Court Opinion

ID: 6520092
Source: CourtListenerOpinion
Date Created: 2022-07-19 18:30:16.555372+00
Date Added: 2024-06-11T15:55:07.572151
License: Public Domain

SHARPE, J.
In. the absence of statutory restriction a solvent lian king corporation, not contemplating insolvency or dissolution, may purchase its own stock in payment of a previously existing debt due from its stockholder. — Morse on Banking, § 716; Zane on Banking, §119 ; Boone on Banking, § 218. Such a purchase does not necessarily operate to withdraw the purchased shares from the capital stock of the corporation or as a fraud on creditors. The shares when so taken and transferred become the property of the bank, and may be resold or held for the benefit of creditors and the remaining stockholders together with any dividends that may be earned on it. — Boone on Banking, § 218; Taylor v. Miami Ex. Co., 6 Ohio, 176.
In this case complainants seek to hold the defendant liable for debts due them as depositors from a bank incorporated pursuant to the laws of this State as the Bank of Anniston and which made a general assignment for creditors September 28, 1898. By the bill it is alleged in substance that on January 27th, 1894, the bank by its board of directors, “undertook to withdraw from its capital stock 287 shares of the par value of $100 each, and thereby reduced the assets of said bank and its capital stock in an amount equal to the value of said shares at $92 per share;” that this was done without notice to the public or its customers or creditors “under the following resolution, adopted by the board on Jan. 27th, 1894, to-wit. ‘Now be it resolved, first, that any stockholder who is indebted to the bank is hereby authorized to pay not exceeding 75 per cent of his debt, by transferring and assigning enough of his stock at ninety-two (92) dollars per share, to pay said amount, and the cashier is authorized to credit the same upon such debt or debts.” It is further alleged that at that time defendant was a stockholder and director in the bank and participated in the passage of the resolution, that a firm of which he was a member then owed the bank about $4,150 by three note, dated November 4th, 1893 due, in sixty or ninety days and indorsed by defendant ; that under the resolution defendant “turned into said bank forty-two shares of his stock at $92 per share, and among other things obtained therefor said three notes, and thereby withdrew *185from the capital stock of said bank that amount.” Further, it is alleged that about November, 1897, the bank published a statement showing its capital stock to be $78,950, which sum included 287 shares which had been surrendered to the bank in January, 1894, under the resolution referred to, without which surrendered shares the capital stock was only about $50,000; that the withdrawal of the 287 shares under the resolution was a fraud on the existing creditors of the bank and those who became creditors subsequently without knowledge of the fact, and that complainants had no knowledge of any reduction of the capital stock until after the bank assigned. It is nowhere alleged or shown by the bill that at the time of the transactions complained of the bank was insolvent, or that the directors, in passing and acting under the resolution of January, 1894, had in comtemplation the-occurrence of the bank’s insolvency, or of the assignment which occurred more than four years later.
Applying the principles stated in the authorities above referred to, it will be seen that the facts alleged as effecting a reduction of the capital stock of the bank do not shoAV there was in fact a reduction of the stock, or that the acceptance of shares held by defendant and others in payment of debts due the bank involved any illegality or operated in any Avay to defraud or even injure complainants.
The bill is without equity. The decree appealed from will be reversed, and a decree will be here rendered dismissing the bill.
Reversed and rendered.