Duke v. Force

• Decision Date: 07 July 1922
• Docket Number: 17286.
• Parties: DUKE, Supervisor of Banking, v. FORCE.
• Court: Washington Supreme Court

208 P. 67

120 Wash. 599

DUKE, Supervisor of Banking, v. FORCE.

No. 17286.

Supreme Court of Washington, En Banc.

July 7, 1922

Appeal from Superior Court, King County; J. T. Ronald, Judge.

Action by James P. Duke, Supervisor of Banking, against Horton Caumont Force. Judgment for plaintiff, and defendant appeals. Affirmed.

Fred H. Peterson and H. C. Force, both of Seattle for appellant.

W. V Tanner and John P. Garvin, both of Seattle, for respondent.

MACKINTOSH J.

The case under the above title and the cases of Duke v Mines, 208 P. 75, Burke v. Duke, 208 P. 77, and Duke v. Burke, 208 P. 77, all relate to the same subject and the issues involved are so interwoven that it seems advisable to discuss the entire situation in one opinion; therefore various positions and arguments made by different counsel in these cases will be here considered though all these questions were not raised and argued in any particular one of the cases. Where a case presents issues not common to all, it will be considered in a separate opinion.

The appellant in this case has been a stockholder since 1907 in the Scandinavian-American Bank, a failed institution. In the year 1920 he paid a 100 per cent. assessment upon his stock, and upon the taking over of the bank on July 1, 1921, by the respondent for the purpose of liquidation, he was called on to pay the superadded liability imposed by section 11, art. 12, of the state Constitution, and section 35, c. 80, Laws 1917. He refusing to pay this final assessment, this action was brought for the purpose of collecting it. He defended on the ground that he had already paid the superadded liability by the payment in 1920. A demurrer was sustained to this defense, and he has appealed.

As was said in the beginning of this opinion, we will not confine ourselves to the argument advanced in the instant case, but will consider all the arguments presented in the different cases, which are advanced to the common purpose of preventing the collection of this final assessment.

It will be well to first set forth the constitutional and statutory provisions which have any bearing upon the questions at issue:

Section 1, art. 12, of the Constitution reads:

'Corporations may be formed under general laws, but shall not be created by special acts. All laws relating to corporations may be altered, amended or repealed by the Legislature at any time, and all corporations doing business in this state may, as to such business, be regulated, limited, or restrained by law.'

Section 4 of the same article provides:

'Each stockholder in all incorporated companies, except corporations organized for banking or insurance purposes, shall be liable for the debts of the corporation to the amount of his unpaid stock, and no more, and one or more stockholders may be joined as parties defendant in suits to recover upon this liability.'

Section 11 of the same article is:

'No corporation, association, or individual shall issue or put in circulation as money anything but the lawful money of the United States. Each stockholder of any banking or insurance corporation or joint stock association shall be individually and personally liable equally and ratably, and not one for another, for all contracts, debts, and engagements of such corporation or association accruing while they remain such stockholders to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares.'

Section 35 of the banking act, being section 35, c. 80, Laws 1917, which puts the constitutional provision last quoted into statutory form, reads:

'The stockholders of every bank and trust company shall be individually and personally liable, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation accruing while they remain as stockholders, to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares. Persons holding stock as executors, administrators, guardians or trustees, if such relation of trust shall appear in the stock certificate and on the books of the corporation, or as collateral security or in pledge, shall not be personally liable as stockholders, but the assets and funds in the hands of such trustees constituting the trust shall be liable to the same extent as the testator, intestate, ward, or person interested in such funds would be, if living or competent to act, and the person pledging such stock shall be deemed a stockholder and liable under this section. Such liability may be enforced by the examiner as soon after taking possession of any bank or trust company as in his judgment the same may be necessary. The failure of the stockholders of any bank or trust company immediately upon possession being taken by the examiner to make good all impairment of its assets shall be conclusive evidence that the enforcement of double liability is necessary.'

Section 60 of the same chapter is as follows:

'Whenever it shall in any manner appear to the state bank examiner that any offense or delinquency referred to in the preceding section renders a bank or trust company in an unsound or unsafe condition to continue its business or that its capital or surplus is reduced or impaired below the amount required by its articles of incorporation or by this act, or that it has suspended payment of its obligations or is insolvent, said examiner may notify such bank or trust company to levy an assessment on its stock or otherwise to make good such impairment or offense or other delinquency within such time and in such manner as he may specify or if he deem necessary he may take possession thereof without notice.'

Section 34 of the same banking act reads:

'Whenever the state bank examiner shall notify the board of directors of a bank or trust company to require the payment of an installment or to levy an assessment upon the stock of such corporation, such board shall within ten days from the issuance of such notice adopt a resolution for the collection of such installment or the levy of such assessment and shall immediately upon the adoption of such resolutions serve notice upon each stockholder personally or by mail at his last-known address to pay such installment or assessment and that if the same be not paid within twenty days from the date of the issuance of such notice, his stock shall be subject to sale, and all amounts previously paid thereon will be subject to forfeiture. At any time after the expiration of said twenty-day period, the board may proceed by action at law or otherwise to collect the installment or assessment from any delinquent stockholder, or it may, whether any action has been commenced or not, at any time before the installment or assessment is actually paid, sell the stock of such stockholder and forfeit all amounts previously paid thereon. At any time after the expiration of sixty days from the expiration of said twenty-day period, the examiner may require any stock upon which the installment or assessment remains unpaid to be canceled and deducted from the capital of the corporation. If such cancellation shall reduce the capital of the corporation below the minimum required by this act, or its articles of incorporation, the capital shall, within thirty days thereafter, be increased to the required amount by original subscription, in default of which the examiner may take possession of such corporation in the manner provided by law in case of insolvency.

'If any stock be sold prior to cancellation, there shall be returned to the original stockholder, his heirs or assigns, any surplus which remains after deducting from the amount realized at such sale, the amount of the installment or assessment due upon such stock, together with all costs incurred in connection with the sale of such stock, and interest upon the installment or assessment from the date of the notice to the stockholder. In the event of the failure of any board of directors to adopt the resolution herein required within the time specified, or to collect any installment or assessment, or to forfeit the stock of any delinquent stockholder, as herein provided, the examiner may, himself, in his discretion, at any time, issue the notice herein provided for on behalf of such corporation, and bring any appropriate action in his own name, but for the benefit of such corporation, for the collection of any installment or assessment, declare the forfeiture of any stock, or perform any other act herein referred to with the same force and effect as if such act were performed by the board of directors, and in the event that the examiner shall have brought any proceeding for the collection of any installment or assessment, the board of directors shall thereafter have no power to cancel the stock involved or continue such proceeding, except as permitted by said examiner.'

On January 17, 1920, the state banking department sent the following letter to the board of directors of the Scandinavian-American Bank:

State of Washington, Banking Department, Olympia.

'January 17, 1920.

'Board of Directors, Scandinavian-American Bank, Seattle Washington-Gentlemen: The last examination of your bank made by representatives of this department disclosed the fact that a large number of the assets being carried on the books of the bank are either worthless or of such questionable value as to justify this office in requiring you to charge them off.

'According to a recent report received in this office, you have already utilized $163,912.01 of your undivided profits for the purpose of eliminating certain of these items. To charge off the remaining objectionable assets will require the application to that purpose of additional funds

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