THAYER, Circuit Judge,
after stating the facts as above, delivered the opinion of the court.
[871]*871The circuit court appears to have [¡(Id that the answer filed by the receiver and by the First National Bank was sufficient to show that the plaintiffs occupied Hie relation of stockholders of the bank at the time of its insolvency, and that the grounds relied upon by the plaintiffs to show that they were not stockholders, but were merely creditors, had been held to be untenable in eacli of the following cases: Delano v. Butler, 118 U. S. 634, 7 Sup. Ct. 39; Aspinwall v. Butler, 133 U. S. 595, 10 Sup. Ct. 417; and Bank v. Eaton, 141 U. S. 227, 11 Sup. Ct. 984. Wo are of the opinion, however, that the view which seems to have controlled the decision of the circuit court; was erroneous. In the cases above cited, it appeared that the di rectors of a national bank had voted to increase its capital stock from five hundred thousand to one million dollars; that subscriptions to the new stock had been invited from the shareholders, and that subscriptions to the amount of $461,300, and no more, had been obtained; and that the amount of such subscriptions to the new stock had been paid in full by the several subscribers. Subsequently. the directors adopted another resolution canceling so much of the proposed increased stock as was in excess of $461,300, (lie amount actually subscribed, and fixing the paid-up capital at $9.01,300, in lien of $1,000,000, as at first proposed. The comptroller of the currency approved of the increase, to the extent of $401,300, and issued his certificate, in accordance with section 5342 of the lie-vised Statutes, that the stock had been increased to that amount, and that the amount of such increase had been paid in. The bank having been subsequently declared to be insolvent, and a receiver having been appointed to liquidate its affairs, certain of flic shareholders who had subscribed for the new or increased stock, and who had paid the amount of their several subscriptions, attempted to escape liability as holders of the new stock on the ground that they had never assented to the resolution to cancel a portion of the increased stock and to reduce the capital of the bank from $1,000,-000, as originally proposed, to $961,300. In two of the cases above cited, — Delano v. Butler, 118 U. S. 634, 7 Sup. Ct. 39, and Aspinwall v. Butler, 133 U. S. 595, 10 Sup. Ct. 417,- — it appeared that the subscribers for new stock bad not: only paid for the same, but that they had each received and accepted stock certificates certifying to their ownership of the new stock. In the other case, — Bank v. Eaton, 141 U. S. 227, 11 Sup. Ct. 984, — the stock certificate, it seems, had not been made out or delivered. In these three cases it was held, substantially, that, although Hie original proposition made by the board of directors was a proposition to increase the stock to the extent of $500,000, yet the comptroller had power to assent to an increase less than was originally proposed, but equal to the amount that was actually subscribed and paid for. The court: evidently entertained the view that the by-laws of the bank gave the board of directors authority to cancel such portion of the increased stock as was not taken by the shareholders, and that after the board had canceled so much as was not subscribed, and the comptroller had approved of the board’s aciion, and had issued his certificate declaring that the stock had been increased to a given amount, it was then too [872]*872late for a subscriber to the new stock to object to the increase, or to assert that he was not a stockholder, on the ground that the increase was less than the sum originally proposed. The court also decided, in, the cases above cited, that the several subscriptions then under consideration had not been made on condition that the entire amount 'of the proposed new stock should be subscribed. With reference to these points, Mr. Justice Bradley, in Aspinwall v. Butler, 133 U. S. 595, 607, 10 Sup. Ct. 417, used the following language:
“The deficiency under $500,000 arose from the fact that some of the stockholders did not avail themselves of their right to subscribe. The eleventh section of the by-laws of the bank has this express provision, that, ‘if any stockholder should fail to subscribe for the amount of stock to which he may be entitled, within a reasonable time, which shall be stated in the notice, the directors may determine what disposition shall be.made of the privilege of subscribing for the new stock.’ This gave the directors full power over the deficiency of the subscriptions, and was in itself authority, if no other existed, to validate the action of the directors and the comptroller in disregarding such deficiency, and equating the new stock to the subscriptions actually made and paid in. There was no express condition that the individual subscriptions should be void if the whole $500,000 was not subscribed; and, in our judgment, there was no implied condition in law to that effect. Each subscriber, by paying the amount of his subscription, thereby indicated that it was not made on any such condition. It is not like the case of creditors signing a composition deed to take a certain proportion of their claims in discharge of their debtor. The fixed amount of capital stock in business corporations often remains unfilled, both as to the number of shares subscribed, and as to payment of installments, and the unsubscribed stock is issued from time to time, as the exigencies of the company may require. The fact that some of the stock remains unsubscribed is not sufficient ground for a particular stockholder to withdraw his capital.”
