American Nat. Bank of Macon v. Commercial Nat. Bank of Macon

WALKER, Circuit Judge (after stating the facts as above). The dismissal of the amended bill is sought to be sustained on the ground [256] that its averments do not show that the plaintiff hank has a claim or demand against the defendant bank for which the statute (Act Dec. 23,1913, c. 6, § 23, 38 Stat. 273 [Comp. St. 1916, § 9689]) makes the latter’s shareholders individually responsible. In behalf of the appellees it is contended that the alleged transaction between the two banks'was a sale of assets by one of them to the other, or a consolidation of the two, and that tibe contract entered into and performance under it did not result in the creation of the relation of creditor and debtor between them. Provisions contained in the contract give some color to this contention if they are considered by themselves without due regard to the remainder of the contract, the situation with which it dealt, and the conduct of the parties to the contract while performance under it was in progress evidencing what each of them understood was the effect of a compliance by the American Bank with the obligations imposed upon it by the contract. The provisions referred to — namely, the one as to the transfer of the assets, the one in regard to liquidating the Commercial Bank and consolidating it with the American Bank by the purchase by the latter of the assets of the former, and the one in regard to making one of the banks liquidating agent for the other — lose the significance sought to be attributed to .them when they are considered in connection with other provisions contained in the contract and in'the light of the situation existing when the contract was made and for some time after-wards, and of the construction of the contract by both parties to it as disclosed by what was done under it. The averments of the bill show that at the time the contract was entered into, and for some time thereafter, the Commercial Bank continued in active operation, performing all the ordinary functions of a bank through its.own officers and clerks. Its status then was not that of. a liquidating bank. While its board of directors contemplated and made provision for its future liquidation, if and when duly authorized by the required vote of its shareholders, the process of liquidation provided for by the statute (Rev. St. § 5220 [Comp. St. 1916, § 9806])' had not begun, and could not have begun prior to its going into liquidation and being closed by the required vote of its shareholders owning two-thirds of its stock. While the bank was in active operation, its liquidation not having been determined upon by its shareholders, it was capable of incurring obligations for which its shareholders would be responsible under the statute. Schrader v. Manufacturers’ National Bank of Chicago, 133 U. S. 67, 10 Sup. Ct. 238, 33 L. Ed. 564; Wyman v. Wallace, 201 U. S. 230, 26 Sup. Ct. 495, 50 L. Ed. 738. The American Bank’s obligation to pay the Commercial Bank’s depositors and other liabilities when and as the same were presented for payment was effective from the time the contract was made, not being dependent or contingent upon the contemplated closing and liquidation of the Commercial Bank being determined upon by the required two-thirds vote of its shareholders. Performance was begun by the American Bank while the Commercial Bank remained open, continuing to carry on in the customary way the banking business in which it was engaged. By the terms of the contract the American Bank also obligated itself to continue [257] to pay the Commercial Bank’s depositors and other liabilities when and as the same were presented after the latter went into liquidation and was closed, in the event that happened, the American Bank agreeing to accept the appointment as liquidating agent of the Commercial Bank. In so far as the contract obligated the American Bank to take care of the liabilities of the Commercial Bank prior to the latter being duly closed and put into liquidation, it was one capable of being made by the two banks, acting through their respective boards of directors and managing officers, without being authorized or ratified by a vote of the shareholders of either. Making arrangements for funds needed to meet its liabilities as they accrue is not out of the ordinary course of a banking business. While the Commercial Bank was open, receiving deposits and otherwise continuing the business in which it had been engaged, its directors and managing officers were empowered to incur debts in its behalf to secure funds required to enable it to meet its obligations as they accrued. The creation of debts under such circumstances and for such a purpose is not more out of the ordinary course of a banking business than the incurring of liabilities by the acceptance of deposits. In determining the meaning and effect of that part of the contract which obligated the American Bank to supply the funds required to take care of the liabilities of the Commercial Bank as they accrued before the question of its closing and going into liquidation should be determined by its shareholders, our consideration is