| Ark. | Jul 14, 1919
(after stating the facts). It was proved that the Bank of Cave Springs was duly incorporated and the appellees, among others, are put down as the stockholders, together with the number of shares owned by each, as appears from the certificate required to be filed by the president and directors of the corporation, and which was filed for record on the 10th day of September, 1909, with the county clerk. Section 845 of Kirby’s Digest.
The testimony, as set forth in the above statement, tends to prove that the Bank of Cave Springs became indebted to the Judsonia State Bank, as evidenced by a note, which was executed by the Bank of Cave Springs for $2,500, and, also, its overdraft for $893; that E. R. Hughes, the president of the Bank of Cave Springs, afterwards executed his individual note to cover the sum total of this indebtedness, at which time the Judsonia State Bank delivered to him the $2,500 note and overdraft account, and endorsed the $2,500 note without recourse and that afterwards the Judsonia State Bank transferred the individual note of E. R. Hughes, and also the note of the Bank of Cave Springs and its overdraft, to the Pangburn State Bank for the sum of $3,600.
Counsel for the appellees contend that the stockholders are not liable for the indebtedness of the Bank of Cave Springs to the Judsonia State Bank, because the latter bank accepted Hughes’ personal note with collateral security for the amount of the indebtedness represented by the note and overdraft, and transferred said note to Hughes without recourse, and also its overdraft account. Professor Tiedeman in his work on Commercial Paper, at section 260, says:
“When an endorsement is made ‘without recourse’ the endorser relieves himself of all liability for the dishonor of the paper. But, whatever popular impression it may produce, such an endorsement is not recognized in law as having cast any suspicion upon the character of the paper, or the financial responsibility of the parties to it.”
While the words “without recourse” "tend to show that the Judsonia State Bank, the payee of the note, had accepted the-individual note of Hughes in payment of the note of the 'Bank of Cave Springs and had transferred its title in such note to Hughes, yet the testimony set forth in the statement shows that such was not the purpose of the endorsement, but, on the contrary, the preponderance of the evidence shows that the purpose of the delivery of the note and overdraft account to Hughes was to enable him to make collection of the same from the Bank of Cave Springs and its stockholders, and that the individual note executed by him was given, not for the purpose of paying off an indebtedness of the Bank of Cave Springs to the Judsonia State Bank, but for the purpose of becoming a joint maker and jointly liable for such indebtedness.
We are convinced that the title to the note executed by the Bank of Cave Springs to the Judsonia State Bank, and also the overdraft account, was not transferred by the above transaction to Hughes. But, if we. were mistaken in this, the appellant could still maintain this suit, for there is no testimony whatever in the record to show that either Hughes or the Bank of Cave Springs has paid the note and overdraft account. Even if it were proved that Hughes had paid the note, he was but a joint maker and the Bank of Cave Springs would still be liable to his estate because the debt, as represented by the note and overdraft, was primarily its obligation. It must be remembered that this is a suit by the receiver of the insolvent Bank of Cave Springs to recover the assets of snch bank, alleg-ed to have been illegally withdrawn by its stockholders.
Where stockholders of a banking corporation, knowing that the bank is insolvent, sell their stock to the cashier and are paid out of the bank’s assets, the effect of the transaction is a withdrawal of their stock from the bank on account of its insolvency in fraud of creditors, and such payments may be recovered by the receiver of the bank for the benefit of its creditors. Corn v. Skillern, 75. Ark. 148. See 34 Cyo. 401, and cases there cited. The receiver of an insolvent bank stands in the place of and represents such bank. He must collect and administer its assets for the benefit of creditors, stockholders and all who are interested in the financial affairs of the corporation. Jordan v. Harris, 98 Ark. 200" date_filed="1911-03-13" court="Ark." case_name="Jordan v. Harris">98 Ark. 200. Even if the testimony had shown that Hughes had paid the debt of the Bank of Cave Springs to the Judsonia State Bank, the other stockholders would be liable to him for their pro rata part of such indebtedness, and a stockholder is entitled to have the liability of other stockholders enforced, and the directors have no right to cancel the note. It would be the duty of the receiver of the bank to require the stockholder who had not paid for his stock to' pay for .the same and to require those who had illegally withdrawn funds to refund the same. Bank of Des Arc v. Moody, 110 Ark. 39" date_filed="1913-11-03" court="Ark." case_name="Bank of Des Arc v. Moody">110 Ark. 39; 34 Cyc., supra.
Now, the undisputed testimony shows that at the time of the institution of this suit, the Bank of Cave Springs was insolvent, and that there was an outstanding indebtedness against it. This being true, such of the appellees, who were stockholders, who had wrongfully withdrawn the funds paid for their stock, or who were indebted for stock subscribed, were liable pro tanto to the creditors of the insolvent bank.
It follows that the court erred in dismissing the appellant’s complaint for want of equity.
There was testimony tending to prove that certain stockholders turned their stock certificates back to the cashier and that he returned notes, that had been given for stock, to the parties who gave them, and also refunded money that had been paid by certain stockholders for stock.
There appears to be some uncertainty and confusion in the record as to the precise action taken by the stockholders and as to who were the stockholders, and the number of shares of stock held by those who were stockholders and as to the notes that were returned and the amount of money that was refunded, and to whom.
Inasmuch as the cause must be reversed, we will leave this matter open for further proof and a determination of the trial court.
The decree is reversed and the cause will be remanded with permission to the parties, if they so elect, to take further testimony, and for such other proceedings as may be necessary according to law and not inconsistent with this opinion.