For some years prior to the occurrences out of which this litigation arose the defendant bank was doing business in New York City. Being unable to meet current demands, it closed March 3, 1933. March 13 a conservator was appointed; October 16 the comptroller declared it insolvent and appointed a receiver. Later, he assessed the stockholders par value of their stock. May 31, Oppenheimer brought this action in the federal court for the Southern District of New York to recover damages upon an executed rescission of a sale to him of stock of the bank by means of fraudulent representations made by its president and vice president. At the close of the evidence, the parties respectively sought a directed verdict, and, no request for submission of any issue to the jury having been made, the court found the bank not enriched by the sale, and the president and vice president without actual or apparent authority to make representations in connection with the sale, directed a verdict and entered judgment for the bank. The Circuit Court of Appeals reversed and ordered that judgment for the amount demanded in the complaint be entered against the bank collectible out of assets of the receivership after payment in full of all who were creditors when the bank became insolvent. 85 F.(2d) 582.
Plaintiff applied for a writ of certiorari contending that the Circuit Court of Appeals erred in holding that his judgment is not entitled to rank with other unsecured creditors' claims and that its ruling conflicts with decisions of other Circuit Courts of Appeals. Defendant presented its cross-petition asserting that the court erred in holding: That plaintiff is entitled to participate in the distribution of proceeds of assessments on stockholders collected under 12 U.S.C. § 64 (12 U.S.C.A. § 64); that it may be compelled to take and pay for shares of its own capital stock in a manner not authorized by 12 U.S.C. § 83 (12 U.S.C.A. § 83); that it is liable for fraud of its officers in connection with the sale of shares which were the property of another, the bank not being enriched by the transaction; and that plaintiff is entitled to judgment against defendant. This court granted both petitions.
November 1, 1930, plaintiff purchased 10 shares of the bank's stock for $15,120. He was induced to buy the stock by false and fraudulent representations of the president and vice president of the bank. It sent him a bill for the purchase price. Having considerably more on deposit in the bank, plaintiff sent his check for that amount drawn on it and payable to its order. A vice president acknowledged receipt of the check and sent plaintiff a stock certificate for the shares purchased. His check marked paid and the bill receipted were returned to him. Plaintiff received dividends on the stock amounting to $525 and sold two shares for $2,408. Later, May 6, 1933, he gave the bank notice of rescission, tendered it the certificate and demanded that his account be credited with the amount of his payment less the sums he had received as dividends and from the sale of the two shares. The bank rejected his demand; he brought this suit for $12,187 with interest and costs. In addition to a general denial, defendant's answer set up affirmative defenses of ratification after knowledge of the fraud and of laches but at the trial these were abandoned.
Defendant's evidence tended to prove that the stock was not owned by it but by Harriman Securities Corporation, the shares of which were held in trust for the benefit of the stock of the bank. The bank maintained in its bond department a 'suspense account' in which were reflected purchases and sales of its own stock made by it for account of that corporation. The bank lent the affiliate the sums required for purchasing the stock and the amounts were charged to the latter. When the stock was sold the proceeds were credited to the affiliate. Stock so purchased was taken in the name of Kelly, an employee of the bank, as nominee of the affiliate. The shares in question were so held. Of the amount paid by plaintiff $100 was retained by the bank as its commission for making the sale; the balance was entered in the suspense account. Plaintiff had no knowledge of any transactions between the bank and its affiliate; he believed he was dealing with the bank as principal. He has paid the assessment that the comptroller made against him as stockholder and has not challenged its validity or sought repayment of any part of it.
1. Defendant maintains that a national bank may not incur liability to retake shares of its stock sold by it either as principal or agent.