Duvall v. Robinson

Parke, J., delivered the opinion of the Court. The single question which requires consideration on this appeal is the decision of the trial court that the directors’ liability under the statutory provisions found in section 71 of article 11 of the Code (Supp. 1935), is an asset of the estate of the banking corporation in liquidation and is not available to a creditor directly. The question was affirmatively decided on the pleadings in an action at law brought by a creditor of an insolvent banking institution, in course of liquidation under a receivership within the jurisdiction and under the supervision of a court of equity. The plaintiff, who lost below, ⁴⁹¹ was a creditor of the corporation, and defendants are certain of its directors who are charged with having wrongfully declared and paid dividends while the corporation was insolvent or in danger of insolvency, or was in such a financial condition that a dividend could not be paid without impairing or diminishing the corporate capital.

The material facts necessary for a comprehension of the case will now be stated. The Title Guarantee and Trust Company, a banking institution of the State of Maryland, became insolvent, and, on February 20th, 1933, was duly placed in the hands of a receiver, who proceeded with the administration of its affairs until, pursuant to the provision of article 11 of the Code of Public General Laws of Maryland, as amended by the Acts of Assembly of the State of Maryland of 1933, chapter 529, the board of directors of the company proposed and filed with the Bank Commissioner of Maryland a plan for the reorganization of the company within the contemplation of the statute. After due notice had been given to the creditors of the corporation and to the other parties specified by the law, the plan was approved and became effective. The plaintiff, Raymond M. Duvall, filed his dissent to the plan and elected to take the liquidation value of his claim as creditor.

The plaintiff later made application to the equity court, which had jurisdiction of the subject matter, to fix and determine the liquidation value of his claim as creditor. After this value had been found, the amount so ascertained was paid by the receiver to the plaintiff. Supra, section 9C. The statute prescribed that the determination of the court shall be the present cash value of such objecting parties’ (sic) interest on the basis of a judicial liquidation of said institution.

Acts of 1933, chs. 46, 529. In this determination, the court must include and evaluate every asset, claim or demand, subject to the prior liabilities of the institution, in order that, on the basis of a full and complete liquidation, the amount ⁴⁹² which would become payable to the depositor or creditor would become known and ascertained, so far as the judicial process and procedure are capable. Thus, in this judicial finding, every asset and resource of the corporation, including the provisions for the benefit and use of the depositors and creditors, is taken into consideration and given its due value -and weight in the liquidation and computation prescribed by the statute. As one of the constituent factors in the determination of the liquidation value of the claim of a creditor or depositor are the provisions of section 71 of article 11 of the- Code, which provides: “No dividend shall be declared or paid by the directors except out of the net profits or surplus in excess of its required capital properly applicable thereto, as provided in Section 70 of this Article, and if any such dividend shall be paid every stockholder receiving the same shall be liable to restore the full amount thereof, unless the capital and the surplus to the extent required by Section 70 is subsequently made good; and if the directors shall knowingly pay any dividend when the corporation is insolvent or in