161 U.S.

1
16 S.Ct. 439
40 L.Ed. 595

CHEMICAL NAT. BANK OF CHICAGO

v.
HARTFORD DEPOSIT CO.
No. 735.
February 3, 1896.
This was an action of assumpsit brought by the Hartford Deposit Company against
the Chemical National Bank of Chicago and the receiver of the bank in the superior
court of Cook county to recover damages for a failure to pay rent alleged to be due,
under a written lease, from August 1, 1893, to April 30, 1894. The cause was
submitted to the court for trial on a stipulation as to the facts, of which the lease
formed a part. The issues were found in favor of defendants, and judgment was
rendered accordingly. Plaintiff took the case to the appellate court for the First
district of Illinois, which affirmed the judgment as to the receiver, but reversed it as
to the Chemical National Bank, and entered judgment for the sum of $9,000. 58 Ill.
App. 256. An appeal was prosecuted to the supreme court of Illinois, and the
judgment of the appellate court affirmed. 156 Ill. 522, 41 M. E. 225. This writ of
error was thereupon brought.

The facts were thus stated by the supreme court:

'The Chemical National Bank of Chicago entered into a lease, dated
November 18, 1892, with the Hartford Deposit Company, of a banking
office of a certain building owned by the said Hartford Deposit Company.
In accordance with its terms, the bank paid $2,500 on the delivery of said
lease. The term was for a period of five years, from May 1, 1893, at an
annual rental of $12,000, payable in equal monthly installments of $1,000,
in advance, exclusive of and in addition to said first payment of $2,500.
The bank entered into and took possession of said premises on May 1,
1893, the first day of said term, and the first installment of rent fell due
and was payable on that day. This installment was not paid when due, nor
had it, or any part of it, been paid when, on May 9, 1893, the bank became
insolvent and a national bank examiner took possession of its assets and of
said premises. On July 21st a receiver was duly appointed, and on July
27th he notified the Hartford Deposit Company of his election to

terminate said lease after July 31, 1893, so far as he, as receiver, was
concerned. On the same day, namely, July 27th, said receiver paid to the
Hartford Deposit Company the sum of $2,709.68, which was, as agreed,
the ratable amount of rent due for the period to July 31st, inclusive. No
other or further rent was paid under said lease, by any other person or at
any other time. The premises remained vacant until May 1, 1894, when
they were relet at a reduced rental.' Hiram T. Cilbert, for plaintiff in error.
Charles H. Baldwin, for defendant in error.
Mr. Chief Justice FULLER, after stating the facts in the foregoing
language, delivered the opinion of the court.

It is not claimed that the express covenant to pay rent was released by the
insolvency of the lessee merely, nor that the election of the receiver not to
accept the lease had any effect on the contract between the lessor and the
lessee, nor that the lessor had done anything itself to terminate its rights under
the lease. But it is argued that no judgment could be rendered against the bank,
because the appointment of a receiver amounted to its dissolution, and because
the rent in question was not a demand existing at the date of the bank's
suspension, and therefore not a claim entitled to be proven up and paid out of
the assets of the bank or carried into judgment. The state courts ruled both
branches of this contention adversely to plaintiff in error.

Granting that, in the absence of statutory provision to the contrary, suits cannot
be maintained and judgments rendered against corporations whose chartered
existence has terminated, it is not pretended in this case that that event had
taken place by lapse of time, by judicial proceedings, or otherwise, unless, as is
insisted, the appointment of a receiver in itself put an end to the bank as a
corporate entity.

The general rule is that the legal existence of a corporation cannot be cut short
in this way, and we can find nothing in the statutes in relation to insolvent
national banks which gives that effect to such an appointment, or justifies any
distinction in that regard, as between them and other insolvent corporations.

By section 5136 of the Revised Statutes it is provided that every national bank,
duly incorporated, shall have succession for the period of 20 years from its
organization, 'unless it is sooner dissolved according to the provisions of its
articles of association, or by the act of its shareholders owning two-thirds of its
stock, or unless its franchise becomes forfeited by some violation of law.'

A receiver may be appointed upon the occurrence of the particular defaults

enumerated in sections 5141, 5151, 5191, 5195, 5201, and 5205, not in question
here.

Section 5151 provides, 'The shareholders of every national banking association

shall be held individually responsible, equally and ratably, and not one for
another, for all contracts, debts, and engagements of such association, to the
extent of the amount of their stock therein, at the par value thereof, in addition
to the amount invested in such shares.'

Sections 5220 and 5221 provide for the voluntary dissolution of these
associations, and sections 5226 and 5227 for the protest of their circulating
notes, on failure to redeem, and the appointment of a special agent to ascertain
the fact.

Sections 5228, 5234, 5236, and 5239 are as follows:

'Sec. 5228. After a default on the part of an association to pay any of its
circulating notes has been ascertained by the comptroller, and notice thereof has
been given by him to the association, it shall not be lawful for the association
suffering the same to pay out any of its notes, discount any notes or bills, or
otherwise prosecute the business of banking, except to receive and safely keep
money belonging to it, and to deliver special deposits.'

