Fralick v. Guyer

• Decision Date: 21 February 1923
• Citation: 36 Idaho 648,213 P. 337
• Parties: J. G. FRALICK, as Commissioner of Finance of the State of Idaho and Liquidating Agent of the BELLEVUE BANK AND TRUST COMPANY, an Insolvent Banking Corporation of the State of Idaho, Appellant, v. RAYMOND GUYER, Respondent
• Court: Idaho Supreme Court

213 P. 337

36 Idaho 648

J. G. FRALICK, as Commissioner of Finance of the State of Idaho and Liquidating Agent of the BELLEVUE BANK AND TRUST COMPANY, an Insolvent Banking Corporation of the State of Idaho, Appellant, v. RAYMOND GUYER, Respondent

Supreme Court of Idaho

February 21, 1923

CONSTITUTIONAL LAW - BANKING CORPORATIONS - STOCKHOLDERS - DOUBLE LIABILITY.

Sec. 17 of art. 11 of the state constitution does not authorize the legislature to enact a law imposing on stockholders of a banking corporation organized under the laws of the state of Idaho what is commonly called a "double liability."

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Raymond L. Givens, Judge.

Action brought by Commissioner of Finance to recover from a stockholder of a defunct bank a sum equal to the par value of the stock held by said stockholder. Defendant demurred. From judgment of dismissal, plaintiff appeals. Affirmed.

Judgment affirmed, with costs to respondent.

A. H Conner, Attorney General, and Herbert Wing, Assistant Oppenheim & Lampert and F. L. Stephan, for Appellant.

In art 11, sec. 17, of the constitution, "the amount of stock owned by him" means that the stock is not the subject of the liability, but the measure of it, that is to say, that the legislature may provide that a shareholder may be made liable, not alone for the payment of his stock, but in addition thereto, for a sum measured by the amount of the stock. (6 Fletcher, Corp., sec. 4154.)

This is established particularly by the following interpretations: Minnesota constitutional provision: "To the amount of stock held or owned by him." (Willis v. Mabon, 48 Minn. 140, 31 Am. St. 626, 50 N.W. 1110, 16 L. R. A. 281; Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163.)

Alabama constitutional provision: "To the amount of stock held or owned by him." (Central Agricultural & Mechanical Assn. v. Alabama Gold Life Ins. Co., 70 Ala. 120; McDonnell v. Alabama Gold Life Ins. Co., 85 Ala. 401, 5 So. 120.)

New York constitutional provision: "To the amount of their respective share or shares." (Re Empire City Bank, 18 N.Y. 218.)

New York statutory provision: "To the extent of their respective share or shares." (Briggs v. Penniman, 8 Cow. (N. Y.) 387, 18 Am. Dec. 454; Slee v. Bloom, 20 Johns. (N. Y.) 669; Bank of Poughkeepsie v. Ibbotson, 24 Wend. (N. Y.) 473.)

Pennsylvania statutory provision: "To the amount of stock held by each of them." (Lane's Appeal, 105 Pa. 49, 51 Am. Rep. 166.)

Illinois private charter: "To the amount of their stock." (Root v. Sinnock, 120 Ill. 350, 60 Am. Rep. 558, 11 N.E. 339.)

The foregoing measure is sometimes doubled, and the liability becomes a triple liability. Colorado statutory provision: "In double the amount of the par value of the stock owned by them respectively." (Zang v. Wyant, 25 Colo. 551, 71 Am. St. 145, 56 P. 565.)

Pennsylvania private charter: "To the extent of double the amount of the stock subscribed for or held by them." (Driesbach v. Price, 133 Pa. 560, 19 A. 569.)

Maryland statutory provision: "Double the amount of stock at the par value held by such stockholders." (Murphy v. Wheatley, 102 Md. 501, 63 A. 62.)

Notwithstanding the dictum of Justice Stewart in Wall v. Basin Mining Co., 16 Idaho 313, 101 P. 733, 22 L. R. A., N. S., 1013, the constitutional provision in Idaho has not been authoritatively construed in this state. (See dissenting opinion of Justice Ailshie in said case, 16 Idaho 337, 101 P. 741, 22 L. R. A., N. S., 1013; Weil v. Defenbach, 31 Idaho 258, 170 P. 103; Feehan v. Kendrick, 32 Idaho 220, 179 P. 507.)

J. G. Hedrick, for Respondent.

C. S., sec. 5247, is unconstitutional and void in that it is in violation of the provisions of art. 11, sec. 17, of the constitution of Idaho. (Wall v. Basin Mining Co., 16 Idaho 313, 101 P. 733, 22 L. R. A., N. S., 1013; Schricker v. Ridings, 65 Mo. 208; Ochiltree v. Iowa Ry. Co., 21 Wall. (U.S.) 249, 22 L.Ed. 546.)

