Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

SLAUGHTER v. BROWN

July 19, 1935

SLAUGHTER
v.
BROWN



The opinion of the court was delivered by: AVIS

The receiver instituted suit against defendant based upon an assessment made by the Comptroller of the Currency against stockholders of the Union National Bank, an insolvent banking corporation. In the complaint it is alleged that defendant at the time the assessment was levied owned 10 shares of the capital stock of the bank, of a par value of $100 per share. The assessment, made on January 8, 1934, was 100 per cent. The defendant's alleged liability is $1,000. The answer admits all of the material allegations of the complaint, but sets up thirteen separate defenses as a bar to the action. The first defense states that defendant was adjudicated a bankrupt on April 21, 1933, and that by reason thereof from that time on he was not the legal or equitable owner of said shares of stock, and consequently is not liable for the assessment. It is not necessary to discuss this defense, as defendant in his brief consents that it be stricken.

Defenses "Second" to "Seventh," inclusive, are all based upon the assertion and apparent facts that defendant was, on April 21, 1933, adjudicated a bankrupt, and was duly discharged on July 31, 1933, and that defendant included the stock as an asset and his liability to assessment thereon in his scheduled list of debts.

 The plaintiff moves to strike the answer and the defenses set up, claiming all of them to be frivolous or sham. It does not seem necessary to specifically set forth the various defenses interposed. Many combinations are disclosed in the items set forth, but a study thereof reveals the actual points to be as follows: (1) That the listing of the stock as an asset, and the liability to assessment thereon as a debt, and the liability for assessment not having been excepted in the discharge, the defendant was discharged from the indebtedness. (2) That the liability for assessment was a provable debt at the time of adjudication and discharge, because: (a) Defendant was a surety; (b) debt or liability was founded on implied contract; (c) liability had occurred at the time of and prior to defendant's discharge, and was then a provable debt; (d) insolency of, sale of assets, and voluntary liquidation of Union National Bank prior to adjudication and discharge, rendered the debt provable; (e) claim under assessment on stock was a provable debt and capable of being enforced at the time of adjudication and discharge.

 As to the first question, no cases are cited in brief, and the court has found none, which even suggest that in a case of this character the court has any right to except from discharge any debts of the bankrupt. The statute (11 U.S.C.A. § 35) provides that the discharge "shall release the bankrupt from all of his provable debts," except such as are particularly scheduled in the statute.

 In Remington on Bankruptcy (4th Ed.) vol. 7, § 3440, it is set forth:

 "In some reported cases, the bankruptcy court, in granting a discharge, uses language indicating that it considers it to be within the court's function, when the discharge is granted, to limit or qualify its effect.

 "Notably is this so in regard to individual bankruptcies where the individual bankrupt is also a member of a partnership, the courts sometimes attempting to qualify the order of discharge by limiting it to individual debts. However, in general, the bankruptcy court in granting a discharge should not attempt to limit the effect of the discharge, the sole function of the court being to grant or refuse the discharge, the law itself then fixing the extent and effect of the discharge. Thus, in cases of individual bankruptcies, the discharge should be, in the words of the form of the order, 'from all provable debts excepting those excepted' by the statute. If, then, the statute does not except partnership debts, the court should not attempt to do so." Pages 667, 668.

 The mere fact of scheduling and the failure to except the claim in discharge cannot be relied upon as a defense in this action.

 The second question is as to whether the claim under assessment was a provable debt at the time of adjudication. While it may be that a creditor might have leave to prove a debt accruing after adjudication, under the circumstances in this case, as ascertained from the pleadings and an examination of the cases, I am satisfied that the question involved is whether the amount due on the assessment was or was not a provable claim at the time of adjudication.

 I am unable to agree with the decided cases holding that a stockholde in a national bank becomes a surety as to his liability for assessment to pay the creditors of an insolvent institution. See McClaine v. Rankin, 197 U.S. 154, 25 S. Ct. 410, 49 L. Ed. 702, 3 Ann.Cas. 500. The court in that case on page 161 of 197 U.S., 25 S. Ct. 410, 412, 49 L. Ed. 702, said: "Some statutes imposing individual liability are merely in affirmation of the common law, while others impose an individual liability other than that at common law. If § 5151 had provided that subscribing to stock or taking shares of stock amounted to a promise directly to every creditor, then that liability would have been a liability by contract. But the words of § 5151 do not mean that the stockholder promises the creditor, as surety for the debts of the corporation, but merely impose a liability on him as secondary to those debts, which debts remain distinct, and to which the stockholder is not a party. The liability is a consequence of the breach by the corporation of its contract to pay, and is collateral and statutory." (Italics mine.) See, also, Thomas v. Matthiessen, 232 U.S. 221, 236, 34 S. Ct. 312, 314, 58 L. Ed. 577.

 Under the early cases it is somewhat debatable as to whether the obligation is a contract or a claim based upon a statutory liability. Under different circumstances the courts have come to different conclusions.

 It is quite clear that the one in whose name stock stands on the books of the association remains liable for assessment, so long as the stock is allowed to stand in his name. See Matteson v. Dent, 176 U.S. 521, 530, 20 S. Ct. 419, 423, 44 L. Ed. 571.

 The case of McClaine v. Rankin, 197 U.S. 154, at pages 162, 163, 25 S. Ct. 410, 413, 49 L. Ed. 702, 3 Ann.Cas. 500, supra, involved the statute of limitations as applied to an action instituted to recover an assessment in a national bank matter, and the court said in conclusion: "But here the right to sue did not obtain until the Comptroller of the Currency had acted, and his order was the basis of the suit. The statute of limitations did not commence to run until assessment ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.