While a shareholder has generally a right to transfer his shares, and thereby disconnect himself from the corporation, and from responsibility on account of it, there are limits to that right. A transfer, which is merely colorable-that is, where the transferee is a mere tool of the transferror-so that as between the transferror and the transferee there is no real transfer, as where the transferee is bound to retransfer on request and the benefits of ownership continue in the transferror, does not relieve the transferror of his liability.102 Again even if the transfer is out and out, if the stockholder, knowing or having good reason to believe that the bank is insolvent, colludes with an irresponsible person, with design to substitute the latter in his place, and thus escape individual liability, transfers his shares to such person, the transaction will be deemed a fraud on creditors, and the transferror will be held liable.103

102 Germania Nat. Bank v. Case, 99 U. S. 628, 25 L. Ed. 448; McDonald v. Dewey, 202 U. S. 510, 26 Sup. Ct. 731, 50 L. Ed. 1128. See, also, Foster v. Lincoln's Ex'r, 79 Fed. 170, 24 C. C. A. 470.

Where an executor, without consideration, transfers bank stock in trust for his own benefit, and to enable the transferee to become a director of the bank, the title, for the purposes of assessment, remains with the executor. Witters v. Sowles (C. C.) 32 Fed. 130. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. §§ 916918.

103 Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, 27 L. Ed. 386. Reasonable ground to apprehend failure is enough. Cox v. Montague, 78 Fed. 845, 24 C. C. A. 364.

Knowledge that the bank's reserve is below the limit fixed by Rev. St. U. S. § 5191 (U. S. Comp. St. 1901, p. 3486), is not enough to avoid the transaction in the event of future suspension. A bona fide sale is not a fraud on creditors because the bank is then insolvent, if the fact be unknown to the seller. Earle v. Carson, 188 U. S. 42, 23 Sup. Ct. 254, 47 L. Ed. 373. See, also, Vandagrift v. Rich Hill Bank, 163 Fed. 823, 90 C. C. A. 129; Fowler v. Crouse, 175 Fed. 646, 99 C. C. A. 200.

A transfer by way of gift, although to an irresponsible person, cannot be set aside, if made in good faith and without knowledge of the bank's failing condition. Sykes v. Holloway (C. C.) 81 Fed. 432. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. §§ 916-918.

And the rule has been applied even where the transferee is solvent. "One who holds such shares (the bank being at the time insolvent) cannot escape the individual liability imposed by the statute by transferring his stock with the intent simply to avoid that liability, knowing or having reason to believe, at the time of the transfer on the books of the bank, that it is insolvent or about to fail. A transfer with such intent and under such circumstances is a fraud upon the creditors of the bank, and may be treated by the receiver as inoperative between the transferror and himself, and the former held liable as a shareholder without reference to the financial condition of the transferee." 104 The solvency of the transferee is pertinent in showing that no damage could have resulted to the creditors by the transfer; but one who relies upon a sale of shares made with knowledge of the bank's insolvency to escape his statutory liability has the burden of proving that the vendee was financially responsible to the extent of the assessment. Moreover, one who, with knowledge of the bank's insolvency, transfers his shares to an irresponsible vendee, with intent to evade his statutory liability, can be held liable only for the unsatisfied debts existing when the fraudulent transfer was made.105

Although the transfer is such that the transferror remains liable, the transferee, having voluntarily assumed the position of a shareholder, is also liable.106 After the bank has become

104 Stuart v. Hayden, 169 U. S. 1, 18 Sup. Ct. 274, 42 L. Ed. 639. The insolvency of the purchaser of shares of a bank which subsequently suspends does not render the sale void, as in fraud of the bank's creditors, where the insolvency of the purchaser is unknown to the seller. Earle v. Carson, 188 U. S. 42, 23 Sup. Ct. 254, 47 L. Ed. 373. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. §§ 916-918.

105 McDonald v. Dewey, 202 U. S. 510, 26 Sup. Ct. 731, 50 L. Ed. 1128. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent Dig. § 916-918.

106 Foster v. Lincoln (C. C.) 74 Fed. 382; Baker v. Reeves (C. C.) 85 Fed. 837. See, also, Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, 27 L. Ed. 386. See “Banks and Banking,” Dec. Dig. (Key No.) $ 249; Cent. Dig. §§ 916-918.

insolvent and closed its doors, the liability of shareholders is so far fixed that any transfer is inoperative as against the creditors.107

ENFORCEMENT OF SHAREHOLDERS' LIABILITY

102. In case of the involuntary liquidation of the association, the liability of the shareholders is enforced through a receiver appointed by and under the direction of the comptroller of the currency. In case of voluntary liquidation, the liability may be enforced by creditors' bill, or by a receiver appointed by a court of equity to liquidate the debts of the association.

Involuntary Liquidation

In case of the involuntary liquidation of the association, the personal liability of the shareholders is enforced through a receiver appointed by the comptroller of the currency and acting under his direction.108 It is for the receiver to decide when proceedings are necessary to enforce the liability and to what extent it shall be enforced, and in an action to enforce it such determination must be averred and proved. The creditors of the bank cannot proceed directly in their own names, nor are they proper parties to the suit. When less than the entire liability of stockholders is sought to be enforced, proceedings may be had in equity, and an interlocutory decree may be taken for contribution. When contribution only is sought, all the stock

107 Irons v. Manufacturers' Nat. Bank (C. C.) 17 Fed. 308. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. §§ 916918.