We find nothing in either of these eases- which lends any support to the view that the stock of a national bank can be lawfully increased before the entire amount of the new capital has been paid in and the comptroller of the currency has certified to the increase and to the fact of payment in the mode prescribed by section 5142 of the Bevised Statutes. On the contrary, in Delano v. Butler, 118 U. S. 634, 649, 7 Sup. Ct. 39, it was said by Mr. Justice Matthews, and the doctrine has been adhered to in all subsequent cases, that:
“Three things must occur to constitute a valid increase of the capital stock of a national banking association — First, that the association, in the mode pointed out in.its articles, and not in excess of the maximum prescribed for by them, shall assent to an increased amount; second, that the whole amount of the proposed increase shall be paid in as part of thq capital of such association; and, third, that the comptroller of the currency, by his certificate specifying the.amount of such increase of capital stock, shall approve thereof, and certify to the fact of its payment.”
Free access — add to your briefcase to read the full text and ask questions with AI
THAYER, Circuit Judge,
after stating the facts as above, delivered the opinion of the court.
[871]*871The circuit court appears to have [¡(Id that the answer filed by the receiver and by the First National Bank was sufficient to show that the plaintiffs occupied Hie relation of stockholders of the bank at the time of its insolvency, and that the grounds relied upon by the plaintiffs to show that they were not stockholders, but were merely creditors, had been held to be untenable in eacli of the following cases: Delano v. Butler, 118 U. S. 634, 7 Sup. Ct. 39; Aspinwall v. Butler, 133 U. S. 595, 10 Sup. Ct. 417; and Bank v. Eaton, 141 U. S. 227, 11 Sup. Ct. 984. Wo are of the opinion, however, that the view which seems to have controlled the decision of the circuit court; was erroneous. In the cases above cited, it appeared that the di rectors of a national bank had voted to increase its capital stock from five hundred thousand to one million dollars; that subscriptions to the new stock had been invited from the shareholders, and that subscriptions to the amount of $461,300, and no more, had been obtained; and that the amount of such subscriptions to the new stock had been paid in full by the several subscribers. Subsequently. the directors adopted another resolution canceling so much of the proposed increased stock as was in excess of $461,300, (lie amount actually subscribed, and fixing the paid-up capital at $9.01,300, in lien of $1,000,000, as at first proposed. The comptroller of the currency approved of the increase, to the extent of $401,300, and issued his certificate, in accordance with section 5342 of the lie-vised Statutes, that the stock had been increased to that amount, and that the amount of such increase had been paid in. The bank having been subsequently declared to be insolvent, and a receiver having been appointed to liquidate its affairs, certain of flic shareholders who had subscribed for the new or increased stock, and who had paid the amount of their several subscriptions, attempted to escape liability as holders of the new stock on the ground that they had never assented to the resolution to cancel a portion of the increased stock and to reduce the capital of the bank from $1,000,-000, as originally proposed, to $961,300. In two of the cases above cited, — Delano v. Butler, 118 U. S. 634, 7 Sup. Ct. 39, and Aspinwall v. Butler, 133 U. S. 595, 10 Sup. Ct. 417,- — it appeared that the subscribers for new stock bad not: only paid for the same, but that they had each received and accepted stock certificates certifying to their ownership of the new stock. In the other case, — Bank v. Eaton, 141 U. S. 227, 11 Sup. Ct. 984, — the stock certificate, it seems, had not been made out or delivered. In these three cases it was held, substantially, that, although Hie original proposition made by the board of directors was a proposition to increase the stock to the extent of $500,000, yet the comptroller had power to assent to an increase less than was originally proposed, but equal to the amount that was actually subscribed and paid for. The court: evidently entertained the view that the by-laws of the bank gave the board of directors authority to cancel such portion of the increased stock as was not taken by the shareholders, and that after the board had canceled so much as was not subscribed, and the comptroller had approved of the board’s aciion, and had issued his certificate declaring that the stock had been increased to a given amount, it was then too [872]*872late for a subscriber to the new stock to object to the increase, or to assert that he was not a stockholder, on the ground that the increase was less than the sum originally proposed. The court also decided, in, the cases above cited, that the several subscriptions then under consideration had not been made on condition that the entire amount 'of the proposed new stock should be subscribed. With reference to these points, Mr. Justice Bradley, in Aspinwall v. Butler, 133 U. S. 595, 607, 10 Sup. Ct. 417, used the following language:
