128 Tex. 596 | Tex. | 1937
delivered the opinion of the Commission of Appeals, Section B.
The Court of Civil Appeals for the First District has certified four questions in a suit brought by the Banking Commissioner of Texas against William D. Green as independent executor of the estate of William Green, deceased, for the recovery of a one hundred per cent assessment upon one hundred shares of the capital stock of First State Bank of Westhoff. The material facts found by the trial court and by the Court of Civil Appeals, as stated in the certificate, are in substance as follows: William Green and Philip Welhausen were the members of a partnership engaged in business under the firm name, Green and Welhausen. On March 13, 1912, the partnership became the owner of one hundred shares of the capital stock of First State Bank of Westhoff, which was incorporated under the general banking laws of the State of Texas. Certificates for ninety shares were issued to Green and Welhausen and for ten shares to William Green, and éntries were made in the stock books and records of the bank showing the ninety shares to be owned by Green and Welhausen and the ten shares by William Green.
The records of the bank continued to show the ownership of the one hundred shares of stock as above stated until the ten shares, which stood in the name of William Green were, on November 18, 1927, transferred on the books of the bank to M. C. Driscoll and the ninety shares, which stood in the name of the partnership, Green and Welhausen, were on April 20, 1928, transferred on the books of the bank, forty-five shares to Philip Welhausen and forty-five shares to M. C. Driscoll. The by-laws of the bank provided that the stock should be transferable only on the books of the bank and that upon transfer the existing certificate should be surrendered and cancelled and a new certificate issued.
On September 8, 1928, the bank was closed by the board of directors and placed in the hands of the Banking Commissioner of Texas for liquidation. It was insolvent on that date and for more than twelve months immediately prior thereto. .The Commissioner levied an assessment against all stockholders of the bank owning stock therein, as shown by the books and records of the bank at the time it closed, and against those stockholders
On July 9, 1924, William Green by written contract agreed to sell to M. C. Driscoll his interest in a large amount of real and personal property owned by the partnership, Green and Welhausen, including the one hundred shares of stock in the Westhoff bank. This contract was fully executed on August 23, 1924. Written assignment was made of the shares of stock and the partnership was dissolved, but no transfer of the stock was made on the records of the bank, and no request was made that it be transferred, until November 18, 1927, and April 20, 1928, as above stated.
William Green died May 10, 1927, all of his property passing by the terms of his will subject to the payment of existing debts. The Westhoff bank at the time of the death of William Green owed no debts that it could not pay. The four questions certified are as follows:
“1. After the death of Wm. D. Green, could any stock owned by the partnership firm of Green & Welhausen be held subject to assessment as stock owned by the partnership, which became non-existent on the death of Green, so as to make the estate of Green liable for the assessment made upon the interest of his surviving partner in the stock so assessed?
“2. Were the debts for the payment of which the assessment sued on was made debts of the firm of Green & Welhausen, which firm is shown by the fact findings of the trial court to have been dissolved by the sale by Green of all of his interest in the partnership more than four years before the failure of the bank and notice of such sale published at the time, and given the bank directly more than two years before its failure?
“3. Can appellee executor, upon the facts before shown, be held estopped from denying his liability for the assessment made by appellant on the stock originally owned by the firm of Green & Welhausen merely because no transfer of the stock was made on the books of the bank twelve months prior to the bank’s failure?
“4. Can the Estate of Green, upon the facts before shown, be held liable for any debt of the bank not existing at the date of Green’s transfer to Driscoll, which occurred about four years prior to the failure of the bank?”
Article 535 of the Revised Civil Statutes of 1925, prior to its amendment in 1929 (Chapter 60, Acts First Called Session 41st Legislature, p. 159), by its terms imposed the added liability
Other important controlling facts, however, are the provision of the by-laws of the bank that the stock should be transferable only on the bank’s books and the fact that the records of the bank showed ten shares of the stock to be owned by William Green until November 18, 1927, when they were transferred on the books to M. C. Driscoll, and ninety shares to be owned by Green and Welhausen until April 20, 1928, when they were transferred on the books to Philip Welhausen and M. C. Driscoll. Both of these transfers were made within the twelve months immediately prior to the closing of the bank on September 8, 1928.
