Barth v. Pock

• Decision Date: 24 February 1916
• Docket Number: No. 3723.,3723.
• Citation: 51 Mont. 418
• Parties: BARTH ET AL. v. POCK ET AL.
• Court: Montana Supreme Court

51 Mont. 418

BARTH ET AL.

v.POCK ET AL.

No. 3723.

Supreme Court of Montana.

Dec. 9, 1915.

On Motion for Rehearing, Feb. 24, 1916.

Appeal from District Court, Silver Bow County; J. B. McClerna, Judge.

Action by William Barth and another against Huie Pock and others. From a judgment for plaintiffs, certain of the defendants appeal. Affirmed.

Gunn, Rasch & Hall, of Helena, and Charles R. Leonard, of Butte, for appellants.

Kremer, Sanders & Kremer, of Butte, for respondents.

HOLLOWAY, J.

The State Savings Bank of Butte was organized in 1890 with a capital stock of $100,000, which was increased in 1904 to $300,000. After the enactment of the Codes in 1895, it elected to continue its existence under the statutes then in force. In 1912 many of the stockholders, including these appellants, each donated to the bank one–third of all shares of stock in the bank then owned by him for the purpose of building up the surplus and providing a fund out of which to pay losses incurred by the bank. Less than one–fourth of the donated shares were resold, and at the date of its suspension the bank still held 616 5/9 shares, or more than one–fifth of its entire capital stock. The bank failed in 1914, with assets amounting to $1,400,000 and liabilities of more than $1,800,000. At the date of suspension, defendants Hickey, Leonard, and McDonald were sureties on a statutory undertaking given by the bank to the county treasurer of Silver Bow county. Hickey and Leonard were creditors of the bank and were also sureties on an undertaking given by the bank to the city treasurer of Butte. They had furthermore entered into an agreement to save harmless the United States Fidelity & Guaranty Company on account of an undertaking furnished by that company to secure deposits of state funds. Each of the appellants admits liability upon the shares of stock standing in his name at the date of the bank's suspension, but denies liability upon the shares donated by him. Hickey, Leonard, and McDonald each claims the right to set off, against his stockholder's liability, the amount of the bank's indebtedness to him, including therein the amounts paid on account of the several undertakings mentioned. The trial court denied the right of set–off, and held each of the appellants liable as a stockholder upon the shares of stock donated by him to the bank and not resold at the date the bank failed. The appeal is from the judgment and presents the two questions, viz., the right of set–off, and the liability of the stockholders upon the unsold donated stock.

1. The Right of Set–Off. The right claimed by Hickey, Leonard, and McDonald each to have deducted from his stockholder's liability the indebtedness of the bank to him, is not strictly speaking the right of set–off, but, for brevity, may be designated such. If the right exists, it arises from the peculiar character of the liability imposed upon these appellants by the statutes in force at the date the donations were made. When the bank was organized, the governing statute was section 545, Div. 5, Compiled Statutes of 1887, which declared a uniform, but limited, double liability upon the stockholders of savings banks and trust deposit and security companies, hereafter referred to as trust companies. By the Codes of 1895 the liability of a stockholder in a trust company was imposed by section 601, Civil Code (section 3934, Rev. Codes), a somewhat different liability for a stockholder in a savings bank was fixed by section 628 (3953, Rev. Codes), while the liability of a stockholder in a bank of discount was prescribed by section 578 (3915, Rev. Codes). Though organized as a savings bank only, this institution in 1904 elected to extend its business to include that which might be conducted by a trust company, as it was authorized to do by section 609, Civil Code (3942, Rev. Codes). In 1907 there was enacted a statute entitled “An act relating to banks and banking corporations and to trust deposit and security and savings bank corporations and repealing section 4061 of the Political Code of Montana relating to Licenses.” Laws 1907, p. 499. Section 4, now section 4012, Revised Codes, provides:

“The stockholders of every corporation formed under this chapter, or which may avail itself of its provisions, shall be severally and individually liable, equally and ratably, and not one for the other, for all contracts, debts and engagements of such corporation to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares.”