“The deficiency under $500,000 arose from the fact that some of the stockholders did not avail themselves of their right to subscribe. The eleventh section of the by-laws of the bank has this express provision, that, ‘if any stockholder should fail to subscribe for the amount of stock to which he may be entitled, within a reasonable time, which shall be stated in the notice, the directors may determine what disposition shall be.made of the privilege of subscribing for the new stock.’ This gave the directors full power over the deficiency of the subscriptions, and was in itself authority, if no other existed, to validate the action of the directors and the comptroller in disregarding such deficiency, and equating the new stock to the subscriptions actually made and paid in. There was no express condition that the individual subscriptions should be void if the whole $500,000 was not subscribed; and, in our judgment, there was no implied condition in law to that effect. Each subscriber, by paying the amount of his subscription, thereby indicated that it was not made on any such condition. It is not like the case of creditors signing a composition deed to take a certain proportion of their claims in discharge of their debtor. The fixed amount of capital stock in business corporations often remains unfilled, both as to the number of shares subscribed, and as to payment of installments, and the unsubscribed stock is issued from time to time, as the exigencies of the company may require. The fact that some of the stock remains unsubscribed is not sufficient ground for a particular stockholder to withdraw his capital.”
We find nothing in either of these eases- which lends any support to the view that the stock of a national bank can be lawfully increased before the entire amount of the new capital has been paid in and the comptroller of the currency has certified to the increase and to the fact of payment in the mode prescribed by section 5142 of the Bevised Statutes. On the contrary, in Delano v. Butler, 118 U. S. 634, 649, 7 Sup. Ct. 39, it was said by Mr. Justice Matthews, and the doctrine has been adhered to in all subsequent cases, that:
“Three things must occur to constitute a valid increase of the capital stock of a national banking association — First, that the association, in the mode pointed out in.its articles, and not in excess of the maximum prescribed for by them, shall assent to an increased amount; second, that the whole amount of the proposed increase shall be paid in as part of thq capital of such association; and, third, that the comptroller of the currency, by his certificate specifying the.amount of such increase of capital stock, shall approve thereof, and certify to the fact of its payment.”
A case might possibly arise where a subscriber for new stock would be estopped from asserting, as against a creditor of a national bank, that he was not a stockholder, even though the provisions of the statute had not been strictly followed; but we are not called upon at present to deal with a case of that character. The answer fíléd in the suit at bar does not disclose a state of facts that is sufficient to create an estoppel. It shows affirmatively, as we think, that while certain preliminary steps had been taken, by the requisite number of. shareholders, to increase the stock of the defendant [873]*873bank from $100,000 to $200,000, yet that the comptroller of the currency had refused to consent t.o an increase of capital stock in excess of $50,000; that the latter amount of new capital had not been paid in when the bank failed; and that no certificate had been issued by the comptroller declaring an increase of capital stock and certifying to the fact of payment. Moreover, the complaint averred, in legal effect (and the allegation in that respect was not denied), that the money paid by the plaintiffs on account of their several subscriptions was so paid in pursuance of an express agreement that it should be held in trust and applied in payment of their several stock subscriptions when the full amount of their respective subscriptions had been paid in, and when the comptroller of the currency had duly issued his certificate declaring an increase of capital. Under these circumstances, we think that the answer filed by the defendants failed to show7 that the plaintiffs were stockholders of the defendant bank to the amount of their several subscriptions, or that, at the time of its failure, the stock thereof had been lawfully increased to the amount of $50,000 or to any other amount. It results from this view that the circuit court erred in overruling the demurrer to the answer. Its judgment is accordingly reversed, and the case is remanded to the circuit court, with directions to grant a new trial.