Ivie v. Bailey

• Decision Date: 17 March 1928
• Docket Number: 28247
• Citation: 5 S.W.2d 50,319 Mo. 474
• Parties: Mary E. Ivie, Appellant, v. John S. Bailey et al
• Court: Missouri Supreme Court

5 S.W.2d 50

319 Mo. 474

Mary E. Ivie, Appellant, v. John S. Bailey et al

No. 28247

Supreme Court of Missouri

March 17, 1928

Appeal from Adair Circuit Court; Hon. James A. Cooley Judge.

Reversed and remanded.

Higbee & Mills for appellant.

The court erred in sustaining the demurrer to the amended petition for the following reasons:

(1) The reception of deposits or consenting to the reception of deposits by the directors of an insolvent bank, with knowledge on their part of such insolvency, vests in the person making such deposits a cause of action against such directors for the loss sustained. Sec. 27, art. 12, Mo Constitution; Secs. 11763, 11764, R. S. 1919; Cummings v Winn, 89 Mo. 51; White v. Poole, 272 S.W. 1028; Eads v. Orcott, 79 Mo.App. 511. (2) The statute is remedial as to this plaintiff. Sec. 27, art. 12, Mo. Constitution; Cummings v. Spaunhorst, 5 Mo.App. 27; Eads v. Orcott, 79 Mo.App. 519. (3) Section 27, Article 12, of the Constitution, in providing a court remedy in self-enforcing. In the absence of Secs. 11763 and 11764, R. S. 1919, the Constitution confers upon plaintiff the right to maintain this action against the defendants, and where the Constitution confers a right the law confers a remedy. McGrew v. Ry., 230 Mo. 496; Cummings v. Winn, 89 Mo. 51; State ex rel. v. Duncan, 265 Mo. 26; 12 C. J. 729, par. 106. (4) Respondents contend Section 11724 in effect repeals Sections 11763 and 11764, asserting that Section 11724 was enacted in 1919. The contention is untenable. Section 11724 was Sections 53 of Article 1 of the Banking Department Act, passed in 1915. Sections 11763 and 11764 were Sections 91 and 92 of Article 2, under the head of "Bank" passed by the same Legislature, as a part of the same act. In other words, Article 1 dealt with the State Banking Department, Article 2 dealt with banks, and Article 3, with trust companies. They were all one legislative act and neither can in any manner affect the validity of the other. (5) Section 11724 does not create the exclusive right in the Commissioner of Finance to maintain suits against directors for mismanagement, but simply authorize, him to maintain such a suit, using the language "he may." (6) The point urged by respondents that the judgment sought by plaintiff is a penalty, and that Sec. 27, Art. 12, of the Constitution provides the same can only be collected by an indictment or information, is untenable. The first five lines of the constitutional provision provide such conduct shall be a crime and provides that the punishment shall be prescribed by law. This part is not self-enforcing. The last two lines, viz., "and any such officer, agent or manager shall be individually responsible for such deposits so received and all such debts so created with his assent," clearly vest in the depositor a civil right against the directors, and this last provision has nothing whatever to do with the first part of the provision which provides such action shall be a crime. The last provision creating a civil right is self-enforcing. 12 C. J. 729, par. 106; McGrew v. Ry., 230 Mo. 496; State ex rel. v. Duncan, 265 Mo. 26; Cummings v. Winn, 89 Mo. 51.

Irwin & Bushman for respondents;

Scott J. Miller of counsel.

