Hamilton Nat. Bank v. Am. Loan & Trust Co.

• Decision Date: 22 October 1902
• Citation: 92 N.W. 189,66 Neb. 67
• Court: Nebraska Supreme Court
• Parties: HAMILTON NAT. BANK ET AL. v. AMERICAN LOAN & TRUST CO. ET AL.

66 Neb. 67

92 N.W. 189

HAMILTON NAT. BANK ET AL.

v.AMERICAN LOAN & TRUST CO. ET AL.

Supreme Court of Nebraska.

Oct. 22, 1902.

Syllabus by the Court.

1. In construing constitutional provisions, the rule prevails that words shall be given their ordinary meaning except where the context makes it plain that they have been used in a technical sense.

2. To buy and sell commercial paper, to make and negotiate loans, to receive money to be transferred to and paid at other places, to buy and sell exchange upon other cities in this and foreign countries, to receive money on deposit, and to pay the same out upon checks or orders, are each banking functions; but it is not necessary, in order to constitute a corporation a banking institution within the meaning of section 7, art. 11b, Const., that it shall exercise all of these functions.

3. In determining whether or not a corporation is a banking institution within the meaning of section 7, art. 11b, Const., the court will look to its articles of incorporation, its declared objects and purposes, the character of the business transacted by it, and even the construction which the officers themselves, in their management of its affairs, place upon its charter powers, if this construction is not unwarranted by the language of its charter.

4. A corporation filed articles providing, among other things, that the general nature of its business should be to make and negotiate loans, to purchase and sell notes, mortgages, stocks, and bonds, to borrow money and issue its own obligations therefor, to receive money on deposit, and to execute trusts. It received money on deposit, and paid the same out on checks; it bought and sold commercial paper; it made and negotiated loans; it bought and sold exchange upon other cities, and also transacted much of the business of a loan and trust company. It designated itself a “loan and trust company.” Held, that it was a bank, and its stockholders were liable under the provisions of section 7, art. 11b, of the constitution.

5. In order that a judgment in a prior suit may be a bar to a subsequent action, it must appear either by the record, or by clear and satisfactory evidence, that the identical issue presented by the subsequent suit was involved or adjudicated in the prior suit, and that both actions are between the same parties or their privies.

6. An adverse ruling on a motion the principal purpose of which is to secure the removal of a receiver on the ground that he is a stockholder of the corporation, and therefore not a suitable person to enforce the stockholders' liability provided for in the case of banking institutions, is not an adjudication of the question whether the corporation is a banking institution within the meaning of section 7, art. 11b, of the constitution; but such ruling will leave the party free to litigate the question of the stockholders' liability in another court of concurrent jurisdiction.

7. The liability of stockholders of a banking institution to its creditors, imposed by section 7, art. 11b, of the constitution, is not an asset of the corporation, collectible by suit or assessment by the officers of the corporation or a receiver acting in their stead, but is a subject-matter wholly distinct from that of the assets of the corporation; and a receiver can proceed to the enforcement of such liability only at the instance of the creditors themselves, and by direction of the court, and then only after the claims of the creditors have been judicially ascertained, and the assets of the corporation exhausted.

8. Evidence examined, and found not to sustain the finding and judgment of the trial court.

Commissioners' opinion. Department No. 1. Appeal from district court, Douglas county; Fawcett, Judge.

Bill by the Hamilton National Bank and others against the American Loan & Trust Company and others. Decree for defendants, and plaintiffs appeal. Reversed.J. H. McIntosh, for appellants.

W. D. McHugh, W. A. Saunders, and Montgomery & Hall, for appellees.

KIRKPATRICK, C.

This is a suit brought in the district court of Douglas county by the Hamilton National Bank and others, appellants, against the American Loan & Trust Company and others, who were stockholders in the company, for the purpose of enforcing the constitutional liability of the stockholders; alleging said loan and trust company to be a banking corporation or institution.

