Allen v. Walsh

• Decision Date: 18 March 1879
• Citation: 25 Minn. 543
• Parties: JOHN A. ALLEN <I>vs.</I> JAMES R. WALSH.
• Court: Minnesota Supreme Court

25 Minn. 543

JOHN A. ALLEN vs. JAMES R. WALSH.

Supreme Court of Minnesota.

March 18, 1879.

Plaintiff brought this action in the district court for Ramsey county, in October, 1877, alleging in his complaint that ever since January 1, 1876, the Marine Bank of St. Paul has been and is a corporation duly organized and existing under and pursuant to the laws of the state relative to banking corporations, and carried on a general banking business until November 13, 1876, when, being insolvent, it made a general assignment of all its property, for the benefit of its creditors; that the assignee accepted the trust, and wound up the affairs of the bank, the dividend to the creditors being but a small percentage of their claims, and the bank has no other property out of which the claims against it can be made; that the

defendant became a stockholder in the bank on or about January 1, 1876, and has ever since been such, owning during the entire period 80 shares of stock, of the par value of $100 each. The complaint then sets forth various items of indebtedness of the bank to the plaintiff, accruing between January 3 and November 11, 1876, all of which had been duly proved before the assignee, and allowed by him, the amount of which, after deducting the dividends paid by him, is $3,666.66, for which sum, with interest, judgment is demanded.

The defendant demurred (1) for defect of parties, because of the non-joinder of the assignee and each of the other stockholders of the bank; and (2) for failure of the complaint to state facts sufficient to constitute a cause of action. The demurrer was sustained, on the former of these grounds, by Brill, J., who held that as the bank was required by law to have at least $25,000, of capital stock, and the complaint alleged that it was duly organized, etc., and the defendant was alleged to be the owner of but $8,000 of the stock, it sufficiently appeared on the face of the complaint that there were other stockholders besides defendant; and that, as the bank was insolvent, the plaintiff should have proceeded in the manner provided in Gen. St. c. 76. From the order sustaining the demurrer, the plaintiff appealed.

John B. & W. H. Sanborn, for appellant.

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H. J. Horn, for respondent.

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CORNELL, J.

The demurrer to the complaint admits that ever since the first day of January, 1876, the Marine Bank of St. Paul has been a banking corporation duly created and organized under the laws of the state relating to banking corporations, to wit, Gen. St. c. 33, concerning banks and banking, and that the defendant during all that time has been and still is a stockholder therein. The action is sought to be maintained upon section 21 of that chapter, which, among other things, provides "that the stockholders in each bank" formed pursuant to its provisions "shall be individually liable in an amount equal to double the amount of stock owned by them, for all the debts of such bank, and such individual liability shall continue for one year after any transfer or sale of stock by any stockholder or stockholders.

It is claimed by defendant that the bank in question was not a bank of issue, and upon this assumption it is contended that the statutory liability imposed by the foregoing section has no application to the case, and, if it has, it is void, as being in excess of legislative authority under the constitution. Prior to the amendment of the chapter in 1869 (Laws 1869, c. 85) it may be that the section in question applied only to stockholders in banks of issue; but there can be no doubt that it was within the intention of the legislature, by these amendatory enactments, to embrace within its provisions all banks since incorporated under that chapter, and to make the stockholders therein individually liable, as provided by that section.

The objection that no statutory liability of this character can be created by the legislature in respect to stockholders in a bank not of issue, is rested upon the proposition that this power has been impliedly taken from the legislature by the constitution. This implication is sought to be founded upon the provisions of that instrument contained in the third subdivision of section 13, article 9, and section 3, article 10, of the constitution, the contention being that it was the intention to provide by these clauses for all cases of individual liability for corporate indebtedness authorized by the constitution, and that none other than that therein provided for can be created by the legislature. Neither of these clauses contains any grant of power, nor can they be construed in restraint of legislative authority to any greater extent than is necessary to give them full effect according to the obvious import of the language employed. The restriction contained in the third subdivision of section 13, of article 9, is confined in terms to the case of "stockholders in any corporation and joint association for banking purposes, issuing bank-notes," and there is nothing in the section indicating any intention to extend its provisions beyond such a case. Section 3, article 10, is expressly limited in its application, by section 1 of the article, to stockholders in corporations not having or embracing banking privileges. Conceding, however, without deciding the point, that the provisions of this article can by any fair construction be held to include incorporated banks not of issue, the claim of defendant is not helped, for section 3 of this article, neither in terms nor by any necessary implication, forbids the imposition upon stockholders of a greater liability than what is therein specified. The language of the section is, "Each stockholder in any corporation shall be liable to the amount of the stock held or owned by him." It is neither within the purport nor object of the provision to define the extent of legislative power, or the rights of stockholders, upon the subject of individual liability. It simply declares the creation of a liability to the extent named, in the cases referred to; but it does not prohibit its creation in other cases, nor place any limitations upon the power of the legislature to increase the amount of the liability in any case, according as its views of public policy may require. Its only restrictive effect is to prevent legislative action relieving against the constitutional liability, or decreasing it in amount. The demurrer cannot be sustained on the ground of any want of authority in the legislature to enact the statutory provision relied upon to support this action, and to make it applicable to a case like the one before us.

The objection of a defect of parties, which is raised by the demurrer, seems, however, to be well taken. The complaint shows that the Marine Bank derives its corporate existence from the provisions of Gen. St. c. 33; that it was insolvent when this action was commenced, having theretofore made a general assignment for the benefit of creditors, and that there were other stockholders beside the defendant, who were also individually liable, under the statute, for the corporate debts and demands in suit. The demurrer, therefore, distinctly presents, and for the first time in this court, the question whether a creditor of an insolvent bank, upon such a state of facts, and against an objection of this kind, can enforce his claims against one of the stockholders, without joining the rest, and also all other parties having any interest in the subject of the controversy, in order that their respective interests may be fully and finally adjudicated and settled in the action. The right determination of this question depends upon the nature of the liability, and the policy of the law in respect to...