CO Code § 11-103-203 (2021)
2021 Colorado Code|Title 11 - Financial Institutions|Article 103 - Organization and Corporate Functions|Part 2 - Capital Requirements|§ 11-103-203. Liability of Shareholders

  The shareholders of every state bank shall be held individually responsible, equally and ratably, and not for another, for all contracts, debts, and engagements of said bank, to the extent of double the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.    The term “shareholder” shall apply not only to such persons as appear on the books of the bank as shareholders, but also to every owner of stock, legal or equitable, although the stock may stand on such books in the name of another person, but not to a person who holds the stock as collateral security for the payment of a debt.    Any shareholder of any state bank who has transferred his or her shares or caused such transfer to appear on the books of the bank within sixty days immediately preceding the capital inadequacy of such bank, or who has made such transfer with knowledge of such impending capital inadequacy, shall be liable to the same extent that the transferee or subsequent transferee fails to meet such liability. This section shall not be construed to affect in any way any recourse that such shareholder might otherwise have against those in whose names such shares appear upon the books of the bank at the time of such capital inadequacy.    If the capital of any state bank becomes inadequate, and its assets and affairs have been taken possession of by the banking board pursuant to this code, and the banking board is of the opinion that it will become necessary in the course of liquidation of such bank to resort to the liability of the shareholders as provided for in this section, in order to make good the contracts, debts, or engagements of such bank, it shall be lawful for the banking board to file in the office of the county clerk and recorder of any county in this state, wherein any real estate belonging to any shareholder of such bank is situated, a statement in writing to the effect that such person is a stockholder of such bank (naming it) and that such bank is in process of liquidation, and stating the number of shares held by such shareholder and their aggregate par value and the extent of such shareholder's liability under this code.    Such statement shall be duly endorsed as filed by such county clerk and recorder, giving the date of filing, and shall be indexed with the name of the shareholder as grantor and the name of the bank as grantee, and shall be recorded as mortgages of real estate are required to be recorded, and from the date of filing of such statement the same shall be a lien upon any real estate of such shareholder located in such county.    If such shareholder thereafter deposits with the banking board an amount of money equal to double the amount of the par value of his or her shares, to be held by the banking board as security for the shareholder's liability under this section, then the banking board shall execute and file with such county clerk and recorder a release of such lien and, upon completing the liquidation of such bank, shall return to such shareholder any excess of such deposit, if such shareholder's ultimate liability shall prove to be less than the amount so deposited with the banking board; and in all cases where the liability of the shareholder has been satisfied, either as the result of litigation or otherwise, such liens so filed shall be released by the banking board. The expense of filing and recording such liens and releases thereof shall be paid out of any assets of the bank in the possession of the banking board.    The liability imposed by this section shall not extend to shareholders in any bank that has become a member of the federal deposit insurance corporation; but if any bank that has become a member of the federal deposit insurance corporation ceases to remain a member thereof, the double liability mentioned in this section shall extend to the shareholders in any such bank as provided in this section.    No stockholder of a state bank shall set off against his or her stockholder liability any claim he or she may have as a depositor in or creditor of any insolvent bank.     History. Source: L. 2003: Entire article added with relocations, p. 1082, § 3, effective July 1.    Editor's note:   This section is similar to former § 11-3-105 as it existed prior to 2003.   ANNOTATION   Analysis     I. GENERAL CONSIDERATION.    II. LIABILITY OF PARTIES.    III. ENFORCEMENT.   A. Creation of Lien.    B. Foreclosure.    C. Evidence.        I. GENERAL CONSIDERATION.   Annotator's note. Since § 11-103-203 is similar to repealed laws antecedent to CSA, C. 18, § 50, relevant cases construing those provisions have been included in the annotations to this section.   This section is applicable alike to ordinary commercial institutions and savings banks. Colo. Sav. Bank v. Evans, 12 Colo. App. 334, 56 P. 981 (1898).   II. LIABILITY OF PARTIES.   This section provides for double liability to be borne by four classes of persons: First, any shareholder of record on the books of the bank; second, any one who, though not appearing on the books as a shareholder, is an “owner of stock, legal or equitable”, but not “a person who holds the stock as collateral security for the payment of a debt”; third, any one who has transferred his stock within sixty days before the bank's insolvency; and, fourth, any one who has transferred his stock with knowledge of the bank's impending insolvency. McFerson v. Anderson, 96 Colo. 171 , 40 P.2d 614 (1935).   