This statute is assailed by appellants upon three grounds:

A. It is insisted that the enrolled bill signed by the presiding officer of each House of the Legislative Assembly, bearing the approval of the Governor and lodged in the office of the Secretary of State, contains a substantial provision and an arrangement of section numbers which did not appear in the bill as it passed the Senate; and this court is urged to consult the legislative journals to verify the charge made, and, if it be found to be true, to hold the entire measure invalid. This we may not do. It is the rule in this state that the courts will not go behind the duly authenticated enrolled bill, except to determine whether on its final passage the names of those voting were entered on the journal. Palatine Ins. Co. v. Northern Pac. Ry. Co., 34 Mont. 268, 85 Pac. 1032, 9 Ann. Cas. 579;State ex rel. Gregg v. Erickson, 39 Mont. 280, 102 Pac. 336.

B. Section 4012 is also attacked on the ground that it is meaningless, and it must be confessed that it approaches as nearly that stage of imperfection as it could do and retain any vitality whatever. The words “formed under this chapter or which may avail itself of its provisions” have no place in the section and cannot be assigned any meaning. In its entirety the act provides for transferring certain duties from the state auditor to the state bank examiner; fixes the minimum reserve which banks are required to maintain; determines the maximum credit which may be extended to a single individual, corporation, or copartnership; establishes a basis for assessment of property belonging to a bank; provides a penalty for offenses against the banking laws not otherwise covered by existing statutes, and very clearly intended to provide a uniform rule of liability for stockholders in the different classes of corporations under consideration. The act has to do with existing, going concerns. No provision is made therein for the organization of a corporation, and neither does the act contemplate that its provisions may be availed of at the option of any existing company. All of its terms became effective and binding upon banking and trust companies upon the passage and approval of the act. But neither the entire measure, nor section 4012, should be held invalid if, taken as a whole, the legislative intention can be ascertained and be found to be expressed in language the meaning of which can be comprehended. While the courts are without legislative power, the rule is recognized generally that, whenever it is manifest from the face of an act that an error was made in the use of words, the courts will treat it as corrected to express the legislative will. In Hilburn v. St. Paul, M. & M. Ry. Co., 23 Mont. 229, 58 Pac. 551, 811, this court recognized the rule and in elucidation of it said:

“One word or phrase may be read for another. * * * Words, phrases, and clauses may be expanded or restricted in their meaning * * * so as to carry out the obvious intent of the Legislature. The obvious sense in which words are intended to be understood, and not their abstract force, is to be followed. Words and phrases may be omitted. * * * An erroneous description may be corrected. * * * Phrases may be transposed in order that the sentence may be read in its obvious sense, and attributive words be applied to the proper object. * * * So the court will adopt any other method to make the law effective, provided the context furnishes the real intent of it, and it is not necessary to add substance to it to make it effective.”

Every other section of the act furnishes evidence that the Legislature was considering banks of discount and deposit, trust deposit and security corporations, and savings banks organized under the laws of this state. If the objectionable language quoted above had been omitted, the meaning of the lawmakers could not have been in doubt. A reference to the title of the act and to section 7 (4015, Rev. Codes), which declares that the provisions shall apply only to banking corporations organized under the laws of this state, would have made clear the meaning intended by the use of the general terms employed. We feel justified in assigning the quoted portion of section 4012 above to the category of superfluous and meaningless expressions which creep into legislation, and in disregarding it in order that the manifest purpose of the lawmakers may be given effect. It is equally apparent that it was the intention of the Legislature that the provisions of the act should apply to existing concerns, as well as to those thereafter to be organized.

C. The double liability of a stockholder in a banking corporation is in its nature contractual and not penal (Foster v. Row, 120 Mich. 1, 79 N. W. 696, 77 Am. St. Rep. 565;Whitman v. Bank, 176 U. S. 559, 20 Sup. Ct. 477, 44 L. Ed. 587; 1 Michie on Banks & Banking, § 47 [3]); and, since section 4012 imposes a greater liability upon stockholders than was imposed by the statutes in force prior to its enactment, the contention is made that it transgresses the provision of section 10, art. 1, of the Constitution of the United States, in that it impairs the obligation of the contract which each of these appellants entered into when he became a stockholder in the State Savings Bank. With this contention we do not agree. Sections 2 and 3, art. 15, of our state Constitution provide:

“Sec. 2. No charter...