10

'Sec. 5234. On becoming satisfied, as specified in sections fifty-two hundred

and twenty-six and fifty-two hundred and twenty-seven, that any association
has refused to pay its circulating notes as therein mentioned, and is in default,
the comptroller of the currency may forthwith appoint a receiver, and require of
him such bond and security as he deems proper. Such receiver, under the
direction of the comptroller, shall take possession of the books, records, and
assets of every description of such association, collect all debts, dues, and
claims belonging to it, and, upon the order of a court of record of competent
jurisdiction, may sell or compound all bad or doubtful debts, and, on a like
order, may sell all the real and personal property of such association, on such
terms as the court shall direct; and may, if necessary to pay the debts of such
association, enforce the individual liability of the stockholders. Such receiver
shall pay over all money so made to the treasurer of the United States, subject
to the order of the comptroller, and also make report to the comptroller of all
his acts and proceedings.'

11

'Sec. 5236. From time to time, after full provision has been first made for

11

refunding to the United States any deficiency in redeeming the notes of such
association, the comptroller shall make a ratable dividend of the money so paid
over to him by such receiver on all such claims as may have been proved to his
satisfaction or adjudicated in a court of competent jurisdiction, and, as the
proceeds of the assets of such association are paid over to him, shall make
further dividends on all claims previously proved or adjudicated; and the
remainder of the proceeds, if any, shall be paid over to the shareholders of such
association, or their legal representatives, in proportion to the stock by them
respectively held.'

12

'Sec. 5239. If the directors of any national banking association shall knowingly
violate, or knowingly permit any of the officers, agents, or servants of the
association to violate any of the provisions of this title, all the rights, privileges,
and franchises of the association shall be thereby forfeited. Such violation shall,
however, be determined and adjudged by a proper circuit, district, or territorial
court of the United States, in a suit brought for that purpose by the comptroller
of the currency, in his own name, before the association shall be declared
dissolved. And in cases of such violation, every director who participated in or
assented to the same shall be held liable in his personal and individual capacity
for all damages which the association, its shareholders, or any other person,
shall have sustained in consequence of such violation.'

13

On June 30, 1876 (19 Stat. 63, c. 156), congress passed an act, the first section
of which provides: 'That whenever any national banking association shall be
dissolved, and its rights, privileges, and franchises declared forfeited, as
prescribed in section fifty-two hundred and thirty-nine of the Revised Statutes
of the United States, or whenever any creditor of any national banking
association shall have obtained a judgment against it in any court of record, and
made application, accompanied by a certificate from the clerk of the court
stating that such judgment has been rendered and has remained unpaid for the
space of thirty days, or whenever the comptroller shall become satisfied of the
insolvency of the national banking association, he may, after due examination
of its affairs, in either case, appoint a receiver, who shall proceed to close up
such association and enforce the personal liability of the shareholders, as
provided in section fifty-two hundred and thirty-four of said statutes.'

14

By the third section, whenever any association is placed in the hands of a

receiver, and the creditors and expenses have been paid, and the redemption of
the circulating notes of such association provided for, the shareholders may
elect an agent, to whomon filing bond, the remaining assets of the association
shall be transferred, and 'such agent shall hold, control, and dispose of the assets
and property of any association which he may receive as hereinbefore provided

for the benefit of the shareholders of such association as they, or a majority of

them in value or number of shares, may direct, distributing such assets and
property among such shareholders in proportion to the shares held by each; and
he may, in his own name or in the name of such association, sue and be sued,
and do all other lawful acts and things necessary to finally settle and distribute
the assets and property in his hands.'
15

It thus appears that, by the terms of the statutes, the corporation continues
notwithstanding the appointment of a receiver, if its corporate life has not been
extinguished by lapse of time, by any provision of its articles, by any action of
its stockholders, or by any judgment of forfeiture. The receiver is, indeed,
appointed to close up the association,that is to say, to wind up its business,
get in its assets, and pay its debts, and, if need be, to enforce the personal
liability of its shareholders for all its 'contracts, debts, and engagements,'but
the corporation lingers while this is being done, and, on occasion, when the
receiver has discharged his duty with the satisfactory results enumerated, and
assets remain, an agent may be chosen, who may sue and be sued, in the name
of the association, in the conduct of the final liquidation. Of course, when
insolvency is declared, the corporation is incapacitated from doing any new
business. It has ceased to be a going concern, but it still survives for the
purpose of the discharge of its liabilities, and the final distribution of its
remaining assets when that has been accomplished. No refinement of
construction leads to any other result, and numerous decisions preclude further
discussion.

