Mr. George L. Wilson for plaintiff in error. [221 U.S. 514, 515] Messrs. Wilbur H. Powers, Henry H. Folsom, and Walter Powers for defendants in error.
Mr. Justice Day delivered the opinion of the court:
These cases are practically alike. No. 132 is a writ of error to the United States circuit court of appeals of the first circuit; No. 133 is a writ of error to the superior court of Massachusetts. The suits were originally brought by Albert S. Apsey, receiver of the First National Bank of Chelsea, Massachusetts, against George E. Kimball and Anna G. Whittemore, respectively, under 5151 of the Revised Statutes of the United States (U. S. Comp. Stat. 1901, p. 3465), making the shareholders of a national banking association individually responsible in a sum equal to the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares.
In each of the cases the courts whose judgments are here for review reached the conclusion that the shareholder sued was not liable to the receiver on account of such statutory obligation. In the case from Massachusetts, while the final judgment was entered in the superior court of that state, the decision was in the supreme judicial court of Massachusetts, and is reported in 199 Mass. 65, 85 N. E. 91.
As originally organized, national banks had a corporate existence of twenty years. By the act of July 12, 1882, 22 Stat. at L. chap. 290, p. 162, U. S. Comp. Stat. 1901, p. 3457, such banks were authorized to continue their corporate existence for another twenty years. As pointed out in 2 of the act, such extension must be authorized by consent in writing of shareholders owning not less than two thirds of the capital stock of the association. Before granting a certificate of approval of such extension, the Comptroller of the Currency is required to cause a special examination of the bank to be made, and [221 U.S. 514, 516] if, after such examination, or otherwise, it appears to him that the association is in a satisfactory condition, he is required to grant his certificate of approval, or, if it appear that the condition of the association is not satisfactory, he shall withhold the same.
Section 5, which is the important one in this case, provides:
Except as to the number of shares held by the shareholders sued in the two cases, and the times at which the same were acquired, the facts in both cases are essentially the same. Case No. 132 was tried upon an agreed statement of facts, as follows: [221 U.S. 514, 517] 'The First National Bank of Chelsea was, prior to August 16, 1906, a banking association duly organized and existing under the provisions of the national banking act and amendments, with a capital of $300,000 divided into 3,000 shares of the par value of $100 each; that on said August 16, 1906, the said bank closed its doors and suspended business; that on August 25, 1906, the plaintiff was duly appointed by the Comptroller of the Currency, receiver of said bank; that on September 25, 1906, the Comptroller of the Currency ordered an assessment of $100 per share on each share of stock in said bank, payable by the stockholders, according to their respective holdings, on or before October 25, 1906, and ordered the plaintiff to collect and recover the same by proper proceedings; that the defendant received from said receiver a copy of said order of assessment and a separate notice and demand for payment, all of which were in the following form:
S. B. Hinckley, President.
The question, then, is: Did the shareholders, defendants in error, cease to be such, or were they still shareholders when the bank failed, and liable to assessment for the benefit of creditors? It is the contention of the plaintiff in error that they did not cease to be shareholders until, under 5 of the act, an appraisal of the value of the stock had been made and the certificates of stock duly surrendered. Upon the other hand, the defendants in error contend that, upon complying with the steps required of them, in giving notice, appointing an appraiser, and using diligence to have an appraisal, they ceased to be shareholders, and were no longer liable to pay the assessment made.
The First National Bank of Chelsea was originally incorporated, under the statute, for a period of twenty years, and while that was its span of corporate life, the defendants in error became shareholders therein, received certificates of shares, and were duly registered as shareholders. As twenty years was the life of the corporation, the shareholders had not bound themselves to remain such after the expiration of that definite period of time. As the statute originally stood, the venture would necessarily terminate at the end of that time.
Congress recognized that it might be proper to continue [221 U.S. 514, 521] the organization, that at least a part of the shareholders might desire to do so, and therefore the act of July 12, 1882, provided for the extension of the corporate existence of the bank. It was also recognized that a part of the shareholders might wish to retire from the venture, and it was therefore provided that two thirds of the shareholders must acquiesce to continue the bank's existence, and must certify such desire to the Comptroller of the Currency, who must approve of the extension of the corporate existence.
