125 A. 403 | Md. | 1924
Three cases have been consolidated for the purposes of this appeal. In the suits as separately tried judgments were recovered by the Receiver of the Lafayette Bank, of Baltimore, upon individual promissory notes for $1,500 each, payable to its order, made by the respective appellants. Upon one of the notes a bank deposit of the maker to the amount of $392.90 had been credited. The appellants were three of the twelve directors of the bank. The notes were given in pursuance of a plan for the directors to finance the subscription and payment for the previously unissued portion of the capital stock of the bank, in order that the entire amount of its authorized capital might be paid within a year after its organization as required by law. (Code, art. 11, sec. 20.) It was necessary that the stock should be sold for twelve dollars per share, so as to yield ten dollars for its par value and two dollars for surplus, and as there were five thousand shares to be subscribed and paid for, the total amount to be received by the bank was $60,000. The twelve directors borrowed $50,000 from the Farmers' and Merchants' Bank of Baltimore, on a promissory note made by them in their individual capacities, with the agreement that $8,000 of the amount should be immediately repaid. The check of the Farmers' and Merchants' Bank to the directors for the $50,000 loaned was deposited in the Lafayette Bank, and after $8,000 had been paid to the former bank, in accordance with the agreement, the balance was applied in partial payment for the 5,000 shares of stock for the purchase of which the money was borrowed. For the payment of the remaining $18,000 of the purchase price of the stock each of the twelve directors gave the Lafayette Bank his promissory note for $1,500. The certificate for the stock was issued *608 in the name of J. Shorb Neale, one of the directors, and was pledged as collateral security for the note to the Farmers' and Merchants' Bank. An entry on the books of the Lafayette Bank shows that the payment for the stock was credited as having been made by J. Shorb Neale "et al.," and the proof is conclusive that all of the directors participated equally in the subscription. Subsequently the appellee, who is the State Bank Commissioner, became Receiver of the Lafayette Bank under the decree of the Circuit Court of Baltimore City, and the appellants having refused to pay their notes for $1,500 each given to the bank under the circumstances described, the suits which have resulted in the judgments appealed from were instituted.
The only exception in the record was taken in each case because the trial court declined to instruct itself, sitting as as jury, that there was no evidence of any consideration for the promissory note which was the subject of the suit, and that the verdict should be for the defendant.
It is contended on behalf of the appellants that the notes in question were given simply for the accommodation of the Lafayette Bank, in order that its operations might be continued, and with the understanding that they were to be paid out of the proceeds of the future sales of the stock for which they were ostensibly accepted in payment, but for which the appellants and the other directors were not to be regarded as actual subscribers. The transaction is said to have been designed to enable the bank to nominally comply with the law, and the notice of the Bank Commissioner, as to the full subscription and payment for its capital stock. It is argued that the notes sued on were not only without consideration, but were illegal as part of a plan to mislead the Bank Commissioner into the belief that the requirements of the law had been fulfilled.
The appellants' notes to the Lafayette Bank were unquestionably executed with the intention that they should be paid out of the proceeds of subsequent sales of the stock for which *609 they were given, and with the expectation that they would consequently not have to be paid by the respective makers. But they were delivered to the bank in part payment for shares of stock which it thereupon actually issued, and which represented a substantial interest in the assets of the corporation. There was no concealment in the method by which the subscription and the payment for the stock were accomplished. The nature of the transaction is disclosed by entries on the bank's records. While no formal application for the stock appears to have been signed, and the certificate was issued in the name of only one of the directors, who was president of the bank, the payments and notes received for the shares were credited in an account which indicated that the stock was held for the common interest of those contributing to its purchase. It was proved that the certificate was issued in Mr. Neale's name alone to facilitate transfers as resales of the stock were negotiated. The payment of $42,000 to the bank on account of the stock purchase was certainly not fictitious, and the accompanying delivery of the notes which represented the remaining $18,000 of the purchase price was no less real and effectual. The record wholly fails to show that the appellants gave the notes with any intent to deceive. They acted in evident good faith, in order to provide for the continued existence of the corporation in which they were already interested as stockholders and directors. It was their own as well as the corporate interest which they were thus promoting.
It has been decided in a number of cases that notes or other obligations given by persons financially interested in a bank, to make good a depletion of its capital or assets, are based upon sufficient consideration. Decisions to that effect are cited in a note to State ex rel. Lattanner v. Hills (
In Union Bank of Brooklyn v. Sullivan,
The Supreme Court of Pennsylvania, in State Bank of Pittsburg
v. Kirk,
In the present case the liabilities of the appellants were contracted, not merely because of their existing interest as stockholders and directors of the bank, but also in consideration of the issuance of five thousand shares of its capital stock for their use and disposition.
If, as the appellants contend, the transaction was unreal so far as any contractual liability to the bank on their part was concerned, it nevertheless accomplished its practical purpose of satisfying the requirements of the law, and of thus authorizing the bank to continue in business. In view of that purpose and result, the principle of estoppel might be sufficient to preclude the present defense. Lyons v. Benney, *611
The case of Rankin v. City National Bank,
The court below, in our opinion, was right in declining to direct verdicts for the defendants on the ground that there was no consideration for the notes on which they were sued.
Judgments affirmed, with costs. *612