The liability of stockholders of an insolvent bank is strictly statutory. Bundy v. Wilson, 66 Colo. 253 , 180 P. 740 (1919).   Liability cannot be extended beyond provisions of this section. Liability of stockholders in a banking corporation is undoubtedly a creature of statute. It does not exist at common law; hence it can be said that such liability, being statutory, cannot be extended beyond the plain purpose and intention of the statute. Buenz v. Cook, 15 Colo. 38 , 24 P. 679 (1890).   The purpose of liability is to provide a fund for the payment of the debts of the bank. McDonald v. McFerson, 80 Colo. 4 , 249 P. 496 (1926).   Liability is a contractual and not a penal liability. This liability, unlike the liability imposed by the statute upon directors or officers of a corporation for its debts, because of their fraud or negligence in the management of the affairs of the corporation, is not penal in its nature; it is a liability voluntarily assumed by the act of becoming a stockholder, and an obligation thus assumed is purely contractual, contains all the elements of a contract, and is to be enforced as such. Adams v. Clark, 36 Colo. 65 , 85 P. 642 (1906).   If a bank could purchase its own stock, this liability could be avoided, its capital depleted, and there would be no security to the depositors except in the bank itself. Kassler v. Kyle, 28 Colo. 374 , 65 P. 34 (1901).   Party assuming to act as stockholder cannot escape liability. A party who assumes to act in the capacity and exercise the rights of a stockholder, attends meetings, and, after the bank is closed by the bank commissioner, joins with others to salvage the concern cannot be heard to deny his character as a stockholder when charged as such under this section. Bundy v. Wilson, 66 Colo. 253 , 180 P. 740 (1919).   Where a person holds no stock in a banking corporation, in any capacity, but is nevertheless elected a member of the board of directors, files his oath as such and accepts the office of president, he will not, on the failure of the bank, escape the statutory liability. Swenson v. McFerson, 91 Colo. 519 , 17 P.2d 530 (1932).   The liability of the stockholders being several, it was not essential that all should have been included in the same judgment. The court was empowered, after rendering judgment against the defendant stockholders, who had been served or had appeared, to continue the cause, for the purpose of acquiring jurisdiction of the persons or property of the others, who were named in the decree as being nonresidents but not served, in order that complete relief might be administered with respect to the subject of the cause. Toll v. Cobbey, 22 Colo. App. 244, 124 P. 357 (1912).   Stockholders may not set off their deposits against their statutory liability since this would make stockholders who are depositors preferred creditors against the fund, and, in a measure, defeat its purpose. McDonald v. McFerson, 80 Colo. 4 , 249 P. 496 (1926).   III. ENFORCEMENT.   A. Creation of Lien.   Bank commissioner filing statement claiming lien has same standing as judgment creditor. There is no substantial reason why the same rule that applies to a judgment creditor who, without notice of unrecorded conveyance, files a transcript of his judgment and whose lien is thereby superior to the grantee in the deed, should not be applied in favor of a bank commissioner who files a statement claiming a statutory lien under this section. Fleming v. McFerson, 94 Colo. 1 , 28 P.2d 1013 (1933).   B. Foreclosure.   Section is not void because it does not expressly provide for foreclosure or other judicial proceedings. Fleming v. McFerson, 94 Colo. 1 , 28 P.2d 1013 (1933).   The district court has jurisdiction in all suits to foreclose liens. Fleming v. McFerson, 94 Colo. 1 , 28 P.2d 1013 (1933).   The suit is administrative in character, the main purpose being to enforce contribution by as many of the stockholders as practicable, within the limit of liability fixed by the statute, to the satisfaction of the whole indebtedness of the insolvent bank in excess of its assets. Toll v. Cobbey, 22 Colo. App. 244, 124 P. 357 (1912).   Bank not a necessary party. To an action to ascertain the liabilities of the stockholders of a defunct bank and for judgment against them, the bank is not a necessary party. Kipp v. Miller, 47 Colo. 598 , 108 P. 164 (1910).   Complaint held sufficient. Richardson v. Boot, 18 Colo. App. 140, 70 P. 454 (1902).   C. Evidence.   Books and records are admissible in evidence. In a proceeding to enforce the stockholders' liability under this section, books and records were clearly competent, as admissions against interest, if on no other ground, whether original entry or otherwise. Denver & R.G.R.R. v. Wilson, 4 Colo. App. 355, 36 P. 67 (1894); Plummer v. Struby-Estabrooke Mercantile Co., 23 Colo. 190 , 47 P. 294 (1896); Zang v. Wyant, 25 Colo. 551 , 56 P. 565 (1898); Kipp v. Miller, 47 Colo. 598 , 108 P. 164 (1910).   Stock ledger is admissible to prove who are the stockholders. In an action to recover the statutory liability of alleged stockholders of an insolvent bank, the stock ledger of such bank, identified and supported by the testimony of the ex-cashier of the bank, is competent and sufficient evidence to prove that appellants are stockholders of the insolvent bank. Adams v. Clark, 36 Colo. 65 , 85 P. 642 (1906).   Evidence sufficient to sustain nonresident's statutory liability. McFerson v. Anderson, 96 Colo. 171 , 40 P.2d 614 (1935).