Minnesota State Bank v. Tabbott

¹ Reported in 238 N.W. 53. This is an action to recover an assessment of 100 per cent levied by the district court of Blue Earth county on seven shares of the stock of the Minnesota State Bank of Amboy owned by the defendant, Leonard Tabbott. In a proceeding to enforce the constitutional liability of the stockholders in the bank the assessment was levied. In the case at bar there were findings and direction of judgment for the plaintiff for $700. The defendant appeals from the order denying his motion for a new trial.

The amended answer alleged that 60 per cent of the assessment against the stock of the defendant was paid. Liability for 40 per cent was conceded. As it turned out in the evidence the claim was that the defendant had paid into a trust fund in the bank $420, an assessment of 60 per cent voted by the stockholders, and was entitled to treat it as a payment on the 100 per cent assessment. The issue is whether the defendant paid 60 per cent; or, putting it otherwise and avoiding all technicality, whether the 60 per cent could be offset against the constitutional liability.

In the determination of the issue there are involved three considerations:

(1) The nature of the assessment on bank stock made by the resolution of the stockholders pursuant to G. S. 1923 (2 Mason, 1927) § 7684.

(2) The nature of the assessment of the double liability of stockholders imposed by art. 10, § 3, of the constitution.

(3) The claim of the defendant that an assessment was made under the statute and that he paid $420 into a trust fund in the bank not to be used unless all the assessments were paid; that only a portion was paid; and that therefore the sum which he paid into the trust fund can be used so far as it will go in payment of the 100 per cent levied in the proceeding to enforce liability under the constitution.

1. On October 6, 1923, the stockholders of the bank voted an assessment of 60 per cent payable on or before December 6, 1923. If paid the proceeds became assets of the bank. Slette v. Larson, 125 Minn. 263, 146 N.W. 1093; Devney v. Harriet State Bank, 145 Minn. 339, 177 N.W. 460. In N.W. Trust Co. v. Bradbury, 117 Minn. 83, 91, 134 N.W. 513, 515, Ann. Cas. 1913d 69, the court in referring to the proceeding under § 7684 said:

"It was not a proceeding in the interest of creditors, but rather to place the bank in position for the future transaction of business. And whether the payment thus required to be made was voluntary or involuntary, it served its primary purpose, and on the funds thus acquired the bank was able to reopen its doors."

This is not to be questioned. Leach v. Arthur Sav. Bank,203 Iowa, 1052, 213 N.W. 772; Blackert v. Lankford, 74 Okla. 61,176 P. 532; Smith v. Goldsmith, 49 S.D. 580, 207 N.W. 978; Duke v. Force, 120 Wash. 599, 208 P. 67, 23 A.L.R. 1354.

Nor were the stockholders bound to submit to an assessment voted by the majority. The statute, § 7684, et seq. following the national banking act (12 USCA, p. 98, § 55) prescribes the course to pursue against those who prefer not to pay. If the defendant paid $420 in discharge of the assessment the money was an asset of the bank and not his property, and this action is at an end.

2. The superadded or double liability imposed by art. 10, § 3, of the constitution is different. The 1930 amendment to art. 10, § 3, of the constitution is found in L. 1931, p. 4. And see G. S. 1923 (2 Mason, 1927) § 7669.

The corporate liability imposed by the constitution is not a corporate asset. The proceeds coming from its enforcement are for creditors. In N.W. Trust Co. v. Bradbury, 117 Minn. 83,88, 134 N.W. 513, 514, Ann. Cas. 1913d 69, the court referring to the nature of the liability said:

"The corporation itself has no authority over the fund, cannot compel its payment, nor by any act on its part release the stockholders therefrom. It amounts for all practical purposes to a reserve or trust fund, to be resorted to only in proceedings in liquidation, when necessary to meet the payment of obligations of the corporation. It is limited to an amount equal to the par value of the stock held and owned by each stockholder, and exists in favor of the creditors collectively, not severally, and in proportion to the amount of their respective claims against the corporation."

The authorities outside the state are in harmony. We refer to Leach v. Arthur Sav. Bank, 203 Iowa, 1052, 213 N.W. 772, and cases cited in connection therewith in the preceding paragraph. Against this liability a stockholder cannot assert by way of payment or offset an assessment under § 7684, et seq.

