Gahagan v. Whitney

Defendants in error, as creditors of the Tampico State Bank, filed in the circuit court of Whiteside county a bill seeking to enforce stockholders' liability against the plaintiff in error, Cora Whitney, and others. A decree was entered against her in accordance with the prayer of the bill, which was affirmed by the Appellate Court. The cause is here on writ ofcertiorari.

It appears from the record that the Tampico State Bank was closed for liquidation on the 18th of March, 1932. Fred A. Brewer had owned twenty-five shares of stock in this bank. He died intestate on July 15, 1923, and plaintiff in error, his widow, (and now Cora Whitney,) was appointed administratrix of the estate and continued as such until January 3, 1930, when her final report as administratrix was approved, the estate was closed and she was discharged as such administratrix. It appears from a stipulation of facts that on November 12, 1923, she filed in the probate court an inventory, in which she listed, with other items of personal property, the twenty-five shares of bank stock as of a value of $2500. As Brewer died without children, plaintiff in error took his entire personal estate, subject to the payment of debts. Her final report, filed on December 13, 1929, disclosed that all the debts and claims against the estate had been paid, leaving a balance in money of $4657.72, which plaintiff in error retained as sole heir of the deceased. This stock was not listed or mentioned in that report. It also appears that it was never transferred on the books of the bank from the name of Brewer to plaintiff in error or to anyone else, and her counsel argue that it remained property of the estate and the liability thereon the estate's liability, and since no claim was filed against the estate there exists no liability from any source on this stock.

The argument is advanced that stockholder's liability cannot be imposed upon the widow of a stockholder merely because she is his sole heir unless she accepts the stock, and that in this case there was no acceptance of this stock by her. In this connection certain facts appear in the record either by stipulation or proof. They are: (1) During the course of the administration of Brewer's estate ten shares of the stock made out to him in his lifetime, but not delivered, were received and receipted for by plaintiff in error in her individual capacity and not as administratrix; (2) during the year 1928, while the estate was being administered, two dividends on the stock, amounting to $250, were ordered, and checks therefor were issued payable to the plaintiff in error individually, and that she received and cashed these checks and in her final report did not account for the money as having been received as a part of the assets of the estate; (3) no mention was made of the stock in her final report; and (4) no action renouncing ownership of the stock was ever taken by her.

It may be conceded that a bank stock liability cannot be imposed upon one against his will, but the character of the obligation is such that slight evidence of its acceptance is, in the absence of countervailing proof, sufficient. This is rightly so, for otherwise the owner of stock to whom it has not been transferred on the books of the bank might permit it to lie awaiting future developments of the bank and to speculate upon the benefits of accepting or rejecting it. Here the stock was inventoried by plaintiff in error as a part of her husband's estate. She was administratrix and sole heir of his personal estate. This she is, in law, presumed to have known. She accepted dividend checks made out to her personally, and, so far as her final report shows, used by her personally. It is a fair conclusion to be drawn from the foregoing facts that she accepted the stock as a part of her husband's personal estate which came to her through his death.

Counsel argue, however, that there was no transfer of the stock on the books of the bank, and, since a stock liability is a contract liability, only those may be held liable whose names appear on the books of the bank as stockholders. Her counsel cite Golden v. Cervenka, 278 Ill. 409, where the statement is made that "the liability of the stockholders to the creditors, though created by the constitution, is based upon contract." And also Bell v. Farwell, 176 Ill. 489, where it was said: "Persons who give credit to the corporation do so upon the faith of the personal liability of the stockholders, and upon what principle can it be said that the liability is not contractual?" The fact that this liability is contractual in its nature does not, however, prove plaintiff in error's case. Section 6 of article 11 of the constitution declares every stockholder in a banking corporation or institution to be individually responsible and liable to its creditors in the manner and to the extent therein specified. The question properly arises, therefore, whether the party sought to be charged is a stockholder. The constitution contemplates that the actual owner of the stock shall bear the liability arising thereon. It is not necessary to the establishment of stock liability of the actual owner of the stock that the shares be transferred on the books of the company. It is a rule recognized in this State and elsewhere, that where it is sought to hold the real owner of the stock though his name does not appear upon the transfer books of the bank, the court will determine who is the real owner and decree accordingly. InGillett v. Chicago Title and Trust Co. 230 Ill. 373, stock issued in the name of another was found in the possession of Egbert W. Gillett at his death. The evidence showed that he was the actual owner though his name did not appear as stockholder, and a decree against his executor for the face value of the stock was upheld. It is a general rule that an equitable assignee or owner of stock in an incorporated company may, in the absence of agreement to the contrary, use it as his own property, control it and receive dividends thereon, and, as between himself and his assignor, he is bound to assume the burdens of ownership imposed. Kellogg v. Stockwell, 75 Ill. 68.

That the actual owner of stock may be held to answer for the liabilities of stock ownership though his name does not appear upon the transfer books of the bank has been frequently stated in other jurisdictions. Early v. Richardson, 280 U.S. 496; OhioValley Nat. Bank v. Hulitt, 204 id. 162; Commissioner of Banks v. Tremont Bank and Trust Co. 259 Mass. 162, 156 N.E. 7;Western Pacific Railroad Co. v. Godfrey, 166 Cal. 346,136 P. 284; Pignatel v. Mobley, 38 Ga. App. 508, 144 S.E. 385;Maddison v. Bryan, 31 N.M. 404, 247 P. 275.

Brewer was deceased. Plaintiff in error alone controlled this stock. No one else could have transferred the stock either to her or to anyone else. The laws of descent passed title to her, subject to the payment of Brewer's debts, all of which had been paid long prior to the closing of the bank. As we have indicated, the evidence shows both she and the bank treated the stock as belonging to her.

Plaintiff in error relies upon In re Bingham, 127 N.Y. 296,27 N.E. 1055. It was sought in that case to enforce against the estate of Bingham liability on certain shares of bank stock which stood on the books of the bank in the name of his deceased son, who was the owner of the stock at the time of his death. Bingham had been the sole heir of his son and the administrator of his estate. It there appeared that Bingham, Sr., had voted the stock and received dividends thereon but at the time of his death he had not completed the administration of his son's estate, and the court held that in his control of the stock and receipt of the dividends there was nothing inconsistent with the fact that he was acting as administrator of the estate of his son, and as his interest in the stock could arise only after the son's estate had been closed and the debts paid his interest was residuary in character, and until he was discharged as administrator he held title to the stock in his representative capacity. It need not be pointed out wherein that case is clearly lacking in analogy on the facts. Here the estate had been closed. Not only were the debts all paid but a substantial balance was left in the estate which plaintiff in error received as heir, and, as we have pointed out, she personally received the dividends on the stock.

The judgment of the Appellate Court affirming the decree of the circuit court is right and is affirmed.

Judgment affirmed.