(1) A casual reading of Sec. 11763, R. S. 1919, will disclose that it does not confer upon anyone the power to institute the suit contemplated by the section. It does not confer on the depositor the right to sue and collect for his deposit, neither does it undertake to fix the extent of the liability of the directors or officers who received the deposit with knowledge of its failing condition. Is his liability to be measured by the amount of his deposit or by the amount of his loss? Many failing banks pay large dividends to depositors, and in fact, some have paid depositors in full. In such case, what is the measure of the liability? Is it to be measured for money had and received or for damages resulting from the loss? (2) Section 11764 does not aid Section 11763 except the first clause which says, "In all suits brought for the recovery of the amount of any deposit received or debts created," and then proceeds to say that the defendants may be sued jointly or severally. The sections of the statute here referred to have long been a part of the laws of this State, but in 1915 the Legislature enacted a new section known as Section 11724 which authorizes the Bank Commissioner to institute and maintain in his own name suits against any director, trustee, manager or officers or any of them, any action or proceeding which is vested in such corporation or in the stockholders "or creditors thereof." The word "may" has by our courts frequently been construed to mean "shall". (3) Section 11724 specifically and clearly authorized the bank commissioner to institute and maintain suits against the officers and directors of a bank which has passed into his hands, for the benefit of the "creditors thereof." In this instance we are dealing with a bank that, it is alleged in the petition, was in failing circumstances and in the hands of the bank commissioner, upon whom has been conferred the right to institute suits for creditors against the officers and directors of the bank. Clearly he has the right to do this on behalf of the corporation as was held in the case of Dorrah v. Bank of Pemiscot County, 213 Mo.App. 541. (4) It has been presumed in all previous cases that Section 27 of Article 12 of the Constitution intended to create a civil as well as a criminal liability against the officers and directors of a bank and all previous cases have presented that theory. A careful analysis of the section will disclose that the makers of the Constitution had no such thought in mind. In the first place, Section 9 of Article 12 of the Constitution provides: "But in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him or her." It has always been conceded that single liability on stockholders in corporations was the fixed policy of the State, and was so fixed that it was written into the Constitution. The law requires a director of a bank to be a stockholder. Then by virtue of his office, if appellant's position be correct, he becomes subject to unlimited liability. Section 12 of the Constitution says: "It shall be a crime to receive or assent to the reception of a deposit or the creation of a debt after he shall have had knowledge of the fact that it is insolvent; and any such officer, agent or manager shall be individually responsible for such deposit so received and such debts so created with his assent. In the place of using the words "individually liable" it used the words "individually responsible." Responsible means to answer either legally or morally, as defined by all lexicographers. It provides for individual responsibility and not collective responsibility. Therefore, if the Constitution is to be followed the board cannot be sued as a body but each must be sued individually. (5) Section 11763 violates Section 20 of Article 2 of the Constitution, which provides: "No private property can be taken for private use without compensation unless by the consent of the owner." There is absolutely no contractual relation between the officer of a banking corporation and a depositor, and the statute clearly undertakes, if appellant be correct, to shift the debt of the bank from the corporation to the officer of the corporation and thereby take his property to pay a debt which he did not owe, and any statute which undertakes to do this flies in the teeth of the constitutional inhibition. No legislative enactment can shift the debt of one to the shoulder of another and take his property to satisfy that debt without coming in conflict with this constitutional provision. Eads v. Orcott, 79 Mo.App. 516; Utley v. Hill, 155 Mo. 232. (6) Summarizing we insist: (a) The suit cannot be maintained in the name of the depositors. (b) If maintanied at all, it must be in the name of the Finance Commissioner. (c) If penal, the penalty prescribed cannot be recovered except by the prosecuting attorney to the use and benefit of the school fund of the county. (d) The Constitution did not authorize the Legislature to enact Sections 11763 and 11764. (e) The attempt to compel the officer to pay the debt of another is the taking of private property for private use without consent of the owner. (b) The penalty belongs to the school fund, for the reason that it is not specifically given to the depositor. (g) The petition fails to allege or charge that the act complained of was fraudulently done upon the part of the defendants or either of them. (h) It, in effect, creates an unlimited liability on certain stockholders of a corporation contrary to and in violation of the Constitution forbidding the same. (i) If penal in its nature, then each deposit creates a separate cause of action, and different acts of receiving deposits cannot be joined in the same count of the petition.

Walker, C. J. Atwood, Blair and Gantt, JJ., concur; Graves, Ragland and White, JJ., concur in the result.

OPINION

Walker, C. J.

This action was brought in the Circuit Court of Adair County by the appellant against the respondents as directors of the Mutual Bank of Greencastle, to recover the amount of deposits made by her in said bank. The respondents' demurrer to the petition was by the court sustained, and upon the appellant refusing to plead further a judgment was entered for the respondents, from which appellant has perfected an appeal to this court, which has jurisdiction by reason of the constitutional questions involved.

The Mutual Bank of Greencastle became insolvent and ceased to do business in May, 1925, and its business was taken over by the Finance Department of this...