## Facts

- Henry Oppenheimer bought 10 shares of Harriman National Bank & Trust Company stock on November 1, 1930, paying $15,120.
- He alleged the bank’s president and vice president induced the purchase through false statements about the bank’s condition and the stock’s value.
- The bank closed on March 3, 1933 after failing to meet demands; a conservator was appointed March 13, 1933.
- The Comptroller declared the bank insolvent on October 16, 1933 and appointed a receiver.
- The Comptroller assessed shareholders for the par value of their stock under the national bank shareholder-liability regime in force at the time; Oppenheimer paid the assessment.
- Oppenheimer treated the transaction as rescinded based on fraud and sought to recover the purchase price as a creditor in the receivership, including from the assessment fund.
- The district court directed judgment for the bank; the Second Circuit reversed and ordered judgment for Oppenheimer but subordinated his recovery behind creditors whose claims existed when insolvency occurred.
- Both parties sought Supreme Court review: the bank disputed liability and use of assessment proceeds, and Oppenheimer disputed subordination.

## Issues

1. Whether federal banking statutes preclude rescission of a national bank’s fraudulent sale of its own stock.
2. Whether the bank is liable for fraudulent misrepresentations by its officers where the shares sold were held for an undisclosed principal rather than owned by the bank.
3. Whether the bank’s liability to a defrauded purchaser falls within the bank’s “contracts, debts and engagements” for which shareholder assessment proceeds may be used.
4. Whether a rescinding purchaser who paid the shareholder assessment must be subordinated to general unsecured creditors or shares pari passu with them in the receivership.

## Decision

- The Court held a fraudulent sale by a national bank of its own stock may be rescinded by the defrauded purchaser; the cited banking statutes do not bar rescission.
- The bank was liable for its officers’ misrepresentations in effectuating the sale even if the stock was technically owned by an undisclosed principal.
- The resulting liability constituted a bank “contract[], debt[] [or] engagement[]” and could be satisfied from receivership assets, including proceeds of shareholder assessments.
- The Court reversed the Second Circuit’s subordination ruling and held Oppenheimer’s rescission-based claim ranked pari passu with other unsecured creditors in the receivership estate.

## Legal Principles

- Federal banking statutes regulating national banks’ dealings in their own shares do not prevent rescission of a bank’s fraudulent stock sale.
- A national bank may be held liable for fraudulent misrepresentations by its authorized officers in a stock sale conducted in the bank’s name, even when the shares are held for an undisclosed principal.
- Liability to a defrauded purchaser arising from such a transaction is within the bank’s “contracts, debts and engagements” for which shareholder assessment proceeds may be applied in receivership.
- A defrauded purchaser who rescinds and pays the shareholder assessment is treated as an unsecured creditor and shares ratably with other unsecured creditors, rather than being subordinated.

## Conclusion

The Supreme Court recognized rescission-based creditor status for a defrauded purchaser of national bank stock, permitted payment from receivership assets including shareholder assessment proceeds, and required the claim to share equally with other unsecured creditors rather than being subordinated.


Oppenheimer v. Harriman Nat'l Bank & Tr. Co., 301 U.S. 206 (1937)