Bissell v. Heath

• Decision Date: 26 January 1894
• Citation: 57 N.W. 585,98 Mich. 472
• Court: Michigan Supreme Court
• Parties: BISSELL v. HEATH.

57 N.W. 585

98 Mich. 472

BISSELL v. HEATH.

Supreme Court of Michigan

January 26, 1894

Error to circuit court, Oakland county; Joseph B. Moore, Judge.

Action by Edward J. Bissell, receiver of the Milford State Bank against Francis Heath, to enforce the additional liability of defendant as a stockholder in the bank. There was a judgment for plaintiff, and defendant brings error. Affirmed.

Atkinson & Carpenter, for appellant.

Edward J. Bissell, in pro. per.

MONTGOMERY J.

The Milford State Bank was organized October 21, 1886, and continued in business until the 15th of September, 1891, at which date a bill was filed, under the general banking law of the state, (Act No. 205, Laws 1887,) to wind up the affairs of the corporation. Plaintiff was appointed receiver under said act. Claims were filed with, and approved by, him aggregating $104,287 due depositors, and $4,801.75 due other creditors, besides certain contingent liabilities. Defendant was charged with liability as a stockholder under the provisions of section 46 of the act of 1887 which provides that "the stockholders of every bank shall be individually liable, equally and ratably, and not one for another, for the benefit of depositors in said bank to the amount of their stock at the par value thereof, in addition to the said stock. * * * Such liability may be enforced in a suit at law or in equity by any such bank in process of liquidation, or by any receiver, or other officer succeeding to the legal rights of said bank."

1. It is claimed by appellant that defendant was not a stockholder. It appears by the record that, about the time the bank was organized, the defendant negotiated with one Solon H Wilhelm, who became cashier of the bank, for the purchase of stock. It appeared by the stock ledger that under date of January 3, 1887, there was issued to defendant a certificate of stock. the stock ledger stating that the stock was transferred from subscription of S. H. W. It further appears that a certificate was in fact issued to the defendant, and that he received dividends for several years. It is urged that the only way in which defendant, not being an original subscriber to the capital stock, could become a stockholder, was by securing a transfer of some of the stock subscribed for by others, and that no formal transfer appears upon the bank books, and hence that he never legally became a stockholder. The answer to this is that the evidence of the transfer was sufficient to satisfy the corporators. The stock was in fact issued, and the books of the company showed it sufficiently. Bank v. Warren, 52 Mich. 557, 18 N.W. 356. The corporation was bound by the issue of stock. It could waive the formality of any assignment by S. H. W., and, having done so, could not thereafter deny defendant's rights on the ground that he had failed to produce evidence of an assignment from an original subscriber to the capital stock. Mor. Priv. Corp. � 844.

2. It is next contended that, if the defendant ever legally assumed the relation of stockholder, he was induced to enter into the contract by fraud. The state bank was the successor in business of a national bank having the same officers, and it is claimed, in effect, that the evidence tends to show that the officers unloaded worthless securities belonging to the national bank upon the new organization, and received stock for the same; that, out of the nominal capital stock of $50,000, only a little more than $10,000 was paid in in cash that it was represented to the defendant, at the time he became a stockholder, that the bank was a paying institution, and would earn semiannual dividends of 4 per cent., and that, as a matter of fact, the acceptance of the worthless securities had at this time left the bank with an impaired capital; and that the representations made to defendant were known to be untrue. It is conceded by appellant's counsel that there are authorities which maintain that it is not open to a stockholder, when the rights of creditors have intervened, to assert the claim that he was induced by fraud to become a stockholder; but it is insisted that the true rule is that asserted by Lord Cairns in Smith's Case, 2 Ch. App. 604, "that it is one of the risks which creditors are liable to that it may turn out that some person whose name appears as a shareholder on the list has a right to have his name taken from the list." In the case cited, however, the action was taken before any steps had been taken to wind up the affairs of the corporation under the winding-up act. In Stone v. Bank, 3 C. P. Div. 283, it was held that where the corporation has gone into liquidation, and is proceeding, under the winding-up act, to make calls to satisfy claims of creditors, it is too late for one who has, up to that time, allowed his name to appear as a stockholder, to avoid liability on the ground that his subscription was obtained by fraud. The question was touched upon by this court in Duffield v. Wire & Iron Works, 64 Mich. 293, 31 N.W. 310. In that case, plaintiff had been induced to become a stockholder by fraud, and, on discovery of the fraud, tendered back the shares and dividends received, and brought an action against the company before any assignment was made for the benefit of creditors. On the question of the plaintiff's right to recover, under the circumstances, the court was evenly divided, Justices Champlin and Morse being of the opinion that the plaintiff could not rescind the contract after the rights of creditors had intervened, even though no steps had actually been taken to wind up the affairs of the corporation. Justices Campbell and Sherwood were of the opposite opinion. We do not deem it necessary to decide which of the two opinions we would follow in a case presenting the same state of facts, as we think that, even under the doctrine of Justice Campbell's opinion, the defendant in this case cannot be relieved. Justice Campbell lays stress upon the fact that, under the statute relating to manufacturing corporations, the stockholders are not personally liable to contribute beyond what will pay up for their stock, and that creditors could not enforce any right against fully-paid stock. But such is not the case with corporations organized under the banking law. It is apparent that Justice Campbell recognized the doctrine of Stone v. Bank, supra. We think the defendant in this case cannot, after having permitted the depositors of the bank to rely upon his apparent ownership of this stock, and after having received dividends upon the stock for years, which he has not tendered back, be heard now to repudiate his liability. Mor. Priv. Corp. � 840; Shuff v. Upton, 95 U.S. 665; Cook, Stocks & S. �� 163, 164.

3. It is contended that the general banking act of 1887 is unconstitutional, for the reasons (1) that the title is double; (2) it attempts to confer upon the receiver the judicial power to adjudicate claims to be paid in the course of liquidation; (3) that, as applied to the present case, it impairs the obligation of contracts made by the shareholder before its passage, by imposing a liability not before that time existing. These questions will be considered in the order adopted by counsel.

First. The title of the act is "An act to revise the laws authorizing the business of banking and to establish a banking department for the supervision of such business." Is the title valid under article 4, � 20, of the constitution, which provides that no law shall embrace more than one object, which shall be expressed in its title? It is suggested that the law expresses two objects, which might very well be the subjects of separate acts. It may be true, of any comprehensive statute, that it might be subdivided, and several laws in pari materia enacted in place of one; but it does not follow that an act which has but one general object is in conflict with the constitutional provision. As is stated in Cooley's Constitutional Limitations, (page 176:) "There has been a general disposition to construe the provision liberally, rather than to embarrass legislation by a construction whose strictness is unnecessary to the accomplishment of the lawful purposes for which it was adopted." This court has frequently expressed similar views. See People v. Mahaney, 13 Mich. 481; Kurtz v. People, 33 Mich. 279; Attorney General v. Amos, 60 Mich. 372, 27 N.W. 571; Wardle v. Cummings, 86 Mich. 395, 49 N.W. 212, 538. Davis v. Woolnough, 9 Iowa, 104, is directly in point, and sustains the ruling of the circuit judge.

Second. Section 57 of the...