due and unpaid for six months, unless they are well secured and in process of collection being considered bad debts.""

67

Under the foregoing provisions assets which it is not necessary to retain as capital or for the surplus fund may be returned to the shareholders, and dividends so ordered may be made payable in the future, and on the contingency of future collection. The declaration by the directors of a dividend when there are no net profits to pay it, while an act of maladministration which may subject the association to a forfeiture of its charter and the directors to a personal action for damages suffered by the association or its shareholders, does not render them liable to a criminal prosecution. Nor can a receiver of the bank recover a dividend paid, not out of profits, but entirely out of the capital, where the stockholders receiving the dividend acted in good faith, believed it to be paid out of profits, and the bank, when it was declared and paid, was not insolvent. Nor can the directors be held personally liable for money paid out for dividends to a greater amount than net

69

68

66 Rev. St. U. S. § 5204 (U. S. Comp. St. 1901, p. 3495).

67 Cogswell v. Second Nat. Bank, 78 Conn. 75, 60 Atl. 1059, affirmed Jerome v. Cogswell, 204 U. S. 1, 27 Sup. Ct. 241, 51 L. Ed. 343. See "Banks and Banking," Dec. Dig. (Key No.) § 244; Cent. Dig. §§ 55, 60, 910.

68 United States v. Britton, 108 U. S. 199, 2 Sup. Ct. 531, 27 L. Ed. 698. See "Banks and Banking," Dec. Dig. (Key No.) § 256; Cent. Dig. § 964.

69 McDonald v. Williams, 174 U. S. 397, 19 Sup. Ct. 743, 43 L. Ed. 1022.

The receiver may recover from a stockholder dividends declared and paid after the bank became insolvent, when necessary to meet the demands of creditors. Hayden v. Williams, 96 Fed. 279, 37 C. C. A. 479.

The receiver cannot recover from a stockholder, in an action at law, a sum received by him on a partial distribution of the capital, made and received in good faith during voluntary liquidation, when the bank was at the time solvent, and retained sufficient assets to pay all its liabilities, although it subsequently became insolvent. Lawrence v. Greenup, 97 Fed. 906, 38 C. C. A. 546. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-915.

profits after deducting losses and bad debts, because there were debts bad in fact, but supposed to be good; bad judgment, without bad faith, not making the directors individually liable."

LIABILITY OF STOCKHOLDERS FOR DEBTS OF BANK

100. The shareholders are individually liable equally and ratably, for the debts of the association, to an amount equal to the amount of the stock held by them, at its par value, in addition to the amount that may be due on the shares.

The act provides that the shareholders of every association "shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of such association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares." 71

* * *

* * *

"The liability exists by virtue of the statute and the assent of the corporators to its provisions, given by the contract which they entered into with Congress in accepting the charter. With respect to the character of that liability it is several, and cannot be made joint, and the shareholders are not intended to be put in the relation of sureties or guarantors, 'one for another,' as to the amount which each might be required to pay. * * The insolvency of one stockholder, or his being beyond the jurisdiction of the court, does not affect the liability of another." 72 The statute imposes upon the

TO Witters v. Sowles (C. C.) 31 Fed. 1.

Welles v,

The liability cannot be enforced in an action at law. Graves (C. C.) 41 Fed. 459; post, p. 397. See “Banks and Banking,” Dec. Dig. (Key No.) § 254; Cent. Dig. § 951.

71 Rev. St. U. S. § 5151 (U. S. Comp. St. 1901, p. 3465).

7 United States ex rel. Citizens' Nat. Bank v. Knox, 102 U. S. 422, 26 L. Ed. 216. See, also, Lease v. Barschall 762. Cf. Christopher v. Norvell, 201 U. S. 216, 26

(C. C.) 106 Fed. Sup. Ct. 502, 50

shareholders "an individual responsibility for all its contracts, debts, and engagements, and the terms in which the obligations are created is unconditional and unqualified, except that the liability shall be equal and ratable among the stockholders." 73 As the liability of the stockholder is for the debts, contracts, and engagements of the bank, he is liable for such interest as, according to the nature of the contract or debt, would exist against the bank."

WHO ARE LIABLE AS SHAREHOLDERS

101. Those who appear as shareholders on the books of the association are prima facie liable as such. But there are some exceptions:

1. A person in whose name shares are registered without his knowledge or consent, express or implied, is not liable.

2. The real owner is liable, although he has saused the shares to be registered in the name of another, whether in good faith or in order to conceal his ownership.

3. A mere pledgee is not liable, if the shares are registered in his name as such, or are registered in the name of another.

L. Ed. 732.

4. A trustee is not liable, if the shares are registered in his name as such; but the persons whom or the estate which he represents are liable.

5. When there is a valid and complete transfer on the books, the transferror is relieved from liabil

See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-931.