16

In Pahquioque Bank v. Bethel Bank, 36 Conn. 325, a national bank having

failed, and a receiver been appointed, the supreme court of errors of
Connecticut, in a well-considered opinion, held that the winding up of the
corporation, as provided, did not put an end to its existence so as to affect the
rights of creditors to enforce their claims, or determine their validity, by suit or
otherwise; that there was nothing in the national banking act which justified the
claim that the franchise was transferred to the receiver, in the authority
conferred on him to take possession of the assets; and that the court was unable
to discover 'by what mode of operation known in the law the proceedings in
question can produce that absolute and technical dissolution of a corporation
which is produced by a judgment for forfeiture, or by a legislative repeal, and
bars a suit by a creditor.' Judgment was given against the insolvent bank, and
that judgment affirmed by this court in Bank of Bethel v. Pahquioque Bank, 14
Wall. 383, where it was said, 'None of these proceedings, however, support the
theory that the association ceased to exist when the receiver was appointed, nor
at any time before the assets of the association are fully administered, and the
balance, if any, is paid to the owners of the stock, or their legal representatives.'

17

In National Bank v. Insurance Co., 104 U. S. 54, it was held that a national
bank in voluntary liquidation is not thereby dissolved as a corporation, but may
sue and be sued by name for the purpose of winding up its business; and Mr.
Justice Matthews, delivering the opinion of the court, said: 'It is to be observed
that the sections under which the proceedings took place which, it is claimed,
put an end to the corporate existence of the bank, do not refer, in terms, to a
dissolution of the corporation, and there is nothing in the language which
suggests it, in the technical sense in which it is used here as a defense. The
association goes into liquidation, and is closed. It is required to give notice that
it is closing up its affairs, and, in order to do so completely and effectually, to
notify its creditors to present their claims for payment. And the redemption of
its bonds given to secure the payment of its circulating notes, by the required
deposit of money in the treasury, is limited in its effect to a discharge of the
association and its shareholders from all liability upon its circulating notes. The
very purpose of the liquidation provided for is to pay the debts of the
corporation, that the remainder of the assets, being reduced to money, may be
distributed among the stockholders. That distribution cannot take place, with
any show of justice, and according to the intent of the law, until all liabilities to
creditors have been honestly met and paid. If there are claims made which the
directors of the association are not willing to acknowledge as just debts, there is
nothing in the statute which is inconsistent with the right of the claimant to
obtain a judicial determination of the controversy by process against the
association, nor with that of the association to collect by suit debts due to it. It
is clearly, we think, the intention of the law that it should continue to exist, as a
person in law, capable of suing and being sued, until its affairs and business are
completely settled. The proceeding prescribed by the law seems to resemble,
not the technical dissolution of a corporation, without any saving as to the
common-law consequences, but rather that of the dissolution of a copartnership,
which, nevertheless, continues to subsist for the purpose of liquidation and
winding up its business.'

18

And in Rosenplatt v. Johnston, 104 U. S. 462, 463, Mr. Chief Justice Waite,
speaking for the court, referring to the assets and property of an insolvent
national bank, remarked: 'Such property and assets, in legal contemplation, still
belong to the bank, though in the hands of a receiver, to be administered under
the law. The bank did not cease to exist on the appointment of the receiver. Its
corporate capacity continues until its affairs are finally wound up and its assets
distributed.'

19

It is further urged that the claim was not an existing demand at the time of the
suspension of the bank, and could not be proven up for participation in the
distribution of the assets. What effect, if any, this might have on the mere

recovery of judgment, and the questions often arising in respect of discharges in

bankruptcy or insolvency, or of proceedings against insolvent decedents' estates
as to the postponement of belated claims to subsequently discovered assets, the
state courts did not find it necessary to consider, as they were of opinion that
the liability was an existing demand. The appellate court said: 'The lease in
question was a lawful contract and engagement for the bank to make. The first
monthly installment of rent was due under it nine days before the bank
suspended. By its terms, the defauit that was made by the bank in the
nonpayment of rent on May 1st gave the right to the appellant to re-enter and
terminate the lease. The damages were then matured, and could have been at
once sued for, or appellant could defer its suit, as it did, until, by a reletting of
the premises, the extent of damages had been made certain. That they were
unliquidated did not render them contingent. The contingency default in
payment of renthad happened. After that, the damages were a mere matter of
calculation.' And a similar view was thus expressed by the supreme court: 'The
money was not paid, and there was then a breach of the contract, for which an
action might have been maintained, and this occurred nine days before
insolvency. There is, therefore, no foundation for the position of counsel that
the claim of appellee was not an existing demand at the time the bank
suspended. The amount of damages may not have been as large on the 1st day
of May, 1893, as at a later period, but on that date there was a breach of the
contract, and a right of action for such breach.'
20

Clearly, the conclusion thus reached involved no denial of a title, right,

privilege, or immunity specially set up or claimed under the laws of the United
States, and, as already seen, the only federal question arising was rightly
decided. Judgment affirmed.