New v. Page

Urner, J., delivered the opinion of the Court. Three cases have been consolidated for the purposes of this appeal. In the suits as separately tried judgments, were recovered by the Receiver of the Lafayette Bank, of Baltimore, upon individual promissory notes for $1,500 each, payable to its order, made by the respective appellants. Upon one of the notes a bank deposit of the maker to the amount of $392.90 had been credited.

The appellants Were three of the twelve directors of the bank. The notes, were given in pursuance of a plan for the directors' to. finance the subscription and payment for the previously unissued portion of the capital stock of the bank, in order that the entire amount of its authorized capital might be paid within a year after its organization as required by law. (Code, art. 11, sec. 20.) It was necessary that the stock should be sold for twelve dollars per share, so as to. yield ten dollars for its par value and two dollars for surplus, and as there were five thousand shares to be subscribed and paid for, the total amount to be received by the bank was $60,000. The twelve directors borrowed $50s,000 from the Farmers’ and Merchants’ Bank of Baltimore, on a promissory note made by them in their individual capacities, with the agreement that $8,000' of the amount should be immediately repaid.

The check of the Farmers’ and Merchants.’ Bank to the directors for the $50,000 loaned was deposited in the Lafayette Bank, and after $8,000 had been paid to the former hank, in accordance with the agreement., the balance was applied in partial payment for the 5,000 shares of stock for the purchase of which the money was borrowed. For the payment of the remaining $18,000 of the purchase price of the stock each of the twelve directors gave the Lafayette Bank his. promissory note for $1,500. The certificate for the stock was issued ⁶⁰⁸ in the name of J. Shorb Neale, one of the directors-, and was pledged as collateral security for tbe note to- the Farmers’ and Merchants’ Bank. An -entry on the books of the Lafayette Bank shows that the payment for the stock was credited as having been made by J. Shorb Neale “et al.,” and the proof is conclusive that all of the directors- participated equally in the subscription.

Subsequently the appellee, who is the State Bank Commissioner, became Receiver of the Lafayette Bank under' the decree of the Circuit Court of Baltimore City, and the appellants having refused to- pay their notes for -$1,500' each given to the bank under the circumstances described, the suits which have resulted in the judgments appealed from were instituted. The only exception in the record was taken in each case because tbe trial court declined to instruct itself, sitting as as jury, that there was no- evidence of any consideration for the¡ promissory note which was the subject of the suit, and that the verdict should he for the defendant. It is contended -on behalf of the appellants that the- notes in question were given simply for the accommodation of the Lafayette Bank, in order that its operations might he continued, and with the- understanding that they were to- be paid out of tbe proceeds of the- future sales of the stock for which they were ostensibly accepted in payment, but for which the appellants and the other directors were- n-ot to- be regarded as actual subscribers-. The transaction is said to have been designed to- enable the bank to nominally comply with the law, and the notice of the Bank Commissioner, as to the full subscription and payment for its capital stock.

It is argued that tbe notes sued on were not only without consideration, but were illegal as part of a plan to mislead tbe Bank Commissioner into- tbe belief that the requirements of the law had -been fulfilled. The appellants’ notes to the Lafayette Bank were unquestionably executed with the intention that they should be paid out of the proceeds of subsequent sales of the stock for which ⁶⁰⁹ they were given, and with the expectation that they would consequently not have to. he paid by tbe respective makers. But they were delivered to the bank in part payment for shares of stock which it thereupon actually issued, and which represented a substantial interest in tbe assets of the Corporation. There was no concealment in the method by which the subscription and the payment for the stock were accomplished.

The nature of the transaction is disclosed by entries on the bank’s records. While no formal application for the stock appears to have been signed, and the certificate was issued in the name of only one of the directors, who was president of the bank, the payments and notes received for the shares were credited in an account which indicated that the stock was held for the common interest of those contributing to its purchase. It was proved that the certificate was issued in Mr. Neale’s name alone to facilitate transfers as resales of the stock were negotiated. The payment of $42,000 to the bank