State v. Phœnix Bank

Butler, J. We cannot assent to the proposition that the state, and other subscribers to the non-transferable stock of the respondent bank, became, by subscribing, depositors or creditors. That such subscribers became shareholders or stockholders, and members of the corporation, was decided in this court in the case of The United Society v. The Eagle Bank, 7 Conn. R., 456. The case was determined by two judges only, the others being disqualified. But the decision, and the reasoning of the court in support of it, command our deliberate approval. So far as the able arguments to which we have listened, made in favor of the proposition that such subscribers did not become stockholders, are founded-on analogies which had their origin in the rules applied to determine the relative rights and duties of individual corpora-tors where the charters were in general terms, they are without force. It was competent for the legislative power to constitute this corporation the special and peculiar being [236] which the petitioner claims that it was ; and if they did in fact give one class of members the entire control and management, and another class a right of withdrawal and restrain them from transferring their stock or voting upon it, intending that they should be members nevertheless, the differences made cannot be legitimately urged as a reason why all could not, or did not, become members pursuant to the legislative will. Nor, on the other hand, do we assent to the claim that the state should be considered a transferable stockholder. For if we were of opinion that it might have become such, originally, under the provisions of the charter, we should not hold that it was such now. The state did not elect to become such, but as to the shares in question became a non-transferable stockholder, and has ever so considered itself, and so been treated by the bank, and it does not comport with justice, or the dignity of the state, to claim the benefit of a different construction at this late day, even if not technically estopped. The state must therefore be considered a nontransferable or qualified stockholder; and we come to the question, what was the effect of the re-organization of the bank as a national institution upon the shares of the stock owned by the state. It is conceded that the stock is not now represented in the national organization. Has the state then a right to be thus represented ? and have we any power to enforce that right ? We are of opinion that both these questions must be answered in the negative. The act of Congress providing for the organization of national banking institutions was intended not only to provide for the organization of new banks, but to absorb the old, and establish a general exclusive banking system for the whole country. It therefore provided for the re-organization of the existing state banks. The existence of a class of qualified stockholders in some of them does not seem to have been contemplated or specially provided for in the act. Its provisions ’ are in general terms, and contemplate the re-organization of the state banks as they then existed. The language used is [237] sufficiently broad and comprehensive to enable the voting stockholders — the managers of a bank constituted as this was — to transfer the entire institution, including the nontransferable stockholders, and the entire capital and assets, and organize all under the provisions of the national law. The remedy of the non-transferable stockholders, in the absence of other state legislation adapted to the case, was in their right of withdrawal and in that only. If therefore there had been no state legislation in respect to the re-organization of this bank, the non-transferable stockholders would have been carried into the national organization, by a transfer of all the capital and assets, unless they chose to avail themselves of their privilege to withdraw, and it would not have been in the power of the bank to exclude them against their consent. But the legislature, in 1863, while this bank existed only under the laws of the state, authorized them to surrender their charter, for the purpose of entering into a national organization, and they did so surrender. Both the surrendry and the re-organization were necessarily the work of the absolute stockholders. The act of surrendry, preceding the act of re-organization, divested the corporation of existence under the state laws, to the extent provided for, and divested the qualified stockholders of all further rights, except their right of equitable ownership in the assets of the deceased institution. The absolute stockholders therefore on such surrendry were absolved from any further obligations to conduct or continue the business for the benefit of the qualified stockholders ; and were at liberty to re-organize under the national law, like any other number or class of individuals. The effect then of the act of 1863, authorizing a surrendry of the charter, was to authorize the absolute stockholders to discontinue the business in connection with the qualified stockholders, and to carry the qualified stockholders into the new organization or not, as they and the qualified stockholders might agree. But it is said and conceded that the bank did not re-organize until after the act of 1864 took effect. If that act was [238] binding upon the absolute stockholders whether accepted or not, then they were bound to carry the qualified stockholders into the new organization, if they elected so to be carried, pursuant to its provisions. But looking at the whole purpose and tenor as well as at the particular provisions of the act of 1864, we are of opinion that it was not absolutely binding upon them in that respect, but that it was optional with them to accept its provisions, or to act under the law of 1868, and without regard to them. They did so act; and it follows that the state and other qualified stockholders have now no right to insist upon a representation in the stock of the bank. The act of 1865 does not apply to the case. This view of the case renders a further consideration of the power of this court to interfere in respect to the stock, unnecessary. Another material question is made as to the right of the state to a share of the surplus. If, as we have assumed, the managing stockholders of the bank surrendered its charter, and it ceased to be a bank before entering into the national organization, with the assent of the state and by its authority, and they thereby severed their connection with the qualified stockholders, it follows logically that the qualified stockholders were entitled to such a distribution of the assets as they would have been entitled to if the affairs of the bank had been wound up, or its assets had been sold bodily in the market; and that clearly would have been a full share of all the assets or avails of the sale. We-do fiot.assent to the claim that the absolute stockholders had ''any. equitable right to require these qualified stockholders to accept par and interest for tlieir stock. They had .no such equity;,; The granting of the charter originally was a great privilege, and the reception of these qualified stockholders, with 'all the rights conferred upon them, as qualified members of.-the"'corporation, was not only one of its provisions, but one of the inducements to the grant; for the charter was deemed valuable beyond the amount of the capital. And the whole capital, as constituted by the subscrip [239] tions of the qualified stockholders as well as the absolute stockholders, was employed in producing the surplus. Moreover the accumulation of the surplus was not an essential part of the business of the bank. It was organized upon the idea that its earnings would be divided as earned, and a court of equity would have compelled a division of them if unjustly or unduly accumulated and withheld, for every stockholder, qualified or absolute, became an equitable owner in the eai’nings as soon as earned, and entitled to an equal share in and a reasonable division of them. The only remaining question is, what advice shall be given to the superior court in relation to the enforcement of the rights of the state. By the act of 1863 the.charter of the bank, although deemed to be surrendered, is preserved so far as is necessary for winding up its affairs, and prosecuting and defending suits. The bank claims the benefit of that act, and makes no objection to the form of this proceeding; and it is competent for a courtof equity, which has obtained jurisdiction for one purpose, to proceed to a final disposition of the whole matter involved. The superior court is therefore advised to take the account, ascertain the value of the capital and accumulations at the date of the surrendry of the charter and re-organization, and the proportionate interest of the state therein, and pass a decree for that amount, and enforce the same by penalty or execution. In this opinion the other judges concurred.