Los Angeles herald., 1892-11-29
THAT SAN DIEGO BANK FAILURE,
Judge Ross Squelches Receiver
Pauley's Petition.
Stockholders Fraudulently Trying
to Avoid Loss Are Scored.
Yesterdays Happenings in the Various
Tribunals-Notes of Cases Which
Were on Trial--New
Suits Filed.

Judge Ross yesterday denied the peti'
tion OF Fred A. Pauley, receiver of the
California national bank at San Diego,
for the compounding of the indebted
ness of that institution.
In substance the petition prayed the
court to allow the receiver to settle all
claims against it for $4,000 1t was at
first proposed to levy an assessment OF
$100 per share on 7Sl outstandingshares.
The comptroller Of the currency know
ing that a number of the shareholders
were insolvent and that others had dis
posed of their property in anticipation
of such levy, and further that euch pro.
cess would be resisted by many, in
structed the receiver to make applica-
tion to the court for settlement as above
stated, deeming that the more expedi-
tious method, as that amount, 100000,
could be raised with little effort. In the
opinion Judge Ross reviews the case at
length, but only his opinion is given.
Assuming that the court is authorized
to grant the order asked for, it is unheei-
tatingly refused. To sanction proceed
ings by which stockholder in q ma
tional banking association fraudulently
put away his property for the purpose
of avoiding his just and legal obliga-
tions as such stockholder, and is then
permitted to compromise his liability,
by the payment of less sum than is
due, is to place premium upon fraud.
With such conduct there should be no
compromise. Laws are made to be OBJ
served and enforced, and everyone
should be made to know them in re-
spect to every contract made pursuant
to their provisions, the government will
accord and exact fair dealing and the
utmost good faith. 1t is far better that
the entire amount of the obligation of
stockholders in question should be lost
to the trust fund than that the slightest
judicial countenance should begiven the
proposed proceedings. The liability of
the stockholders Of the insolvent bank
ia several and not joint. (Kennedy vs..
Gibson, 70 U. 81, 505.) And there is no
reason why the property of every one
who has conveyed or may convey it for
the fraudulent purpose of avoiding his
just and legal Obligations arising under
the law should not be followed, and
every reason why it should be.
What has been said is sufficient to dis
pOnO VI tliO pcIltlOus 1t 10, uOWcNcT, W
say the least, extremely doubtful wheth-
er the court has the power to authorize
the compounding of the individual liza
bllity of stockho]der in a national
bank. The provision of the statute
upon the subject is found in section 1884
of the revised statutes. By that section
it is declared: "Such receiver, under
the direction of the comptroller, ehall
take possession of the books, records
and assets of every description of such
association, collect all debts due and
claims belonging to it, and upon the
order of q court of record of competent
| jurisdiction, may sell or compound all
bad or doubtful debts, and on like
order may sell all the real or personal
property of such association on such
terms as the court shall direct, and may,
If necessary to pay the debts of such
association, enforcce the individual liza
bility of the stockholders"
1t is by no means clear that the indi-
| vidual liability OF the stockholders is a
debt, withing the meaning of the clause
authorizing the court to sanction the
compounding of all bad or doubtful
debts. In the view have taken of the
case, however, it is not necessary to de
eide this point.