Cleary v. Brokaw

• Decision Date: 06 April 1937
• Parties: CLEARY et al. v. BROKAW.
• Court: Wisconsin Supreme Court

224 Wis. 408

272 N.W. 831

CLEARY et al.

v.BROKAW.

Supreme Court of Wisconsin.

April 6, 1937.

Appeal from a judgment of the Circuit Court for Outagamie County; Edgar V. Werner, Judge.

Affirmed.

This action was commenced on May 27, 1935, by the plaintiffs, Peter A. Cleary, H. F. Ibach, and S. N. Schafer, as members of the Banking Commission of the state of Wisconsin, and the Bank of Kaukauna, a state banking corporation, to recover from the defendant, Kate Brokaw, a stockholder of the bank, the amount of the double liability assessed against her pursuant to the provisions of section 220.07 (20) and section 221.42, Stats. 1933. The defendant answered and asserted in substance that she was in no manner bound or obligated as a stockholder of said bank to pay the assessment sought to be recovered and that the laws in pursuance of which the plaintiffs seek to recover are as to her unconstitutional in that they violate rights guaranteed to her by the Constitution of the United States and the Constitution of this state, particularly those guaranteed by article 1, § 10 of the Constitution of the United States in so far as it provides, “No State shall *** pass any *** law impairing the Obligation of Contracts,” and article 1, § 12 of the Constitution of this state in so far as it provides, “Nor any law impairing the obligation of contracts, shall ever be passed.”

Trial was had to the court. The court found for the plaintiffs and against the defendant. From a judgment for the full amount of the double liability assessed against the defendant, together with interest and costs, entered August 24, 1936, the defendant appealed. The facts will be stated in the opinion.C. G. Cannon, of Appleton, for appellant.

Bradford, Bradford & Derber, of Appleton, for respondents.

NELSON, Justice.

The material facts are not in dispute. The Bank of Kaukauna was incorporated on August 14, 1883, pursuant to the statutes then existing. Its capital stock was $30,000 represented by 300 shares, each of the par value of $100. In 1892, its articles were duly amended, increasing its capital stock to $80,000, divided into 800 shares of the par value of $100 each. On September 1, 1892, N. H. Brokaw, a resident of Kaukauna and the late husband of the defendant, agreed to purchase and did purchase 24 shares of its stock for which he paid $2,400. Stock certificate No. 105, for 24 shares, was delivered to him. On October 30, 1900, N. H. Brokaw died testate. On September 1, 1903, the bank executed and delivered to her stock certificate No. 30, upon her surrendering stock certificate No. 105. On December 3, 1901, said stock was duly assigned to the defendant as trustee by the final judgment of the county court, pursuant to the will of her deceased husband. On September 8, 1914, the said trust having terminated, said stock certificate No. 30 was duly assigned to the defendant in pursuance of the will of her deceased husband. On September 14, 1914, said certificate was surrendered to the bank and canceled and a new certificate, No. 128, was issued to her in lieu thereof. In December, 1929, the capital stock of the bank was again increased from $80,000 to $100,000, divided into 5,000 shares, each of the par value of $20. The defendant's stock certificate No. 128 was called in by the bank and canceled and a new certificate, No. 8, was issued and delivered to her on December 8, 1929, in lieu of her old certificate. The new certificate was for 120 shares, the total par value of which was $2,400.

