Belcher v. Willcox

Brown, C. J. 1. We are fully agreed that a stockholder of a bank, whose charter makes him liable for the payment of the bills of the bank, in the proportion which his stock bears to the whole capital stock of the bank, or to the whole indebtedness of the bank, who has redeemed by purchase, or in any other legal way, an amount in the bills of the bank as large as the amount of his liability, is fully discharged from all further liability, and may plead that fact, accompanied by a tender of the bills, in bar of any suit brought against him on his -personal liability to pay or redeem the bills of the bank. We understand this to be the settled rule in this Court, admitted by the counsel on both éides, in this case, to be law. See 16 Georgia, 217; 18 Georgia, 109. And why not? If each stockholder will redeem a like proportion, the whole liability is at once extinguished. At any rate, it is extinguished_ as to each, when he redeems his proportion. 2. When the assets of an insolvent bank are to be collected and distributed by a Receiver, section 1496 of the — 397 — Code provides, that debtors are not, in such case, allowed to pay their debts to the Receiver, in bills, of the bank at par value, unless accompanied by an affidavit that they are the identical bills received from the bank, by which the debt was created. Now it is admitted that this.Bank is insolvent, and the question is, how the assets shall be divided among the creditors. This Court in Collins vs. the Central Bank el. al., 1 Georgia, 461, lays down the rule distinctly and broadly, that in the distribution of the assets of an insolvent bank, each bank bill should take in proportion to the, quantum of consideration paid therefor by the holder, or claimant on the fund, and not that each bill should take in proportion to the value received by the bank for it, at the time of its emission by the bank, and that each holder or claimant should state the quantum actually paid therefor,’ on oath, in writing, etc. This rule, when the distibution is'to be made in Chancery, seems to us to,be sustained by reason as, well as authority, and to rest upon the most solid and substantial equities. The Receiver has a claim against a debtor to the bank. The statute says he shall not be permitted to buy up the depreciated bills of the bank, at a heavy discount, and be allowed par value for tjiem in his settlement with the bank, unless they aré the identical bills received from the bank, by which the debt was created. If this is a sound rule, upon yhat reason can the bill-holder, who claims the fund when collected, be permitted to demand par value for bills which he purchased at ten cents in the dollar ? A planter or farmer gave one hundred bushels of corn for $100 00 of the bills of the Bank of Columbus, before the war, when they were worth par in. the market, and circulated as currency. He has kept them ever since, and now lays them before the Receiver to claim his part of the assets of the bank for distribution. A broker since the war has purchased $100 00 of the bills for ten cents in the dollar, and brings them in to claim his part of the assets. What principle of equity or justice wo_uld say that he should share equally in the distribution with the creditor'who paid one hundred cents in the dollar, and has lost the use of his money for several years — 398 — longer than the creditor who ,gave but ten cents in the dollar for his ? In analogy, the rule fixed by the statute, to govern in the payment of debts due to the bank, and upon the authority of the case of Collins vs. the Central Bank, we are very clear that each bill-holder takes his proportion of the whole assets of the bank only in proportion of the quantum of consideration paid by him for the bills, and that each should be required to state, on oath, in writing, that he is a bona fide holder of the bills, and to state as nearly as possible the amount he paid for them, and when, and to whom, and in what, it was paid; and that every other claimant should have the right to contest the statement made by each as to the quantum, or true value of the consideration paid by him for the bills. In this position also I understand the whole Court to agree. Section 1495 of the Code provides in case of an insolvent bank, that the order of paying off the debts shall be the same as is prescribed in case of administration, to the extent applicable, except where special preference or postponement is given by law. Now it must be remembered that creditors who fail to give notice of their claims, within the time allowed after the notice published by the administrator, do not lose their equal participation in the funds of the 'estate with, other claims of equal dignity, if their claims are brought to the notice of the administrator, before the distribution is made. They only lose their right to hold the administrator personally liable, if he has paid out the fund after the time' expired, and before he had notice of their claims. But they may still be paid after the distribution, if there are assets in the hands of the administrator, and there are no claims of Ivigher dignity unpaid. So in this case, if the Receiver goes on and distributes the fund, after the six months publication of notice, without knowledge of the claims of bill-holders, who have not presented their bills, he is not personally liable, nor will the more vigilant bill-holders, who have received the money on distribution, be held liable to refund, or to contribute to those who did not give notice of their claims within the six months. — 399 — For these reasons I understand the majority of the Court to hold, that bill-holders who presented their bills after the end of the six months, but before the distribution was made, share pro rata with the other bill-holders Avho presented theirs within the six months. The object of the Legislature in this case, as in the case of administration, was to fix a time when the Receiver might safely proceed to distribute the fund without personal liability, and not to cut off creditors of equal dignity, and with equal equities, whose claims were presented before the distribution was made. 4. But it must be borne in mind, that section 1495 excepts cases from the general rule applicable to administration, where special preference is given by law. And by section 1493, construed in connection with the former legislation on this subject, and in the light of the former decisions of this Court, we all hold that special preference is given by law to bill-holders over all other-creditors of the bank. See 18 Georgia, 66. 