108 Rev. St. U. S. § 5234 (U. S. Comp. St. 1901, p. 3507); Act June 30, 1876, c. 156, § 1, 19 Stat. 63 (U. S. Comp. St. 1901, p. 3509); Act Aug. 3, 1892, c. 360, 27 Stat. 345 (U. S. Comp. St. 1901, p. 3513); Act March 2, 1897, c. 354, 29 Stat. 600 (U. S. Comp. St. 1901, p. 3514);; post, p. 413.

holders who can be reached by process of the court may be joined, and it will be no objection that there are others beyond the jurisdiction who cannot be reached. 109 When the order of the comptroller is to enforce the full amount of the liabilitythat is, an amount equal to the par of the stock-the action must be at law.110 Actions by the receiver for assessments on the stock are subject to the state statutes of limitations.111

The order of the comptroller, determining to what extent the liability shall be enforced, is conclusive on the stockholders, and cannot be controverted by them in a suit for the recovery

See, also, Na

109 Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 476. tional Bank of Metropolis v. Kennedy, 17 Wall. 19, 21 L. Ed. 554. The comptroller may appoint a receiver for an insolvent bank, or make a ratable assessment on the stockholders, without a prior judicial determination of the necessity for a receiver or of the existence of the liabilities of the bank. Rev. St. §§ 5151, 5234 (U. S. Comp. St. 1901, pp. 3465, 3507), empowering the comptroller to appoint receivers for insolvent banks, and to make ratable assessments upon stockholders, does not vest in him a judicial power, in violation of the constitution. Bushnell v. Leland, 164 U. S. 684, 17 Sup. Ct. 209, 41 L. Ed. 598.

As to sufficiency of proof of comptroller's determination to enforce liability, see Bowden v. Johnson, 107 U. S. 251, 2 Sup. Ct. 246, 27 L. Ed. 386.

As to sufficiency of pleading comptroller's determination, see Welles v. Stout (C. C.) 38 Fed. 67; Young v. Wempe (C. C.) 46 Fed. 354; Nead v. Wall (C. C.) 70 Fed. 806; O'Connor v. Witherby, 111 Cal. 523, 44 Pac. 227. See "Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-943.

110 Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 476; Casey v. Galli, 94 U. S. 673, 24 L. Ed. 168. See, also, Young v. Wempe (C. C.) 46 Fed. 354. See "Banks and Banking," Dec. Dig. (Key. No.) § 250; Cent. Dig. 88 932-943.

111 Putler v. Poole (C. C.) 44 Fed. 586; Price v. Yates, Fed. Cas. No. 11,418.

As to the applicability of particular statutory provisions, see McDonald v. Thompson, 184 U. S. 71, 22 Sup. Ct. 297, 46 L. Ed. 437; McClaine v. Rankin, 197 U. S. 154, 25 Sup. Ct. 410, 49 L. Ed. 702; King v. Armstrong, 9 Cal. App. 368, 99 Pac. 527. See "Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-943.

thereof.11 But the comptroller may make a second assessment upon the shareholders, where the first proves insufficient to pay the debts and liabilities of the bank.118 The statute of limitations does not commence to run against the enforcement of the entire liability, or of any particular portion thereof, until the comptroller has called the entire liability or the particular portion of it in issue.114

A payment of an assessment made by a bank on its shareholders in order to continue in business and avoid liquidation is not a discharge of the shareholder's liability for the debts. of the bank, and cannot be applied thereto.115 Nor can a stockholder, who is also a creditor of the bank, offset against the amount of an assessment ordered by the comptroller an indebtedness of the bank to him, but he must come in with the other general creditors.116

112 Kennedy v. Gibson, 8 Wall. 498, 19 L. Ed. 476; Casey v. Galli, 94 U. S. 673, 24 L. Ed. 168. See, also, Aldrich v. Yates (C. C.) 95 Fed. 78; Deweese v. Smith, 106 Fed. 438, 45 C. C. A. 408, 66 L. R. A. 971.

The determination of the comptroller does not conclude stockholders as to the validity of the debts to pay which the assessment is made. Moss v. Whitzel (C. C.) 108 Fed. 579. See “Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932–943.

113 Studebaker v. Perry, 184 U. S. 258, 22 Sup. Ct. 463, 46 L. Ed. 528. See "Banks and Banking,” Dec. Dig. (Key No.) § 250; Cent. Dig. $$ 932-943.

114 Deweese v. Smith, 106 Fed. 438, 45 C. C. A. 408, 66 L. R. A. 971. See, also, McDonald v. Thompson, 184 U. S. 71, 22 Sup. Ct. 297, 46 L. Ed. 437; Thompson v. German Ins. Co. (C. C.) 76 Fed. 892; Howarth v. Ellwanger (C. C.) 86 Fed. 54; Aldrich v. Yates (C. C) 95 Fed. 78. See "Banks and Banking," Dec. Dig. (Key No.) § 250; Cent. Dig. §§ 932-943.

115 Delano v. Butler, 118 U. S. 634, 7 Sup. Ct. 39, 30 L. Ed. 260. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. § 926.

116 Hobart v. Gould (D. C.) 8 Fed. 57; Wingate v. Orchard, 75 Fed. 241, 21 C. C. A. 315. See, also, Witters v. Sowles (C. C.) 32 Fed. 130; Sowles v. Witters (C. C.) 39 Fed. 403. See "Banks and Banking," Dec. Dig. (Key No.) § 249; Cent. Dig. § 929.