Glahn v. Harris
| Decision Date | 30 June 1875 |
| Citation | 73 N.C. 323 |
| Court | North Carolina Supreme Court |
| Parties | HENRY VON GLAHN v. GEORGE HARRIS. |
*1 In an action against A, as a stockholder in the bank of C, to recover the value of certain notes or bills issued by said bank: the charter of the same providing that in case of insolvency, or ultimate inability of the bank to pay, the individual stockholders shall be liable to creditors in sums double the amount of the stock by them respectively held: It was held, that the creditors of the bank were joint obligors, and that such action must be brought in the name of the plaintiff and all the other creditors, who will become parties to the action, and prove their debts, so as to entitle them to a part of the fund.
CIVIL ACTION, tried at the Spring Term, 1875, of the Superior Court of NEW HANOVER county, before his Honor, Judge McKoy.
This was an action brought 22d of May, 1871, by plaintiff to recover of defendant, one of the stockholders of the Commercial Bank of Wilmington, alleging that the defendant was a stockholder to the extent of 20 shares of stock at the value of $100 per share, making $2,000. That the Bank is insolvent, and was so at the commencement of this action, and that the defendant was, and is liable under the clause of the charter, which reads: “That in case of insolvency or ultimate inability of the Bank to pay, the individual stockholders shall be liable to creditors in sums double the amount of the stock by them respectively held,” &c. By agreement the issues to be submitted to the jury were:
1st. Was the Bank as well known by the name of the Commercial Bank, as by the name of the President and Directors of the Commercial Bank?
2d. Was the defendant a stockholder at the time the suit was brought; if so, to what amount?
3d. Was the defendant a stockholder at the time of the judgment obtained against the Bank by the plaintiff, and has he transferred his stock?
4th. Was the Bank insolvent at the time the suit was commenced and demand made?
5th. Was the Bank insolvent at the time of the transfer, and was the transfer made with the intent to avoid liability under the charter?
The jury by consent and in accordance with the direction of the Court, passed upon these issues, finding all in favor of the plaintiff and fixing the value of the 15 shares owned by the defendant at $1,500. The issues of law were passed upon by the Court.
The plaintiff proved that the corporation was chartered and organized and operated. That defendant was a stockholder as found by the jury, and found the amount that he deposited with the said Bank, $36,445.38. That the plaintiff sued the corporation and obtained judgment in New Hanover county, at December Term, 1869, for $23,259.89, with interest on $16,545.38 from 13th December, 1869, and for $25.55 costs, with a remittance at same term of $992.72. That the plaintiff issued execution, on which were made $76.05 on 13th May, 1870, $90.67 on the 2d June, 1870, and $41.74 on the 16th February, 1870, and as to the balance of the judgment and execution, the return of the sheriff was nulla bona.
*2 After the finding of the jury, the plaintiff asks for judgment for the amount of $3,000, being double the nominal value of the 15 shares of stock owned by the defendant. The Court then heard the other issues raised by the pleadings. The defendant insists that no judgment can be rendered on the finding of the jury for the following reasons:
1st. The liability of the stockholders is secondary only, and if plaintiff's claim against the Bank is extinct, his claim against the stockholder is extinct also.
2d. Plaintiff's claim against the Bank is extinct, because by the 3d section of the charter, (which is produced and proved,) the corporation ceased to exist on the 31st December, 1871.
3d. In reply to plaintiff, who says this is not so, for the reason that the Revised Code, chap. 26, sec. 5, continues the corporation in existence for three years longer, the defendant says this act is not retrospective and does not include corporations like this, which were in existence at the time of its passage.
4th. If it is held to be retrospective and to include this corporation, then it continues the corporation only for the purposes expressly mentioned; that is, for the purpose of actions against the corporation only, and not for the purpose of actions against the stockholders.
5th. If the corporation is continued for the purpose of keeping alive the debts against the stockholders, then the act is unconstitutional, as impairing the value of the franchise of the corporation by extending the liability of the stockholders for three years, as any limitation which impairs the value of a franchise in the least degree, is unconstitutional.
6th. That if by chap. 26, sec. 5, Revised Code, the corporation is continued for three years only, that they have expired since 31st December, 1871.
7th. That the proof shows that there are other creditors who should be made parties.
8th. That the assets of the Bank should be exhausted before the individual stockholders should be made to answer for the debts of the corporation, and that a reasonable effort should be made by the plaintiff to exhaust the $74,000 in N. C. bonds, with coupons attached, before he calls upon the defendant to answer for the debts of the Bank, it having been in proof that the State bonds issued during the war under an act of the Legislature prior to 1861, were issued in aid of the W., C. & R. R. R.
9th. That the corporation of the Bank should be made a party.
10th. That there are other solvent stockholders who should be made parties. To this plaintiff replies that the debt of plaintiff having been reduced to judgment against the Bank and a return of nulla bona on the execution, then it becomes the debt of the stockholder, George Harris, the defendant.
Upon the questions reserved, the Judge presiding, being of opinion that the plaintiff ought not to recover, entered judgment against the plaintiff for the costs of this action.
From which judgment the plaintiff prayed an appeal.
*3 Appeal granted. Notice of appeal waived.
W. S. & D. J. Devane and R. S. French, for appellant :
Upon the point, “the individual stockholders shall be liable to creditors in sums double the amount of stock by them respectively held in said corporation.” Charter of the Commercial Bank 1847-'8, sec. 8.
Rev. Code, chap. 108, sec. 2. We submit that this alters the common law rule of joinder of all parties as plaintiff, where the contract is created by statute.
Battle & Son and Strange, contra , filed the following brief:
The defendants insist that no judgment can be rendered on the finding of the jury, for the following reasons:
1st. The liabilities of the stockholders are secondary only, and if plaintiff's claim against the bank is extinct, his claim against the stockholders is extinct also. Malloy v. Mallett, 6 Jones Eq., 345; Fox v. Hurrah, 1 Iredell Eq., 358; Wintry v. Webb, 3 Dev., 27.
*4 2d. Plaintiff's claim against the bank is extinct, because by the third section of the charter, (which is produced and proven,) the corporation ceased to exist on the 31st day of December, 1871.
3d. In reply to plaintiff, who says this is not so, for the reason that the Revised Code, chap. 26, sec. 5, continues the corporation in existence for three years longer, the defendant says this act is not retrospective, and does not include corporations, which were in existence at the time of its passage. 15 Howard, 421; 24 Ibid, 242; 9 Ired., 288, Battle v. Speight; 12 Ired., 21, Williams v. Davis; Potter's Dwarris, 162 to 166.
4th. If it is held to be retrospective and to include this corporation, then it continues the corporation only for the purposes expressly mentioned. That is, for the purposes of actions against the corporation only, and not for the purposes of actions against the stockholders.
5th. If the corporation is continued for the purpose of keeping alive the debts against the stockholders, then the act is unconstitutional as impairing the obligation of contracts. 1 Kent, 461; 8 Wheaton, 1; 11 Iredell, 558.
6th. That if by chapter 26, section 5, of Revised Code, the corporation is continued in existence beyond the term of the charter, it is for three years only, and that has expired.
7th. That the proof shows that there are other creditors who should be made parties.
8th. That the liability of the stockholders is only secondary. That in order to determine the extent of their liability, there must be an account to ascertain the whole debt of the bank and the amount of assets. It may be admitted that the creditors are not compelled to wait for a distribution of the assets, still the amount of assets which can be subjected in a reasonable time to payment of creditors, must first be ascertained. And the balance of debt, after...
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