Christopher v. Brusselback

Decision Date03 January 1938
Docket NumberNo. 108,108
Citation302 U.S. 500,58 S.Ct. 350,82 L.Ed. 388
PartiesCHRISTOPHER et al. v. BRUSSELBACK et al
CourtU.S. Supreme Court

Mr. Wellmore B. Turner, of Dayton, Ohio, for petitioners.

Messrs. J. Arthur Miller, of Chicago, Ill., and Roy G. Fitzgerald, of Dayton, Ohio, for respondents.

Mr. Justice STONE delivered the opinion of the Court.

Respondents, creditors of a Federal Joint Stock Land Bank located in Illinois, brought the present suit in the District Court for Southern Ohio to collect a 100 per cent. assessment of the statutory double liability of its shareholders, which had previously been decreed in a suit brought by respondents in the District Court for Northern Illinois. In the Illinois suit the bank and all its stockholders were named as parties defendant, but the present defendants, petitioners here, who are stockholders residing in Ohio, were not served with process. A motion in the District Court to dismiss the present suit raised the question whether the bill of complaint, which sets up the decree of the court in the Illinois suit in which it states petitioners were not served with process, but does not allege that the bank is insolvent or show any necessity for the assessment, states a cause of action. The District Court gave judgment for petitioners which the Circuit Court of Appeals for the Sixth Circuit reversed. Brusselback v. Arnovitz, 87 F.2d 761. We granted certiorari, Christopher v. Brusselback, 302 U.S. 672, 58 S.Ct. 16, 82 L.Ed. -, to resolve a conflict between the decision of the court below and that of the Circuit Court of Appeals for the Second Circuit in Holmberg v. Carr, 86 F.2d 727. Compare Brusselback v. Cago Corporation, 2 Cir., 85 F.2d 20.

The question decisive of the case is whether petitioners are bound by the Illinois adjudication, in their absence of the bank's insolvency, and the amount of the assessment. Section 16, Federal Farm Loan Act, July 17, 1916, c. 245, 39 Stat. 374, 12 U.S.C. § 812, 12 U.S.C.A. § 812, provides, 'Shareholders of every joint-stock land bank organized under this Act (chapter) shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagemnts of such bank to the extent of the amount of stock owned by them at the par value thereof, in addition to the amount paid in and represented by their shares.'

Before respondents had brought the Illinois suit this Court in Wheeler v. Greene, 280 U.S. 49, 50 S.Ct. 21, 74 L.Ed. 160, had before it the provisions of the Federal Farm Loan Act which authorize the Farm Loan Board to declare a joint-stock land bank insolvent, and to place it in the hands of a receiver. Section 29, Federal Farm Loan Act, July 17, 1916, c. 245, 39 Stat. 381, 12 U.S.C. §§ 931, 963, 12 U.S.C.A. §§ 961, 963 and notes. We held that those provisions do not confer upon the Federal Farm Loan Board any power to levy an assessment on the stockholders, or give to the receiver authority to maintain suit for the enforcement of their statutory liability, or otherwise set up any machinery comparable to that of the National Banking Act, 12 U.S.C.A. § 21 et seq., for enforcing the stockholders' liability. Compare Rankin v. Barton, 199 U.S. 228, 232, 26 S.Ct. 29, 50 L.Ed. 163; Casey v. Galli, 94 U.S. 673, 24 L.Ed. 168; Id., 94 U.S. 680, 681, 24 L.Ed. 307. The only means of enforcing the liability left to creditors of a joint-stock land bank, as the Court pointed out in the Wheeler Case, is an adversary suit in equity against the stockholders wherever they may be found.

The obligation which the statute imposes upon the stockholders is personal, and petitioners can be held to respond to it only by a suit maintained in a court having jurisdiction to render a judgment against them in personam. As the liability of the stockholders is to pay the debts of the bank to creditors 'equally and ratably,' judicial determination of the inability of the bank to pay its debts and the amount to be assessed against the stockholders to meet the deficiency are prerequisites to the enforcement of liability, and are essential parts of the only cause of action which the statute gives to the creditors. It is plain that in such a suit the existence and extent of insolvency are facts, the allegation and proof of which cannot be dispensed with as to any stockholder unless, as between the parties to the suit, they are matters already adjudicated.

A stockholder is so far an integral part of the corporation of which he is a member, that he may be bound and his rights foreclosed by authorized corporate action taken without his knowledge or participation. Sanger v. Upton, 91 U.S. 56, 58, 23 L.Ed. 220. The subscriber to corporate stock, whose subscription is payable on call of the directors, as required for corporate purposes, is bound by the action of the board in making the call as he is bound by a valid decree of a court against the corporation, although made in his absence, which directs performance of the corporate duty to make the call. Hawkins v. Glenn, 131 U.S. 319, 329, 9 S.Ct. 739, 33 L.Ed. 184; Great Western Telegraph Co. v. Purdy, 162 U.S. 329, 336, 16 S.Ct. 810, 40 L.Ed. 986; cf. Kerrison v. Stewart, 93 U.S. 155, 23 L.Ed. 843. Similarly, where a procedure is authorized by statute, under which a corporation may be brought into court for determination of its insolvency and the amount to be assessed against stockholders for the payment of its debts, and the judgment is declared by statute to be binding upon them, they are deemed by virtue of their membership in the corporation to have so far subjected themselves to the prescribed procedure and its consequences as to be bound by the determination although not nominal parties to the proceeding. Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163; Converse v. Hamilton, 224 U.S. 243, 32 S.Ct. 415, 56 L.Ed. 749, Ann.Cas.1913D, 1292; Selig v. Hamilton, 234 U.S. 652, 34 S.Ct. 926, 58 L.Ed....

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