Pollard v. Bailey
| Decision Date | 01 October 1874 |
| Citation | 87 U.S. 520,22 L.Ed. 376,20 Wall. 520 |
| Parties | POLLARD v. BAILEY |
| Court | U.S. Supreme Court |
ERROR to the District Court for the Middle District of Alabama.
By an act passed in 1854, the legislature of Alabama chartered a bank to be called the Central Bank of Alabama. The capital was $900,000, divided into shares of $100 each.
The charter made certain provisions in case of the insolvency of the bank, or of its suspension of payments in specie. They were thus:
Of the capital authorized by the charter a certain Pollard took $20,000, or two hundred shares. In 1865 the bank became insolvent, and in 1869 had ceased to do any business, having about $700,000 of bills outstanding and unpaid. In 1872, one Bailey, who had $17,000 of these bills, sued Pollard, at law, as the owner of two hundred shares of stock, assuming that he could thus sue him under the above-quoted section sixteen (article two) of the charter of the bank, which prescribes, as the reader will remember, 'that the stockholders shall be respectively bound for all of the debts of the bank in proportion to their stock holden therein.' The declaration contained averments that the bank had ceased to do business since 1868, and that no demand had been made of the bank for the payment of the bills, and that a demand had been made of the defendant, who was a stockholder of the bank during the period the plaintiff had been the owner. But there was no reference to the other creditors or the ability of the other stockholders to pay any proportion of the claim.
The defendant demurred to the declaration, but the court overruled the demurrer and gave judgment for the plaintiff. From that judgment the defendant brought the case here.
Mr. J. A. Elmore, in support of the ruling below:
1. The declaration was properly held to be sufficient. The bank having ceased to act and being without funds and indebted, was in law deemed to be dissolved, so far as to give the remedy afforded against the shareholders to the creditors of the corporation.
This dissolution, or insolvency, being proved, the liability of the stockholders, as declared by its charter, became absolute, and there was no valid objection to its enforcement at law. Various cases in New York1 settle this.
The election to go into equity must be at the election of the creditors, and the difficulty of the stockholder in protecting himself beyond the statute liability has never been suggested as a ground for proceeding in equity.2
The liability is made by the charter several and direct, and not collateral. The measure of damages is different in each case, depending on the number of shares held; each stockholder is responsible to the amount of stock held by him.3
Whenever a statute imposes a legal obligation upon one party to pay money to another, the person to whom the payment is to be...
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