On or about March 4, 1933, the bank was closed for the period of the bank holiday. During the holiday the bank was examined. After about ten days it was permitted to reopen, but on a restricted basis. Later on, the banking commission suggested that the bank would have to stabilize. On April 7, 1933, a meeting of the directors of the bank was held. It was resolved by the directors that the bank adopt a stabilization plan on the percentage basis to be approved by the commissioners of banking and that a 100 per cent. voluntary assessment be made upon all of the stockholders of the bank, payable on the call of the commissioners of banking. On April 18, 1933, the directors further resolved “that there be and hereby is made a levy and assessment upon each and every share of capital stock of this bank in the sum of 100% of the face thereof, *** the same to be paid at the counters of this bank on or before one year pursuant to section 220.07, Wisconsin statutes, and that all stock on which such assessment is not paid as required shall be sold as provided by section 220.07.” No attempt seems to have been made to collect the voluntary assessment levied by the directors, and it appears that no stockholder paid the amount thereof. On May 2, 1933, representatives of the commission met with the directors of the bank and many of its creditors, for the purpose of discussing stabilization plans. At that meeting three trustees were elected by the creditors of the bank to administer certain slow, unacceptable, and depreciated assets of the bank, amounting to 40 per cent. thereof and including notes, bond depreciation, etc. A stabilization agreement was thereafter formulated with the approval of the banking commission and signed by more than 80 per cent. of the unsecured creditors of the bank. The segregated assets were assigned to the trustees to administer for the benefit of the creditors who waived 40 per cent. of their claims against the bank, pursuant to the terms of the stabilization agreement.

The present action is concededly grounded upon and is brought pursuant to the provisions of sections 220.07 (20) and 221.42, Stats. 1933. Section 220.07 (20) is as follows: “ Stockholder's liability, when due, effect of payment. Whenever a stabilization and readjustment agreement entered into between any bank and the depositors and unsecured creditors of such bank has been approved by the commissioner of banking, the double liability provided by section 221.42 shall forthwith become due and the payment thereof by the stockholders of such bank shall be enforced by the commissioner of banking in the manner provided by said section 221.42 or in some other manner as he may deem advisable. All proceeds therefrom shall be for the benefit of the depositors and unsecured creditors existing at the time of the approval of such stabilization and readjustment agreement by the commissioner of banking. Any stockholder who has fully paid a voluntary assessment levied against him under any such agreement shall, upon the unconditional surrender of his stock to said bank, be relieved from all further liability thereon. Whenever an assessment levied against any stockholder under such agreement has been fully paid, such stockholder shall not be subject to any further or additional assessment for one year after the date of such payment.”

So much of section 221.42 as need be recited, is as follows: “221.42 Liability of stockholders. The stockholders of every bank shall be individually liable, equally and ratably, not one for another, for the benefit of creditors of said bank to the amount of their stock at the par value thereof, in addition to the amount invested in said stock. Such liability shall continue for one year after written notice to the commissioner of banking of any transfer of stock, as to the affairs of the bank at the time and prior to the date of the transfer. *** Such liability shall accrue and become due and payable as to the stockholders of any bank forthwith, upon the commissioner of banking taking possession of the property and business of such bank under the provisions of the statutes, and may be enforced by him, in an action brought in his name, in any court of record having civil jurisdiction of the county in which such bank is located, and such action shall have precedence over all other actions pending in such court. In the event of the liquidation of such bank, the stockholders who shall have discharged such additional liability shall, after the payment of expenses and the claims of creditors, be entitled to reimbursement on account thereof out of any remaining property of such bank before the same is distributed among its stockholders.”

The defendant earnestly contends that she is not bound by or subject to the provisions of section 220.07 (20) for the reasons that the stock which she owns is the identical stock which her husband purchased in 1892; that when her husband purchased the stock in 1892, the provisions of the Federal and State Constitutions, the statutes then in force, relating to state banks, the stock thereof and the liability of stockholders to creditors entered into and became a part of such contract of purchase; that the rights in and obligations under the stock in question became vested and such rights cannot be changed, added to, or taken away without impairment of the contract; that when, upon the death of her husband and upon the termination of the trust under his will, she took the stock and became subrogated to all of the rights of her deceased husband in such stock she assumed and became responsible only for the liabilities and obligations imposed by law at the time of its original purchase; that statutes cannot be given retroactive effect if they deprive parties to a contract of rights guaranteed by the Federal or State Constitutions; that neither statutes nor constitutional amendments giving creditors of a bank new remedies against stockholders can affect or bind stockholders whose rights have become vested prior to such enactments; that the remedies provided by the statutes of this state, which existed at the time her husband purchased the stock, entered into his contract of purchase and cannot be lessened, as to the creditors of the bank, or increased, as to the stockholders of the bank, without impairing the obligations of that contract of purchase. Numerous other contentions are made, all of which are directed principally to the...