Fox's Appeal , 93 Pa. 406 ( 1880 )

Mr. Justice Sterrett

delivered the opinion of the court, March 30th 1880.

The charter of the Kutztown Savings Bank, granted by the legislature in 1869, declares, “ That the business of the corporation shall be, to receive on deposit, from time to time, such sums of money, not less than ten cents, as may be offered by tradesmen, clerks, mechanics, laborers, servants, minors, married women and others, and to invest the same in the stocks of this Commonwealth or of the United States, or in the stocks or bonds of any city authorized to be issued by any Act of this Commonwealth, or in other stocks, or in bonds and mortgages, and other improved and valid securities; the said corporation shall receive all sums of current money offered as aforesaid, and shall invest the same in the manner aforesaid.” Although styled a bank in the charter, it is expressly provided that nothing therein contained “shall be so construed as to confer upon the said corporation banking privileges :” Pamph. L. 365.

After being in operation for about seven years, the institution became insolvent, and pursuant to resolutions of its stockholders and board of trustees a voluntary assignment, in the usual form, was executed, in trust for the benefit of its creditors. The fund for distribution represents part of the assigned estate, including a portion of the capital which had been subscribed, but not paid at the time of the assignment, and the whole fund is insufficient to pay depositors in full.

The assignments of error involve only two propositions: 1. That the appellants and other depositors constitute- a preferred class, and as such are entitled to the whole fund, to the exclusion of all other creditors; 2. If not entitled to the entire fund, they have an exclusive right to that portion of it which represents capital collected by the assignee. In support of the first, it is contended, that the corporation was subject to the provisions of the Act of April 16th 1850, Pamph. L. 477, and other statutes regulating distribution of the assets of insolvent banks and establishing an order of preference; first, to note holders, second to depositors, and third, to all other creditors except stockholders. The learned auditor examined with great care the several Acts of Assembly on this subject, and came to the conclusion that they do not embrace savings institutions or banks, so called, which are prohibited from exercising banking privileges. In this we think he was clearly right. The Act of 1850, entitled an act regulating banks, established a complete system for the organization and winding up the affairs of banks in this Commonwealth. It provides, among other things, for division of the capital stock, the manner of taking subscriptions, the issuing of letters patent, acceptance of charter, election of directors, issuing notes, assignment for the benefit of creditors, individual liability of stockholders, keeping notes at par in Philadelphia and Pittsburgh, and other matters peculiar to banks of issue and discount, and not applicable to banks of deposit only. The Act of April 26th 1844 also relates to the same class of banks. Indeed, it is evident from the first preference given to note holders as a class that the legislation relied on by the appellants, relates exclusively to banks of issue and discount, and was not intended to embrace such institutions as the Kutztown Savings Bank.

The second proposition is based on the 5th section of the charter, which provides that for the security of depositors a capital of not less than $5 nor more than $50,000, in shares of $20 each, shall be raised previous to granting letters of incorporation; “ which capital shall at all times be liable to the depositors for the amount of their deposits and the interest accruing thereon.” The capital, small as is the minimum thus required to be raised aa a condition precedent to the issuance of letters patent, was evidently intended as a security for depositors, but not for them exclusively. It was designed to constitute a fund to be employed by the trustees for any of the legitimate purposes of the corporation. It might be loaned, or invested in property required for the use of the institution in conducting its business, or used in paying its creditors. There is nothing in the charter to indicate that it was intended to be a special fund, separate and distinct from other funds of the institution and for the exclusive benefit of depositors ; but it could not be withdrawn by or refunded to those by whom it was subscribed. The capital stock of a corporation is a trust-fund for the payment of its debts: Wood v. Dummer, 3 Mason 308; Mann v. Pentz, 8 Coms. 422; and unpaid subscriptions to its stock are a part of its assets, which pass to the assignee under a general assignment for the benefit of creditors: Railroad Co. v. Thomas, 2 Phila. Rep. 344. They are unlike' those shares of stock which, for the special benefit of depositors, are sometimes made assessable to double the amount of the capital. We think that the depositors, as a class, had no exclusive right to the whole or any particular portion of the fund. All the property and effects of the corporation passed, under the assignment, to the trustee, subject to the ordinary rules of distribution pertaining to general assignments for the benefit of creditors. The distribution was correctly made on this basis.

Decree affirmed, and appeal dismissed at the costs of the appellants.