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Matched Legal Cases: ['§ 1', '§ 191', '§ 63', '§ 2', '§ 65', '§ 181', '§ 65', '§ 63', '§ 103', 'sui generis', '§ 5', '§ 93', '§ 63', '§ 103', '§ 63', '§ 103']

BROWN V. O'KEEFE, 300 U. S. 598 (1937) - US SUPREME COURT DECISIONS ON-LINE
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4. Creditors of a national bank which is in course of voluntary liquidation and known to be insolvent, may enforce the statutory liability of a bankrupt shareholder by filing their claims in the court of bankruptcy. That court has authority to liquidate, or to chanroblesvirtualawlibrary
Petitioner was adjudicated a bankrupt on April 21, 1933, and, on July 31, 1933, was granted a discharge. At the filing of the bankruptcy petition, he was the owner of ten shares of stock of the Union National Bank of Atlantic City, N.J. Since September 30, 1931, the Union Bank had been in course of voluntary liquidation (under chanroblesvirtualawlibrary
In defense of the suit, petitioner asserts, as we have seen, that the ownership of the stock was divested by the bankruptcy, and also that liability was barred, if ownership remained. To estimate correctly the worth of these defenses, we must have some other facts before us. The record shows that, on October 27, 1933, by order of a referee, the trustee in bankruptcy was "authorized and directed chanroblesvirtualawlibrary
to abandon all title to and to disclaim all the interest of the bankrupt in" the ten shares of Union National Bank, now the subject of this suit. There is no suggestion that, in the interval between adjudication and disclaimer, the trustee had done anything betokening acceptance. The record also shows, in the form of an affidavit accepted by the court, that the bankrupt, in his list of liabilities, included the liability to assessment on his shares of Union stock, and that, in his schedule of creditors, he included Union and Atlantic, as well as the receiver for Atlantic, then in charge of its affairs. The same affidavit tells us that, promptly upon the transfer of the assets in September, 1931, the liabilities assumed by Atlantic were paid to the last dollar; that, at the time of the defendant's bankruptcy, Union had no debts or liabilities except the debt or liability to the liquidating agent, and that, even before the bankruptcy, the fact had been definitely ascertained that the liquidation of the Union assets would result in a deficiency which would require an assessment of the stockholders up to the maximum amount of the par value of the shares. [Footnote 1] The estimate was not impracticable, for about a year and seven months had passed since liquidation chanroblesvirtualawlibrary
We dismiss with a few words the petitioner's contention that, at the moment of the bankruptcy, he lost the title to the shares, and became relieved thereby of the liabilities attendant upon ownership, though his name was left continuously on the stock book of the bank. Cf. Richmond v. Irons, 121 U. S. 27, 121 U. S. 58; Matteson v. Dent, 176 U. S. 521. Whatever title or inchoate interest may have passed to the trustee was extinguished by relation as of the filing of the petition when the trustee informed the court that the shares were burdensome assets, and was directed by the court to abandon and disclaim them. American File Co. v. Garrett, 110 U. S. 288, 110 U. S. 295; Sparhawk v. Yerkes, 142 U. S. 1, 142 U. S. 13; Sessions v. Romadka, 145 U. S. 29, 145 U. S. 39; Dushane v. Beall, 161 U. S. 513; First National Bank v. Lasater, 196 U. S. 115. In such case "the title stands as if no assignment had been made." Sessions v. Romadka, supra, p. 145 U. S. 52. Cf. Mills Novelty Co. v. Monarch Tool & Mfg. Co., 49 F.2d 28, 31; In re Frazing, 183 F. 28, 32; Kirstein Holding Co. v. Bangor Veritas, Inc., 131 Me. 421, 424, 163 A. 655. A precise analogy is found in the law of gifts and legacies. Acceptance is presumed, but rejection leaves the title by relation as if the gift had not been made. See Albany Hospital v. Albany Guardian Society, 214 N.Y. 435, 441, 442, 108 N.E. 812, collecting many cases. For the purposes of the case at hand, the result will chanroblesvirtualawlibrary
Liabilities are not discharged in bankruptcy unless claims thereon exist in favor of claimants whose identity is determinable at the date of the petition. Zavelo v. Reeves, 227 U. S. 625, 227 U. S. 631; Everett v. Judson, 228 U. S. 474, 228 U. S. 479. If the Union Bank, at that date, had been a going concern, the possibility that it might later become insolvent or resort to liquidation would not have furnished an occasion for stripping the shares of their statutory incidents by the device of a discharge in bankruptcy. In such a situation, there would be no claim to be proved, and no one capable of proving it. But, at the date of this petition, the Union Bank was not a going concern with the liability of shareholders a latent possibility. It was in course of liquidation by a voluntary liquidator. Not only was it in liquidation, but, according to the evidence, it was already known to be insolvent. Liquidation, coupled with insolvency, is the critical event which is capable of transforming a potential liability into one presently enforceable as soon as a qualified claimant appears upon the scene. The method of winding up determines who the spokesman for the claim shall be. If a bank is in course of liquidation by the Comptroller of the Currency, the personal liability of stockholders is enforceable upon the direction of the Comptroller at the suit of a receiver. Act of June 30, 1876, c. 156, § 1, 19 Stat. 63; 12 U.S.C. § 191. Cf. 12 chanroblesvirtualawlibrary
U.S.C. §§ 63, 64. If the bank is in course of liquidation by a voluntary liquidator, the liability is enforceable by a creditor or creditors, suing for themselves and for others similarly situated. Act of June 30, 1876, c. 156, § 2, 19 Stat. 63, 12 U.S.C. § 65. Cf. 12 U.S.C. § 181. We have no occasion to inquire whether, in the absence of an assessment by the Comptroller of the Currency the statutory liability may be enforced by a receiver through the medium of a claim in bankruptcy. Cf. Erickson v. Richardson, 86 F.2d 963. That question is not here. An assessment by the Comptroller, even if a necessary preliminary to a suit by a receiver when a bank is in the course of involuntary liquidation, is not a condition precedent, in cases of voluntary liquidation, to proceedings in behalf of creditors. No adequate reason occurs to us, and none, we think, is stated in the arguments of counsel, why a court of bankruptcy is then incompetent to liquidate the amount of the indebtedness effectively and speedily, and give relief accordingly. Cf. Cunningham v. Commissioner of Banks, 249 Mass. 401, 426, 144 N.E. 447; United States v. Illinois Surety Co., 226 F.6d 3, 662-663.
