The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1934-12-17
Trends
Treanor Ruling on
Liability Blow to
Private Banks
: BY VINCENT S. LYONS
Zines FinaneisI Editor

FUDGE WALTER z. TREANOR
- Of the Indiana Supreme Court.
in writing the decision that stock
holders Of a private Of partnership
bank are liable TO the full extent
Of the institutions liabilities. in
Guiding, of course, the claims of
depositors, and not limited TO an
assessment equal TO the value of
their share holdings, touches upon
a focal point Of banking affairs.
The opinion was rendered ir
connection with an APPEAL from a
Wells County case arising out Of
the r~eceivership Of the Eank Of
Tocsin, which was located in that
county. The Circuit Court in Wells
County. in passing on the case, had
ruled that the stockho ders were
Liable for all debts Of the bank. The
Safe Supreme Court action merely
upholds the lower court decision.
Whether the defendants Will
eventually bring the matter before
the United States Supreme Court
Is not known at this time. The
august cody of jurists at Washing
ton has been quite busy in the
last year or more S udying ard
passing on recovery leg station and
suits which have been instituted rs
a direct result Of economic changes
wrought by the depression.
n q
CUPREME Court review of all
- such litigation performs a use
full function in itself. 1t serves
TO stack up measures and actions
against the Constitution. The tri-
bunal can then subject these actions
to its keenest scrutiny and deter
mine whether they are capable of
standing up under all the neces-
sary requirements.
The question of liability of stock
holders of banking institutions
when failures ensue has been a
mooted point for some time. In
recent months it has been more
widely discussed as attorneys for
depositors in closed institutions
began to get around to the work
OF inaugurating court suits for the
purpose of attempting to get the
most return for their clients.
In most instances owners of
stock in banking institutions are
liable to the full extent of the par
value of the stock held. In scat
tered cases the stakeholder of a
defunct institution may be called
upon TO pay twice the amount of
the value of his stock. This is
what is known as the double liza
bility clause. 1t is quite possible
that the legislatures of several
states in their 1885 sessions will
be asked to approve bills asking for
double liability.
THE decision rendered by Judge
Il Treanor applied only to pri-
vate, OF partnership. banks. He
held that it is clear that the legis-
lative intent was to treat the own
ers Of a private bank as partners
as respects debts of the bank. This
section gives depositors a first lien
on the assets of the bank and then
expressly provides that for any
balance the depositors shall share
in the general assets of the owner
or owners. alike with general cred
TORS
Under the cd regime private
banking institutions were rather
popular, for there are certain liber-
slities of action permitted them
that are not allowed to the regular,
or public, banking institution.
Changes in the Banking Act by
Congress last year eradicated a few
of these. Judge Treanor's action
tends to place them at a further
disadvantage.
Interpreting Judge Treanor's de-
cision, it would seem that the own
er of stock in a private banking
institution would be liable to a
much greater extent than would
owners of other bank shades, even
under the double liability. After all,
the double liability clause fixes a
definite limit on the amount to be
paid, but the Indiana jurist's opin-
ion leaves the amount open until
all liabilities are met.