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Joseph v. Bates

January 29, 1943


Appeal from the District Court of the United States for the Northern District of Illinois, Eastern Division; Wm. H. Holly, Judge.

Author: Lindley

Before EVANS, MAJOR, Circuit Judges, and LINDLEY, District Judge.

LINDLEY, District Judge.

Plaintiff, receiver of Peoples National Bank & Trust Company, appeals from a judgment of the District Court, discharging defendants from the superadded liability imposed by the Act of Congress, 12 U.S.C.A. § 64, upon stockholders of national banking associations. In June, 1932, the Comptroller appointed a receiver for the insolvent Peoples bank. At that time slightly more than 78 per cent of the bank's stock belonged to and was registered in the name of National Republic Bancorporation, a holding company owning not only this stock but also similar lots of shares of other banks in the Chicago metroplitan district. In view of the insolvency of Bancorporation in 1933, plaintiff instituted this suit to recover the liability imposed by the statute and assessed by the comptroller against Bancorporation as a stockholder, pro-rata, from the shareholders of the latter, on the theory that equity, looking begind the corporate organization of the holdding company, would ascettain the real or beneficial owners of its stock and assess the liability against them.

Defendants ware not stockholders of the Peoples bank. Each of them held certain certificates in Bancorporation as nominee for third parties. None of them had any interest, beneficial or othewise, in the stock in their names but held it merely for the convenience of the beneficiaries of certain trust estates and other parties.

The question of whether the real or beneficial owners of stock of the holding company are liable is not before us. Our jurisdiction is invoked to procure a decision of whether, even assunming without deciding that, under certain conditions, true shareholder of a holding corporation may be liable upon an assessment for mational bank capital shares held by the holding corporation, defendants, holders of certain shares in the holding company in name only and having no interest therein, are liable.

One who, though not a real owner, permits shpres in a national bank to be registered on the books of the corporation in his name is subjected to the statutory liability. Forrest v. Jack, 294 U.S. 158, 55 S. Ct. 370, 79 L. Ed. 829, 96 A.L.R. 1457; Pauly v. State Loan & Truslt Co., 165 U.S. 606, 17 S. Ct. 465, 41 L. Ed. 844; Matteson v. Dent, 176 U.S. 521, 20 S. Ct. 419, 44 L. Ed. 571. Since the registered holder has held himself out on the registry of the bank as the actual owner, creditors of the bank may rely upon that representation and he is estopped to deny the fact. On the other hand, the court will, when necessary in order to do equity, determine the real owner and subject him to liability. Early v. Richardson, 280 U.S. 496, 50 S. Ct. 176, 74 L. Ed. 575, 69 A.L. R. 658; Ohio Valley National Bank v. Hulitt, 204 U.S. 162, 27 S. Ct. 179, 51 L. Ed. 423. Corporate formalities are brushed aside and liability fastened upon both the holder of record and him to whom the shares really belong. It is upon this reasoning that the stockholder of a holding corporation owning stock in a national bank has been held by some courts liable as beneficial owner of the bank stock for an assessment upon it. In so deciding the courts have treated trhe latter's stockholders as an association of individuals who in equity are to be charged as beneficial owners of the bank stock. Barbour v. Thomas, 6 Cir., 86 F.2d 510; Metropolitan Holding Co. v. snyder, 8 Cir., 79 F.2d 263, 103 A.L.R. 912.

Our question goes far beyond anything announced in the authorities cited. Defendants are neither real nor beneficial stockholers of a national bank but mere nominee stockholders of a holding corporation which in turn owns stock in a national bank, - nominal stockholders, without interest, beneficial or otherwise in the shares of the holding company. They are beyond the class held chargeable in the decisions subjection true beneficial owners of stock in a holding corporation to liability for assessment upon national bank stock owned by that holding corporation. They are in no sense the real or beneficial owners of any stock even in the holding company. They have exercised none of the rights of stockholders, have participated in no wise in the corporate activities and have nothing of value invesrted in the stock; they are naked nominees for the real parties in interest.

Courts may properly inquire as to the real and beneficial owners of bank stock and having ascertained the fact enforce assessment against them. But they may not, in determining such beneficial or real ownership, ignore the facts negativing ownership and assert liability against one who is neither real nor beneficial owner. To permit recovery under such circumstances is to lose sight of the real basis upon which courts have based liability, namely, ascertainment of real and beneficial ownership. Liability of such beneficial or real owners, whose names do not appear of record on books of national banks, arises by inference from the fact of such beneficial ownership. Only because parties actually own holdding company stock, does the lawl impute to them actual ownership of bank stock. To proceed furtheer and fix liability against one who is not a real or beneficial owner of strock in the holding corporation is to draw the inference of real ownership from the mere fact of titular ownership without regard to the true facts. This, we think, is not permissible.

Nor has any estoppel been built up against defendants. Their names did not appear upon the books of the bank. Even though they may have appeared upon the books of the Bancorporation, no credit could have been extended to the bank because of that, - so far as the credit of that institution is concerned, defendants were clothed with anonymity. Bancorporation was a private corporation to which its stockhollders had access but persons dealing with the Peoples bank did not.

The judgment is affirmed.

EVANS, Circuit Judge (dissenting).

The point of our difference may be clarified and stressed, if we state the propositions upon which we agree. They are:

(a) The "statutory double liability" of national bank stockholders, 12 U.S.C.A. § 64, evidences a long established public policy, the object of which was to ...

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