such was neces hands. This assertion is based on the sary for the ascertainment of facts or the following facts: were chal rights establishment or liabilities in lenging validity gas of an oil and suit, volved in latter but where the also given lease Oil Gas Sinclair object proved former suit had a similar but Company. They possession were delay unavailing; has been where excused land developing and were it for oil and plaintiff by proceeding first lost time gas. litigation While pending, person expected whom he another they sold the Refining oil to the Garber primarily to be liable.6 The Court Company agreement under pro that the has held the fact that decree can ceeds, royalty, less one-eighth person do no harm to innocent does to be escrowed in the Farmers State away with defense laches.7 preserved to be Garber under the terms agreement, escrow which are not equitable These considerations are here, material and were to be delivered to especially applicable Appel to case. by them the escrow holders and if when only secondarily lants were liable. Their finally the litigation adjudicated rights their duty respond depended upon ability to the lease, to the aor settlement favorable to appellees money of to obtain a them was made appears outside of It Ap court. the American National Bank. while that these funds pellees’ unliquidated escrowed with claim was an were demand bank, appellees the the Garber very in obtained a founded a tort of a controversial $40,000 release to them of nature, some the by of as is evidenced that the fact charged It is funds. that this was a the was sustained the rights of violation of the Garber Re majority. they a bare Had Company fining as that joined appellants original in the guilty of a they wrongful themselves were ma promptly no doubt would have been funds, they these nipulation a of proceedings demand that now met stayed wrong primary urge the and Enid until the of Garber them be ground recovery as a liability the bank banks of was determined. That of funds Am.Jur., Equity, Tel. 30 S.Ct. v. Equity, 4 City of Roswell 3 Druggists’ Circ., Vanderwerker, 30 C. C.J.S., & §§ Tel. J.S., Equity, 439, 40 Equity, L.Ed. 508; §§ 10 160 §§ 2 383; D. v. § Cir., Cir., U.S. 112 19 O. Mountain States 509; Northern Pac. 32 F.2d Haynes ; 78 F.2d Townsend Am.Jur., 120; & 379; Co. 16 19 57 of Public ern Pac. tion, Ry. Ct. Ct. 5 ^[7] 6 L.Ed. 931. McIntire v. Nuveen v. 30 v. 5 C.J.S., Equity, Cir., Boyd, 57 L.Ed. Ry. Instruction, L.Ed. 88 F.2d 175. 228 Board Pryor, Boyd, U.S. 931; §§ 5 228 of Public 173 482, 125, Nuveen v. Board U.S. 33 228; 88 F.2d 482, S.Ct. Instruc North 19 33 S. 554, S. required that National bank directors theirs. is subject liability a equity statutory must of to both one who into a court a comes every liability discharge It is not commonlaw in of the spotless come with hands. petitioner duties of right of office.13 U.S.C.A. stain will bar the a their § duty maxim is application°of the makes of of directors to relief. The the board faith, certify Comptroller and to the Cur upon good of conscience and based rency liquidate to a notice to misconduct in relation of their intention is confined to publish in litigation, period some a a of two in so that notice for matter newspaper published of months in equitable relation affects the a manner it City York, other New in a news parties Aside from of and also the considerations, to the suit.8 paper published in city which is in or town the transaction ap of which the bank is notice urged a stain on hands located. This as to is whatever of neces pellees herein bears benefit creditors no relation published sity which the must be funds of transaction out of before Admittedly Bank arose. American National institution are distributed. complied statutory requirement was not Liability Directors. Personal of the prior with the distribution of the correctly held The trial court to the stockholders. charged with the that the directors were supervision any provides di- U.S.C.A. liquidation under U.S.C. any knowingly rector shall violate who discharge of such A. provisions chapter, which in- capacity. they fiduciary duties acted in a provision publication cludes chargeable they would be It follows that notice, personally the all liable for shall be any their failure to resulting with loss damage consequence sustained in in manner re discharge quired by functions a their such violation. relationship. What then such a duty toward the bank a of a director It has been held that before concern, going and toward its personally director becomes liable while liquidation? The statutory duty, creditors when it is relationship must be violation of same, intentionally either event is the that he violated the established fiduciary statutory is a requirement. in each case a director Establishment negligence or a trustee. Officers directors mere sufficient.14 We at commonlaw the banks are fiduciaries and think a clear show absence there is is such as stems ing wilfully for their acts or directors acted duty relationship.10 publish intentionally from such failure variously upon has been resting prior directors to the disbursement this notice requiring diligence care and defined such funds. The found that court faith; ordinarily prudent appellants good man would exer as an none acted contend faith; reference to the