In saying this, we are not unmindful that a comprehensive suit in equity is commonly the proper remedy against shareholders where insolvency becomes manifest in voluntary liquidation. 12 U.S.C. § 65. The remedy does not exclude the presentation of a proof of claim in bankruptcy, the amount to be liquidated under the direction of the court by bill in equity or otherwise. Cunningham v. Commissioner of Banks, supra; United States v. Illinois Surety Co., supra; King v. Pomeroy, 121 F.2d 7; Irons v. Manufacturers' Nat. Bank, 17 F.3d 8, 314; 27 F.5d 1. Cf. Hightower v. American Nat. Bank, 263 U. S. 351; Wyman v. Wallace, 201 U. S. 230. By the mandate of the statute (Bankruptcy Act § 63b, 11 U.S.C. § 103(b)):
Liquidation being possible, the claim is not defeated though there was uncertainty as to its amount at the filing of the petition. Maynard v. Elliott, supra. Yet even the amount was certain, if we are to credit the defendant's statement. By this it appears that, long before the bankruptcy, the necessity for an assessment to the amount of the par value of the shares had become obvious to the liquidating agent, and indeed to all concerned. The facts are far removed from those in Miller v. Irving Trust Co., 296 U. S. 256, where the claim had its origin in the covenants of a lease. For historical causes, such covenants are sui generis (Manhattan Properties v. Irving Trust Co., 291 U. S. 320; Gardiner v. Butler & Co., 245 U. S. 603), but the analogy is still imperfect if that distinction be ignored. There, the only cause of action belonging to the claimant was for a deficiency that was chanroblesvirtualawlibrary
dependent upon unpredictable events. [Footnote 2] Here, the progress of the liquidation had already brought about a deficiency too great to be corrected by any unexpected windfall. This at least is the situation as the petitioner describes it. What infusion of contingency will vitiate a claim is, at best, a question of degree (Maynard v. Elliott, supra, p. 283 U. S. 278), though there is a leaning toward allowance in aid of the purpose of the statute to relieve the honest debtor ( 236 U. S. 554-555; Central Trust Co. v. Chicago Auditorium Assn., 240 U. S. 581, 240 U. S. 591). To all this we add that the uncertainty, if there was any, as to the exact amount of the assessment was to be dispelled, at the farthest, by September 30, 1933, less than six months later, for obligations then unpaid were to be classified as losses. [email protected] Bankruptcy Act, § 5m, as amended May 27, 1926, 11 U.S.C. § 93n. Upon the facts of this case, the impediments to a prompt ascertainment of the liability of shareholders were unsubstantial, if not imaginary.
There is argument that a claim against a stockholder is not provable in bankruptcy for the reason that it is founded on a statutory liability not subject to discharge. Bankruptcy Act § 63, as amended, 11 U.S.C. § 103. True indeed it is that the liability is created by a statute, and not solely by agreement. McClaine v. Rankin, 197 U. S. 154, 197 U. S. 159-161; Christopher v. Norvell, 201 U. S. 216, 201 U. S. 225-226. No disclaimer by the stockholder would be effective to avoid it. Even so, the liability, created though it is by statute, is quasi contractual in its origin and basis. Chisholm v. Gilmer, 299 U. S. 99, 299 U. S. 102; 285 U. S. 477; Coffin Brothers & Co. v. Bennett, 277 U. S. 29, 277 U. S. 31; Bernheimer v. Converse, 206 U. S. 516, 206 U. S. 529; Christopher v. Norvell, supra; McClaine v. Rankin, supra, p. 197 U. S. 159; McDonald v. Thompson, 184 U. S. 71, 184 U. S. 74. Cf. Erickson v. Richardson, supra. It is an incident affixed by law to the contract of membership between shareholder and bank. Ibid. A liability upon quasi-contract is one upon an "implied contract," and so provable in bankruptcy (Bankruptcy Act § 63a(4), as amended, 11 U.S.C. § 103(a)(4)); Crawford v. Burke, 195 U. S. 176; Tindle v. Birkett, 205 U. S. 183, 205 U. S. 184; Davis v. Aetna Acceptance Co.,@ 293 U. S. 328, 293 U. S. 331, if the other conditions of allowance are found to be fulfilled.