Golden v. Golden

• Decision Date: 08 June 1917
• Docket Number: No. 10943.,10943.
• Citation: 278 Ill. 409,116 N.E. 273
• Parties: GOLDEN er al. v. CERVENKA et al. NIBLACK v. GOLDEN et al.
• Court: Illinois Supreme Court

278 Ill. 409

116 N.E. 273

GOLDEN er al.

v.CERVENKA et al.

NIBLACK

v.GOLDEN et al.

No. 10943.

Supreme Court of Illinois.

April 19, 1917.

Rehearing Denied June 8, 1917.

Appeal from Circuit Court, Cook County; Frederick A. Smith, Judge.

Suit by John F. Golden and others against John A. Cervenka and others, wherein William C. Niblack filed a cross-bill. From the decree, complainants, cross-complainants, and some defendants appeal to the Supreme Court, one defendant appealing to the Appellate Court, and moving to dismiss the appeal to the Supreme Court, which motion was denied. Decree affirmed in part, reversed in part, and remanded.

Craig, C. J., and Carter, J., dissenting.Charles Le Roy Brown, of Chicago, for appellants Golden and others.

Alfred S. Austrian, Henry R. Platt, and Hiram T. Gilbert, all of Chicago, for appellant Niblack, receiver.

William A. Rogen and Ralph W. Condee, both of Chicago, for appellant Hanecy.

Stein, Mayer & Stein, Levinson, Becker, Cleveland & Schwartz, Scott, Bancroft, Martin & Stephens, Culver, Andrews, King & Cook, Zeisler, Friedman & Zeisler, Ryan, Condon & Livingston, Jeffery & Campbell, Isadore S. Blumenthal, C. Van Alen Smith, Delaven B. Cole, Walter W. Ross, Walter H. Jacobs, and Knapp & Campbell, all of Chicago (Jerome N. Frank, William D. McKenzie, Royal B. Cushing, and John R. Cochran, all of Chicago, of counsel), for various stockholders.

John Barton Payne, Silas H. Strawn, and Harry B. Hurd, all of Chicago, for appellee Central Trust Co.

Richard J. Cooney, John A. Verhoeven, Clarence S. Darrow, and Peter Sissman, all of Chicago, for appellees Selig and others.

Moses, Rosenthal & Kennedy, of Chicago (Joseph W. Moses, of Chicago, of counsel), for appellee Bennett.

Edward A. Dicker, of Chicago, for appellee Hackney.

DUNN, J.

The La Salle Street Trust & Savings Bank, a corporation organized under the Banking Act (Hurd's Rev. St. 1915-16, c. 16a) of the state of Illinois, being insolvent, ceased to do business on June 11, 1914, and on June 18th a bill was filed in the circuit court of Cook county in the name of the people of the state of Illinois, on the relation of the auditor of public accounts, against it and its stockholders for its dissolution and for the appointment of a receiver. A receiver was appointed, and a decree has since been rendered dissolving the corporation and decreeing the conversion of its assets into money and the distribution of them among its creditors. After the appointment of the receiver, actions at law were begun in the superior court of Cook county and in the nunicipal court of Chicago by John A. Cervenka, a creditor of the bank, against different stockholders to enforce their liability as stockholders for the satisfaction of the indebtedness of the bank to Cervenka. The appellants John F. Golden and the Importers' & Manufacturers' Company, who were creditors of the bank, filed their bill in the circuit court of Cook county, and later a second amended and supplemental bill in behalf of all other creditors of the bank who might choose to come in and prove their claims, as well as of themselves, against the bank, its present and former stockholders, Cervenka and others, to enjoin the prosecution of the suits against the stockholders brought by Cervenka, and the institution or prosecution of any other suits of like character, to ascertain the creditors of the bank and its liabilities, as well as its stockholders, and the extent of their liability to the creditors, for adecree for the amount of the stockholders' liability and the distribution of such amount among the creditors of the bank, and for the appointment of a receiver to collect such amounts from the stockholders. The receiver appointed in the auditor's suit and the Central Trust Company of Illinois were also made parties defendant to the bill, and a decree was prayed against the Central Trust Company because of certain acts in connection with the organization of the La Salle Street Trust & Savings Bank, to be mentioned hereafter. Verious defendants answered the bill. The receiver filed a cross-bill, containing the same allegations and asking the same relief as the original bill. The cross-bill was answered, replications were filed, the cause was heard, and a decree was rendered against the Central Trust Company for $1,487,854.16, and against the stockholder, respectively, for an amount equal to the par value of the respective shares of stock held by them, the payments to be made to the receiver appointed in the auditor's suit. The complainants, the cross-complainants, and some of the defendants appealed to this court, the question of the construction of the constitutional provision as to the liability of stockholders in a banking corporation being involved. The Central Trust Company appealed to the Appellate Court, and made a motion to dismiss the appeals to this court. That motion was denied at the October term, and the Central Trust Company, as well as various other defendants, assigned cross-errors on the record.

