Kent v. Love

• Decision Date: 25 January 1926
• Docket Number: 25320
• Citation: 106 So. 772,141 Miss. 523
• Court: Mississippi Supreme Court
• Parties: KENT v. LOVE, STATE SUPERINTENDENT OF BANKS. [*]

106 So. 772

141 Miss. 523

KENT v. LOVE, STATE SUPERINTENDENT OF BANKS. ^[*]

No. 25320

Supreme Court of Mississippi

January 25, 1926

Division B

1. BANKS AND BANKING. Stockholder of bank regularly coming under guaranteed deposit law, though without his knowledge, subject to double liability.

Stockholder of bank coming regularly and legally on resolution of majority of stockholders, under guaranteed deposit law though without his knowledge, is subject to double liability to depositors prescribed for such a bank on its becoming insolvent.

2. BANKS AND BANKING. Stockholder liable for interest from time demand made on him on account of double liability.

Stockholder in bank under guaranteed deposit law is liable for interest from the time demand was made on him on account of his double liability; it then being ascertained that the assets would be insufficient to pay the depositors.

HON. T P. GUYTON, Chancellor.

APPEAL from chancery court of Carroll county, HON. T. P. GUYTON Chancellor.

Action by J. S. Love, state superintendent of banks, against R. C Kent. Judgment for plaintiff, and defendant appeals. Affirmed.

Affirmed.

Gardner, Odom & Gardner, for appellant.

In this case, it is admitted that the appellant never attended any meeting of the stockholders or directors at which any resolutions were passed, and that he had no knowledge of the passage of either of the resolutions, and the first time he ever heard of the passage of either resolution was after the filing of this suit. He never ratified or confirmed in any way the passage of either of the said resolutions, either in person or by representative, and the defendant was an original subscriber when the bank was organized. In other words, it is admitted that the action of the board of directors and stockholders, if any action was ever taken, was done without his knowledge or consent, and of course, without this knowledge or consent it cannot be said that he ever ratified what was done.

When the stockholders in the Bank of Carrollton, under the Constitution of 1869, subscribed for this stock in the bank, they did so with the express agreement and understanding that they should not be liable "over and above the stock by him or her owned." No double liability, such as is now sought to be enforced against these stockholders, was provided. We, therefore, submit that the Banking Law of 1914, imposing double liability, is in direct contravention, and in violation of the contract clause of article 1, section 10, of the United States Constitution.

The charter of incorporation is a contract between the corporation and the state, and no subsequent act, either of the legislature or any constitution, can impair or affect that contract, unless the right was originally reserved in the act under which the charter was granted, or of the constitution. 14 C. J., pages 161 and 162; 71 Miss. 500; Stone v. Y. & M. V. R. R. Co., 62 Miss. 607; Realty Co. v. Co-operative Stores, 114 Miss. 319; Columbus Insurance & Banking Co. v. First Natioal Bank, 73 Miss. 103; Payne v. Baldwin, 3 S. & M. 661; Dartmouth College v. Woodward, 4 Wheat. 518, 4 L.Ed. 629.

We submit that under its charter the stockholders of the Bank of Carrollton, who did not participate in any of the meetings of either the stockholders or directors, which authorized the Bank of Carrollton to become a guaranteed bank, cannot now be held liable under the Banking Law of 1914, because to do so would violate the contract the state made with them when its charter was granted, in 1890, under the Constitution of 1869.

The allowance of interest in this case is erroneous. All of the authorities hold that interest on the par value of the stock cannot be added to such value, for the purpose of increasing the liability of the stockholders. In other words, complainant cannot collect interest on the value of the stock, the value of which is sued for in this case. 7 C. J. 508, 10 Ann. Cas. 774, 85 P. 642. The reason for the rule is that the stockholders are not in default until it has been determined that it is necessary to enforce their liability and the amount of such liability has been ascertained. 7 C. J. 509; 161 Mich. 600, 126 N.W. 708; 72 Minn. 266, 75 N.W. 180.

T. O. Yewell and Flowers, Brown & Hester, for appellee.

Appellant contends that decree should not have been rendered against him for the amount of the par value of the stock owned in the failed Bank of Carrollton because he was one of the original subscribers to the stock in March, 1890, while article 12, section 17, of the Constitution of 1869 was in force, and that to impose upon him the liability created by section 59, chapter 124, Laws of 1914, as amended by chapter 207, Laws of 1916, impairs the obligation of contract and takes his property without due process of law, in violation of article 1, section 10, of the Constitution of the United States, and article 12, section 17, of the Mississippi Constitution of 1869. If appellant had raised this issue when the Bank of Carrollton was about to come under the protection of the State Guaranty Law, it would have been entitled to more consideration than it now deserves. These stockholders by their own act and at their own instance elected to come under this law. They wanted to make their bank a "guaranteed bank." They were anxious to be able to hold out to depositors that enticing and all-powerful assurance of safety which is of paramount consideration in the mind of every depositor in a bank. It strikes us as rather late for these stockholders to raise the constitutionality of the law after the fund created under the law has been called upon to the extent of more than fifty thousand dollars to pay off depositors who lost their money through the failure of their bank. They are, as said by the court in Pate v. Bank of Newton, 116 Miss. 666, 77 So. 601, ". . . in a poor position to claim exemption now from the effect of what they voluntarily did."

Appellant insists that he is not liable under section 59, Acts of 1914 section 2619, Hemingway's Code, because he did not attend the meetings of the stockholders and directors at which they passed the resolutions necessary to place the Bank of Carrollton in the guaranty system, as provided by the Banking Act of 1914. He was a stockholder in this bank, and for that reason, owed a duty to the depositors who placed their money with it to see that the bank was properly operated and managed. He received the benefits that came to him as stockholder from Bank of Carrollton's being a member of the guaranty system, and now seeks to avoid the burdens. He, of course, was bound by the actions of the majority of the stockholders who attended the meeting at which the resolution was passed, authorizing the directors to make application for admission into the guaranty system. He does not claim that he had no notice of the stockholders' meeting. He simply paid no attention to the affairs of the bank, and sets up his ignorance of what was done, ignorance due to his inattention and negligence, as a defense to liability. Counsel say appellant would be liable if he had known of such action. If he knew nothing of it, it was his own fault. He should have attended the stockholders' meetings. He should have shown some interest in the bank. We say that appellant's silence, acquiescence in what was done, inattention to management of bank's affairs, failure to protest against entering the guaranty system...