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to deputice the sheriff, constable, or other before the suit was instituted in Pennsylofficer, as aforesaid, of the county where vania. In order to obviate this difficulty the the office of the insurance commissioner plaintiffs, in their declaration or statement may be located, to serve the same on him; in assumpsit, in the Pennsylvania court, and each and every service so made shall alleged that the contract of insurance was have the same force and effect, to all in- governed by the laws of Indiana, "the contents and purposes, as personal service on tract having been entered into at Indiansaid company in the county where said apolis, Indiana;” also, that "said policy of process issued; ..

insurance and the contract touching the The defendant association introduced no issuing the same were executed in the state evidence. If, looking alone at the plead- of Indiana, in which state all provisions ings in the Pennsylvania suit, it be taken limiting liability on policies where suit that, at the time of the contract in ques- is not brought within a certain time are tion, the Indiana corporation was engaged held void and of no account.” The plainin transacting, at least some business in tiffs cannot, therefore, be heard now to say Pennsylvania, without having complied with that the contract was not, in fact, made in the provisions of the above statute of that Indiana. What they alleged in the Penncommonwealth,—that is, without having sylvania suit precluded the idea that the filed with the insurance commissioner the contract of insurance was made in that written stipulation required by that statute, commonwealth. Indeed, if they had alleged -still, plaintiffs cannot claim, on the pres that the business was transacted in Pennent record, the full benefit of the general sylvania, their action on the contract would rule that the judgment of a court of su- have been defeated by the condition in the perior authority, when proceeding within policy that no suit thereon could be brought the general scope of its powers, is presumed on it after the expiration of six months to act rightly within its jurisdiction; that from the death of the person whose life

thing shall be "intended to be out of the was insured. jurisdiction of a superior court but that But even if it be assumed that the inwhich specially appears to be so.” Pea- surance company was engaged in some busicock v. Bell, 1 Wms' Saund. 74. When a ness in Pennsylvania at the time the conjudgment of a court of superior authority tract in question was made, it cannot be is attacked collaterally for the want of ju- held that the company agreed that service risdiction, such a presumption cannot be in- of process upon the insurance commissioner dulged when it affirmatively appears from of that commonwealth would alone be sufthe pleadings or evidence that jurisdiction ficient to bring it into court in respect of all was wanting. We make this observation in business transacted by it, no matter where, view of the fact, distinctly shown by the with, or for the benefit of, citizens of plaintiffs themselves, that the policy of in- Pennsylvania. Undoubtedly, it was surance and contract in question was, in petent for Pennsylvania to declare that no fact, executed in Indiana, and not in Penn- insurance corporation should transact busisylvania. The policy sued on provided as ness within its limits without filing the one of its conditions that "for all purposes written stipulation specified in its statute. and in all cases this contract shall be Lafayette Ins. Co. v. French, 18 How. 404, deemed to have been made at the special | 15 L. ed. 451; Paul v. Virginia, 8 Wall. 168, office of this association in the state of In- 19 L. ed. 357; Hooper v. California, 155 U. diana, U. S. A., and all benefits and claims S. 648, 653, 39 L. ed. 297, 300, 5 Inters. Com. thereunder shall be payable at such of- Rep. 610, 15 Sup. Ct. Rep. 207, and aufice.” Besides, to the complaint or petition thorities cited; Waters-Pierce Oil Co. v. in the Pennsylvania court was appended the Texas, 177 U. S. 28, 45, 44 L. ed. 657, 664, 20 following memorandum signed by the at. Sup. Ct. Rep. 518. It is equally true that, torney for the plaintiffs: “The above con- if an insurance corporation of another state tract of insurance is governed by the laws transacts business in Pennsylvania without of the state of Indiana, the contract hav- complying with its provisions, it will be ing been entered into at Indianapolis." And deemed to have assented to any valid terms when the suit was brought in Pennsylvania prescribed by that commonwealth as a conthe plaintiff's were confronted with the condition of its right to do business there; and dition in the policy that "it is expressly it will be estopped to say that it had not understood and agreed that no action shall done what it should have done in order that be maintained nor recovery had for any it might lawfully enter that commonwealth claims under or in virtue of this policy, aft- and there exert its corporate powers. In er the lapse of six months from the death Baltimore & O. R. Co. v. Harris, 12 Wall. 65, of said member,”—McNally. More than six 20 L. ed. 354, the question was as to the months had elapsed after McNally's death | jurisdiction of the supreme court of the Dis


trict of Columbia of a suit against a corpo- | sylvania court in rendering the judgment ration in Maryland, whose railroad entered must be deemed that of the state within the District with the consent of Congress. the meaning of the 14th Amendment,t-we This court said: "It [the corporation] hold that the judgment in Pennsylvania was cannot migrate, but may exercise its au- not entitled to the faith and credit which, thority in a foreign territory upon such con by the Constitution, is required to be given ditions as may be prescribed by the law of to the public acts, records, and judicial prothe place. One of these conditions may be ceedings of the several states, and was void that it shall consent to be sued there. If as wanting in due process of law. it do business there it will be presumed to The judgment of the Supreme Court of have assented, and will be bound according- Indiana must, therefore, be reversed, with ly.” This language was cited and approved directions for further proceedings not inin Chicago & N. W. R. Co. v. Whitton, 13 consistent with this opinion. Wall. 270, 285, 20 L. ed. 571, 576. The same

It is so ordered. question was before the court in Ex parte Schollenberger, 96 U. S. 369, 376, 24 L. ed. 853, 854, and the principle announced in the

FRANKLIN S. JEROME, Plff. in Err., Harris and Whitton Cases was approved. In the Schollenberger Case the Pennsyl- CHARLES P. COGSWELL, the State Savvania statute here in question was involved.

ings Bank, et al. To the same effect are the following cases: Ehrman v. Teutonia Ins. Co. 1 McCrary, 123, National banks-reduction of capital stock 129, 1 Fed. 471; Knapp, S. & Co. v. National -distribution of charged-off assets. Mut. F. Ins. Co. 30 Fed. 607; Berry v.

The stockholders of record at the Knights Templars' & M. Life Indemnity Co. time of the reduction of the capital stock 46 Fed. 439, 441, 442; Diamond Plate Glass of a national bank, and not those of record Co. v. Minneapolis Mut. F. Ins. Co. 55 Fed. tled to the proceeds of the bad or doubtful

at the expiration of its charter, are enti27; Stewart v. Harmon, 98 Fed. 190, 192.

assets set apart at the time of such reducConceding, then, that by going into tion in compliance with the requirement of Pennsylvania, without first complying with the Comptroller of the Currency that such its statute, the defendant association may assets should be charged off or set aside be held to have assented to the service upon for the benefit of those who were then the insurance commissioner of process in a stockholders, the bank, after such reduction, suit brought against it there in respect unimpaired, and a surplus exclusive of the

being left with its capital stock, as reduced, of business transacted by it in that com-assets in question. monwealth, such assent cannot properly be implied where it affirmatively appears, as

[No. 80.] it does here, that the business was not transacted in Pennsylvania. Indeed, the Argued November 2, 1906. Decided January Pennsylvania statute, upon its face, is only

7, 1907. directed against insurance companies who do business in that commonwealth,"in I NERROR to the Supreme Court of Errors

of the State of Connecticut to review a this state." While the highest considerations of public policy demand that an in- judgment which, reversing the judgment of surance corporation, entering a state in de- in that state, adjudged that the stockfiance of a statute which lawfully prescribes holders of record of a national bank at the the terms upon which it may exert its

time of its reduction of its capital stock powers there, should be held to have assented to such terms as to business there directed distribution accordingly. Affirmed.

were entitled to the charged-off assets, and transacted by it, it would be going very far

See same case below, 78 Conn. 75, 60 Atl. to imply, and we do not imply, such as

1059. sent as to business transacted in another state, although citizens of the former state

Statement by Mr. Chief Justice Fuller: may be interested in such business.

The Second National Bank of Norwich, As the suit in the Pennsylvania court was upon a contract executed in Indiana;

+Ex parte Virginia, 100 U. S. 339, 346, as the personal judgment in that court 347, 25 L. ed. 676–680; Neal v. Delaware, against the Indiana corporation was only 103 U. S. 370, 26 L. ed. 567; Yick Wo v. upon notice to the insurance commissioner, Hopkins, 118 U. S. 356, 30 L. ed. 220, 6 without any legal notice to the defendant 162 U. S. 565, 40 L. ed. 1075, 16 Sup. Ct.

Sup. Ct. Rep. 1064; Gibson v. Mississippi, association, and without its having ap: Rep. 904; Chicago, B. & Q. R. Co. v. Chipeared in person or by attorney or by agent cago, 166 U. S. 226, 233, 234, 41 L. ed. 979, in the suit; and as the act of the Penn- 1983, 984, 17 Sup. Ct. Rep. 581.

27 S. C.-16.

Connecticut, was a banking

a banking association, items were of real estate; the rest were not organized and existing under the laws of well secured; and all were those referred to the United States, with a capital stock of in the directors' statement to the Comp$300,000.

troller, dated June 9th. As stated, in substance, by the supreme “This left the bank with good assets court of errors of Connecticut, the direct- worth over $240,000. ors, having voted to recommend a reduction "The bank thereafter, until its charter ex. of the capital stock from $300,000 to $200,- pired in 1903, kept a separate account re000, were advised by the Comptroller of the lating to the assets included in the Currency that it would be approved, "pro- schedule, entitled 'Stockholders' Trust,' in vided so much of the amount as is neces- which were credited all collections and sary is used to charge off bad, doubtful, and charged all expenditures arising in conunproductive assets, the difference only nection with endeavors to realize upon them. being paid to the shareholders in cash," and "Two of the scheduled items represented that "the shareholders of a national bank, claims for a larger amount; the valuation upon a reduction in capital stock, are en- affixed to each representing the estimated titled to either receive the cash or the loss upon it. The same claims were also charged-off assets, and neither can be with entered in the books of the bank, as part of held without their consent." The Comp- its remaining capital, at a valuation for troller also informed the president of the each equal to the difference between its face bank: “The assets belong to the stock and the valuation assigned to it in the holders of record, and a trust fund must be schedule. created, so that those assets may be dis- “The receiver has received $20,240 on actributed among the stockholders of record count of the scheduled assets. Some of when your capital is reduced.” The stock them also remain uncollected, but have a holders, in May, 1900, voted to make the value. To one of the items, entered as reduction, and the president first, and then 'Demand loans, E. A. Packer, $15,647.50.' bethe directors, filed with the Comptroller a longed certain railroad stock held as colwritten statement that "the whole amount lateral security. A note for over $1,000, of the reduction, viz., $100,000, will be used made by 'C. P. Cogswell, trustee,' and disfor the purpose of charging off bad, doubt. counted by the bank to pay an assessment ful, and unproductive assets, no money to on this stock, was included in the reduced be paid to the shareholders unless realized capital of $200,000, and in March, 1903, was from said assets, which are to be set aside paid off from the proceeds of sales of the and collected for the benefit of the share- stock; leaving a balance of such proceeds, holders of record at date of the issuance of which was included in the $20,240 above the Comptroller's certificate approving the mentioned. reduction." The Comptroller gave his “All the certificates representing the certificate, dated June 9, 1900, approving shares in the original capital were, on or the reduction, without any qualifications. about July 1st, 1900, exchanged by the

"On June 27th a schedule of certain as holders for certificates in favor of each for sets of the bank, each item being given a two thirds of the number of his original valuation, and the total valuations of all shares." amounting to $100,307.86, was presented to The charter of the bank expired by lapse the directors, who thereupon voted that the of time February 24, 1903, and its affairs assets so scheduled, 'which assets are con- were being settled in the manner provided sidered either bad or doubtful, and on ac- by law, when a complaint in equity was count of which the capital stock of the bank filed by a stockholder in the superior court has been reduced from $300,000 to $200,000, of Connecticut, asking for the appointment be set aside from the other assets of the of a receiver to wind up its affairs, because bank, and be held by it in trust for the of alleged misappropriation, and a receiver stockholders of record on the 9th day of was appointed. The receiver filed a petition June, 1900, and that whatever may be with the court, stating that in May, 1900, realized from said assets be distributed from the capital stock of the bank was reduced time to time as may be reasonable among from $300,000 to $200,000, and that theresaid stockholders in proportion to their re- upon assets of the face value of $100,000 spective holdings on said date.'

