Corrington v. Crosby

• Decision Date: 29 September 1926
• Docket Number: No. 5140.,5140.
• Parties: CORRINGTON v. CROSBY et al.
• Court: North Dakota Supreme Court

54 N.D. 614

210 N.W. 342

CORRINGTON

v.CROSBY et al.

No. 5140.

Supreme Court of North Dakota.

Sept. 29, 1926.

Syllabus by the Court.

A judgment or order of a district court in Montana declaring a banking corporation to be insolvent, and levying an assessment on the stockholders generally, in proceedings against such corporation for the appointment of a receiver, and for winding up its affairs, is conclusive on stockholders in this state, though they were not parties to said action nor served with process therein.

A creditor of an insolvent banking corporation, domiciled in Montana, may, on behalf of himself and all other creditors, institute and maintain, in this state, a suit against stockholders resident herein, to recover their added statutory liability, without first having his claim reduced to judgment.

Appeal from District Court, Cass County; A. T. Cole, Judge.

Action by Glenn H. Corrington, for the use and benefit of all the creditors of the Farmers' State Bank of Barber, Mont., against H. D. Crosby and others. From an order sustaining defendants' demurrer to plaintiff's amended complaint, plaintiff appeals. Order reversed.

John G. Pfeffer, of Fargo, for appellant.

Lawrence, Murphy & Nilles, of Fargo, for respondents.

COOLEY, District Judge.

This action is brought by Glenn H. Corrington, for himself, and in behalf of all other creditors of the Farmers' State Bank of Barber, Mont., to recover of certain stockholders of said bank, resident in North Dakota, the added statutory liability of said stockholders, imposed by section 6036, of the 1921 Revised Code of Montana, and by the amendment thereof (chapter 9 of the Montana Session Laws for the year 1923). This law reads as follows:

“The stockholders of every bank 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 [capital] stock therein, at the par value there of, in addition to the amount invested in such shares.”

The defendants have demurred to the amended complaint. This appeal is from an order sustaining the demurrer. The allegations of the amended complaint, so far as is necessary for the consideration of the questions involved on this appeal, are substantially as follows:

The creditors of said bank are very numerous, more than 97 in number; that some are unknown to plaintiff; that it is impracticable to bring them all before this court in this action, and that accordingly this suit is brought for the use and benefit of all the creditors of said bank; that the Farmers' State Bank of Barber, Mont., was, at all times mentioned in said complaint, a banking corporation, organized under the laws of the state of Montana, and doing business at Barber, Golden Valley county, Mont.; that the authorized capital stock of said bank was $20,000, divided into 200 shares of the par value of $100 each; that the said bank closed and ceased doing business on the 28th day of November, 1923; that on or about the 1st day of December, 1923, the then state examiner and superintendent of banks in said state, by virtue of the authority vested in him by law, examined into the affairs, business, and financial condition of said bank, and from such an examination found and determined said bank to be in an insolvent condition, which fact was reported to the Governor of said state, with a request that the Governor direct the Attorney General of said state to petition the district court of Golden Valley county, Mont., for the appointment of a receiver for said bank; that thereupon and on December 12, 1923, the Governor of said state did direct the said Attorney General to file such petition, asking for the appointment of a receiver for said bank, as provided by the laws of Montana; that on the 7th day of January, 1924, the said Attorney General, in an action wherein the state of Montana was plaintiff, and the Farmers' State Bank of Barber, Mont., was the defendant, filed in said district court a petition, asking that the said bank be declared insolvent, that its business and affairs be wound up, and its assets distributed to those entitled thereto, as ascertained by said court, and that a receiver be appointed to take charge of its assets, books, and accounts, and to administer them under the direction of said court, with the powers, duties, and liabilities of a receiver in such cases, and that such receiver be appointed without the plaintiff in that action being required to give notice of said application therefor to the defendant therein, and for further and other relief; that on the same 7th day of January, 1924, after the filing of said petition, an order was duly made in said proceedings, by the judge of the district court, of said Golden Valley county, Mont., appointing a receiver for said bank, for the purpose of winding up its affairs, with the usual powers conferred upon receivers in such cases; that on the 13th day of March, 1924, a summons in said action was duly served upon the defendant therein, Farmers' State Bank of Barber, Mont., and thereafter on the 3d day of June, 1924, a judgment was duly entered in said district court, wherein the said court found that said bank was and now is wholly insolvent, and that the liabilities of said bank exceed the assets by more than $40,000; that the authorized capital stock of said bank was $20,000, and that the holders of said stock on the 7th day of January, 1924, the date of the appointment of the receiver, were each liable, severally and individually, equally and ratably, for the contracts, debts, and obligation of said bank to the extent of the amount of the capital stock therein, at the par value thereof, in addition to the amount invested therein, and adjudged and decreed that the said bank “was on the 7th day of January, 1924, and at all times thereafter, and now is wholly insolvent and that the proven liabilities exceed the value of the assets by the sum of $56,194.82.” By the terms of said judgment it was further ordered that the receiver proceed to enforce the liability of the holders of the capital stock, as provided by the laws of Montana, and to take whatever steps are necessary to secure the payment of said liability.