administration acted bad nor cise moneyed why they management of such a instit reason should have is there intentionally publish said that wilfully It has been owe refused ution.11 duty degree general required high appellant notice. None of the stockholders.12 public and knew had directors or reason to believe 11 Banks, 8 Sharp, Cir., Am.Jur., Oil Co. v. 10 7 286. § Ohio See Co., 12 303, and cited therein. Bk. cases First State v. Met. Cas. Ins. 135 F.2d A.L.R, 9 Briggs Spaulding, 113, 132, 835, 141 11 v. 79 S.W.2d 98 U.S. 125 Tex. 1256; 662; Baker, 924, 283, Fi L.Ed. Williams v. 70 Tex. 7 35 Seale v. S. S.Ct. 744; Savings 43, Briggs delity Co., 742, Spaulding, & 142 v. 141 Va. U. Loan W. 664; 662; 132, 615, 924, A.L.R. State 11 45 First S. C.J., S.Ct. 35 L.Ed. 7 128 S.E. Co., C.J.S., 113, p. 563; 169, 125 Ins. Banks and Bk. v. Cas. Tex. 9 Met. Banking, 835, 1256. 98 A.L.R. 79 S.W.2d 13 10 Am.Jur., Banks, 286, 291, 825; Hamner, 504, §§ Bowerman 250 U.S. 7 v. Spaulding, 132, 510, 549, Briggs 141 11 U.S. S. 63 L.Ed. 1113. 39 S.Ct. 14 662; 924, Bank, Williams v. Fidel Yates v. Jones Natl. 206 U.S. Ct. 35 L.Ed. 615, 638, 1002; Payne 43, ity Co., 158, 128 142 Va. 27 S.Ct. 51 L.Ed. Loan S.E. 664; Ostrus, 1039, First Bk. v. Met. 50 77 A.L. State F.2d 45 A.L.R. 531; 113, Hamner, Co., 125 Tex. 79 S.W.2d Bowerman v. Ins. R. Cas. 1256; Ham Bowerman v. 39 S.Ct. 63 L.Ed. 1113. 98 A.L.R. ner, 39 S.Ct. 63 L.Ed. 250 U.S. outstanding of an could have been done the course any was claim there timely orderly, liquidation made would have against the bank. of a fund available the satisfaction although directors But claim the which existence of was unknown statutory their for violation not be liable parties litigation to to this prior to duty publish to this notice year liquidation than a more after funds, they may never these distribution of undertaken. they if their com liable violated theless be duty liquida mon law as directors Liability Not Within U.S.C.A. above, pointed out tion of the bank. As §§ at law must exercise common directors trans It is contended that the ordinarily prudent men would such care as appellees’ judgment of which out manage exercise in the administration “contract, did not constitute debt arose institution, they will ment such engagement”, or as terms are used those care, to high degree both held to a in 12 U.S.C.A. stock §§ general public. the stockholders and the upon become holders liable assessment But a director not an insurer and is sup their stock. Authorities are cited absolutely his resulting from liable loss port judgment of the contention that a only inattention. is liable for loss that He bank a con based is not tort negligence.15 results from his tract, debt, engagement of bank Every paid know-n claim meaning statutory within the provisions. of similar No satisfied. one connected unnecessary We deem liquidation of the bank had reason to decisions, discuss these because we believe any possible that there claim existed believe far national as bank act funds. these these Under circum concerned, question is settled stances we do believe can be said Supreme Op decision that there common violation penheimer v. Harriman Nat. Bank Trust & duty law to exercise reasonable care 301 U.S. 81 L.Ed. paying money the stockholders. 1042. In that case the Court in terpreted very terms of the statute. But even if it be said that there sounded tort. also negligent in the disbursement of this right Involved holders of money, personally still are not liable. such a to have it satisfied out of They proxi are liable for such loss as liability. assessments on stockholders’ mately negligence.16 results from their pointed court out that should statute The mere fact the directors do not reasonably construed favor of claim know of the existence of a claim does Speaking “contracts”, ants. of the terms relieve from publish them failure the “debts”, “engagements”, the court purpose notice. One of the notice said: permit those who have claims of which enough “They are the bank broad all knowledge present has no include them pecuniary obligations and call liabilities them to the attention of Indeed, well-recognized is a officers. But here the themselves meaning ‘engagement.’ did of the word Plain not know at that time money a claim is for tiff’s claim the bank the American National fraudulently got him They Bank. in its did used not know it for consider ably year Clearly more than a business. by is covered after the bank ‘contracts, doing phrase ceased liquida engage business and debts went into ” (page U.S., tion. page then ments.’ must be conceded that had this S.Ct., published, 1042). notice been claim of 57 L.Ed. would not and presented. could have not The construction which appellants follows that the failure appellees of the contend cannot be sustained. $240,000 to reach this fund of in the hands Insolvency Bank. liquidating agent proxi not was mate result of negligence claimed on The American Bank National closed its part of the Nothing banking doors as institution on directors. that the even- 15 382, 1097; Billings, L.R.A.1918A, Am.Jur., 218, v. Wallach 277 Ill. N.E. 115 7 1097; 382, L.R.A.1918A, 298; Briggs Spaulding, Banks, 294, N.E. §§ Warner v. v. Penoyer, Cir., 132, 587, 924, 2 91 44 F. 141 11 L.R.A. 761. S.Ct. 35 L.Ed. 662. 16 Billings, 218, v. Wallach Ill. 277 115

