Farmers' Loan & Trust Co. v. Funk

CourtSupreme Court of Nebraska
Citation68 N.W. 520,49 Neb. 353
PartiesFARMERS' LOAN & TRUST CO. v. FUNK.
Decision Date07 October 1896

49 Neb. 353
68 N.W. 520

FARMERS' LOAN & TRUST CO.
v.
FUNK.

Supreme Court of Nebraska.

Oct. 7, 1896.



Syllabus by the Court.

1. The provisions of section 7 of article 11 of the constitution of Nebraska, designated “Corporations,” that “every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors, over and above the amount of stock by him held, to an amount equal to his respective stock or shares so held, for all its liabilities accruing while he remains such stockholder,” are enforceable without special supplementary statutory enactments.

2. The special individual liability of a stockholder in a banking corporation or institution, superadded to his ordinary liability by the above-quoted section of the constitution, is for the creation of a trust fund for the benefit of all creditors of the banking corporation or institution in which stock is held; and an action to render available such liability must be prosecuted by one creditor of such corporation or institution for the benefit of all other creditors, or by the receiver of such corporation or institution when there is a receiver.

3. The requirements of section 4, art. 11 (designated “Miscellaneous Corporations”), of the constitution, that before enforcement of individual liability of stockholders there must be judicially ascertained the indebtedness proposed to be enforced, and that the assets of the corporation be first exhausted, held applicable to the stockholders' liability in banking corporations or institutions described by section 7 of the same article.


Error to district court, Brown county; Bartow, Judge.

Action by the Farmers' Loan & Trust Company against Z. T. Funk to enforce defendant's liability as stockholder in an insolvent bank. From a judgment for defendant, plaintiff brings error. Affirmed.

[68 N.W. 520]

M. J. Sweeley and P. D. McAndrew, for plaintiff in error.

J. A. Gallaher and R. M. Logan, for defendant in error.


RYAN, C.

By its petition filed in the district court of Brown county plaintiff alleged that on the 23d of June, 1892, it deposited in the Ainsworth State Bank $5,000, for which there was issued by the bank its certificate of deposit, payable four months after date, with 8 per cent. per annum interest; that, with the exception of two payments, in the aggregate amounting to $3,040, said certificate was unpaid; and that, after said issue of its certificate of deposit, said bank had failed, and become insolvent, and that by reason of such failure and insolvency plaintiff was unable to enforce or collect said claim from said bank. The sole defendant was Z. T. Funk, against whom the following were the only allegations contained in the petition, to wit: “That on the 23d day of June, 1892, and at the time the liability of said bank to plaintiff was incurred as hereinbefore alleged, the defendant, Z. T. Funk, was a stockholder in said Ainsworth State Bank, and at said time held therein one share of stock, of the total par value of one hundred dollars.” Following the above described and quoted allegations there was a prayer for judgment in the sum of $100 and interest against Mr. Funk. There were, in effect, denials of the averments of the petition, followed by allegations that for the State Bank of Ainsworth a receiver had been appointed before this action was brought, and that plaintiff, on the 9th day of January, 1893, had filed the claim sued on in this action, and that said claim was still in the hands of said receiver, pending adjudication by him. It was also answered that there were sufficient assets to pay the bank's indebtedness, which the receiver was endeavoring to collect, and that no suit could be maintained till the assets of the bank were exhausted, and that neither a judgment had been rendered nor an execution issued against said bank when this action was brought. By reply there was a denial of each averment of the answer except that a receiver had been appointed for the bank, which alleged fact was admitted. On the trial the proofs were that the assets of the bank had not been exhausted, and the receiver, being sworn as a witness, in his testimony estimated that, when realized, said assets would enable him to pay about 10 per cent. of the indebtedness of the bank. It was further shown that no judgment had been rendered, and, of course, no execution had ever been issued, against the bank on plaintiff's claim. There was a judgment in the district court for the defendant, and this error proceeding is prosecuted by the plaintiff for its reversal.

In regard to the necessity of a judgment to establish the amount of its claim against the bank, plaintiff insists that it was sufficient for this purpose to file its claim with the receiver of the bank. The interest which this contention might elicit is wholly destroyed by the consideration that by its reply plaintiff denied certain averments of the answer, among which was one that its claim was filed as the plaintiff now in argument assumes it was. What effect this filing would have had in a proper case we cannot, therefore, determine. In Globe Pub. Co. v. State Bank of Nebraska, 41 Neb. 175, 59 N. W. 683, there was quoted section 4, art. 11, of the constitution of this state, of which the provisions are as follows: “In all cases of claims against corporations and joint stock associations, the exact amount justly due shall be first ascertained, and after the corporate property shall have been exhausted, the original subscribers thereof shall be individually liable to the extent of their unpaid subscription and the liability for the unpaid subscription shall follow the stock.” Following the above quotation was this language: “The word ‘ascertained’ in this provision we take to mean ‘judicially ascertained,’ and to ‘judicially ascertain’ the amount due from a corporation to a creditor means to have the finding and judgment or decree of a court as to such amount. Such an ascertainment of a debt due from a corporation could be ascertained, and ascertained only, within the meaning of this constitution, in a suit brought by a creditor of