The petition, among other things, alleged that the American Loan & Trust Company was incorporated in December, 1885; that it continued to do business until May 10, 1894, at which time it went into the hands of a receiver, who subsequently collected the assets of the corporation and closed up its business; that appellants are creditors of the company, and that appellees were stockholders, each holding the number of shares set out in the petition, and that they were such stockholders at the time the indebtedness due appellants respectively was contracted; and praying the appointment of a receiver, with an order to him to proceed to enforce the constitutional liability of the stockholders. The answer admits the incorporation as alleged, and that appellants are creditors of the trust company, and at the trial it was further admitted that appellees were stockholders of the American Loan & Trust Company at the time the indebtedness pleaded was contracted; admitted the commencement of the action in the circuit court of the United States, and the appointment of a receiver, and alleged that each of the appellants duly entered an appearance in said proceedings; that said receiver was finally discharged by order of the circuit court. It is further alleged that appellants duly presented to said circuit court an application for an order adjudging the American Loan & Trust Company to be a banking corporation, and that the stockholders of said corporation be adjudged liable as stockholders of a banking corporation under the constitution of the state of Nebraska; that upon said application the circuit court of the United States adjudged that the American Loan & Trust Company was not a banking corporation, and that the stockholders were not liable as stockholders of a banking corporation, and denied the application; and that said proceedings amounted to an adjudication of the rights of appellants, which is binding upon each of them, and that they are estopped from pleading, asserting, or maintaining the present action. To this answer, for reply, was filed a general denial. Trial was had on the 22d day of December, 1900, resulting in a finding that the American Loan & Trust Company was not a banking institution, and that the stockholders were not liable, and a judgment dismissing the petition filed by appellants for want of equity. To reverse this judgment, the cause is brought to this court upon appeal.

But two questions requiring determination are presented: First, is the American Loan & Trust Company a banking corporation within the meaning of section 7, art. 11b, of the constitution? and, second, are the proceedings had in the circuit court of the United States a bar to the right of appellants to recover in this suit? The constitutional provision referred to is as follows: “Every stockholder in a banking corporation or institution shall be individually responsible and liable to all 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.”

In State v. Bacon, 6 Neb. 286, this court, quoting with approval from Sedgwick on Constitutional Law, said: “In the consideration of these questions, it may be observed, in the first place, that in the construction of a constitution the rule is ‘its terms must be taken in their ordinary and common acceptation, because they are supposed to have been so understood by the framers and by the people who adopted it.’ This is unquestionably the correct rule of interpretation. Unlike the acts of our legislature, it owes its whole force and authority to its ratification by the people; and they judge it by the meaning apparent on its face, according to the general use of the words employed, when they do not appear to have been used in a legal or technical sense.” This has become the settled rule of interpretation of constitutional provisions. State v. Lancaster Co. Com'rs, 6 Neb. 474;Belnap v. City of Louisville, 99 Ky. 487, 36 S. W. 1118, 34 L. R. A. 256, 59 Am. St. Rep. 478.

The question would, therefore, seem to be, was the American Loan & Trust Company a banking corporation or institution within the meaning of the provision quoted, taking those terms in the ordinary and commonly accepted meaning? 1 Morse, Banks (3d Ed.) § 2, defines a bank as follows: “An institution, usually incorporated, with power to issue its promissory notes intended to circulate as money (known as bank notes); or to receive the money of others on general deposit; to form a joint fund that shall be used by the institution for its own benefit for one or more of the purposes of making temporary loans and discounts; of dealing in notes, foreign and domestic bills of exchange, coin, bullion, credits, and the remission of money; or with both these powers, and with the privileges, in addition to these basic powers, of receiving special deposits, and making collections for the holders of negotiable paper, if the institution sees fit to engage in such business.” As a further definition, he says: “Practically, a bank is a place where deposits are received and paid out on check, and money is loaned on security. If the institution has the additional power of issuing its promissory notes to circulate as money, it is called a bank of issue.” Zane, in his work on Banks and Banking (section 2) says: “A learned and generally accurate judge, attempting a general...