not confined to the language used in the written instrument evidencing the agreement of the parties, but where the terms employed are in any respect equivocal or of doubtful meaning, the construction given to the contract by both parties to it, evidenced by their dealings with each other in the course of carrying out the contract, may be looked to. The contract contains expressions and provisions which do not seem to us to be reconcilable with the existence of an intention other than that the making by the American Bank of the agreed disbursements in taking care of the liabilities of the Commercial Bank was to have the effect of creating a debt or debts owing by the latter to the former. Those disbursements were called “advances,” and it was provided that the amounts realized by the American Bank from the assigned assets was to be applied by it— “first, in repaying to itself all amounts advanced by it hereunder, with interest thereon at the rate of seven (7%) per cent, per annum; next, in discharging the liabilities of the Commercial National Bank which shall not have been paid by advances made by the American National Bank; and that when all of said liabilities have been fully discharged, it will account to the shareholders of said Commercial Bank and from time to time pay over to said shareholders pro rata the surplus remaining in its hands from the proceeds of said assets.” This plainly indicates that the parties intended that performance by the American Bank of the obligations it incurred was to have the effect of creating an interest-bearing debt owing to it, and that the transferred assets were received and held by it, not as property bought by it, but as a pledge or security for the payment of that debt. If [258] the stipulated outlays by the American Bank had been understood to be payments on the price of the assets transferred, it is not to be supposed that they would have been called “advances,” or that interest on them would have been provided for. Laffin & Rand Powder Co. v. Burkhardt, 97 U. S. 110, 24 L. Ed. 973. _ The concluding provision of the contract was to the effect that neither the contract nor the resolutions authorizing it— “shall relieve the shareholders of thp Commercial National Bank from their legal liability as shareholders to respond, in the event it may be necessary to have recourse upon such shareholders’ liability, for any deficit which may remain after exhausting the other assets of said association in the payment of its liabilities.” It hardly is conceivable that this provision would have been inserted in the absence of an intention that the making by the American Bank of the disbursements it obligated itself to make would result in creating a liability of the Commercial Bank for which the latter’s shareholders would be individually responsible. But it may be assumed or conceded that the language of the contract fails to show unambiguously that performance by the American Bank of the obligations it incurred was to have the effect of making it a creditor of the Commercial Bank. The averments of the bill show that both parties to the contract, from the commencement of performance under it, treated the payments made by the American Bank as having the effect of making it a creditor of the Commercial Bank. The American Bank entered the payments on its books as overdrafts. This was in pursuance of an agreement to which the officers and the finance committee of the Commercial Bank were parties. On the books of the latter these transactions were entered under the head “Due American National Bank.” Each of the entries indicated the existence’ of the relation of creditor and debtor, not that of purchaser and seller. The agreement between the two banks in pursuance of which the disbursements made by the one to discharge the liabilities of the other were entered as overdrafts of the one on the other was as clear a recognition that debts were thereby created as if the one bank had given its notes to the other for the amounts of such disbursements. The incidents mentioned, as well as others disclosed, show that those in charge of the business of each of the banks understood that what was done under the contract had the effect of creating a debt owing by the Commercial Bank to the American Bank. It fairly appears from the averments of the bill as amended that neither party to the contract during the period of performance understood that it had the meaning now attributed to it in behalf of the appellees, and that the conduct of each of them from the time perform'ance under the contract commenced was inconsistent with the contract having that meaning or effect. We think the averments of the bill as amended show that the American Bank, while the Commercial Bank in the customary way was transacting business as an active banking institution, so made payments for it and at its instance or request that a claim or demand was created against the last-named bank for which its shareholders [259] are by the statute made individually responsible to the extent of the amount of their stock. It follows that the dismissal of' the bill as amended was erroneous. The decree to that effect is reversed.