Citizens State Bank of Stratton v. Strayer

• Decision Date: 22 April 1926
• Docket Number: 24715
• Parties: CITIZENS STATE BANK OF STRATTON, APPELLEE, v. FRANK P. STRAYER, APPELLANT
• Court: Nebraska Supreme Court

208 N.W. 662

114 Neb. 567

CITIZENS STATE BANK OF STRATTON, APPELLEE, v. FRANK P. STRAYER, APPELLANT

No. 24715

Supreme Court of Nebraska

April 22, 1926

APPEAL from the district court for Hitchcock county: CHARLES E ELDRED, JUDGE. Reversed and dismissed.

Judgment reversed and action dismissed.

Norval Bros., Letton, Brown & Dibble and J. F. Ratcliff, for appellant.

Stewart Perry, Stewart & VanPelt and Butler & James, contra.

Allen G. Fisher, amicus curiae.

Heard before MORRISSEY, C.J., DAY, GOOD, THOMPSON and EBERLY, JJ.

OPINION

GOOD, J.

In March, 1924, the capital of the plaintiff bank was impaired and its reserve depleted. Because of these facts, the department of trade and commerce of the state of Nebraska took possession of the bank, and in April following requested the bank to make an assessment of 100 per cent. on its capital stock, for the purpose of restoring the impaired capital and depleted reserve. On the 18th of April, 1924, the directors of the plaintiff bank adopted a resolution declaring an assessment of 100 per cent. on its capital stock, and notified the stockholders to pay such assessment by a date named. The stockholders had not authorized the directors to make any such assessment. Defendant was the owner of 19 shares of the capital stock of the plaintiff bank, of the par value of $ 100 each. He neglected and failed to pay the assessment. Pursuant to a notice given to defendant, the directors sold his 19 shares of stock for $ 100, which was applied on the assessment, leaving an unpaid balance of $ 1,800, to recover which this action was brought.

The above stated facts were set forth in detail in plaintiff's petition, to which defendant filed a general demurrer, which was overruled. Defendant elected to stand upon his demurrer and not to further plead. Judgment went against him for the full amount demanded in the petition. Defendant appeals.

Plaintiff bases its right to make and enforce collection of the assessment on the provisions of section 8031, Comp. St. 1922. That section provides:

"After the department of trade and commerce or receiver shall have taken possession of any bank under the provisions of this article, the stockholders thereof may repair its credit, restore or substitute its reserves, and otherwise place it in condition; but such bank shall not be permitted to reopen its business until the department of trade and commerce, after careful investigation of its affairs, is of the opinion that its stockholders have complied with the law, that the bank's credit and funds are in all respects repaired, all advances, if any made from the depositor's guaranty fund, with interest, fully paid, its reserve restored or sufficiently substituted, and that it should be permitted again to reopen for business; whereupon said department of trade and commerce is authorized to issue written permission for resumption of business under its charter. The directors shall have power and authority to levy and collect assessments on the stock for the purpose of repairing the credit of the bank and any deficiency that may occur by reason of the impairment of the capital stock of said bank. If any shareholder or shareholders of such bank shall neglect or refuse, after three weeks notice, to pay the assessment, as provided in this section, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such shareholder or shareholders to be sold at public auction after three weeks notice shall be given by posting such notice of sale in the office of the bank, and by publishing such notice in a newspaper of the city or town in which the bank is located, or in a newspaper published nearest thereto to make good the deficiency, and the balance, if any, shall be returned to such delinquent shareholder or shareholders."

Defendant contends that if the section quoted shall be constructed to authorize the board of directors to levy an assessment upon the capital stock for the purpose of repairing its impaired capital or restoring its depleted reserve, without first being authorized by the stockholders of the bank, it would be void because in conflict with sections 4 and 7, art. XII of the Constitution. It also contends that, in any event, the statute does not authorize the taking of a personal judgment against a shareholder, but that the right to enforce the assessment can, in no event, go farther than the sale of the shareholder's stock.

In determining what was the purpose and intent of the legislature in enacting section 8031, Comp. St. 1922, it is proper to consider the situation and the rights of the parties to be affected, viz., the state, the bank and its stockholders. In this state the banking business may be carried on only by corporations. The banking business is declared to be quasi-public and is therefore subject to reasonable regulation for the protection of the public. It is entirely proper to require a bank, as a condition to its continuing in business, to keep its capital unimpaired and its reserve intact for the protection of its depositors and creditors. Anything that might...