CHICAGO TITLE & TRUST CO. et al. v. STATE BANK OF AMBIA, 86 F. 863

SHOWALTER, Circuit Judge, after making tbe foregoing statement, delivered the opinion of tbe court. We are not referred to any by-law of tbe defendant in error or to any statute of Indiana wbicb obligates tbe stockholders of corporations sucb as this defendant in error to make good any mere impairment of capital other than tbe following provisions, being part of what is now

section 13, as substituted by -amendment March 9, 1895, for tbe original

section -13 of the act of February 7,1873, of tbe Revised Statutes of Indiana, entitled “An act to authorize and regulate tbe incorporation of banks of discount and deposit in tbe state of Indiana”: “Whenever the auditor of state shall have reason to believe that the capital steck of any of said associations is reduced by Impairment or otherwise, below the amount required by law or by its articles of association and certificate of increase or decrease of capital, as the case may be, the auditor shall require the deficiency to be made good and the board of directors shall immediately give notice of such requisition to each stockholder and of the amount of assessment which he must pay, by notice made to such stockholder at his place of business or served personally upon him.

If any stockholder shall refuse or fail to pay the assessment specified in the notice within sixty (60) days from the date thereof, said directors shall have the right to sell said stock, or any part thereof, to the highest bidder at public or private auction, and with or without notice as .the auditor may direct the sale to be made, but such stock shall not be sold for a less sum than valuation put thereon by the auditor and certified by him to the board of directors, and the auditor may revalue such stock, and new offers for sale may be made at any time, and from the proceeds of sale shall first be deducted the costs thereof. “If ány association shall neglect for sixty (60) days after the auditor shall have required such deficiency to be made good to comply with such request, the auditor shall report the fact to the attorney-general, who shall at once institute such legal proceedings as shall be proper to wind up the defaulting association according to law, and in [any ?] violation of law, or default named in this act shall be sufficient cause for the appointment of a receiver for any such association.” Tbe directors are empowered to sell, provided tbe purchaser will pay as much as tbe value certified by tbe auditor; but it is nowhere stated in this statute that tbe price received by tbe directors shall go to and become tbe property of tbe bank.

Presumably, tbe price, less the expenses of the sale, would belong to the owner of the stock sold. In such case the bank would lose nothing. The purpose of the statute is apparently to enable the bank to get rid of unwilling stockholders, and go. on with its business. The extra obligation of shareholders for debts and liabilities of the corporation in default of assets is fully provided for in other portions of the statute. No obligation of that sort is involved here.

The statute does 'not in terms or by necessary implication create an obligation on stockholders to pay more than the full par value of the shares merely to replenish or replace capital lost: in the business of the corporation. Counsel do not question the validity of the amendment as concerns the sale of shares in the manner provided in case the holder does not choose to pay the assessment made by the auditor. Apparently the bank may be wound up if stockholders, or persons willing to become stockholders, by purchase in the manner directed, do not replenish the capital as demanded by the auditor.

But, whatever may be the precise meaning anu policy of this statute, we do not find in it satisfactory ground for the ruling that these plaintiffs in error, owning the 100 full-paid shares, must forfeit $4,000, — that being the entire value of the shares sold pursuant to the direction of the auditor, ■ — -because they did not elect to pay $6,000 additional in order to replenish the capital, and enable the business to continue.

The statute does not say that the *54,000 — the price received for these shares— should he forfeited by the owners; it does not say that the bank should become owner either of ihe shares or the money received as ihe price of the same. The diredors had, according to the statute, the power to sell for the price fixed by the auditor, but not the right to withhold that price, less the expenses of the sale, from the owner of the shares. Whether or noi, if such were the expressed meaning, the statute would be valid or constitutional, is a question which need not be discussed.

The judgment is reversed, and the cause remanded for further proceedings not inconsistent with this opinion.