United Securities Co. v. Ostenberg

Gabbert, C. J., delivered the opinion of the court. Accepting as correct the findings of the trial court that the stock was sold to Chapman and Eldredge the defendant cannot escape liability. The purchase was made with the funds and assets of the bank. The defendant knew this, and having received its funds and assets with this knowledge, he is liable therefor to its creditors. DeBaca v. Higgins, 58 Colo. 75,143 Pac. 833. As a fact, however, the sale was made to the bank. At least the transaction must be so treated, because it is clear the purchase was not made by any individual. The statute inhibited the bank from making the purchase. The funds and assets of the bank were used to make the purchase with the knowledge of the defendant. [257] As a rule, to which there are few, if any exceptions, a stockholder who conveys his stock in a bank, to it, or for a transfer of his stock knowingly receives therefor the funds and assets of the bank, holds the same subject to the prior rights of the creditors of the institution. — Crandall v. Lincoln, 52 Conn. 73, 52 Am. Rep. 560; DeBaca v. Higgins, supra. Whether or not the stock belonged to Ostenberg or his wife is not material. He was the cashier of the bank. True, he states that he handed in his resignation before the sale was agreed upon or the transfer was made, but it had not been accepted. This was a mere subterfuge resorted to for the purpose of apparently changing his relations with the bank. He still assumed to have control and authority over its affairs by entering the transaction upon the books of the bank, and in the circumstances of this case he must be treated as the cashier of the institution, not only at the time the arrangement for the sale of the stock was made, but also when the transaction was closed and he is therefore liable for the misappropriation of the assets of the bank to which he was a party in his official capacity independent of the ownership of the stock transferred. The next question to consider is whether it can be said the transaction was ratified so as to estop the receiver, or his assignee, the plaintiff, from maintaining an action to recover the funds and assets received by Ostenberg in consideration of a transfer of the stock. Chapman, Freeman and Eldridge constituted a majority of the board of directors after Ostenberg retired. There is no testimony tending to prove that they attempted to ratify the application of the funds and assets of the bank for. the purchase of the stock either by Chapman or Eldridge, or by the bank, or for its transfer, except their silence or failure to demand from, Ostenberg that he repay the bank. They were members of the board authorizing the illegal transaction and could not ratify it as against creditors. Oliver v. Rahway Ice Co., 64 [258] N. J. Eq. 596, 54 Atl. 460. Neither does the silence of the stockholders of the bank, other than the directors above named, constitute a ratification. There is no testimony that they had any knowledge of the misappropriation of the funds and assets of the bank. Oliver v. Rahway Ice Co., supra. The final question relates to the title of plaintiff to the causes of action sued upon and its right to maintain an action thereon. The bank could have maintained an action to recover on these items. So could the receiver for the benefit of the creditors of the institution. Under the law providing for the appointment of a receiver for an insolvent bank, and by the order of the court appointing him, the title to all the assets of the bank vested in him. The law authorizes the receiver to sell or compound all doubtful debts, and sell the personal property of the bank on such terms as the court may direct. This embraces indebtedness from persons which the creditors of the bank have a right to subject to the payment of their claims. The proceedings relating to the sale of the assets of the bank were regular, and were approved by the court. The indebtedness of Ostenberg sued upon was part of these assets. It was scheduled by the receiver, and though not specifically mentioned, unqestionably passed to the plaintiff by virtue of the sale by the receiver. The bid for the assets was approved, because it appeared it was for the best interest of the creditors and depositors that it be accepted, and we must assume that the sale was authorized, so that funds would be realized to apply upon their claims. The overdraft of Ostenberg was a debt due the bank. The money he received on the drafts and cashier’s check created the relation of debtor and creditor between the bank and himself. These several items were, therefore, assignable, and plaintiff may maintain an action thereon. Byxbie v. Wood, 24 N. Y. 607; Harrington v. Conner, 51 Nebr. 214, 70 N. W. 911; sec. 7258 Revised Statutes 1908; Home Insurance [259] Co., v. A. T. & S. F. R. Co., 19 Colo. 46. 34 Pac. 281. In other words, the items upon which plaintiff’s causes of action are based are choses in action, and could, therefore, be assigned and an action maintained thereon by the assignee. The judgment of the District Court is reversed and the cause remanded with directions to enter judgment in favor of the plaintiff and against the defendant in accordance with the views herein expressed. Judgment reversed and cause remanded with directions. Mr. Justice Garrigues and Mr. Justice Scott concur.