Phelps v. Farmers & Mechanics Bank

Ellsworth, J. This petition is brought by an individual stockholder of the Farmers and Mechanics’ bank, to try the question whether the public and privileged stockholders in the bank, as the state, colleges, school societies, religious corporations and the like, stand on the same ground as to dividends, whenever made by the bank, as the other stockholders. It appears from the record that this bank went into operation in 1833, and had at the time of the dividend of fifteen per cent., (May 11th, 1857,) an accumulated surplus of about $90,000, which surplus or a considerable part of it had been accumulating for years, and the greater part of which had been earned before most of the subscriptions of these corporations had been made. It is claimed by the petitioner that these corporate bodies are not shareholders entitled to the lights and privileges of shareholders, but are mere depositors, entitled by virtue of their peculiar relation to the bank, to participate only in the profits which their own funds respectively helped to earn, just as the statute of 1855, (Pub. Acts 1855, p. 18,) directs shall be the law thereafter. On the other hand it is contended that when these corporate bodies subscribe under the 10th section of this charter, (the provisions of which are to [272] be found in the bank charters generally,) they hold their stock just like the other shareholders, and of course are entitled to share as others in all the dividends and property of the bank. We think this, latter view is the correct one. The charter speaks of these subscriptions as “ shares of stock,” and for aught we see they are throughout placed on the same footing with other shares of stock, saving only that they may not be transferred, and may be withdrawn after notice, at par, so long as the bank is solvent. The profits of a bank, no matter when made, until separated from the stock by declaring a dividend, are mere increment and augmentation of the stock. They are properly stock themselves, composing a part of the stock of the bank, and will pass with the stock under that name, either by contract, bequest or levy of execution. The impossibility of ascertaining the exact state and condition of the bank at the moment of subscribing, (and subscriptions of this class are made, not at any fixed time, but at the pleasure of the party,) is a weighty consideration why undeclared profits should be held to be a part of the stock itself. If a bank has a certain defined surplus, which has actually been separated and made distinct, and is so known and treated by contracting parties or by the statute, it is possible that it may, in that case, be held to possess a new character and be dealt with accordingly; but it must be a very peculiar case, differing essentially from what we have here. This $90,000 had not been separated from the other profits, but was mixed indiscriminately with them, and was attached to and constituted a part of each share of the stock until the dividend of the 11th of May, 1857. The case in this court of the United Society v. Eagle Bank, 7 Conn., 456, is against the views of the petitioner. There the court held that the society by its subscription became a part of the corporation and held its shares like the other stockholders, and that its inability to transfer its stock and its privilege to withdraw at par made no difference in its character as a stockholder. Indeed these qualifications presuppose that these corporate bodies are stockholders, for why [273] else does the charter provide that they shall not transfer their stock, and may on notice withdraw it at par. The bill must be dismissed. In this opinion the other judges concurred. Bill to be dismissed.