674 25, to against 1929. Thereafter claim estate of

ing their of November file Gannon, Kate abandoned their business. The have banking did no against to the claim distributed her estate. involved was this suit its December, 1929. After stockholders in Min Oklahoma adheres had distribution, the bank asset rule,19 permits nesota $100,- right an additional was to receive heirs, creditor of decedent dev Enid Bank of 000 from National the First isees legatees have or of the estate who guaranteed paper when the which it estate, received assets of the to the extent of on its paid, was its total but contend, Appellants the value thereof.20 $138,591.- paper guarantee amounted to however, appellees’ barred that claim is addition, appel- outstanding In 48. comply 58 with O.S.A. failure $249,000. lees’ claim of part provides first of this section insolvent A bank is national all contracts made are forever heretofore Bank meaning National within Act, of the presented against barred if not estate seq., when it is 12 21 et U.S.C.A. within fixed the time notice they obligations when unable meet its presentation portion of claims. This of the appellees’ was con claim mature.17 While provides statute tingent are claims that con bank tingent and unknown at time presented or due within be doors, considered closed its it must one month after become absolute. solvency determining the bank.18 part The latter deals with section Na quite that the American It is obvious provides contracts thereafter made and any time wholly unable at tional thereunder, as to such contracts all claims evening of closed on the after it its doors due, due, contingent, whether or must obligations to meet November presented within fixed in time insolvency from that time. that its dates notice have or barred. We held appellant stockholders, including M. C. All the American Bank was National 2783, Garber, in who transferred their No. 26, insolvent after 1929. It must November sixty days prior to November within stock contingent follow claim had a 1929, 26, were liable for the stock assess against stockholders Gannon at least C. E. though made ments even the transfers were their from the time instituted suit good faith. Appellants their appeal rely largely upon two decisions Appeal No. 2874. Supreme of Oklahoma sus Liability and Distributees Heirs position, Douglas, tain their 158 Fluke v. of Deceased Estates 300, 210, Okl. P.2d Timmons v. Han 13 Stockholders. 180, na 55 P.2d 110. Const. Okl. Gannon, stockholder, held E.C. express cases Both of these involved con 26, November of stock shares by operation Here the tracts. arose 4, 1934. His estate was December He died relationship in of law and creates a present to creditors to probated notice implied nature of contract. No deci published claims was their June Supreme sion Court of Oklahoma is file claim his did Appellees implied dealing obligations cited February a final On decree estate. arising by operation law. contracts A distributing the was entered distribution interpretation statutory reasonable of the wife, Gannon, Kate estate to his entire provision would seem to indicate daughters, Florence Lovell his two applies only express contracts. In the Munger. distribution of this Ruth aid absence Oklahoma ap- prior date on which estate Court, interpret we so the section. judgment against the pellees obtained their Furthermore, showing there no district court. Kate in the state bank purchased. when stock was record May and her estate died Gannon requested finding was and none daughters, No Florence two her descended record, Appellees In condition we Munger. made. Ruth failed Lovell Dent, Witherow, Cir., v. 176 U.S. Matteson 102 F.2d See v. Smith Bradbury, Cir., 638; Aycock 44 L.Ed. for a discus 77 F. S.Ct. 14; Woolley, Minnesota rule. Kullman & sion 2d Co. Gillett, 20 Chitty 724, 148 46 Okl. P. 129. F.2d Commissioner, L.R.A.1916A, 1048, 1181. 