Hopkins v. Glendenning

• Decision Date: 20 September 1941
• Docket Number: 8454
• Citation: 68 S.D. 208,299 N.W. 905
• Parties: N. K. HOPKINS, et al, Respondents, v. G.H. GLENDENNING, Appellant
• Court: South Dakota Supreme Court

68 SD 208, 299 NW 905 (1941)

N. K. HOPKINS, et al, Respondents v. G.H. GLENDENNING,

Appellant

South Dakota Supreme Court

Appeal from Circuit Court, Kingsbury County, SD

Hon. Frank R. Fisher, Judge

# 8454–Affirmed.

Warren & Eggen, De Smet, SD

Attorney for Appellant.

Trygstad & McCann, Brookings, SD

Attorney for Respondents.

Opinion filed Sep 20, 1941

ROBERTS, J.

The Citizens State Bank of Arlington, having become insolvent, suspended business on October 22, 1926, and was taken over by the superintendent of banks. An inventory of the assets of the bank was made by a representative of the banking department, and the defendant was given notice in the course of liquidation that the assets of the bank were insufficient to pay its liabilities and demand was made that he pay his liability as a stockholder in such bank. A plan of reorganization was agreed upon under the provisions of Chap 104, Laws 1925, and the same was presented by petition to the circuit court on January 18, 1927, in the pending liquidation proceedings. This statute in substance authorized the reorganization of a bank on agreement of depositors representing eighty per cent of the amount of the deposits of the bank. Notice of hearing was given by publication upon the deposit creditors. The court upon the hearing found that deposit creditors of the bank representing more than eighty per cent of the amount of the deposits of the bank agreed to the plan of reorganization and ordered that the bank be reinstated as a solvent bank in accordance with the terms and conditions of the agreement. The bank so reorganized was reopened on March 3, 1927. The bank when reorganized was to have a capital of $25,000 and a surplus of $2,500; preferred claims, public funds, church funds and small deposits were to be paid in full; fifteen per cent of the nonpreferred deposits were to be assumed by the reopened bank and certain assets were to be retained to enable the bank to pay its assumed obligations; certain other assets of the bank were to be segregated and placed in trust to be administered by the Arlington Holding Corporation against which participation certificates were to be issued representing the remaining eighty-five per cent of the nonpreferred deposits; the bank was to have the privilege of substituting its own assets during the period of liquidation for those in the trust; and the stockholders were to surrender their stock with the option to repurchase.

Defendant executed and delivered his promissory note on February 28, 1927, payable to the Citizens State Bank for $2,000, an amount equal to the par value of the shares which he owned. The note was transferred by endorsement to the Arlington Holding Corporation. Defendant executed and delivered a renewal note on January 25, 1936, and the instant action was brought by the plaintiffs as trustees of the Arlington Holding Corporation, a dissolved corporation, to recover on the renewal note. The court awarded recovery and defendant appeals.

Defendant contends that stockholders’ liability was released and was unenforcible by reason of the facts and agreement above set forth: that the note given by him was without consideration and void, and that plaintiffs cannot maintain a suit to enforce the liability of a stockholder.

SDC 6.0603 (§ 8924. Rev. Code 1919) authorizes the superintendent of banks to require a bank to make good an impairment of its capital. The assessment is not a personal liability of the stockholder, but the failure to pay the assessment renders the stock liable to sale on proper notice. Ruden v. Heckenlaible, 60 SD 62, 243 NW 95. Section :1), Article 18, Constitution of South Dakota, and SDC 6.0436 (§ 8993. Rev. Code 1919) provide for a different and unrelated liability. Payment of stock assessments levied by directors under direction of the superintendent of banks under SDC 6.0403) does not discharge any part of the constitutional and statutory superadded liability. Smith v. Goldsmith, 50 SD 1, 207 NW 977; Farmers’ State Bank of Lane v. Erickson, 54 SD 345, 223 NW 306; Bush v. Lien, 57 SD 501, 234 NW 29. This liability of stockholders under the provisions of the constitution and the statute commonly spoken of as a double liability is for the benefit of creditors and the bank has no authority to collect or release it. Farmers’ State Bank of Lane v. Erickson, supra.

The bank was in process of liquidation when the plan of reorganization was agreed upon and there was a resumption of business. Speaking of a somewhat similar plan of reorganization under a statute enacted in Mississippi, the Supreme Court of the United States in Doty v. Love, 295 US 64, 55 SCt 558, 561, 79 LEd 1303. 90 ALR 1438, said: “All that the statute does upon its face is to change the method of liquidation. The assets of the business are to be devoted without impairment or diversion to the payment of the debts. As to this the statute is explicit. Act of 1932, c. 251, § 3. In the discretion of the court of chancery a reopened bank is to take the place of the state superintendent for the purpose of gathering in the...