Court Opinion

ID: 6563318
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:17:32.438205+00
Date Added: 2024-06-11T15:56:37.287812
License: Public Domain

Mr. Jüstice Gabbert
delivered the opinion of the court.
Conceding that the capital stock of the bank was legally reduced, such action did not of itself authorize a distribution of the assets of the bank in any form among the stockholders in a sum equal to the difference between the original and the reduced amount of capital. Such a distribution would be limited to the extent that there would still be left with the bank, assets equal in value to the reduced capital stock. 1 Cook’s Stockholders, sec., 289; Strong v. Brooklyn R. Co., 93 N. Y., 426; McCann v. First Nat’l Bank, 14 N. E. Rep., 251. That would be, assets equal in value to the par value of its capital stock, as reduced, after its liabilities were discharged. It was incumbent, therefore, upon the plaintiff to show that the assets which the officers of the bank, in pursuance of the resolution of the stockholders, undertook to distribute, and which are represented in part by the certificates of deposit upon which plaintiff bases his right of action, were of the character which they could legally distribute — McCann v. Bank, supra. He not only failed to do this, but the testimony introduced on behalf of defendant clearly establishes *377that at the time the capital stock of the bank was reduced and the distribution of assets made to the stockholders, the bank was hopelessly insolvent, and there was therefore, no surplus to distribute among the shareholders.
Again, conceding that the stock of the bank was regularly re-.duced, the action of the stockholders in directing the officers to distribute assets among the stockholders equal to one-half the par value of the original stock, cannot be upheld. The consummation of that transaction was, in effect, a sale of one-half of the capital stock of the bank to itself. This the statutes of the state expressly prohibit, except in specific instances — Sec. 510 Mills Ann. Stats. Its agreement, therefore, to pay plaintiff the sum represented by the certificates of deposit was in violation of its charter powers — 7 Enc. Law. 2nd ed.., 819 — and cannot be enforced to the detriment of the rights of general creditors. Independent of statute, except in the instances thereby expressly permitted, banking corporation are inhibited from purchasing their own stock. To the holders of bank stock, certain liabilities attach in favor of general creditors— Zang v. Wygant, 25 Colo., 551; See. 533 Mills Ann. Stats. If a bank may purchase its own stock, this liability can be avoided, its capital depleted, and there would be no security to the depositors except in the bank itself. German Savings Bank v. Wulfekuhler, 19 Kan., 60.
Plaintiff is not in a position to invoke protection upon the ground'that he is. an innocent holder of the certificates in question for value. He surrendered the original stock, knowing that in lieu thereof he would receive one-half in new stock and one half in certificates of deposit, so that when he received the latter, he knew the purpose and the consideration for which they were issued.
Under the law it is the duty of the assignee to ascertain whether a claim presented for payment is legal. His failure to do so would render him liable to those injured by a neglect ol duty in this respect. He was, therefore, the proper party to file *378the exceptions in this case. Burrill on Assignments, 6th ed., sec., 384. The judgment of the district court is affirmed.

Affirmed.