Washington Loan & Trust Co. v. Allman

• Decision Date: 05 March 1934
• Docket Number: No. 6081.,6081.
• Citation: 63 App. DC 116,70 F.2d 282
• Parties: WASHINGTON LOAN & TRUST CO. v. ALLMAN.
• Court: U.S. Court of Appeals — District of Columbia Circuit

63 App. DC 116, 70 F.2d 282 (1934)

WASHINGTON LOAN & TRUST CO. v. ALLMAN.

No. 6081.

Court of Appeals of the District of Columbia.

Argued February 5, 1934.

Decided March 5, 1934.

Rehearing Denied March 26, 1934.

Arthur Peter, Charles V. Imlay, and Vinson L. Smathers, all of Washington, D. C., for appellant.

Edward F. Colladay and Joseph C. McGarraghy, both of Washington, D. C., for appellee.

W. W. Millan, William E. Richardson, and Milton D. Campbell, all of Washington, D. C., amici curiæ.

Before MARTIN, Chief Justice, and ROBB, VAN ORSDEL, HITZ, and GRONER, Associate Justices.

GRONER, Associate Justice.

The Departmental Bank was incorporated under the laws of Arizona in August, 1920. Its charter allowed it to do business within or without that state. Immediately after its incorporation it established a banking house in Washington City, and continuously thereafter did business there and nowhere else. In July, 1932, the Comptroller of Currency, having determined the bank was insolvent, took possession, appointed appellee as receiver, and a little later made an assessment upon the shareholders equal to 100 per cent. of the par value of the shares of its capital stock. Appellant, as the owner of 102 shares of stock, refused to pay the assessment. The receiver brought suit, and appellant demurred to the declaration. The lower court overruled the demurrer, and appellant having refused to plead further, judgment went against him, and he brings the case here on appeal.

The grounds relied on are that the Arizona statutes do not vest power in a federal receiver to enforce double liability against stockholders in an Arizona corporation (bank); that the federal statutes do not attempt to do so; and that there is no power in Congress to enact such a statute.

Article 14, § 11, of the Constitution of Arizona (1910) provides:

"The shareholder or shareholders of every banking or insurance corporation or association shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements, of such corporation or 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 of stock;"

Substantially the same language was contained in the charter of incorporation.

The provision of the Arizona Constitution to which we have referred has been considered by the Supreme Court of Arizona, and in the case of Fredericks v. Hammons, 33 Ariz. 310, 264 P. 687, was declared to be self-executing and, without more, to impose double liability on all shareholders of a bank organized after its adoption. It is our duty to follow this construction. Middletown Nat. Bank v. Railway Co., 197 U. S. 394, 404, 25 S. Ct. 462, 49 L. Ed. 803. From this it follows that a purchaser of shares of stock in an Arizona bank voluntarily assumes by the act of purchase an obligation to become liable to the extent provided in the Arizona Constitution, and such an obligation, obviously, is contractual and may be enforced like any other contract.

But it is urged here that the Legislature of Arizona (Laws of 1922, c. 31, § 23) had prior to appellant's purchase made definite provisions for the enforcement of the double liability provision of the Constitution and had limited the power to an Arizona receiver, and by him only after a judicial determination of insolvency, and it is insisted that this created a substantive right and that a later statute of Arizona (Laws of 1928, c. 8, par. 227) passed after appellant's purchase of shares, which enlarges the provisions of the act in permitting the claim to be enforced by the superintendent of banks or by any receiver is an impairment of the contract between the shareholder and the corporation and is therefore unconstitutional. But we need not stop to notice this, except to say that the contention is clearly without merit and is contrary to the doctrine approved by the Supreme Court in Henley v. Myers, 215 U. S. 373, 385, 30 S. Ct. 148, 54 L. Ed. 240, and Converse v. Hamilton, 224 U. S. 243, 253, 32 S. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292, where it is said in substance that legislation of this nature is procedural and that methods of procedure in actions on contracts that do not affect the substantial rights of the parties are always subject to the control of the Legislature. Here no new right is created by the amended act, nor any penalty imposed. It neither impairs the obligation of the contract nor increases the liability. Hence, even if it be conceded that under the Arizona law as it was prior to 1928 the shareholders' liability could only be enforced by a receiver appointed pursuant to the provisions of the laws of that state, the limitation no longer exists since, as we have seen, the Legislature, as it had the right to do, has struck down the limitation and provided specifically that the liability may be enforced by "any receiver," and this change, we think, applies to the case of shareholders who purchased before its enactment equally with those who purchased after.

This brings us to the questions whether the federal statute, giving the Comptroller power to appoint a receiver in the case of a foreign banking corporation doing business in the District, is valid; and, if it is, whether the receiver so appointed is empowered, within the provisions of the Arizona laws, to bring the suit. As we think both questions must be answered in the affirmative, we need not consider the further question, whether the receiver, without regard to the provisions of the Arizona laws, would have the same right.

Title 5, § 298, of the D. C. Code (1929) provides...