were charged off and set aside, and that a “Thereupon the

the account with capital question had arisen as to whether the prostock on the books of the bank was credited ceeds of those assets be distributed to the with a reduction of $100,000, and the items stockholders of record at the time of the named in the schedule above described were reduction or of the expiration of the charged to the account of profit and loss at charter. the valuation of $100,307.86. Some of the Claims to the charged-off assets by virtuo

of ownership of original stock when capital should be charged off or set aside for the was reduced; of such stock, although it had benefit of those who were stockholders at been surrendered and new stock issued; and the date of the approval. This requireof stock after the reduction,-were filed. ment, though not stated in the certificate of

The superior court held that those assets approval, was evidently, on the facts, made belonged to the bank, and should be dis- a condition thereof, and presumably in actributed to the stockholders of record at the cordance with the practice of the Compexpiration of its charter.

troller's office, and was imposed to the end The supreme court of errors adjudged that justice might be done to the owners that the stockholders of record at time of of the original shares. reduction were entitled to the charged-off It is said that the original capital of the assets, and reversed the judgment of the bank of $300,000 was impaired prior to the superior court, with directions to distribute reduction, say to the extent of $30,000, as accordingly. 78 Conn. 75, 60 Atl. 1059. shown by adding to the $240,000 the value Whereupon this writ of

of error was of the scheduled assets, estimated at $30,brought.


As a general rule, it may be admitted Messrs. Donald G. Perkins and William that where capital stock is impaired and a H. Shields for plaintiff in error.

reduction is made merely to meet that imMessrs. Frank T. Brown and Hadlai A. pairment, there can be no distribution. But Hull for defendants in error.

that is not this case, in which the stock

holders of record June 9, 1900, had a right Mr. Chief Justice Fuller delivered the to require a distribution among them of an opinion of the court:

excess upon reduction in proportion to their This is not a case involving the rights of respective holdings. In the language of the creditors or of minority stockholders as

Connecticut supreme court: “The right to such, but a case raising the bare question from the fund thus set apart became, there

receive what night ultimately be realized to whom assets remaining on a valid reduction of the capital stock of a national fore, irrevocably vested in those who were bank belong.

shareholders on June 9th, 1900, and they The national banking act (title 62, Rev. or their assigns are now entitled to what

ever is to be distributed from it." Stat.) provides:


Conn. 79, 60 Atl. 1060.] "Sec. 5143 (U. S. Comp. Stat. 1901, p.

It follows, as held, that the transfer of 3463). Any aşsociation formed under this title may, by the vote of shareholders own- shares after the reduction of June 9, 1900, ing two thirds of its capital stock, reduce did not carry any right to an interest in its capital to any

sum not below the the special trust fund, the proportionate inamount required by this title to authorize terest therein having vested in the then

shareholders as individuals. The result is the formation of associations; but no such reduction shall be allowable which will re- unaffected by the fact that distribution in duce the capital of the association below cash may have been contemplated as the the amount required for its outstanding cir-assets set aside were realized upon. .

The conclusion at which we have arrived culation, nor shall any such reduction be made until the amount of the proposed re- dispenses with the necessity of discussing duction has been reported to the Comptrol

other questions suggested. ler of the Currency, and his approval thereof

Judgment affirmed. obtained.

The reduction in this case was accomplished at a time when the bank was not being wound up, by the required vote of

CORWIN D. BACHTEL, Piff. in Err., the stockholders, and with the approval of the Comptroller of the Currency, and the R. FRANK WILSON, Sheriff of Stark Counnew shares on the basis of the reduction

ty, Ohio, were accepted by all the stockholders.

Error to state court-Federal question-deThe bank was left with good assets of cision on non-Federal ground. more than $240,000, or, in other words, with

The judgment of the Ohio supreme an unimpaired capital stock of $200,000 and court upholding the validity of the provi. a surplus of 20 per cent,—that is, $40,000, sions of the free banking act of March 21, exclusive of the assets, the distribution of 1851, $ 30, as amended April 24, 1879, under which is the matter in controversy. These which an indictment had been found against assets were set apart in compliance with that act, in the face of the objection that

the cashier of a bank incorporated under the requirement of the Comptroller that cer

such section, by subjecting officers of insti. tain bad, doubtful, and unproductive assets tutions so incorporated to criminal liabilit

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when officers of other banking institutions | A demurrer to the indictment having been guilty of similar acts are not so subjected, overruled, he, before arraignment, sued out denies the equal protection of the laws, a writ of habeas corpus in the circuit court cannot be reviewed by the Federal Supreme of that county. Thereafter, the final judgCourt, where the failure of the state court to file an opinion leaves it doubtful wheth- ment of the supreme court of the state in er that court may not have held that the that proceeding having been adverse, he words "any banking company,” as used in brought the case here on this writ of error. the section in question, embrace all banking institutions in the state, whether incor- Mr. William A. Lynch for plaintiff in porated under the free banking act or not.error.

Messrs. Charles C. Upham and John W. [No. 446.]

Craine for defendant in error.

Argued November 14, 15, 1906. Decided Mr. Justice Brewer delivered the opinion January 7, 1907.

of the court:

Counsel predicate the unconstitutionality IN ERROR to the Supreme Court of the of this statute, not on its provisions standState of Ohio to review

to review a judgmenting by themselves, but on its relation to which affirmed a judgment of the Circuit other statutes. Court of Stark County, in that state, dis- On February 26, 1873 (70 Ohio Laws, 40), missing a writ of habeas corpus sued out an act was passed in terms incorporating by the cashier of a bank incorporated under savings and loan associations, but with the free banking act, who had been indicted powers such as in fact authorized the carryfor a violation of such act. Dismissed for ing on of ordinary commercial banking. want of jurisdiction.

Under this statute a few institutions were

organized. In 1880 a general incorporation Statement by Mr. Justice Brewer: law was enacted (Rev. Stat. Ohio 1880, $

The sole question in this case, as stated 3235 and following), and under it many by counsel for plaintiff in error, is whether | banks were formed. In addition the bankthe following section of the statutes of Ohio ing statistics of the state show that there contravenes § 1 of the 14th Amendment of are several banks owned by unincorporated the Constitution of the United States:

stockholders, copartnerships, or individuals. “Every president, director, cashier, teller, Now, in no statute, save the free banking clerk, or agent of any banking company who act, is there any section with provisions shall embezzle, abstract, or wilfully mis- kindred to those in § 30, above quoted, and apply any of the moneys, funds, or credits the contention is that the plaintiff in error of such company, or shall, without author was denied the "equal protection of the ity from the directors, issue or put forth laws" guaranteed by the 14th Amendment, any certificate of deposit, draw any order in that he was subject to prosecution and or bill of exchange, make any acceptance, punishment for matters and things which, assign, any notes, bonds, drafts, or bills of if done by a cashier of any similar instituexchange, mortgage, judgment, or decree, or tion, whether unincorporated or incorposhall make any false entry in any book, re- rated under the statutes of Ohio other than port, or statement of the company, with in the free banking act, would not subject him tent in either case to injure or defraud the to punishment. The cashiers of such other company, or any other company, body institutions are charged with duties subpolitic or corporate, or any individual per- stantially the same as those of this plainson, or to deceive any officer of the com- tiff in error, and yet the one may be punpany, or any agent appointed to inspect the ished for a violation of those duties and the affairs of any banking company in this others not. Can the state single out a few state, shall be guilty of an offense, and, men and punish them for acts, when for upon conviction thereof, shall be confined like acts others are free from liability ? in the penitentiary, at hard labor, not less No opinion was filed by the supreme court than one year nor more than ten years." of the state, and we, therefore, are not adSection 30, act of March 21, 1851, entitled, vised of the grounds upon which that court “An Act to Authorize Free Banking," as held § 30 valid; yet that court did hold it amended April 24, 1879, 76 Ohio Laws, 74; valid, and in the face of the same objec2 Bates's Anno. Stat. (Ohio) 6th ed. S$ 3821-1 tions that are made to it here. If "any 3885.

banking company,” as found in the free Plaintiff in error, who was cashier of the banking act, is applicable to every banking Canton State Bank, a bank incorporated institution, no matter under what statute under the above "free banking" act, was in organized, there is no violation of the equal dicted in the court of common pleas of protection of the laws. Counsel for plaintiff Stark county for a violation of this section.' in error contend that the supreme court

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