Island City Savings Bank v. Sachtleben

Citations

• 67 Tex. 420
• 3 S.W. 733
• 1887 Tex. LEXIS 898

Syllabus

<p>1. Banks and Banking— Franchise—Contract—'Corporation.— The Island City Savings Bank, chartered in 1870, by special Act of the legislature, becoming insolvent, suspended business, and compromised with al its depositors, save one, on the basis of a payment of seventy-four cents on the dollar. About two months after the suspension the insolvent bank transferred all its assets, including its name and franchise to a new association (whose names were not revealed on the trial) and obligated itself to pay back to the new association any amount it might be compelled to pay in excess of the seventy-four per cent compromise, the new association agreeing to pay for the old association any such amount. The new association resumed business under the old name and franchise. In a suit against the bank as re-organized, by the depositor who refused to . accept the compromise, held:</p> <p>(1) When a bank becomes insolvent, it may, under proper contract, transfer its assets to a new association who may continue a similar business without incurring liability for the debts of the insolvent corporation.</p> <p>(2) If, however, the shareholders of the insolvent bank agree with a new set of shareholders that the latter shall become substituted to the rights of the former in the corporate property and franchise, in consideration of their agreement to pay the debts to a specified amount, and the new organization in its business uses the seal of the insolvent bank, it becomes liable for its unpaid debts.</p> <p>(3) A corporation is not necessarily dissolved by insolvency. A surrender of it franchise will not be presumed as long as it has power to continue its business.</p> <p>(4) Nor will the sale of its visible property to pay debts, and a temporary suspension of business, work a forfeiture of its charter, so long as it has capacity to increase its subscriptions, call in more capital and resume business.</p> <p>(5) Nor will such temporary suspension work a forfeiture of its franchise if