It is well settled by the decisions in this State, in cases arising prior to the amendment of Article 535 in 1929, that when the by-laws of the bank provide that the stock is transferable only on the books of the bank, the banking commissioner may enforce the stockholder’s liability under that article of the statutes against one who, though not a real owner, allows the stock to stand in his name on the books of the bank. Fuqua v. Shaw, 119 Texas, 325, 29 S. W. (2d) 319; Pace v. Shaw (Com. App.), 29 S. W. (2d) 965; Chapman v. Pettus, 269 S. W., 268 (application for writ of error refused); Heldenfels v. Chapman, 283 S. W., 179; Chapman v. Sparks, 283 S. W., 338; Orndorff v. Austin, 294 S. W., 681; 6 Tex. Jur., Secs. 38, 39, pp. 168-169. These decisions are in harmony with the general rule, “that the transfer of stock by a shareholder in a corporation does not relieve him of liability to creditors of the corporation for unpaid subscriptions or statutory superadded liability until the transfer is perfected by being registered on the books of the corporation.” Note 45 A. L. R, p. 139 and authorities cited. See also: 3 R C. L., p. 399, Sec. 28; Michie on Banks and Banking, Sec. 41, Vol. 2, p. 121. The reason for the rule has often
Article 535 makes the stockholder liable for an additional amount equal to the par value of his stock “as long as he owns shares therein and for twelve months after the date of the transfer thereof.” The transfer here referred to is a transfer on the books of the bank when, by statute or by by-law, the stock is transferable only on the books. “The period of liability of the stockholder is determined by the date of the formal transfer of his stock upon the books of .the bank.” Chapman v. Sparks, 283 S. W., 338, 340. The stockholder is relieved of liability, notwithstanding the fact that the transfer is not entered on the books of the bank, when he has done all that is legally required of him. in order to have the transfer made of record. Chapman v. Beeman, 265 S. W., 243; Chapman v. Sparks, 283 S. W., 338; 6 Tex. Jur., Sec. 42, p. 172; 3 R. C. L., Sec. 34, p. 406; Note 45, A. L. R., pp. 144-145. This exception to the general rule has no application in the instant case, because it appears from the certificate that no steps were taken to procure the transfer of the stock of record prior to the dates when the transfers were actually made on the books.
Since the transfers of record were made within twelve months before the closing of the bank (and construing the certificate to mean that sufficient proof was made of the insolvency of the bank at the time the transfers were made: Pool v. Chapman (Com. App.), 283 S. W., 762; Austin v. Poole, 299 S. W. 935), the estate of William Green is liable for the assessments made against the owner of the one hundred shares of stock, unless a different conclusion is warranted by the partnership’s ownership of the stock or by the dissolution of the partnership or by Green’s death.
The one hundred shares of stock were acquired and owned by the partnership composed of William Green and Philip Welhausen, engaged in business under the firm name of Green and Welhausen, ninety shares being issued to and in the name of the partnership and ten shares being issued in the name of William Green, and the stock was carried in such names on the
In accordance with the rules announced in the foregoing paragraph, the estate of William Green would have been liable upon the assessment by reason of actual ownership of the one hundred shares of stock by the partnership, Green and Welhausen, if actual ownership by that partnership had continued until a time within twelve months prior to the closing of the bank. This being true, the estate is liable by reason of the continuance, until a time within such twelve months period, of the apparent ownership of the stock by the partnership, as shown by the books of the bank. This appears to be an extreme case on account of its peculiar facts, particularly the sale by Green of his interest in the partnership property four years before the date on which the bank was closed and his death
The stock was acquired by and for the partnership, the statutory added liability, although contingent, becoming by reason of such acquisition and ownership of the stock, a partnership liability. The records of the bank were caused to show, and were permitted by Green, and by the executor after Green’s death, to continue to show, ownership of ten shares of the stock by Green and of ninety shares by Green and Welhausen, the name in which the partnership business was conducted. Creditors of the bank, seeking to determine from its books its financial stability, would be justified in looking to the individual responsibility of William Green to an amount equal to the par value of the ten shares and to the individual responsibilities of William Green and Philip Welhausen to amounts equal to the par value of the ninety shares. The accomplishment of the purposes of the statute and the by-laws requires that the executor of the estate be held to the same duty to cause the transfers to be made of record as that which rested upon William Green.
There are apparent conflicts in the decisions as to the nature of the stockholder’s added liability, whether it is to be considered contractual or statutory. See: Austin v. Strong, 117 Texas, 263, 268, 1 S. W. (2d) 872, 3 S. W. (2d) 425, 79 A. L. R., 1528; Austin v. Guaranty State Bank of Fulbright, 282 S. W., 262; Orndorff v. Austin, 294 S. W., 681; Richmond v. Irons, 121 U. S., 27, 7 Sup. Ct., 788, 30 L. Ed., 864; Matteson v. Dent, 176 U. S., 521, 20 Sup. Ct., 419, 44 L. Ed., 571; McClaine v. Rankin, 199 U S., 154, 25 Sup. Ct., 410, 49 L. Ed., 702, 3 Am. Cas., 500; Christopher v. Norvell, 201 U. S., 216, 26 Sup. Ct., 502, 50 L. Ed., 732, 5 Am. Cas., 740; Thomas v. Matthiessen, 232 U. S., 221, 34 Sup. Ct., 312, 58 L. Ed., 577; 3 R. C. L., Sec. 37, pp. 410-411. The liability is neither wholly contractual nor wholly statutory. The relation of the stockholder to the bank, as pointed out by Judge Leddy in Austin v. Strong, supra, is contractual in its nature. Until that relation is once created, with the voluntary assent of the party, he does not become individually
Each of the four questions certified is answered in the affirmative, with the following qualifications or explanations, which seem to be made necessary by the form of the questions.
Opinion adopted by the Supreme Court January 6, 1937.
Rehearing overruled February 10, 1937.