5. The stockholders of the Bank of Columbus are by the charter declared to be personally, individually, and severally bound for the payment of the bills of the bank, Avithout suit against the bank, to creditors holding bills unpaid, in the proportion that the stock subscribed for by them, bears to the whole stock of the bank, It was contended in the argument, .that the stockholders, under this provision of the charter, are copartners with the bank, and that, as such, they are to be postponed till all other creditors of the partnership are paid. I do not so understand the law. The stockholders are no more nor less than indorsersj or secureties, for the payment, of the bills of the bank. 11 Georgia, 517. In this case they are sureties, liable to be sued separately, -without first suing. the bank. But they are none the less sureties on that account. A surety to a joint and several promissory note may be sued separately, and in the first instance, just as the stockholders of the Columbus bank may be under the charter. The corporation is a person in law entirely separate and distinct from the corporators or stockholders, and they, in consideration of the credit given it by the bill-holders, become — 400 — sureties for the redemption of the bills. This is the nature and whole extent of the liability. Therefore the law of partnership has no application to this case. 6. But it is insisted that each stockholder is liable to redeem. his proportion of the bills in circulation, that when he redeems a bill it is in extinguishment of his liability, and that he can not claim a share in the distribution of the assets, that the redemption of the bill by a stockholder is a payment of the bill, and it can not be used to claim any part in distribution. If this rule be sound, all the bills of this, and probably every other bank in the State, have no doubt long since been redeemed and' paid off. For, in that case, no matter when a bill may come to the hands of a stockholder it is paid off and extinguished, and could not be afterwards used as a circulating medium. And probably all the bills of the bank, or most of them at least, have, at some time, passed through the hands of the stockholders, as it is a well known fact that the bills are repeatedly paid into the bank, and paid out again in its daily transactions. I see no good reason why the bill-holders, who are stockholders, may not present their bills and share equally with other bill-holders in the distribution of the assets of the bank, under the rules above laid down. Indeed, I do not see how we can investigate the question in this proceeding, who are or who are not stockholders. 'There may be many persons whose names now appear on the books as stockholders, who aré not such in fact, and are not liable for the redemption of any part of the bills. To exclude such bill-holders from participation in the distribution of the fund would do great injustice. And it is foreign to the objects of this bill to investigate the question of the individual liability of each person who is charged to be a stockholder, or the, extent of his liability. Again, such a ruling would do great injustice between stockholders themselves. Suppose the assets of the bank to be twenty-five per eent. upon the circulation, and that one half of the bills are now in the hands of stockholders, and that the stockholders who are bill-holders are denied any — 401 — participation in the assets, and what is the result? The bill-holders, not stockholders, who hold half the entire amount of bills, and among whom the whole fund is distributed, will get fifty per cent, upon their bills. What then ? The remaining stockholders who 'had redeemed none of the bills are only liable to redeem that part of their half of the bills which was not paid by the assets of the bank. In other words, they are only liable to redeem half of their original liability, while the stockholder bill-holders have been obliged to redeem all of theirs. Thus by operation of the rule insisted upon, all the assets of the bank are applied to the ex-tinguishment of the liability of half of the stockholders, while the other half are left to redeem their entire liability. This is neither just nor equitable. The true rule, in my opinion, is to distribute, the assets among all the bill-holders whose bills are presented to the Receiver before distribution, and leave the bill-holders who are not stockholders to their remedy, against all the stockholders, on their personal liability, for the balance. In this way, the questions of law between them can be fairly adjudicated, and each bill-holder, who appears by the books to be a stockholder, will have a fair chance to defend himself, if he is' nqt, in fact, liable as such. If by participation in the assets, any bill-holder, should have the amount of bills held by him reduced below'the whole amount of his liability, for his proportion of the bills not redeemed by the assets, he will be obliged to make up the deficiency by the purchase or redemption of other bills, or he will be liable for the difference. As this is a proceeding in equity, it is the opinion of the majority of the Court, and it is so adjudged, that the assets of the Bank of Columbus, in the hands of the-Receiver, be distributed pro rata among all the bill-holders of the bank, whose bills are before the Receiver, at the time he makes the distribution, in proportion to the quantum of consideration paid by each,'without regard to the fact whether they are stockholders or not, and in preference to all other debts of the bank. As the judgment of' the Court below let in a creditor, not a bill-holder, to share > — 402 — with bill-holders, and permitted all bill-holders to share according to the face of their bills, we reverse the judgment on these grounds, and send the case back with instruction that the distribution be made in conformity to this ruling. Judgment reversed.