Court Opinion

ID: 7885474
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:39:58.90802+00
Date Added: 2024-06-11T16:31:43.930492
License: Public Domain

The opinion of the court was delivered by
Horton, C. J.:
The Second National Bank of Leavenworth was organized as a corporation, and commenced doing business in 1865, under the act of congress approved June 3, 1864. Its capital was $100,000, divided into one thousand shares of $100 each. The bank carried on its business from its organization until July, 1874, when it went into voluntary liquidation, and ceased to do business as a national bank. The meeting of the shareholders which adopted the resolution that the bank should be put into liquidation, was held December 6, 1873, and all the holders then present voted in favor of the liquidation. J. C. Stone was the owner of $60,000 of shares at this time, and $25,000 of stock stood in the name of William P. Borland. The remaining stock ($15,000) had been taken by the bank from insolvent shareholders, and was then owned by the bank. The stock held by William P. Borland was in part owned by him for himself, and in part as agent of certain minors and one Alexander B. Hasson. Neither J. C. Stone nor the Clarks knew that any other person than Borland was interested in the shares of stock standing in his own name. J. C. Stone was largely indebted to the bank, amounting in all to the sum of $52,-633.44, and he was then also indebted to A. M. and M. E. Clark in the sum of $21,280.56. J. C. Stone, to relieve himself from embarrassment, proposed to A. M. and M. E. Clark to sell them his interest in the bank, and to Borland, to pay off his indebtedness to the bank in his stock. At this time Borland made in writing an estimate of the value of the *360stock in the bank as then held by Stone and himself, and it was agreed between them that the indebtedness of $52,633.44 should be paid by the surrender of the stock of said J. C. Stone, at $123.19 per share, In sufficient amount to equal said indebtedness, and that Stone should then purchase a sufficient interest in the stock held by Borland at $139 per share to make his interest in the stock of said bank equal to that held by William P. Borland. This last-mentioned agreement was fully performed by the surrender of the stock by Stone, and the purchase and payment of a sufficient amount of the stock of Borland. Thereupon A. M. and M. E. Clark purchased of Stone his interest in the stock of the bank, and it was then the understanding and agreement between Borland and A. M. and M. E. Clark that the stock in the bank held by Borland and the Clarks should be considered $50,000, of which the said Borland should be the owner and holder of $25,000 and the said A. M. and M. E. Clark of the other $25,000, and that $50,000 should be presumed to be taken by other parties, and the bank kept in business, if practicable.
The agreement between Borland and Stone, supplemented by the action of A. M. and M. E. Clark thereon, and the understanding between Borland and the Clarks, raises the principal question involved in this case. It is claimed by plaintiffs in error that the agreement between Stone and Borland, and the subsequent connection of the Clarks therewith, was fraudulent and wholly void as to the minor children of Borland, and Alexander B. Hasson; that the assets withdrawn from the bank with the consent of the Clarks should be refunded or the value thereof made good by the Clarks, and that the minor children and the estate of Hasson be permitted to have a distribution as though there had been no reduction of the capital stock of the bank, or any diminution in the value of its assets by the action of Borland, Stone and the Clarks. The agreement between Borland and Stone, made soon after the adoption of the vote for the bank to go into voluntary liquidation, is binding and valid as between Stone and Borland, and for all of the shares of *361stock then standing in Borland’s own name. Stone treated with Borland as if he was the sole owner of the stock held by him, and he had the right so to deal and agree with him, as he had no notice to the contrary. The Clarks acted upon the contract entered into between Stone and Borland, upon the understanding and belief that Borland was the sole owner of the stock held by him, and also of that which he had disposed of to Stone to make the interest of the two equal. If the rights of Hasson or his estate, and the rights of the minor children of Borland, have suffered by the transactions between Borland and Stone and the Clarks, it is certainly most unfortunate, but the result is owing to the conduct of Borland. If the stock respectively owned by Alexander B. Hasson and the minor children of Borland had been issued in their name, or if Stone and the Clarks had had notice that Borland was holding their stock in trust for them, the argument made by plaintiffs in error would be pertinent, and the principles announced in Ryan v. L. A. & N. W. Rld. Co., et al., 21 Kas. 365, applicable. As the stock was understood between the parties to be owned by Stone and Borland, there was no obstacle to any arrangement among themselves as to the disposition of such stock which did not interfere with the interests of the government, or the rights of creditors. The government does not intervene, and makes no claim in this matter. The creditors are satisfied, and do not object to the arrangements of Stone and Borland, or the Clarks. As Borland is estopped from objecting to the disposition of the assets, and to the subsequent management of the bank affairs, owing to his agreement and participation therein, so the parties for whom he held stock in his own name, and for whom he acted, are likewise estopped, as neither Stone nor the Clarks knew of their interest. This conclusion leaves only a calculation of the amount of shares of stock the present owners are entitled to, and the manner in which the assets are to be divided. * *362If the sum which the Borland heirs have already drawn is treated as an asset, and added to the other assets before making a distribution, and then after determining the distributive share or proportion of each in the aggregate assets, and the amount so drawn out by such heirs be deducted from their share or portion, as it is less than such share, such distribution furnishes a correct method of division for the Clarks, Mrs. Hasson, and the heirs. Under this rule, if the division had been made on July 12, 1879, at the date of the decree of the court below, and the assets in the hands of the receiver had been $20,000, as we now calculate it, M. E. & Mary C. Clark, as successors of Clark & Co., would have been entitled to receive $12,853.97; Hetty A. Hasson, $5,054.93; and the heirs of Borland, $2,091.15. Of course, if the amount overdrawn by W. P. Borland is refunded, or if the assets prove to sufficiently exceed the present estimate so as to render the advances to Borland less than his distributive share, such additional assets will be divided in accordance with the above rule as to the respective interests of the owners in the capital stock. Substantially, this affirms the judgment of the district court, excepting that instead of the balance of the assets being paid to M. E. Clark and Mary C. Clark, as ordered by the district court in its fifth finding of distribution, the moneys are to be divided as above stated.
All the Justices concurring.