Wyman v. Wallace

Prior to December 21, 1895, the American National Bank and the Union National Bank, hereinafter called respectively the American and Union bank, were each engaged in business in the city of Omaha, Nebraska. During that month the American bank was in such financial condition that it became necessary for it to provide for the payment of a large amount of deposits on or about January 1, 1896, and, though possessed of abundant nominal assets, did not have sufficient funds to make such payment. It knew that a neglect to pay would precipitate a run and bring on a failure of the bank. Thereupon, in order to obtain the money necessary therefor, its officers and leading stockholders entered into negotiations with the Union bank for the payment of its immediate obligations, and thus enabling it to secure an opportunity to realize upon its assets. As a result of such negotiations a contract was entered into by and between the two banks, through their boards of directors. By its terms the Union bank was to assume the payment of all the liabilities of the American bank, receiving therefor cash and such bills receivable as it was willing to accept at par and without recourse. The difference between the amounts so received and the liabilities assumed was to be represented by three non-negotiable promissory notes of the American bank, the payment of which was to be secured by a pledge of all its remaining assets to Thomas L. Kimball, as trustee. This contract was carried out. The Union bank moved into and took possession of the offices of the American bank. Upon adjustment, as above indicated, the difference was found to be $201,000, for which the American bank executed to the Union bank three non-negotiable promissory notes, each being for $67,000, and payable in one, two, and three years, respectively. In accordance with the contract the remaining assets of the American bank were placed in the hands of the trustee, Thomas L. Kimball, who proceeded to collect them and apply the proceeds on the notes until his death during the pendency of this suit. Subsequently a successor was appointed, who continued in performance of the trust until the entry of the decree. The execution of the contract of December 21, 1895, by the president and cashier of the American bank, was directed by resolution of its board of directors. On January 14, 1896, at an annual meeting of the shareholders of that bank, at which were represented 1,665 3/4 shares out of a total of 2,000, a resolution was adopted instructing the directors to take action looking to the liquidation of the bank. On February 25, 1896, another meeting of the shareholders was held, at which 1,696 shares were represented, and a resolution for voluntary liquidation was adopted by an affirmative vote of 1,639 3/4 shares. The Union bank fulfilled its obligations under the contract, having taken up all the liabilities assumed by it. The trustee meeting with little success in collection of the assets, this suit was, after the first note had matured, instituted in the circuit court of the United States for the district of Nebraska by Sumner Wallace, a citizen of New Hampshire, to whom the note had been transferred, against the Union bank, Thomas L. Kimball, the trustee, the American bank and its stockholders, including the appellants. By an amended bill the complainant sought, on behalf of himself and all other creditors of the American bank, the winding up of the affairs of that bank, the determination of the amount due upon his note, the ascertainment of all the creditors and the amounts of their claims, the subjection of the remaining assets to the payment of those claims, and the enforcement of the liability of the stockholders. He had not reduced the note to judgment prior to the commencement of this suit. Upon a final hearing a decree was entered ascertaining the amounts due the complainant and the Union bank (they being the only creditors) after the application of all credits, the number of shares of stock held by each shareholder of the American bank, and directing a recovery of $97.23 on account of each share of stock. This decree was affirmed by the United States circuit court of appeals for the eighth circuit (68 C. C. A. 40, 135 Fed. 286), from whose decision an appeal was taken to this court.

Messrs. Westel W. Morsman and Howard B. Smith for appellants.

[Argument of Counsel from pages 233-238 intentionally omitted]

Messrs. James M. Woolworth and R. S. Hall for appellees.

Statement by Mr. Justice Brewer:

[Argument of Counsel from pages 238-240 intentionally omitted]

Mr. Justice Brewer delivered the opinion of the court: