Fouche, assignee, vs. Brower.

Bones & Co. for about $7,000.00, and certain real estate. To the real estate Brower has taken deeds in his own name, and the stock also stands in his name; but all having been paid for with assets of the bank, a trust resulted in its favor. The money for which Brower owed the bank was used in improving some of the land; the Bones note was secured by a mortgage which was foreclosed and Brower bid in the property. The arrangement between Brower and Frost, Samuel & Co. was a fraudulent device to transfer to that firm the bank stock, and clothe them with the franchise, name and charter of the bank, denuded of its capital and assets, and induce the public to make deposits and deal with and credit the bank; and all of this was known to Brower. Frost, Samuel, & Co. were and are insolvent and non residents, and never could or intended to pay for the thousand shares of stock transferred to them, or to replace the assets conveyed to Brower and converted by him with full knowledge of the facts. On February 20, 1879, Frost, Samuel & Co., with the knowledge of Brower, elected themselves officers of the bank, and in its name notified the public that they had purchased it; that it had a paid-up capital of $50,000.00 and increased facilities for business, and invited public patronage, when, in fact, all of the assets had been abstracted and turned over to Brower. They did an extensive business, received on deposit $100,000.00, and became indebted to customers $20,000.00 otherwise; of the amount deposited, they fraudulently appropriated to their own use $75,000 00. Having no capital, the bank failed, and assigned to J. H. Reynolds on March 25, 1881. He resigned, and complainant was appointed to succeed him. The prayer was for an accounting by Brower; that he be required to deliver up and transfer the property received by him as above stated; for general relief and subpoena. Discovery was waived.

The answer gave the following account of the transfer to Frost, Samuel & Co.: About February 1, 1879, defend

Fouche, assignee, vs. Brower.

ant became sole owner of all the shares in the bank, and was proceeding to wind it up; he issued a circular notifying the public of this intention, and a copy was sent to all his customers, and one to the governor. Thus all the assets became the sole and exclusive property of defendant. About February 20, 1879, Frost, Samuel & Co., with a view to continuing business in the name of the bank and under its charter, bought from defendant the bank building for $, which they paid in full. Having no fur. ther use for the charter of the bank, and to accommodate them, without any consideration at all, he transferred all the stock and charter to them. The firm represented to him that they would increase the capital and do a large business. At the time of the transfer to the firm, defendant merely retained what was his own, and took a paper from them for the purpose of showing that it was not transferred. The firm re-organized the bank, and began business, but defendant does not know how much capital they put into it. He published a notice of the transfer of his stock, as required by law. After the sale of the build ing and transfer of the stock, defendant had no interest in the bank; had nothing to do with the re-organization on the 20th of February, 1879; does not know how much capital was paid into the bank, or whether any sum was paid in; nor does he know how the stock was divided. When he sold the building and transferred the stock, he had nothing more to do with the bank, and knew nothing more about its operations.

It is unnecessary to set out all the evidence in detail, but the following will serve to explain the questions at issue:

Complainant introduced the following contract:

"It is agreed by and between A. Thew H. Brower, of the first part, and E. D. Frost, R. G. Houston and C. G. Samuel, composing the firm of Frost, Samuel & Co., that in part payment for the whole of the capital stock of the Bank of Rome, consisting of one thousand shares, this day sold by said A. Thew H. Brower to said Frost, Samuel & Co., he, the said Brower, shall retain, and the said Frost, Samuel &

Fouche, assignee, vs. Brower.

Co. do hereby transfer and assign to him the stock of the bank in the East Rome Town Company; also certain Rome city bonds which were the property of said bank, together with the bills receivable, mortgages, books of account and choses in action held by and due to said bank; also the iron safe now in use in said bank, together with two desks, one rocking and one desk chair, four spittoons, one door mat, and such other articles as are usually designated as bank tools, consisting of rules, inkstands, paper-weights, etc.; and it is further agreed that the said A. Thew H. Brower shall have the right to use the name of the bank, so far as it may be necessary to bring pending litigation to a final settlement, he holding the bank harmless on account of the same. February 20, 1879. FROST, SAMUEL & Co.

Witness: W. S. COTHRAN, Notary Public."

Also the minutes of the bank, showing that Brower was elected president on January 13, 1879, and that on February 20, 1879, all of the stock being represented in person or by proxy (C. G. Samuel and J. S. Panchen casting the vote), an election was held for a board of directors, and Samuel, Frost, Houston and Panchen were elected.