The deficiency in the assets of the bank for the payment of its creditors was greater than all its capital, surplus, and undivided profits, and the court by its decree held each holder of stock in the bank at the time of its suspension individually liable to the creditors of the bank for an amount equal to the par value of his stock, and each former stockholder who had ceased to be a stockholder before the suspension also liable to an amount equal to the par value of the stock which he had previously held. The assignments of error by complainants and cross-complainants question the action of the court only in fixing the liability of the stockholders at the amount of the par value of their stock and not at twice that amount, and in not decreeing costs in favor of the complainants and cross-complainants.

Section 6 of article 11 of the Constitution provides 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 or her held, to an amount equal to his or her respective shares so held, for all its liabilities accruing while he or she remains such stockholder.’

Counsel for the appellants argue that this section imposes upon the stockholders a liability for twice the amount of the stock held, relying not upon the language of the section itself, which seems at first blush clearly not to impose such liability, so much as upon the expression of the court in the case of Dupee v. Swigert, 127 Ill. 494, on page 505, 21 N. E. 622, on page 625, that:

‘Under the section of the Constitution thus quoted, every stockholder is liable for the debts of the bank to an amount equal to twice the amount or stock held by him, and may be sued for such amount by any creditor, whose claim is large enough to cover it.’

This was not an interpretation by the court of the meaning of this section of the Constitution, but the language was used in argument only. There was no question before the court as to the amount of the liability of stockholders of a banking corporation. The action was mandamus against the auditor to compel him to issue a permit to organize a bank, which he refused to do; one ground of his refusal being that the second section of the Banking Act as it then stood was unconstitutional because it provided that each stockholder should be liable only for his ratable share of the debts of the bank, and not for the full amount fixed by the Constitution. What the court held was that such provision of the Banking Act was in conflict with the section of the Constitution which has been quoted, but that the constitutional provision, being self-executing, the part of the act which attempted to make each stockholder liable only for his ratable share of the indebtedness of the bank was void, and the constitutional provision should be regarded as a part of the Banking Act.

[1] The statement that the stockholder is liable for the debts of the bank to an amount equal to twice the amount of stock held by him is correct in the sense that his liability to have his property taken for the debts of the bank includes both the amount which he has invested in his stock and a like amount for which he is declared personally and individually liable by the Constitution, but it is only for the latter amount that he may be sued by any creditor, and the statement that he may be sued for twice the amount is inaccurate. The same inaccuracy, arising in the same way, occurs in the opinion of the Supreme Court of West Virginia in the case of Dunn v. Bank of Union, 74 W. Va. 594, 82 S. E. 758, L. R. A. 1915B, 168, which is also cited and relied upon by the counsel for the appellants. The provision of the Constitution of West Virginia is in substantially the same language as that of this state, and the court stated that it imposed ‘a personal liability on stockholders for debts accruing while they are such shareholders in a banking corporation-a liability thereby made personal, not as sureties, but as principals, for double the amount of shares so held by each of them at the date the liability accrued.’ The incorrectness of this statement in made manifest by a reference to the case of Clark v. Bank of Union, 72 W. Va. 491, 78 S. E. 785, a case involving the same bank failure and the same effort as the case of Dunn v. Bank of Union to fix the stockholders' liability, in which the court reversed the decree and remanded the cause, saying that if the assets belonging to the bank were found to be insufficient to satisfy the debts, ‘the stockholders could then be assessed a sufficient amount to pay off the debts, not to exceed the par value of their stock.’ A similar rule as to the extent of the stockholders' liability is intimated in Benedum v. Citizens' Bank, 72 W. Va. 124, on page 141, 78 S. E. 656, though it is not decided, the question as to the amount of liability not being involved. In neither of the cases...