mally claimed n. prior lien. It was intended by the clause of reservation to save and protect the rights and equities of all the parties to the suit as they might thereafter appear. We hold, therefore, that enough appeared upon the record in this court, and in the state court, to put the purchaser upon inquiry concerning the claim of the present complainant of a vendor's lien upon the mortgaged property, and that, therefore, the Chicago, Mil waukee & St. Paul Rail way Company is not a purchaser without notice of said claim. The conveyance by the marshal to Rutten & BonD, and hy them to the Davenport & Northwestern Bailway Company, and by the latter company to the Chicago, Milwaukee & St. Paul Railway Company, the present owner, were all made pending this suit, and each of the purchasers must, upon the principles already stated, be held to notice of the present complainant's rights. He is not estopped by lapse of time, and has been guilty of no laches. He brought his suit in due time, and has prosecuted it ever since with due diligence, eitiler in this court or in the state court, with our consent and approval. Upon the whole case, we are constrained to hold that the de'ree hereinbefore rendered in favor of the complainant was strictly in accordance with equity, and should not be set aside. LovE, J 0, concurs.
Ex'r, etc., and others v.
NAT. BANK OF
ACT OF JUNE
(Circuit Court, N. D. Illinois.
NATIONAL BANKS- INDIVIDUAL LIABILITY OF STOCKHOLDERS -
30, 1876. The bill eonte'1lplated ·fly the second section of the act of June :l0, 1876, to enlorce the individual liability of stockholders in a natIOnal banKing associat·on that has gone into liquidation, need not purport expressly on its face to be tiled hy complainant on behalf of himsl'lf and all other ere litors, for the law wonld give it th:lt effect and the court would so treat it; but, jf this was necessary, the hill might be amended in that respect byle:we of the court.
The manifest intention of the national banking act isa distrihution of its assets, in case a hank bel;omes insolvent, equally among all the unsecured ·creditors; and the dil,gence of a creditor who fiies a ereditor's hill can gin: him no greater r.g .Is than are given any 0'11<'1' creditor to s:mre in the distribution of the assets. and a prayer in the bill that such creditur be given priority over other creditors will not be I!ranted.
Where the original bill filed before the of the aet of Jnne 30, 1876, was amenrled alter the pas"age of that act so as to makl' the indiv,dual sharehulders defe:1dants, and suhject them to liability, such bill will not be considcred on that account multifarious. 4. SAME-EFFECT OF ACT OF JUNE 30,1876. The act of June 30. 1876, did not create any new liahility on the part of the stockholders, or provide for enforcing such liability against them under circum-
IRONS V. MANUFACTURERS' NAT. DANK OF CHICAGO.
stances wllcre it could have not been enforced hefore that nct was This act not ret oactive, and does not creute rights which did not exist prior to its passa!!e, as against existing stockholders, tllough it may he construed as limiting thc trilJUnul in which pl'oceedngs are to be institll1ed for enforcing the stockholder's liah;1ity to a United ::iLates court, insteau of allowing creditors to resort to any competent trihunal wIth equity power.
Entering an oruer that "thc the pleas of bankruptcy of defend'lIlts, it is oruered t hat this he stayed as to them," docs not amount to a final decree, Lut simply confesses the fucts setup in tile plea, leaving the court to adjudge the law upon su(·h fueLs whenever the main cause is heard.
OF ::iTOCKITOT,DER A BAH.
PLEA OF llANKHUPTCY.
Where the original bill was tiled )<'ehruary 3, 187fi, before the of the act of June ;jO, Itli6, ani a receiver wa. appointed Fellruary 26, lbifi, thereunder, and an anended LilI, making the in(lividual stockholders defpndallts, was fi cd OctoLer 5,1-76, and after the tiling of the allletlflcd hill certain of the defendants were adjIH1.!\"cd bankrupts, tlJeir pleas of Lankruptcy will constitute a sullieient hal' in thClr hehalf
OF NUmlER OF 8ITAHES OWNED.
'Vhere it IS admitted hy the defendants th'lt they were shareholdf'rs in a national hank, hilt the numher of sharell held hy them not "dmit· tell, the names of the shareh ,ld"rs and the nUltlhel' ot" sharI'S held hy each, as shown hy the sto(·k led!!er, a Id stub. of the lItoek certificates, and the dividcnd sheets of the hnn": on which they re.peetivelr drew the last (I.vidends, will be primafocie proof of the numher of shares helJ, and, unless rebutted, sutlieient.
OF 81UlIES AFTETl FAIJ.UHE OF HANK.
After a national hanl, has beeo;ne insolv('nt anrl has closed its rloorll for busine.,.'i, ItS sharehollr-rll' !i'Polity to cre(litors is so f'll" fixed that an)' transfer of thdr lIhares must Le held fraudulent and illupcrativIJ as agailll>t tL.e cleLlitors of the bauk.
BLODGETT, J. The original bill in this caRe was filed lly J ftIDeS lrons, a creditor of tbe l\1ll.nufacturers' NatIOnal Bank, in F'Ihruary, 1875. It was in the usu:11 form of a credilor's hill, alleging recovery of a judgment against the bank, issue of execution, and return of "no property." It charged that the bank had suspended payment and gone into liquidation by a vote of its stockholders; that the comptroller of the currency had refused to appoint a receiver; that it had equitable assets, which were not subject to execution; and that such assets were being misapplied by its officers. It was also alleged in the bill that the capital stock of the kmk was $300.00a, and a list of the stockholders, and the number of shares held by each, was set out in the bill. The bill askecl for the appointment of a receiver to take possession of the assets and wind up the affairs of the bank. A receiver was appointed, to whom the officers of the bank were to turn over the assets, and the receiver so appointed accepted the trust and entered on the discharge of his duty. The stockholders were not made parties to this bill, and no order was made directing the receiver to take any steps for the enforcement of the liability of the stockholders; and it was at this time insisted that the stockholders' liability could only be enforced through the medium of a receiver appointed by the comptroller of the currency. On the thirtieth of June, 1876, congress, by the second section of "An act authorizing the appointment of receivers of national banks, and for other purposes,"
provided that "when any national banking association shalliutyegone into liquidation under the provisions of section 5220, Rev. St., the individual liability of the shareholders, provided for by section 5151 of said statutes, may be enforced by any creditor of such association by a bill in equity, in the nature of a creditor's bill, brought by such creditor on behalf of himself, and all other creditors of the association, against the shareholders thereof, in any court of the United States, having original jurisdiction in equity, for the district in which such association may have been located or established." On October 5, 1876, by leave of court, complainant filed an amended bill charging the recovery of the judgment at law mentioned in the original bill, issue of execution, and a return of "no property ;" that said judgment was still wholly unpaid; that said bank suspended payment on or about September 22, 1873, and soon thereafter had gone into voluntary liquidation; that no receiver of the bank had ever been appointed by the comptroller of the currency; alleging the names of the several stockholders of the bank, and the amount of stock held by each, making such stockholders pa.rties defendant to the bill; alleging fraudulent dealings in regard to their stock between some of the stockholders and the bank and its officers; and praying that such frandulent transfers of stock be set aside; that said stockholders, now made defendants, as should be found liable to complainant and the other creditors of the bank, upon their stock liability as created by the national banking act, should be decreed, to pay whatever amount should be found due from them and each of them, respectively, into court, or to the receiver; and that out of such fund complainant might be paid in full, and the balance 'distributed among the other creditors ofth.e bank. :Most· of the stockholders thus' brought into court have appeared and answered, setting up various defenses; some special to the particular case of the defendants so especially answering; and all insisting upon certain general and common grounds of defense. These general grounds of defense are: First. That the bill, as amended, does not purport to be filed in behalf of complainant and all other creditors, within the technical language of the "econd section of the act of June 30, 1876. The language of this section is that the individual liability of ers of national banks "may be enforced by any creditor of such ciation, by bill in equity, in the nature of 'a creditor's bill, brought by such creditor on behalf of himself and all' other creditors 'of the association against the shareholders thereot" . Neither the original nor the amended bill, upon their face, expressly purport to be brought by complainant in behalf of himself and alLother creditors of the as· sociatioll, although, by the prayer, complainant asks that "the said defendants, or such of)hemas shallyour orator, .the judgment and other creditors of the said bank upon the said stock liabilitycr,eated:by;the said banking-law, ,* .. ,'!" be decreed to pay whate,or amonnt shall be found to be due from them and each
NA.T. D.l.Nr.: OF CIIICAGO.
at them, respectively, into court, or to the receiver appointed by the court, and that out of the fund so created orator's judgment be paid. in full, and the balance thereof distributed among the other creditors of such bank in such way as the court shall direct." I doubt much whether it is necessary that a bill contemplated by the second section of the act of June 30,1876, needs to purport expressly on its face to be filed by the complainant on behalf of himself and all other creditors. The law itself gives that direction and force to the bill, and, whether the complainant says so to the court or not, it would be the duty of the court to treat such a bill as only filed in behalf of the complainant and all other creditors of the bank. The complainant in this case proceeded, evidently, upon the assumpti>ln that, having been first in diligence, he was to be first in right, and had beCCTme entitled to be in full, before any part of the proceeds, which should be collected through the agency of his bill, should be distributed to other creditors; but the manifest intention of the national banking act is a distribution of its assets, in case a bank becomes insoh-ent, equally among all the unsecured creditor3, and the diligence of a creditor who files a creditor's bill, especially for the purpose of enforcing the stockholders' liability, can give him no greater rights than are given any other creditor to share in the distribution of the assets. This complainant in effect, as I have already quoted from the amended bill, asks that the benefit of his suit should be given to himself and the other creditors. He asks, however, that he be allowed a priority over the other creditors in the distribution of the fund collected. This the law would not allow, and his praying for it in his bill would not justify the court in giving it to him. If, however, it is necessary that the bill should purport upon its face to be filed in behalf of the complainant and all other creditors, it is not a matter of substance, but only a mere matter of form, which can be amended at any time before the entry of the final decree in the case; and, as a matter of precaution, perhaps, the complainant had better so amend his amended bill as to show that it is filed in behalf of himself and all other creditors. It is stated in the briefs of counsel that if an amendment of this character is allowed, it would be equivale11t to the filing of a new bill, and will entitle them to set up the defense of the statute of limitations, which, they insist, has run in their fa vor since the original hill was filed. I do not agree with the learned counsel, from whom this suggestion comes, in regard to this effect of the amendment; but in order to preserve all their rights, if the complainant amend as suggested, I shall allow defendants to complete the record by amending their answer so as to set up the statute of limitations. Second. It is. further urged in behalf of these stockholder defendants that the amended bill is not germane to the subject-matter of the original bill, and that it makes the bill as a whole multifarious. I do not :see that there is any force in this objection to, or criticism
of, the amended bill. The original bill, as heretofore stated, was a creditor's bill. It sought to r8ach all the assets available for the purpose of paying the debts of this bank. No specific allegation or charge was made upon which to found a decree against tbe stockholders for their liability on t11eir stock, and the stockholders were not made parties; but the decree against the stockholders would be, in no sense, contradictory to a decree against any other person who might be made defendant for the purpose of reaching assets in his hands, or securing the payment to the receiver of any \:l1ich was owing to the bank. The scope of the bill is in no degree changed. It is, at most, only enlarged in reference to the number of persons to be actert upon, and to some extent in reference t.o the character of the liability of such persons. I am, therefore, of opinion that this ob. jection is not well taken. 'fhe third objection is, that prior to the passage of the amendment of Jtme 30, 1b7ti, the supreme cOllrt of the United States had held, in Kwncdy v. Gillson, 8 Wall. 4!J8, that the stockholders' liability could only be enforced through a receiver appointed by the comptroller of the currency; that a receiver could only be appointed by the comptroller of the currency in certain contingencies, such as that the bank has failed to pay its circulating notes, had failed to keep good its reserve, or to make good its capital stock when impaired; that a receiver could not be appointed by the comptroller of the CUl'rency for a bank which bad gone into voluntary liquidation, and that the act of June 30, 1()76, created a new liability, or mther provided for enforcing the stockholders' liability under circumstances where it could not have been enforced before; and that, therefore, the act of June 30, 1876, is only applicable to banks which shall have gone into voluntary liquidation after the passage of the act, and is not applicable to cases like this, where the b:tnk had gone into voluntary liquidation before the passage of this act. Section 51510f tne national banking act declares "shareholders of every national bmking association shall be held indi vidul111y responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the of the amount of their stock therein, at par value thereof, in addition to the amount invested in such share,." This position on the put of the defendants finds its main support in some of the expresBions of the court in Kenncrlg v. GihsOIl, 8 Wall. 4U8, where it is intimated that the stockholders' liability can only be enfurced by the comptroller of the currency through a appointed by him; but it has never seemed probable to me that, even if the amendment of June, lti7ti, had not been passed, that the supreme court would fully adhere in futureca<;es to the intim'ltions in the case just quoted. The obvious intent and purpose of thtJ national banking act was to make e'"ery stockholder liable to the extent of the amount of stock held by him at the par value thereof, in addition to the amount invested by'him in such
mONS V. MANUFACTURERS' NAT. BANK OF CHICAGO.
shares. This stockholders' liability was one of the securities which institutions gave to those who might become their creditors, anel I never doubted tiJat if a case should come before the supreme court, where the comptroller had acquired no right, or had exercised no right, if he acquired one, to appoint a receiver under the power delegated to him by the law, anj yet it was found necessary, in order to pay the debts, to resort to the stockholders' liability, that the courts would say that the po'Ver to enforce such liability rested in a court of equlty, and could be enforced through such court. It seems to me so palpable that this stockholders' liab!lity was one of the securities to the public dealing with the bank, that tlJe court would have been astute, if necessary to fiud a means of enforcing such liability, whenever a necessity for so doing exhibited itself; and I therefore never doubted that even if the act of June, 1870, had not been passed, the creditors of a national bani. could lm."e reached the stockholders, when necessary, through the aid of a court of equity, adapkng itself by its flexible methods to all the necessities of the case. I cannot believe that the courts would have allowed the benefit of this liability to stockholders to be to creditors merely because congress had not specifically directed how this liability was in all cases to be enforced. It therefore seems quite evident to me that the act of JUile 30, 1876, did not create any new liability, nor did it even provide for enforcing such liability against stockholders under circumstances where it could not have been enbrcerl before that act was passed. This act, then, is not retroactive, and does not create rights which did not exist prior to its passage as against these stock· holders. If any constructioIl is to be given to this act, it is that of limiting the tribunal in which proceedillgs are to be instituted for enforcing the stockholden.i' liability to a United States court, instead of allowing creditors to resort to any competent tribunal with equity power. I am, therefore, of opinion that it was competent for this court to allow the complainant to amend his originai bill by enlarging its scope se as to reach the stockholders and er..for0e their liability as such. Four of the defendant stockholders-Ira Holmes, Edgar Holmes, M. D. Buchanan, and W. G. .G. Pope-haYe, either by plea or uns'Ver, set up their disch:nges in bankruptcy as a defense in this case. On the Reventh of May, 1879, an order was entered in this case of the following tenor: "And the complainants, confessing the pleas of bankruptcy herein filed by Edgar Holmes, [and the other defell(lants,] it is ordered that this case be stayed as to them." It is now urged that this amounts to a decree in favor of these defendants upon their pleas in bankruptcy. This can, in no sense, it seems to me, be held to be a final decree in favor of these defeadants; it is merely an order that the proceedings be stayed as to these defendants, the complainant confessing the facts set up in the pleas, -not confessing the law or the sufficiency of the pleas as a defense,
but ci:nply confl'ssing the facts, and leaving it for the courts to adjudge the law upon tnose confessed facts whenever the main cause should come on for hearing. The question then arises, do these pleas offer or present a sufficient defense to these defendants' liability as stockholders of this bank? Section 5068, Rev. St., tit. "Bankruptcy," is as follows:
.. (6) In all cases of contingent debts and cuntingent liabilities contraetetl by a bankrupt, not herein otherwise provided for, the creditor may make claim therefur, and have his claim alluwed, with right to share in the dividends, if the contingency happened before the order for the final dividend; or he may at any time apply to the conrt to have the present value of the debt or liabilityascertained or liquidated. which shall be done in such manner as the court shall order, and he shall be allowed to prove for the amount so ascertained."
The facts in this case, so far as applicable to this defense, are briefly these: On February 3, 1875, the complainant tiled the original bill in this case. On the fifth of October, 18H;, the amended bill was filed, wl1ich brought the stockholders before the court. There has been a receiver in this case, appointeu under the original bill, ever since Febmary 26, 1875, and these dejendants have all been adjudged bankrupts since the amendment to the bill was filed. After the appointment of this receiver, and especially after the amendment of the bill and enlargement of its scope, so as to reach the stockholders, it was certainly competent for the receiver to have proved the claim in bankmptcy against these stockholders. ,He could, as readily then as now, have ascertained the amount of the assets and liabilities of the bank, and have made as close an approximate estimate of the amount which would be required to be collected from the stockholders, as he can now. The two factors for estimating the extent of the stockholders' liability, the debts and assets, were as well known then as now. But if he CQuid not have done it at that time; if the assets of the bank had not been then so far converted, or made amilable, as to be able to show just what wodd be required from the stockholders,the court of bankruptcy would undoubtedly have given time, and so far delayed the proceedings as to enable such an estimate to be made before closing the affairs of the bankrupt estate and ordering a final dividend. From the time this bank suspended, the only element of contingency which can be said to have characterized this stockholders' liability, so far as these defendants are concerned, "as as to its amount. From the time these men became stockholders, they stood li!1ble for the debts of the bank to the extent of the stock held by them, if it should become necessary to resort to such liability after exllausting the assets of the bank, and therefore the receiver stood in a position, at the time these bankruptcy proceedings were pending, to have proved these claims before the bankruptcy court. In Riggin v. .M ag1L"ire, 15 'Vall. 549, the supreme court says: "As long as it remains wholly unsettled whether a contract or engagement will ever give rise to an actual duty or liability, and there is no means of removing the
MANUFACrUREnS' NAT. BANK OF CIIICACO.
, uncertainty by calculatiotl;such contract 01' engagemetlt is not provable." But here there was a method, as it seems to me, of removing : the uncertainty, as to the extent or amount of these stockholders' , liability, by a simple calculation as to how much would ,be needed to vay the debts of the bank after exhausting the assets, and this bal, ance or deficiency was the measure of the stockholders' liability to the extent of an amount equal to the amount of his stock. Without, therefore, discussing the numerous authorities which are cited by the · counsel on both sides of this. case, I shall hold that these pleas in bankruptcy are a sufficient bar in behalf of these defendants. . By the other special matters of defense set up in the answer of some , of the defendants, two questions are raised: (1) The kind and amount of proof required to show that the defendants are shareholders in the bank. (2) Does an assignment of shares, made after the bank suspended payment, relieve the shareholder from liability? , As to the first question, these defendants have all or nearly 'all of · tliem ans\\'ered, admitting that they were shareholders in the bank, but not admitting the number of shares they respectively held. The proof in the case, as to the names of the shareholders and the number 'of shares held by each, consists of the stock ledger and stubs of the stock certificates, and the dividend sheets of the bank, and they all show the number of shares standing in the names of these defenda.nts, and the number of shares on which they respectively drew the last dividends. This certainly is, prima facie proof of the fact that these defendants were shareholders, and of the number of shares they held, and unless rebutted is sufficient to sustain the allegations of the bill. Turnuull v. Payson, fl5 U. S. 418. As the proof corresponds with the allegations of the bill, the finding must be that these defendants are sharellOlders as chal"ged. " , "As to the second point made, the proof shows that some of these defendants have transferred their shares since the bank suspended ',payment. And in some cases the defendants allege that they had negotiated a sale of their shares before the snspension, but the transaction was not consummated by a transfer on the books of the bank until after the suspension of payment. The bank act (section 51.38, Hev. St.) makes the shams in national banl,s "transferable in the books of the association, in such manner ,as may be prescribed by the by-laws or articles of and ,every person becoming a shareholder by such transfer, "shall succeed to all the rights and liabilities of the prior holder of such shares.;" and the provisions of the law require lists of the slJareholders to be kept 'by the bank, which list shall be subject to inspection by all shareholders and creditors of the bank. · In the light of these provisions of the law, shareholders of a na,tional bank mllst remain liable until a transfer of their shares is made on the books of the bank; and a transfer of shares, after the :bauk Las become insoh-ent, certainly cannot be constmed to release
the shareholders from liability to the creditors of the bank, for the reason that it would enable the shareholders to wholly escape liability by transferring their stock to irrpsponsible persons after it became evident that the shares were not only valueless, but that they involved an actual and pending liability for deLts of the bank. After a national bank, therefore, has become insolvent. and has closed its doors for business, its shareholders' liability to creditors must be so far fixed that any transfer of such shares must be held fraudulent and inoperative as against the creditors of the bank. If sharehold. ers, at the time the Lank suspended, can evade liability by a transfer of their shares, those to whom t11ey so transfer can also escape by the same method, even after suit is commenced. It seems, therefore, quite clear to me that those who are shareholders when a bank snspends must bear the burden imposed by the law in favor of creditors. A decree will, therefore, be entered referring the case to one of the masters of this court to hear proof, and report the amount of the deuts of the bank still unpaid, the value of the assets of the Lank still available for the payment of such debts, and the amount of assessment necessary to be made on each share of the capital stock in order to fully meet the indebtedness.
WnOUGIIT-InoN BmDGE Co. v. TOWN OF UTICA and otners.
.tv. D. Illinois.
lIuXICTPAL CORPORATTOXS-OBTAIXING PROPERTY WITHOUT AUTHORITy-RESTITUTION on CmIPENSATION.
T!w obligation to do jnstice rests upon all persons, natural and artifipial, and if a municipality obtains money or property without authorily, tho law. independent of any statute, w.II compel resliLution or compoilsaLion.
In Equity. C. C. J; C. L. Bonney, for complainant. Lawrence, Campbell J: Lawrence, for defendants. BLODGETT, J. This case is one which it appears to me is to be solved solely upon the undisputed facts, and those facts are substantially these:
The towns of Utica and Deer Park, situate in La Salle conntv, in this state. adjoin. and the Illinois river forllls the boundary line between them; Utica lying on the north and Derr Park on the south side of the river. On the fourteenth of FeLruary, 1876. an election was held in the town of Utica, at which a proposition for borrowing money. with whieh to build a across the Illinois river, was carried by a vote of the lrgal voters of the town. On the twentieth of May, 1876. a town meetin"" was held in Deer Park. at which a like pr?position was alloptpd. In of a notice from the highway commiSSIOners of the town of Utica, a joiut meeting of the highway COllimis-