Following these proceedings on the minutes was the following circular:

"THE BANK OF ROME, CHARTERED 1874, capital $50,000.

ROME, GA., February 20th, 1879.

DEAR SIR-We beg to inform you that we have purchased the entire franchise and property of the Bank of Rome, of this city, and have re-organized upon a basis which affords ample facilities for doing a leading banking business in all its branches.

The business of the banking firm of Frost & Panchen has also been merged with the above. We have reliable correspondents at all accessible points, and make no charge for collections when drawn 'with exchange.' We refer to our New York correspondent, the National Park Bank, and pledge our prompt and faithful attention to all business entrusted to our care.

E. D. FROST, Vice-President.

Respectfully,

C. G SAMUEL, President.

J. S. PANCHEN, Cashier."

The other evidence showed as follows: Brower transferred the stock in bulk, and it was then subdivided. Frost, who was the capitalist of the firm of Frost & Panchen, put the assets of that firm into the new firm of Frost, Samuel & Co., being $6,990.49 in cash, and notes and accounts, run

Fouche, assignee, vs. Brower.

ning the amount to $20,872.96; for this he took $20,000 of the bank stock, and was paid the balance of $872.96. He afterwards took $2,500 more of the stock, but how it was paid for does not appear Samuel took $10,000 of the stock, and gave his note with the stock as collateral; one Mrs. Deason took $5,000 of stock, and gave her note therefor; for the balance of the stock, up to $50,000 ($12,500), Frost, Samuel & Co. gave their note. This was the capital with which the bank organized. No dividends were ever declared thereafter. The books showed credits on Samuel's note amounting to $8,800. As collateral for the stock note of Frost, Samuel & Co., there was also placed $10.000 of stock in the Carbondale Iron Co.; what its value then was is not shown, but it was sold by the assignee, in 1883, for $3,500, at a somewhat depreciated valuation. Besides his stock, Samuel owed the bank $11,196.53, and a firm of which he was a member owed it on notes, for debts contracted in the fall of 1879 and in 1880, $36, 274.26, and also an account for $26,016.16. His firm was probably insolvent, then. Frost resides in Mississippi, Houston in Ohio. The latter never put any money into the bank, nor did Mrs. Deason ever pay anything; nor were other payments made than those already stated. Brower, before the transfer, issued a circular to his patrons, stating that the business of the bank would be brought to a close on February 20, 1879, and depositors and creditors were requested to present their claims. After the transfer to Frost, Samuel & Co., he occupied, by their permission, a back room in the bank-building, and paid off all claims accruing up to the time of the transfer. He advertised the transfer of his stock to that firm. It was generally known that he had sold out to Frost, Samuel & Co., and had retired from the business, but the particulars as to the withdrawal of the assets were not generally known.

Brower gave the following account of the transaction between him and Frost, Samuel & Co.: "I owned the en

Fouche, assignee, vs. Brower.

tire stock of the bank, and treated the entire assets as my own In January or February, 1879, I went to Col. Samuel and proposed to sell him the bank building. He told me he had formed a partnership to succeed Frost & Panchen, who were doing business up the street, and when the contract was drawn, he gave me the name of Frost, Samuel & Co. I had concluded to close out, and prepared a circular to that effect and sent it to all the customers of the bank. Colonel Samuel stated to me that they would rather do business under a charter, and that they could get one, but that he would like for me to transfer this one to him. I told him I didn't know whether I could do so without liability to me. He represented to me that he was going to do a large business; that he would bring in stronger men and do a larger business than we had done. I told him that I was going out of the business, and I didn't want any anxiety about it. I told him that Iwould submit it to my attorney in the matter, Colonel Alexander, and if he said it could be done without liability to me, I would then do it as a favor, no consideration being asked I did submit it to Colonel Alexander, and he told me that I could do it. He said that the proper and legal way was to transfer all the stock to this concern, and then receive the assets back, although the assets never were to go to them. I simply transferred the charter to them. They never had the assets of the bank, nor any of them They never saw them, and never had anything in the world to do with them. All that I did, and all that I intended to do, was to sell the bank building and furniture. My attorney wrote the paper signed by Frost, Samuel & Co. At the time of this transaction, I owned all the stock and assets of the bank. No other person had any interest in it. After I got done closing it up, it owed nobody anything. I paid all its debts, and there is now no debt against it. If the bank created any debts afterwards, I had nothing to do with it. I never was afterwards connected with the bank as stockholder or officer of any kind."

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