Court Opinion

ID: 3512136
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:22:56.39921+00
Date Added: 2024-06-11T14:25:08.400366
License: Public Domain

There is no question in my mind as to the correctness of the legal principle that a payment of a voluntary assessment voted by the board of directors does not constitute an offset against a claim for a stockholder's double liability. As I read the record, that is not the question here involved. The only question presented by the record is whether or not the transaction on January 9, 1924, amounted to a payment into the assessment trust fund to the credit of defendant. The bank was in need of replenishing its capital, and October 6, 1923, the directors voluntarily levied an assessment of 60 per cent on the stock. The uncontradicted evidence is to the effect that those stockholders who were willing to pay this assessment paid it to their individual credit in a fund which was to be paid over to the bank only upon all stockholders' contributing the whole of their assessments. In other words, it was intended to be a trust fund for a special purpose which was to become part of the bank's assets only upon the fulfilment of certain conditions. Those conditions were never fulfilled. The record indicates that the plaintiff treated the fund thus created not as a payment of the assessment into the bank's assets, but as a trust fund to the credit of *Page 186 
the individual stockholders who had paid cash into the fund. The peculiar "judgment" that plaintiff obtained in the proceedings for the imposition of an assessment on the stockholders' liability gave credit to such stockholders for cash paid into this fund as an offset against their stockholders' liability. Of course the order for the imposition of the assessment was not the proper place in the proceeding to determine the rights of individual stockholders to offsets or other personal defenses, but it conclusively corroborates defendant's trust fund theory. Defendant's credit in this fund arose, not out of a payment of cash by him, but in consequence of a part of the proceeds of Lee's note to the bank being credited to him in the fund. Lee's note was for $1,120. One hundred and twenty dollars of this was credited to Lee on his own stock. One thousand dollars was credited to Kietzer and defendant. Kietzer gave his own note of $820 more. For all practical purposes Lee borrowed $1,120 from the bank and paid it into the assessment fund. His note became an additional asset of the bank. A receipt was issued by the bank to the defendant for the $420 credited to him in the assessment fund, and the record shows the plaintiff has sued Lee on the note which went into the general assets of the bank at the time credit was given defendant. The plaintiff is therefore trying to collect the same $420 twice, once from Lee and now from defendant upon a theory wholly inconsistent with that by which the cash-paying stockholders were credited with the 60 per cent which lay in the trust fund.
The plaintiff asserts that the Lee note should not be considered as payment until the note is paid. That rule might apply between maker and payee; but here the note of a third person was taken by the payee, credit given defendant for a portion thereof, and a receipt given by the payee which characterized the acceptance of the note as payment. This receipt to defendant acknowledged payment of $420, "60% assessment on 7 shares of Minn. State Bank stock." The trial court ruled out this receipt. I think this was error. The receipt characterized the transaction and was material evidence tending to prove that the Lee note was treated as a payment. Plaintiff's subsequent action in suing on the note also characterizes the transaction as a payment. I also think it was error *Page 187 
not to permit Kietzer to give his explanation of the entries which were claimed to represent payment by Tabbott into the trust fund.
I do not see any indication of fraud in the action of the parties concerned. They put notes into the bank which increased its assets. They took no money from the bank; and if it had remained open until the other stockholders paid their assessment, the fund would have been turned into the assets of the bank and they would have had no offset to a subsequent claim on their stockholders' liability. There is absolutely not a syllable in the record indicating fraud or bad faith or a purpose to shield defendant from liability in a fraudulent way. The record is innocent of support for the assertion that the transaction was intended to take credit to Tabbott for the $420 without anyone paying money and for the purpose of allowing him to claim a payment or offset on his stockholder's liability. The bank accepted the note and placed it in its assets, and plaintiff is still treating it as a valid obligation. Lee borrowed the money and promised to repay it on a certain day. The disposition of the money to defendant's credit was treated as a payment of cash into the fund. That four or five years later Kietzer became a bankrupt and Lee resists payment does not change the character of the transaction and should not prejudice defendant's rights. That the transaction occurred three days prior to the closing of the bank does not, on the record before us, tinge it with suspicion, but rather indicates that they were still hoping to collect the 60 per cent assessment and save the bank. Directors are notoriously unwilling to believe their bank insolvent, and I find no evidence in the record indicating that Lee and Kietzer or defendant were endeavoring to cheat the bank's creditors out of any part of defendant's stockholder's liability. A statement to that effect must rest entirely on speculation.
Lee and Kietzer were obligated to defendant under their agreement to take care of any assessments against defendant's stock, and it was in fulfilment of this obligation that they gave their notes to the bank and caused the credit to be given to defendant in the assessment fund. Plaintiff as successor to the bank has retained the benefits of this transaction and is endeavoring by suit *Page 188 
to collect the Lee note. He cannot do this and at the same time repudiate the transaction by which his predecessor obtained the note. Dickinson v. Citizens I.  F. Co. 139 Minn. 201,165 N.W. 1056.
In my opinion the order appealed from should be reversed.