Hornor v. Henning Et Al

• Decision Date: 01 October 1876
• Citation: 93 U.S. 228,23 L.Ed. 879
• Parties: HORNOR v. HENNING ET AL
• Court: U.S. Supreme Court

93 U.S. 228

23 L.Ed. 879

HORNOR v. HENNING ET AL.

October Term, 1876

ERROR to the Supreme Court of the District of Columbia.

The plaintiff in error, who was plaintiff below, had judgment against him on demurrer to his declaration. The substance of the declaration is, that he is a creditor of the Washington City Savings-Bank; that the bank had incurred an indebtedness of $850,000 in excess of the amount of its capital stock, with the assent of the defendants, who were the trustees of said bank, by reason whereof a right of action had accrued to plaintiff to have and recover the amount of his debt,—to wit, $4,000.

The act of Congress of May 5, 1870 (16 Stat. 98), authorizes the formation of corporations for various purposes within the District of Columbia by the voluntary association of individuals, who shall pursue the directions of the statute on the subject. Sect. 4 of that act provides for manufacturing, agricultural, mining, and mechanical corporations, and contains several provisions on the subject of the liability of the stockholders and of the trustees who manage these corporations. One of these is, that 'if the indebtedness of any company organized under this act shall at any time exceed the amount of its capital stock, the trustees of such company assenting thereto shall be personally and individually liable for such excess to the creditors of the company.'

By the second section of an act of the same session, passed June 17, 1870 (16 Stat. 153), it was enacted that savings-banks might be organized under the provisions of sect. 4 of the act first mentioned, which contains the clause above recited; and it is on the liability of the trustees declared in this clause that plaintiff bases his cause of action.

Argued by Mr. F. P. Cuppy for the plaintiff in error.

1. The act of June 17, 1870, merely authorizes savings-banks to organize and do business under the provisions of sect. 4 of the act of May 5, 1870; therefore, in construing the act as applied to trustees of such banks, the rules of construction applicable to the liability of trustees of mercantile, mining, and other companies, under the first act, should be applied.

2. The right of action is separate and several in favor of each and every creditor.

3. The liability is a joint liability, to which all the trustees assenting to an excess of indebtedness over the amount of the capital stock may be subjected.

4. The statute does not designate or prescribe, expressly or by implication, the form of the remedy to which the creditor shall resort. He therefore has the right to elect that which may be appropriate, under the circumstances of his particular case.

5. In the case at bar, an action at law lies in favor of the plaintiff against the defendants, for the amount of his debt and interest. Debt is the proper form of such action. 3 Paige, 409, 415, 416; Bank of Poughkeepsie v. Ibbotson, 24 Wend. 473; Garrison v. Howe, 17 N. Y. 458; Simmons v. Spencer, 15 id. 548; Chandler v. Hoag, 2 Hun (N. Y.), 613; Union Iron Co. v. Pierce et al., 4 Biss. 327; Dozier v. Thornton, 19 Ga. 325; Bullard v. Bell, 1 Mas. 243; Culver v. National Bank of Chicago, 64 Ill. 530; Steele v. Dunne, 65 id. 298.

Mr. Walter D. Davidge for the defendants in error.

The liability claimed is purely statutory. It did not exist at common law. The liability of the trustees is solely for the excess of indebtedness, and to the creditors of the company, one of whom cannot maintain an action for his individual debt. The whole scheme of the provision is the creation of a fund for the benefit of all the creditors of the company. Sturgis v. Burton, 8 Ohio St. 215; Merchants' Bank v. Stevenson, 10 Gray, 232; Stevenson v. Merchants' Bank, 5 Allen, 398; Moore v. Reynolds, 109 Mass. 473; Harris v. The First Parish of Dorchester, 23 Pick. 112; Crease v. Babcock, 10 Met. 531; Morse on Banking, pp. 438, 439, and cases cited; Pollard v. Bailey, 20 Wall. 520.

The remedy being in equity, the demurrer was properly sustained.

MR. JUSTICE MILLER delivered the opinion of the court.

The demurrer questions the right of a single creditor among many of the corporation to bring his separate action at law for his own debt, and recover a judgment for it against the trustees, though the allegations of his declaration be true.

If there exists an indebtedness of $850,000 in excess of the capital stock (which is alleged to be $50,000), it is clear that there must be other creditors than plaintiff; and as plaintiff's account, filed as part of the declaration, shows that he claims as a depositor in the bank, it is a reasonable inference that there are a great many other creditors, and that most of them are depositors of small sums. Under these circumstances, conceding the liability of the defendants, several questions press themselves on our attention as to the nature and extent of this liability and the mode of its enforcement. Taking the terms of the statute literally, the trustees are liable to the creditors as a body in the full sum of the excess (in this case $850,000), without regard to the amount due them collectively or individually, and though the corporation may be willing and able to pay every debt it owes as it falls due or is demanded. Nor does it matter whether the debts are in excess at the time the suit is brought or not, for 'if at any time' the indebtedness exceeds the capital stock, the assenting trustees are liable. Nor by the strict terms of the clause are the defendants liable to a single creditor, if there be more than one, but to all,—not to each creditor for the amount of his debt, but to all the creditors for the amount of the excess.

Yet in the face of this necessary result, if the literal construction be adopted, plaintiff in error maintains that the excess of indebtedness incurred above the capital is to be treated as a penalty, and that any creditor can sue for that penalty without regard to the rights of the others. If the action is...