McDonald v. Dewey

The first of these cases was an appeal from a decree of the circuit court of appeals, rendered in a case wherein John W. McDonald, receiver of the First National Bank of Orleans, Nebraska, was complainant, and Charles P. Dewey and others were defendants, reversing a decree of the circuit court for the northern district of Illinois, and remanding the case to that court with directions to enter a decree against Dewey for his full assessment on twenty-five shares of stock of the First National Bank, and for interest thereon.

The second case is a cross appeal by Chauncey Dewey and his co-executor from the same decree.

Charles P. Dewey having died pending the litigation, the suits were revived in the name of Chauncey Dewey and Charles T. Killen, executors of his will.

The original was a bill in equity to enforce an assessment of $86 a share on 105 shares of stock of the First National Bank of Orleans, Nebraska, which failed on May 20, 1897. These shares, having been originally owned by Charles P. Dewey, were sold by him in December, 1894, and in January, 1895. Eighty shares were duly transferred on the books of the bank within a few weeks after the sale. The remaining twenty-five shares had been previously transferred by Dewey to his agent, Frederick L. Jewett, who was admitted to be irresponsible, and stood on the books of the bank in the name of Jewett when the bank went into the hands of a receiver, on May 20, 1897, although they had been sold by Dewey. The bill alleged that Hedlund, the original receiver (since superseded by McDonald, the present receiver), was appointed and took possession on June 5, 1897, a fortnight after the failure of the bank; that on September 14, 1897, the Comptroller levied an assessment of $86 a share upon the capital stock; that on May 8, 1894, Charles P. Dewey was the owner of 105 shares of stock, and was registered as such; that the bank was then, and continuously remained, insolvent; that this insolvency was known to Dewey, who, on that day, May 8, assigned ninety-five of these shares to the defendant Jewett, who was wholly irresponsible; that the transfer was colorable only, and made for the sole purpose of evading Dewey's liability as a stockholder; that Jewett thereafter, at various times, transferred eighty of the ninety-five shares to the several other defendants, and that on January 3, 1895, Dewey transferred his remaining ten shares to Jewett, so that at the time the bank failed said 105 shares were registered on the books of the bank in the names of the several transferees; that the several transfers were made at a time when the bank was insolvent, and known by Dewey to be so, for the purpose of evading his liability for assessments, and to irresponsible persons.

The answer of Dewey contained a general denial of all material allegations, and set up that the transfers were outright and for the par value of the stock; that he had sold all his stock, and, with the exception of the twenty-five shares, all transfers had been made on the books of the bank prior to its suspension.

The circuit court found that the sales of stock were all made through Jewett, who acted merely as the agent of Dewey and had no interest in the stock, but held it for Dewey in his name; that the bank failed about two years and five months after the sale by Dewey; that the bank was insolvent in December, 1894, and January, 1895, at the time Dewey sold the 105 shares, and that Dewey, who was vice president of the bank from 1892 to 1895, knew, or ought to have known, that fact; that three certificates, aggregating twenty-five shares, were not transferred on the books of the bank, and still stood in the name of Jewett when the bank suspended; that the claims of the creditors of the bank, who were such when Dewey sold his stock and remained such at the time of the failure, aggregated $11,839.15, of which, however, only $2,787.97 remained unsatisfied, and that of this the ratable share of Dewey was $585.48, for which sum a decree was rendered.

On appeal by the receiver to the circuit court of appeals the decree of the circuit court was reversed and a new decree directed to be entered for the full amount of the assessment on the twenty-five shares standing in the name of Jewett at the time of the failure; that as to the eighty shares there could be no recovery, although the bank was insolvent at the time of the sale of the stock, and was known to be insolvent, and the transfer was made for the purpose of evading liability; but that there could be no recovery without proof of the additional fact that the several transferees were likewise insolvent; that, as to the twenty-five shares, Dewey remained liable, as he had not surrendered the certificate to the bank or given the officers such data as to enable them to make such transfer on its books. The case was remanded to the circuit court, with directions to render a decree against Dewey for his full assessment on twenty-five shares. From this decree both parties appealed to this court.

Messrs. Frank M. Hall, Roscoe Pound, and E. E. Prussing for the receiver.

[Argument of Counsel from pages 513-516 intentionally omitted]

Messrs. William B. McIlvaine, Nathan G. Moore, and John P. Wilson, for Dewey et al.

[Argument of Counsel from pages 516-519 intentionally omitted]

Mr. Justice Brown delivered the opinion of the court: