TILLINGHAST v. BAtLEY et a1.
(CircuIt Court, S. D. Ohio, ·W. D. No. 4,940.
November 29, 1897.)
NATIONAL, BANKS-INCREASE OF STOCK-CONCLUSIVENESS OF COMPTROLLER'S CERTIFICATE.
The certificate of the comptroller of the currency, approving an increase of the capital stock of a national bank, Is conclusive of the existence of the facts authorizing such certificate, and a SUbscriber. to the stock cannot question its validity. ' . " , I. ' . .
Subscribers to a duly-imthorfzed increased issue of stock by a national bank, who accept certificates therefor, vote the stock by proxy,and take dividends thereon, cann,ot question the validity of such stock, as against the receiver, . after the bank has become insolvent. . ', '.
SAME-STOCKHOLDERS-ESTOPI'ELTO QUESTION VALIDITY OF STOCK.
Bill by Phillip Tillinghast,. against ;Bailey, .Jr.. and others, as stockholders in a natIOnal , John W. Herron ,and WID. Q. Herron, for complainant. J. C. Harper, F. B. James,andOscarF. Davisson, for respondents. , G1ARK, D,ist,rict Judge. .IJ?, tpc view I take of this I do not deem it nCGessary to discuss the various phases of this evidence. ,space...As couns.elin the To do so would case, are perfectly familiar. ,With ti,ieevidence so far as it affects the be determined, it ;wQuldbe. of no service to do .more than to state: in the way, my conclufacts, disclosed. bJ; .therecord, anq. the law applicable sions upon to such facts. ',L'wo ,propositions ll.re mainly. relied ()q :for the complainant"either of which, if will dispose of the case without entering at large upon the facts in the case. It is insisted for the the of the comptroller of the currency 'authorizing tpe increase, of stock to which the defendants were subscribers, except two, was the final act necessary to make the increase valid, and that thiscertificate'is conclusive on the defendants, and that they ClUlnot, as a matter of);:tw, go behind the certificate .for the pur:pose of making any: to whether the facts on' wbiq}:l the comptroller was by law authorized to give his certificate existed; and,second, that, upon the facts:of the case, :the' def ndants are as .to creditOl:,'s ,of theIJanking ,aE\spciation, in whose interest tbis suit is from question on the and yalidity increase of stoc!c' cer.tjfied to by ... ,The' secp,nd proposition would"Qf. course, require 1m' exainliultioninto thf?tm;th: oftpefactl!!l allegfdascqnstjtuting the true ground of the estoppel claimed. I turn, then, for a moment to the contention that the certificate of the comptroller is conclusive of the facts necessary to be ascertained and to authorize his certificate. It is now well settled that the action of the comptroller in determining that such facts and conditions exist as authorize the appointment of a receiver for a national banking association is conclusive in all subsequent legal proceedings based upon his action and decision in that respect. So, too, bis determination that it is
make on:the. st()ckholders of a,bankf<lI', the I!1ent debts, an9: of the amount which must be paid, whether the full amQunt of the,pl;lrvalue of the stock or less, is conclusive, and no ques. be made. Qr litigllted in regard to ,whether there exist such facts as authorize his decision in this regard. In like manner, his determination that the factl:!necessary to authorize the: original formation of a banking association, and that the conditions which .ju$tify his certificateexist"are facts which become conclusively established when he issues his Certificate approving the formation of the bank and authorizing it to proceed to transact business. The existence of the facts which authorize the comptroller to declare the formation of the cor· poration complete cannot thereafter be called in question. These several propositions are no longer open to question. Kennedy v. Gib· son, 8 Wall 498; Oasey v. Galli, 94 U. S. 673; Bushnell v. Leland, 164 U. S. 685, 17 Sup. Ct 209. Now, after study of this question, and the reasoning on which the decisions in the. cases just referred to proceeded, I am constrained to say that lam una,ble to distinguish this case from those cases, and am unable to perceive on what ground it could be held in a case like this that the certificate of the comptroller is not conclusive, and I think the principle announced in the cases referred to controls the question here presented. Every reason of public policy on which the decisions in those cases rest extends equally to thil:!' case and the questions here made. It seems to me that the certific,ateof the comptroller approving the original formation of the with a fixed capital stock, and his certificate approving an. increase of stock, cannot.· be distinguished. I do not believe that any just distinction in principle exists, and a decision which unqertakes to make such distinction is, in my opinion, not sust.ainedby sound reason. The facts which are left to the determination of the comptroller in certifying to the original formation of the association are vastly more important in every direction, both in kind and magnitude, than the facts which he finds, and to which he certifies, in the case of a mere increase of stock inl an association already formed. If a shareholder of the increased stock may go behind the comptroller's certificate, and make the question that the stock in his hands is void because the facts do not exist which authorize the certificate of the comptroller, I must confess that I see no reason why a shareholder of the original stock may not equally go behind the certificate issued, declaring the association duly formed and authorized to do business, and cause the original stock to be declared invalid because of the nonexistence of. the facts which the comptroller was required to ascertain before P1aking his certificate. Further than this, r am of opinion, after careful consideration, that I cannot do otherwise than hold that these defendants are estopped now to make the question that the stock held by them is invalid. Without going more at length into particulars, certain uncontroverted facts may be mentioned; at least, such facts as are not open to serious contention. Among these facts may be mentioned that these defendants undoubte9ly understood themselves as subscribing for shares in the
86 FEDERAL REPORTER.
increased stock of the asSociation. Certificates were issued to them plainly showing this fact, and the defendants 'unquestionably understood themselves to be stockholders during the entire time after payments by them on their subscriptions to this increased stock, and practically they never made any question that this was so until after the insolvency of the bank became publicly known, when it was placed in the handS of a receiver, and their liability to the assessments to pay debts asserted. They were paid dividends on the stock, and unquestionably understood and accepted the same as dividends, and not as interest. In addition to this, they, by proxies duly executed,clothed designated persons with full general authority to act for them and vote the stock, which was obviously equivalent to an assertion that they were stockholders and erttitled to enjoy their rights as such; It does not relieve this feature of the case for the defendants to say that they only gave general authority, and were' not aware of what the persons designated to act for them were doing. T4ey are not' permitted to confer general authority'to act, and then, as occasion may seem to require, repudiate the authority,and thereby disappoint the public creditors. In authorizing a representative to act for them, they have virtually, through such representative, sanctioned much of which they now complain. Hthe defendants were unfortunate in thus holdingMt persons as authorized to act for them, it raised merely a question whether the defendants must be affected by the conduct of their representatives,' or whether the public must be disappointed; and I think there is no difficulty in saying that, as between the innocent creditors of this bank and the defendants who have thus enabled persons with apparent authority to deceive such creditors, the result must fall on the defendants. Nor is it any answer'to say that the plaintiff in the case does not show that any particular creditor 'relied on the increased stock and the payments made thereon by these defendants, and was deceived thereby. The public, in' dealing with these banking associations, do not rely except upon public known facts in regard to the association, and the public are not supposed to be familiar with or rely on the facts of a pa.rticular case as between a shareholder and the bank. A rule which exacted any such condition as this would practically deprive innocent creditors of any remedy. These defendants have appeared regularly on the books of the association as subscribers to the increased stock, with their subscriptions all paid in, and this condition of things has been carried in the published statement of the bank intended for pub· lie information. This character of information is what the creditors of the bank rely on, and particularly the amount of capital stock of the bank. The defendants were still aware that the stock thus subscribed and paid in, although not certified, was subject to he certified and approved by the comptroller. at any time. The defendants have never sought, by any step or proceeding, to stop the method in which they were thus held out to the public, or to change their relation from that of a shareholder to creditor, until the event which made it apparent that it would be to their advantage to shift
NORTHERN PAC. RY. CO. V. SODERBERG.
their position in this respect. There is apparent conflict in the decisions on the circuit in relation to both of .the propositions on which the plaintiff's case here proceeds. Fortunately, I am not called upon to undertake the task of reconciling these decisions, and my duty is discharged when I choose between the opinions of these courts of equally high authority and equally entitled to the greatest respect. I think the correct doctrine upon this subject was an· nounced in the case of Latimer v. Bard, 76 Fed. 536. I think, too, in principle, the cases of Upton v. Tribilcock, 91 U. S. 45, Sanger v. Upton, 91 U. S. 64, and Louisville Trust Co. v. Louisville, N. A. & O. Ry.Co., 43 U. S. App. 551, 22 C. C. A. 378, and 75 Fed. 433, are applicable. I do not think the position of the Gronewegs, two of the defendants in the case, is different or that the case as to them authorizes a different ruling from that made as to the other defendants. It has not been pointed out that their status is specially different by reason of having original instead of increased stock. On the contrary, it is evident that it would not be different, so far as their relation to the question now made is concerned. They must have been informed by the face of their certificates ,of stock that it was original instead of increased stock, and it is not in the least likely that their conduct would have been at all different from what it has been if they had been expressly informed that they were furnished with original instead of increased stock. So, without giving the case a more particular discussion, I hold that the plaintiff is entitled to recover upon both grounds indicated herein, and decree will go accordingly.
NORTHERN PAC. RY. CO. v. SODERBERG. (Circuit Court, D. Washington,N. D. March 14, 1898.)
PUBLIC LANDS-RAU,ROAD GRANTS-DE'l'EHMINATION OF CUARAC'l'ER OF LAND.
In a suit to enjoin the removal of stone from unsurve;yed lands which would fall within the odd sections of a railroad grant, the court will not undertake to determine, in advance of a decision by the land department, the question as to whether the land is mineral or nonmineral. A railroad company has an interest in the odd-numbered sections within its grant, and, before the question of the mineral or nonmineral character of such land has been determined by the land department, the commission of waste thereon calculated to work irreparable injury to the land itself wlll be restrained, the court retaining the case for further consideration after such question shall have been determined.
SAME-WASTE BEFORE TITLE DETERMINED-INJUNCTION.
SAME-INJUNCTION TO RESTRAIN REblOVAL OF STONE-ADVEHSE ENTRY AFTER
A suit to restrain the removal of stone from an odd·numbered section within a railroad grant, before the mineral or nonmineral character of the land has been determined, cannot be defended on tl1e ground of an entry, made by de. fendant after the suit was commenced, under Act Aug. 4, 1892, authorizing the entry of land chiefly valuable for bUilding stone, where such entry was not put in issue by proper plea.
This was a suit in equity by the Northern Pacific Railway Company against J. A. Soderberg, to enjoin him from working a granite quarry on certain lands claimed by the complainant.