Farmers Loan & Trust Co. v. Funk

• Decision Date: 07 October 1896
• Docket Number: 6820
• Citation: 68 N.W. 520,49 Neb. 353
• Parties: FARMERS LOAN & TRUST COMPANY v. Z. T. FUNK
• Court: Nebraska Supreme Court

68 N.W. 520

49 Neb. 353

FARMERS LOAN & TRUST COMPANY v. Z. T. FUNK

No. 6820

Supreme Court of Nebraska

October 7, 1896

ERROR from the district court of Brown county. Tried below before BARTOW, J.

AFFIRMED.

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

The following section of the constitution is self-executing "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." (Constitution, sec. 7, art. 11, under "Miscellaneous Corporations"; State v. Weston, 4 Neb. 216; Willis v. St. Paul Sanitation Co. 50 N.W. 1110 [Minn.]; Thomas v. Owens, 4 Md. 189; Reynolds v. Taylor, 43 Ala. 420; Miller v. Marx, 55 Ala. 352; People v. Hoge, 55 Cal. 612; Hentig v. James, 22 Kan. 326; Fowler v. Lamson, 34 N.E. 932 [Ill.].)

By filing its claim with the receiver, plaintiff did not lose its right to proceed against the stockholders. (Shellington v. Howland, 53 N.Y. 371; Sleeper v. Goodwin, 67 Wis. 579; First Nat. Bank of Barre v. Hingham Mfg. Co. 127 Mass. 563; 2 Beach, Private Corporations, sec. 658.)

The action was properly brought by plaintiff as a creditor in its individual capacity. (2 Morawetz, Private Corporations, sec. 869; 1 Cook, Stock & Stockholders, sec. 218; Thompson, Liability of Stockholders, sec. 341.)

Plaintiff concedes that this suit might have been brought in equity. Had that been done it should have been for the benefit of all the creditors, and perhaps against all the stockholders, but it contends that it had its election, and when the action is at law it must be by a single creditor and against a single stockholder. (1 Cook, Stock & Stockholders, sec. 220; First Nat. Bank of Barre v. Hingham Mfg. Co. 127 Mass. 563; Mason v. Alexander, 44 Ohio St. 318; Bank of Poughkeepsie v. Ibbotson, 24 Wend. [N.Y.] 479; Flour City Nat. Bank v. Wechselberg, 45 F. 547; Norris v. Johnson, 34 Md. 485; Abbey v. Grimes Dry Goods Co. 24 P. 426 [Kan.]; Flash v. Conn, 109 U.S. 371; Kennedy v. Gibson, 8 Wall. [U.S.] 498; Casey v. Galli, 94 U.S. 673; Hatch v. Dana, 101 U.S. 213; Terry v. Little, 101 U.S. 216; Fuller v. Ledden, 87 Ill. 310; McCarthy v. Lavasche, 89 Ill. 270; Hull v. Burtis, 90 Ill. 213; Culver v. Third Nat. Bank of Chicago, 64 Ill. 528; Freeland v. McCollough, 43 Am. Dec. [N.Y.] 685, note and cases cited.)

Plaintiff was not compelled to reduce its claim to judgment and exhaust the assets of the bank as conditions precedent to suit. (Terry v. Anderson, 95 U.S. 632; Mills v. Scott, 99 U.S. 29; Hatch v. Dana, 101 U.S. 213; Marine & River Phosphate Mining & Mfg. Co. v. Bradley, 105 U.S. 175; McDonnell v. Alabama Gold Life Ins. Co. 5 So. [Ala.] 120; Flour City Nat. Bank v. Wechselberg, 45 F. 547; Abbott v. Aspinwall, 26 Barb. [N.Y.] 202; Perkins v. Church, 31 Barb. [N.Y.] 84; Paine v. Stewart, 33 Conn. 516; Munger v. Jacobson, 99 Ill. 349; Kincaid v. Dwinelle, 59 N.Y. 548; Toucey v. Bowen, 1 Biss. [U.S.] 81; Kennedy v. Gibson, 8 Wall. [U.S.] 498; Moses v. Oconee Bank, 1 Lea [Tenn.] 398; Morgan v. Lewis, 17 N.E. 558 [O.].)

R. M. Logan, contra:

An action at law cannot be maintained by a creditor against an individual stockholder to enforce the statutory liability for corporate debts; but if such an action will lie, plaintiff must reduce its claim to judgment and exhaust the assets of the bank as conditions precedent. (Coleman v. White, 14 Wis. 762; Sleeper v. Goodwin, 31 N.W. 355 [Wis.]; Harris v. First Parish of Dorchester, 23 Pick. [Mass.] 112; Smith v. Huckabee, 53 Ala. 191; Baker v. Atlas Bank, 9 Met. [Mass.] 182; Crease v. Babcock, 10 Met. [Mass.] 525; Spear v. Grant, 16 Mass. 9; Spence v. Shapard, 57 Ala. 598; Judson v. Rossie Galena Co. 38 Am. Dec. [N.Y.] 569; Briggs v. Penniman, 18 Am. Dec. [N.Y.] 454; Morgan v. New York R. Co. 40 Am. Dec. [N.Y.] 244; Wright v. McCormack, 17 Ohio St. 86; Umsted v. Buskirk, 17 Ohio St. 113; Brown v. Hitchcock, 36 Ohio St. 667; Pollard v. Bailey, 20 Wall. [U.S.] 520; Globe Publishing Co. v. State Bank of Nebraska, 41 Neb. 175.)

J. A. Gallaher, also for defendant in error.

References: Belknap v. North American Life Ins. Co. 11 Hun [N.Y.] 282; Cole v. Knickerbocker Life Ins. Co. 23 Hun [N.Y.] 255; Paulsen v. Van Steenbergh, 65 How. Pr. [N.Y.] 342; Stewart v. Lay, 45 Iowa 604; Allen v. Clayton, 63 Iowa 11; 2 Morawetz, Corporations, sec. 748.

OPINION

The facts are stated by the commissioner.

RYAN, C. J.

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 eight 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 ten 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 his 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 Publishing Co. v. State Bank of Nebraska, 41 Neb. 175, 59 N.W. 683, there was quoted section 4, article 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 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...