117 F. Scott 36. 2d say cannot the trial We know of holding decision the no case to that effect. of Rosenbaum, respect Certainly court in is erroneous. the of this case Brown v. 510, 77, 1345, 287 N.Y. 41 N.E.2d 141A.L.R. part judgment against That D. J. upon relies, appellant which does not so Oven, Crumpacker, Randolph E.N. C. F. hold. It holds that where bank closed a is interest, $188,280 and R. Sanford L. appointed, day a conservator is on the directors, reversed, is the actions the bank was which closed determine are remanded with to dismiss the directions both rights the date which on of credi the third cause of the directors tors of at liabilities stockholders prejudice. respects, with all In other People tach. In v. Merchants’ Trust is affirmed. of The costs 293, 1004, 187 N.Y. it 79 N.E. held appeal equally appel- divided between appointment temporary of a receiver appellees. lants and taking operated pre assets of him Rehearing. On Petition for vent the paying claims defendant of ne creditors and therefore obviated Garber, appellant M. C. in Num cessity of a payment. formal demand for petition rehearing ber has filed a Aaron, In Broderick v. N.Y. in which misinterpreted he contends we superin N.E. 103 A.L.R. seq., 21 et U.S.C.A. as it affects the lia possession tendent of banks took aof bank bility of one who transfers stock a bank December appear not It did ing institution. It is that we contended es that on that in date bank actually tablished date on deter which The court solvent. held that less “none the mined that the bank was in the insolvent closing bank of occasioned an auto sense that its liabilities its assets exceeded payment matic default debts its of rather than the date on which the bank and liabilities.” meet obligations its when failed Garber sold his stock November matured as the date which determines disposed The bank of its business and closed liability transferring one of stock. With its doors November and did is agree. agree we cannot We that it banking function as a institution thereaft- which its date on a bank to meet fails liquidation voluntary er. It went into obligations that liability determines appointed a liquidating agent December one is transferring his stock. true 1929. The directors distributed “insolvency” is used in the word received from the First National Bank applicable opinion statute. The well could December, 1929, Enid some time have omitted the use the word “insol stockholders record as of November vency.” However, ques there can be no single Thereafter the bank had not dollar tion as sense which we used the which to meet claim. Its doors insolvency pur term. We defined had ceased to closed function pose liability determining of one banking presentation as a institution. The transferring being stock as the failure of a payment a claim for after that would obligations bank to meet its when ma By have been a formality. mere course ture. said: “A We national bank insol of conduct the automatically disquali- bank vent within the meaning the National fied itself from meeting any obliga- its Act, seq., et U.S.C.A. 21 when necessary tions. To hold it was still to meet obligations unable when presented claim be and dishonored Inability mature.” obligations meet its liability before stockholder’s attached the test establishes construction, would adopting strained transferring one stock. We do under entirely purpose out line with sought require law to stand the that a claim be ac accomplished by statute. presented payment tually pay and that petition ment be refused before attaches. rehearing is denied.

Case Details

Case Name: Hoehn v. Crews

Court Name: Court of Appeals for the Tenth Circuit

Date Published: Jul 6, 1944

Citation: 144 F.2d 665

Docket Number: 2870-2876

Court Abbreviation: 10th Cir.