It is provided in 5, above quoted, that each nonconsenting shareholder shall give notice in writing to the directors of the association, within thirty days of the date of the certificate of approval by the Comptroller, of his desire to withdraw from the association; and further, that he thereupon shall be entitled to receive from the association the value of the shares held by him, such value to be ascertained by an appraisal by a committee of three, one to be selected by the shareholder, one by the directors of the association, and the third by the first two thus selected, the value ascertained and determined is to be deemed a debt of the bank and forthwith paid, and the surrendered shares to be sold after due notice, at public sale, after thirty days from the final appraisement provided for in the section.
The agreed facts show that the shareholders here involved strictly complied with the statute in giving the required notice, and in the selection of their appraiser. The bank also selected its appraiser, and the facts show that the shareholders urged action, employed counsel, and endeavored to bring about the appraisal. Apparently the delay was caused by the bank's representative; at least, this was the possible inference suggested by the supreme judicial court of Massachusetts. 199 Mass. 68, 85 N. E. 91.
We agree with the courts below that the defendants [221 U.S. 514, 522] ceased to be shareholders after thus complying with the statute. Section 5151 of the statute makes shareholders liable to the assessment. The statute makes specific provision for the manner in which the shareholder may sever his connection with the corporation. These necessary steps were taken, as the agreed facts show. The shareholders had a right to end their connection with the association at the termination of the period of original incorporation, or, if they so desired, they might go on with the association in its renewed life.
Section 5 provides for the manner of manifesting such determination to terminate their relations with the corporation at the expiration of its original life. True, other things were to be done to ascertain the amounts to be paid the retiring shareholders; that they were not done in these cases is no fault of the retiring shareholders. We cannot agree with the contention of the plaintiff in error, that they ceased to be shareholders only when the appraisal had been made, and the certificate of shares surrendered.
It is said that the shareholders, when the bank's representative did not act in the matter of the appraisal, might have brought suit to compel further proceedings, or to cancel their stock on the books of the company. Again we answer-that they did all that the statute required them to do.
But, it is urged, in not getting their names off the books, whatever might be their relations with the bank, these shareholders continued to be registered shareholders, and, as such, liable to creditors. Cases are cited which hold that where one permits his name to be registered on the books of the bank as a shareholder, or where he fails to obtain a transfer of the shares to another name, although he has in fact parted with his stock, such shareholder remains liable to the creditors. (See Germania Nat. Bank v. Case, 99 U.S. 628 , 25 L. ed. 448; Matteson v. Dent, 176 U.S. 521 , 44 L. ed. 571, 20 Sup. Ct. Rep. 419). [221 U.S. 514, 523] But those are not cases where shareholders have done all that the law required in order to end their relation to the bank and to get their names off the books.
Where the shareholder has performed every duty which the law imposes upon him in order to secure a transfer of the stock, the fact that it is not transferred on the register of the bank does not continue his liability as such shareholder. Whitney v. Butler, 118 U.S. 655 , 30 L. ed. 266, 7 Sup. Ct. Rep. 61; Earle v. Carson, 188 U.S. 42 , 47 L. ed. 373, 23 Sup. Ct. Rep. 254. The facts of the cases at bar bring them within this principle. These shareholders had done all that the law required of them. Any further action to evidence the changed relation of the shareholders to the bank, upon its books, was not a matter within the control of the shareholders.
It is argued that the construction we have given the statute may amount to a reduction of the capital stock, to the detriment of creditors. The corporation in which these shares were held expired in twenty years. The creditors after that time had no right to hold these shareholders in face of the law, of which all must take notice, permitting the retirement of nonassenting shareholders. If this results in the diminution of outstanding shares of the bank assessable for creditors, it was the very thing made possible by the amended statute. New shareholders are to be brought in by the sale of the stock, as provided in 5. It is true that these defendants retained their certificates, but they were not obliged to surrender them except upon payment for their shares.
It is said, had the corporation made a large gain, instead of failing after the action of these shareholders, in giving notice and naming their appraiser, they might have withdrawn their notice, and obtained the benefit of such increase, but this depends upon the construction of the statute. As we view it, when the shareholders made their election to retire at the end of the first twenty-year period of corporate organization, and took the steps re- [221 U.S. 514, 524] quired in 5, by giving notice and appointing an appraiser to obtain a valuation of and payment for their shares of stock, they thereby ceased to be shareholders beyond the original twenty-year term of the life of the corporation, and they could neither share its profits, nor be compelled to bear its burdens.
The views here expressed require the affirmance of the judgments in both cases.