Statutes imposing an additional liability upon a stockholder are in derogation of the common law and should be strictly construed, and courts will not carry the liability beyond the plain provisions of the statute; and if the statute is susceptible of more than one construction, it should receive that imposing the lightest burden. (3 R. C. L. 397; Thompson on Corp., sec. 4774.)

As the constitutional provision referred to is in the exact language of the Missouri constitution, there can be no question but that the constitutional convention in adopting it intended to adopt the construction placed upon the Missouri provision. (National Lead Co. v. United States, 252 U.S. 140, 40 S.Ct. 237, 64 L.Ed. 496; Heald v. Dist. Col., 254 U.S. 20, 42 S.Ct. 434, 65 L.Ed. 34; Edwards v. Wabash Ry., 264 F. 610; vol. 2, pp. 1108, 1109, Proceedings and Debates, Constitutional Convention, 1889.)

James & Ryan, Amici Curiae.

Where a statutory or constitutional provision is adopted from another state, and the courts of that state have theretofore placed a construction upon the language thereof, it is to be presumed that such provision was adopted in view of such judicial interpretation, and with the purpose of adopting such judicial interpretation. (Stein v. Morrison, 9 Idaho 426, 75 P. 246; Neil v. Public Utilities Commission, 32 Idaho 44, 178 P. 271; In re Schriber, 19 Idaho 531, 114 P. 29, 37 L. R. A., N. S., 693.)

The court should in interpreting a constitutional provision construe it in such a way as to give effect to the intention of the constitutional body that framed such provision. (Grice v. Clearwater Timber Co., 20 Idaho 70, 117 P. 112; 12 C. J. 711, sec. 64.)

An individual liability on the part of a stockholder, other than the liability to pay for the stock, was unknown at common law. (Feehan v. Kendrick, 32 Idaho 220, 179 P. 507; 14 C. J. 972, sec. 1507.)

If any individual liability upon the part of stockholders is permitted by sec. 17, art. 11, of the Idaho constitution, it exists solely for the benefit of creditors of the bank and cannot be collected by the commissioner of finance. (Williams v. Carver, 171 Cal. 658, 154 P. 472.)

Peterson & Coffin, Amici Curiae.

If there is such liability it is on account of a constitutional or statutory enactment. At common law stockholders of all corporations were liable only for the amount of stock owned by them. (14 C. J. 972, par. 1507; Toner v. Faulkerson, 125 Ind. 224, 25 N.E. 218.)

Any constitutional or statutory provision seeking to hold such stockholder for any amount in addition to the stock owned by him must be construed strictly in favor of such stockholder. (Gray v. Coffin, 9 Cush. (Mass.) 192.)

That the framers of the constitution desired to limit the liability of stockholders to the amount invested in the stock is almost as clear as the language which they employed to effectuate this design. (Vol. 2, Proceedings and Debates, Idaho Const. Convention, pp. 1107-1111.)

The constitution of Oregon is not more certain than ours, and yet in the case of Ladd v. Cartwright, 7 Ore. 329, it was held that the stockholder was liable only for the amount of stock subscribed and unpaid.

DUNN, J. William E. Lee, J., and T. Bailey Lee, Dist. J., concur. WILLIAM A. LEE, J., Dissenting, Mr. Justice McCarthy, concurs in the conclusion.

OPINION

DUNN, J.

This action was brought by appellant as Commissioner of Finance to recover from respondent a sum equal to the par value of respondent's stock in the Bellevue Bank and Trust Company, said stock having been fully paid up.

Respondent demurred to the complaint on the ground that the facts stated did not constitute a cause of action. The demurrer was sustained, appellant declined to plead further and judgment of dismissal was thereupon entered, from which this appeal was taken.

C. S., sec. 5274, upon which the action is founded, reads in part as follows: "The stockholders of every incorporated bank or trust company doing a banking business shall be liable to the creditors of such bank or trust company to the amount of their stock at the par value thereof, in addition to the stock held by them."

Respondent defends the action on the ground that the portion of said section above quoted, in attempting to impose a double liability on a stockholder of a bank or trust company doing a banking business, is unconstitutional because of conflict with sec. 17 of art. 11 of the constitution of this state, which reads as follows: "Dues from private corporations shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him."

This provision (sec. 17) was undoubtedly taken from the Missouri state constitution, and its adoption here came many years after the supreme court of that state had construed the very clause now in dispute. The constitution of Missouri adopted in 1865 contained the following provision: "Dues from private corporations shall be secured by such means as may be prescribed by law; but in all cases each stockholder shall be individually liable over and above the stock by him or her owned, and any amount unpaid thereon, in a further sum at least equal in amount to such stock."

In 1870 the foregoing section was amended so as to read as follows: "Dues from private corporations shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable in any amount over and above the amount of the stock owned by him or her."

In Schricker v. Ridings, 65 Mo. 208, at page 215, in discussing the contention made there just as it is now made here, namely: that the expression, "the amount of the stock owned by him," means an amount equal to and in...