73 Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-931.

74 Richmond v. Irons, 121 U. S. 27, 7 Sup. Ct. 788, 30 L. Ed. 864. See "Banks and Banking,” Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-931.

ity, and the transferee succeeds thereto. A transferror is relieved, although the transfer is not registered, if he has done everything to effect registration that a careful man could reasonably do. A transferror is not relieved by a colorable transfer; nor is he relieved by a transfer out and out, if made in view of the insolvency of the association and in fraud of creditors to an irresponsible person, or even to a responsible person, unless the transferror can prove that he was responsible; but in such cases the transferee also is liable.

Who Deemed to be Shareholder

As a rule, any one whose name appears on the books of the bank as a stockholder is a shareholder for purposes of assessment; and the burden of showing that he is not a shareholder rests upon him.75 Of course, a transfer on the books of the bank to a person without his knowledge and consent would not subject him to the liability of a shareholder; 7 but if he ratifies or acquiesces in the transfer, as by accepting benefits thereunder, he is liable." For this purpose a transfer on the books,

75 Irons v. Manufacturers' Nat. Bank (C. C.) 17 Fed. 308; Turnbull v. Payson, 95 U. S. 418, 24 L. Ed. 437; Finn v. Brown, 142 U. S. 56, 12 Sup. Ct. 136, 35 L. Ed. 936. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913–931.

76 Keyser v. Hitz, 133 U. S. 138, 10 Sup. Ct. 290, 33 L. Ed. 531; Stephens v. Follett (C. C.) 43 Fed. 842.

One buying stock in the names they are incapable of assenting. 797; Foster v. Wilson (C. C.) 75 ing," Dec. Dig. (Key No.) § 248; 77 Keyser v. Hitz, 133 U. S. 138, 10 Sup. Ct. 290, 33 L. Ed. 531. If one is elected to an office for which ownership of stock is a qualification, and shares are transferred to him on the books, and he acts as such officer, he will be chargeable with knowledge that shares stand in his name. Finn v. Brown, 142 U. S. 56, 12 Sup. Ct. 136, 35 L. Ed. 936.

of minor children is liable, since Foster v. Chase (C. C.) 75 Fed. Fed. 797. See "Banks and BankCent. Dig. §§ 913-931.

One who was notified that shares had been transferred into his

79

without the issue of a new certificate, is sufficient.78 The fact that record owners may be held does not necessarily mean that actual holders may not be held. The real owner is liable, and one purchasing for himself and causing the transfer to be made in the name of another, whether in good faith or so as to conceal his ownership, is liable. A married woman, who is a stockholder, is subject to the statutory liability, although she may be incapable under the local law from making or binding herself personally by a contract, if such law does not incapacitate her from becoming the owner of such stock.80 One who becomes a stockholder in consequence of frauds practiced upon him by others, whether the officers of the bank or of the government, is estopped, as against creditors, to deny that he is a shareholder, if at the time the rights of creditors accrued he was accorded and exercised the rights of a shareholder.81

name, although he had in fact no interest therein, and who indorsed the certificates in blank, but took no steps to have the stock transferred to the name of the true owner, cannot avoid liability for an assessment thereon. Kenyon v. Fowler, 155 Fed. 107, 83 C. C. A. 567, affirmed 215 U. S. 593, 30 Sup. Ct. 409, 54 L. Ed. 341. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913931.

78 Keyser v. Hitz, 133 U. S. 138, 10 Sup. Ct. 290, 33 L. Ed. 531. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §S 913-931.

79 Davis v. Stevens, Fed. Cas. No. 3,653, 17 Blatchf. 259; Hubbell v. Houghton (C. C.) 86 Fed. 547; Houghton v. Hubbell, 91 Fed. 453, 33 C. C. A. 574. See, also, Pauly v. State Loan & Trust Co., 165 U. S. 606, 17 Sup. Ct. 465, 41 L. Ed. 844. See "Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-931.

80 Keyser v. Hitz, 133 U. S. 138, 10 Sup. Ct. 290, 33 L. Ed. 531; Christopher v. Norvell, 201 U. S. 216, 26 Sup. Ct. 502, 50 L. Ed. 732 (and cases cited). See, also, Bundy v. Cocke, 128 U. S. 185, 9 Sup. Ct. 242, 32 L. Ed. 396. See “Banks and Banking," Dec. Dig. (Key No.) § 248; Cent. Dig. §§ 913-931.

81 Scott v. Deweese, 181 U. S. 202, 21 Sup. Ct. 585, 45 L. Ed. 822. Fraudulent representations by which one is induced to take shares is no defense in an action at law by the receiver to enforce the liability. Lantry v. Wallace, 182 U. S. 536, 21 Sup. Ct. 878; 45 L.