Independently of the judgment and its recitals, which are set forth in full in the complaint, the complaint further alleges that at all times since the appointment of the receiver said Farmers' State Bank of Barber, Mont., has been and is now closed and insolvent; that the total indebtedness of said bank exceeds the value of the assets thereof in an amount of not less than $56,194.82; that the difference between the value of the assets of said bank and the amount of the liability is more than two times and almost three times greater than the total amount of the capital stock of said bank; and that the amount of the liability of each of the stockholders of said bank to the creditors is the sum of $100 per share with interest thereon from the 28th day of November, 1924. The complaint further alleges: That the defendants are stockholders of said bank; that they are all residents of the state of North Dakota, and are all the stockholders of said bank residing in said state; that at the time of the closing of said bank they owned, respectively, shares therein, in certain specified amounts.

The complaint sets out the amended section 6036 of the Revised Codes of the state of Montana, as amended, quoted above, and alleges that, at and before the time of the closing of said bank, one J. E. Corrington had on deposit with said bank the sum of $11,000, with interest thereon, evidenced by certain certificates of deposit, issued by said bank to the said J. E. Corrington, that, prior to the beginning of this action, the said J. E. Corrington assigned and transferred to the plaintiff all his right, title, and interest in and to said certificates, and that the plaintiff is still the owner and holder thereof, no part of which has been paid.

In his prayer for judgment, the plaintiff asks that the defendants be adjudged to be stockholders of the Farmers' State Bank of Barber, Mont., and that the number of shares owned by each, and the amount of liability thereon, be determined, and that they be required to pay such liability, together with interest thereon from November 28, 1923, to the plaintiff for the use and benefit of all the creditors of such bank.

To this complaint the defendants have demurred upon the following grounds:

(1) That the court has no jurisdiction of the subject of the action.

(2) That the plaintiff has no legal capacity to sue.

(3) That there is a defect of parties plaintiff in this, that the other creditors for whose benefit this action is brought have not been made parties plaintiff or defendant, nor facts stated in the complaint why the necessary parties have been omitted; and that there is a defect of parties defendant in this, that neither the said corporations nor its receiver is made a party defendant nor are the other resident or nonresident creditors or stockholders made parties defendant or good cause stated in the complaint why such necessary parties have been omitted.

(4) That several causes of action have been improperly united.

(5) That the complaint does not state facts sufficient to constitute a cause of action.

In disposing of the issues involved in this action, a general consideration of the nature of the added statutory liability of a stockholder in a state banking corporation and the proper method of enforcing that liability will be sufficient, without considering and determining separately each of the specific questions sought to be raised by the defendants' demurrer.

The defendants assert that the issues presented by the demurrer are as follows:

First. The action must of necessity be an equitable action, because of the interests of other creditors and stockholders.

Second. Being an equity action, it must be brought in the ...