3. On January 26, 1927, an order was entered in the district court in the liquidation of the Minnesota State Bank of Amboy levying an assessment of 100 per cent on the seven shares of stock of the defendant. The shares came from his son-in-law, A.F. Kietzer, who originally held 47 shares. Kietzer had acquired his stock from Lee, the president. After Tabbott acquired his seven shares he was elected a director. The 60 per cent assessment voted on October 6, 1923, pursuant to § 7684, was paid only in part. Not all the stockholders responded. The specific claim of Tabbott is that the receipts from the 60 per cent assessment were put into a trust fund in the bank to be used only in the event all stockholders contributed. The statute does not provide for such a thing. It requires a pro rata assessment. It provides what shall be done if the stockholders do not pay. They are not required to pay if they prefer submitting to the provisions of the statute.

On January 9, 1924, there was upon the books of the bank a credit designated "assessment." The amount of the assessment was $3,740. The assessment of 60 per cent should have been paid on December 6, 1923. If paid it would have produced $9,000, assuming that the outstanding stock was the full amount of the capital of $15,000. The time for payment was past.

On January 9, 1924, Kietzer gave the bank his note for $820, and Lee, the president, gave his note for $1,120. No money passed. There was credited to what we call the assessment fund from these two notes $1,940. It was all on paper. The transaction was between Lee and Kietzer alone, or at least the court could find it so. They were president and vice president. There was no actual cashier. Tabbott was there. There was a credit of $120 placed on the assessment fund to Lee which covered the 60 per cent assessment on his two shares. There was a credit to "L. Tabbott and A.F. Kietzer" for $1,820. The testimony is that the parties understood that $420 was apportioned to the defendant and the balance of $1,400 to Kietzer. Lee was giving Kietzer the benefit of $1,000 of his note of $1,120 because he had sold him the stock. The details are not shown, and they are unimportant. The books at the same time show a credit of $120 on the same fund to one Ellis. Upon this we have no further information, and it is unimportant. Altogether this made at the close of January 9 a credit of $5,800, of which $2,060 had been credited on that day. On the third day thereafter, January 12, 1924, the superintendent took charge of the bank for purposes of liquidation.

The defendant claims that he had $420 in the assessment fund which was a trust fund and that he can now apply that sum on the $700. We assume that if he had this amount in a trust fund he could apply it or use it as an offset. We assume that under the authority of such cases as Straw Ellsworth Mfg. Co. v. L. D. Kilbourne B. S. Co. 80 Minn. 125, 83 N.W. 36; Finch, Van Slyck McConville v. Vanasek, 132 Minn. 9, 155 N.W. 754, and McCabe Bros. Co. v. Farmers G. S. Co. 172 Minn. 33,214 N.W. 764, he could, in an action by the superintendent of banks to recover upon his constitutional double liability, interpose as a payment or offset his interest in the trust fund in the bank.

The claim of Tabbott is that the money paid in response to the 60 per cent assessment was to be put into a trust fund in the bank to be used only in the event that all contributed. There is evidence supporting this claim. It does not appear upon the records of the bank. It does not appear from any writing. The records show that on October 6, 1923, at a special meeting of the stockholders, held for the purpose of voting an assessment of 60 per cent on the capital stock as ordered by the superintendent of banks, such assessment was voted, to be paid on or before December 6, 1923. When the credits were made on January 9, 1924, it is not clear that Tabbott knew just what was to be the effect of it. He knew he was to be relieved of liability; in other words, that he was to be saved from his stock purchase. He did not pay for his stock. It is inferable that Kietzer and Lee undertook to save him from loss and intended to do so by the transaction of January 9, 1924.

Kietzer later went into bankruptcy. He scheduled no unexempt assets. The note to the bank was scheduled as a liability. It does not appear whether he was discharged; neither does it appear that his progress towards a discharge was interrupted. Suit was brought on the Lee note, and it is in litigation.

The parties do not effectively disguise the transaction of January 9, 1924. It was plainly intended to take credit to Tabbott for the $420 without anyone paying money and for the purpose of allowing him to claim a payment or offset on the stockholders' liability by asserting that the bank had $420 of his money in a trust fund. The trial court was not under obligation to find, and did not find, and hardly would be permitted to find, that this paper transaction originated by the officers of the bank created a trust fund which might be used sometime to pay Tabbott's $420 assessment under § 7684. A month had passed since the payment became due and three months since the assessment was voted. If a trust fund was arranged in October, 1923, as claimed by the defendant, it was not intended on January 9, 1924, three days before the commissioner of banks took charge, that this $420 would be paid under, § 7684. At the best the people interested were setting aside $420, nominally under the 60 per cent assessment, that they intended Tabbott would offset against his constitutional liability when it came to be enforced. The trial court was justified in finding that the transaction of January 9, 1924, did not give Tabbott a credit in the trust fund which he could offset against the $700 assessment.

Order affirmed.

WILSON, C.J. took no part.