[68 N.W. 521]

a corporation against it, not against the stockholders thereof, nor against the stockholders and corporation jointly. The expression in the constitutional provision just quoted above, ‘that after the corporate property shall have been exhausted,’ means ‘exhausted by judicial proceedings'; that is, when executions issued on judgments or decrees rendered against corporations shall be returned unsatisfied. This constitutional provision is the supreme law of the land, and we are not at liberty, nor desirous, of evading it, or construing it away. We think, therefore, that the creditors of a de jure corporation have no right of action against the stockholders thereof until they have reduced their claims against the corporation to judgment, and until an execution issued upon such judgment has been returned wholly or in part unsatisfied. It follows from this that a creditor's cause of action against the stockholders of a corporation under said section 136 would not accrue until such creditor had sued the corporation for the corporate debt, obtained a judgment thereon, and an execution issued on such judgment had been returned, at least, in part, unsatisfied.” Counsel for plaintiff concede that the above construction is proper, as applied to section 136, c. 11, Gen. St. 1873, which prescribed a penalty for failure to publish notice of incorporation, but criticise the general language used as to the ascertainment of the amount due and exhausting the corporate property, as not being applicable to banking corporations. It is also insisted by plaintiff that the receiver was not the proper party to bring this action, and that any creditor of the bank, for himself alone, to the extent of his being such a creditor, had a right of action against any shareholder to an amount equal to the par value of such shareholder's stock in the bank. In line with its above-noted criticism of the language quoted from Globe Pub. Co. v. State Bank of Nebraska, it is argued that neither judgment nor issue and return of execution was an indispensable condition precedent. These questions we shall now consider as general propositions in view of the facts already stated.

Section 7, art. 11 (designated “Corporations”), of the constitution, is in this language: “Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors over and above the amount of stock by him held, to an amount equal to his respective stock or shares so held, for all its liabilities accruing while he remains such stockholder; and all banking corporations shall publish quarterly statements under oath of their assets and liabilities.” The liability of a...

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68 practice notes
  • Shriver v. Woodbine Sav Bank of Woodbine, Iowa, No. 158
    • United States
    • United States Supreme Court
    • April 11, 1932
    ...805; Converse v. Hamilton, 224 U. S. 243, 253, 32 S. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292; Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N. W. 520. See James B. Ames, Lectures on Legal History, Implied Assumpsit, 149, 161. In the face of the sweeping language of the statut......
  • Brownell v. Adams, No. 27682.
    • United States
    • Nebraska Supreme Court
    • May 29, 1931
    ...W. 702. See, also, German Nat. Bank v. Farmers' & Merchants' Bank, 54 Neb. 593, 74 N. W. 1086;Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N. W. 520;Pickering v. Hastings, 56 Neb. 201, 76 N. W. 587;Hastings v. Barnd, 55 Neb. 93, 75 N. W. 49;Brown v. Brink, 57 Neb. 606, 78 N. W......
  • Hall v. Ballard, No. 4161.
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • June 14, 1937
    ...21 P. 673; Harvey v. Lord (C.C.) 10 F. 236, 238, 239; Wilson v. Book, 13 Wash. 676, 43 P. 939, 940; Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N.W. 520, 522, 524; Hayden v. Thompson, 71 F. 60, 66, 17 C.C.A. 592, The proper remedy in cases of voluntary liquidation of national ban......
  • Corn v. Skillern
    • United States
    • Supreme Court of Arkansas
    • April 22, 1905
    ...N.Y. 603; 113 U.S. 302; 71 Ark. 1; 110 Ga. 827; 95 Cal. 581; 16 Ga. 217; 100 Ill. 225; 40 Ia. 648; 77 Me. 465; 115 Mass. 380; 43 Mo. 452; 49 Neb. 353; 148 N.Y. 9; 17 Oh. St. 86; 85 Pa.St. 75; 6 R. I. 154. The stock was withdrawn by the defendants. 66 Ark. 329; 120 Mich. 1. D. B. Sain, W. D.......
  • Request a trial to view additional results
49 cases
  • Shriver v. Woodbine Sav Bank of Woodbine, Iowa, No. 158
    • United States
    • United States Supreme Court
    • April 11, 1932
    ...Ed. 805; Converse v. Hamilton, 224 U. S. 243, 253, 32 S. Ct. 415, 56 L. Ed. 749, Ann. Cas. 1913D, 1292; Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N. W. 520. See James B. Ames, Lectures on Legal History, Implied Assumpsit, 149, 161. In the face of the sweeping language of the statut......
  • Brownell v. Adams, No. 27682.
    • United States
    • Nebraska Supreme Court
    • May 29, 1931
    ...221 N. W. 702. See, also, German Nat. Bank v. Farmers' & Merchants' Bank, 54 Neb. 593, 74 N. W. 1086;Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N. W. 520;Pickering v. Hastings, 56 Neb. 201, 76 N. W. 587;Hastings v. Barnd, 55 Neb. 93, 75 N. W. 49;Brown v. Brink, 57 Neb. 606, 78 N. W.......
  • Hall v. Ballard, No. 4161.
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • June 14, 1937
    ...21 P. 673; Harvey v. Lord (C.C.) 10 F. 236, 238, 239; Wilson v. Book, 13 Wash. 676, 43 P. 939, 940; Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N.W. 520, 522, 524; Hayden v. Thompson, 71 F. 60, 66, 17 C.C.A. 592, The proper remedy in cases of voluntary liquidation of national banks t......
  • Corn v. Skillern
    • United States
    • Supreme Court of Arkansas
    • April 22, 1905
    ...N.Y. 603; 113 U.S. 302; 71 Ark. 1; 110 Ga. 827; 95 Cal. 581; 16 Ga. 217; 100 Ill. 225; 40 Ia. 648; 77 Me. 465; 115 Mass. 380; 43 Mo. 452; 49 Neb. 353; 148 N.Y. 9; 17 Oh. St. 86; 85 Pa.St. 75; 6 R. I. 154. The stock was withdrawn by the defendants. 66 Ark. 329; 120 Mich. 1. D. B. Sain, W. D.......
  • Request a trial to view additional results

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