Kingston v. Old Nat. Bank of Centralia

Decision Date12 February 1935
Docket NumberNo. 22689.,22689.
Citation359 Ill. 192,194 N.E. 213
PartiesKINGSTON, Commissioner of Banking of Wisconsin, v. OLD NAT. BANK OF CENTRALIA.
CourtIllinois Supreme Court

OPINION TEXT STARTS HERE

Action by A. C. Kingston, Commissioner of Banking for the State of Wisconsin, against the Old National Bank of Centralia, as executor. Judgment for plaintiff, and defendant appeals.

Affirmed.

SHAW, J., dissenting.Appeal from Circuit Court, Marion County; F. R. Dove, Judge.

June C. Smith and Hugh V. Murray, Jr., both of Centralia, for appellant.

Wham & Wham, of Centralia, for appellee.

HERRICK, Justice.

The appellee (hereinafter called the plaintiff) brought his suit in the circuit court of Marion county against the appellant (hereinafter called the defendant) to collect the superimposed liability of the defendant's decedent as a stockholder of thirty shares of the Merchants' Exchange Bank of Door County, Wis. (hereinafter called the bank). Judgment was rendered in favor of the plaintiff, against the defendant as such executor, for $3,000 and costs, from which judgment the defendant has appealed directly to this court.

The plaintiff, Kingston, is the commissioner of banking for the state of Wisconsin, and, as such, receiver of the bank. The bank was organized on July 17, 1904, under the laws of Wisconsin and had authority to do a general banking business. It functioned as a bank until October 6, 1932, when under an appropriate resolution and action of its board of directors the plaintiff took possession of the bank for liquidation. The decedent died in October, 1931. On July 2, 1906, he acquired twenty shares, and on July 17, 1914, an additional ten shares, of the capital stock of the bank. All shares were of $100 par value.

The declaration consisted of a special count and the consolidated common counts. The special count stated by apt averments the official capacity of the plaintiff; his duties as such to control and supervise the liquidation of insolvent banks of his state; the organization of the bank; its engagement in the general banking business; its insolvency and the date thereof; that the plaintiff, as such commissioner, took charge of the bank for the purpose of liquidation; the purchase by the decedent in his lifetime and the date of purchase of shares of stock in such bank and his continued ownership thereof until his death; the date of his death; the appointment and qualification of the defendant as such executor; that with other assets of the decedent's estate there came to defendant's possession such shares of stock; that the administration of the estate was still open; and that the estate was solvent and the executor had in its possession assets of the estate in excess of the amount required to pay the defendant's liability and all other claims against the estate, including the expenses of administration. The special count then proceeded to charge that at the time of the purchase of such several shares of stock there was then in full force and effect in the state of Wisconsin a certain statute hereinafter referred to; that the statute was amended in 1915 by the amendment hereinafter stated, and that the statute as amended has been ever since its enactment, and is yet, in full force and effect; that there was, at and prior to the time the plaintiff took charge of the bank, a certain other statute to which reference is here made later; that, under and by virtue of such state statutes as interpreted and construed by the courts of Wisconsin, upon the plaintiff taking charge of the bank the defendant became liable to pay forthwith to the plaintiff a sum equal to the par value of such thirty shares.

The Wisconsin statute as it existed at the time of the purchase of the bank stock was as follows:

Section 39 [later designated as section 221.42]. Liability of stockholders. The stockholders of every bank shall be individually liable, equally and ratably, not one for another, for the benefit of creditors of said bank to the amount of their stock at the par value thereof, in addition to the amount invested in said stock. Such liability shall continue for six months after any transfer of stock, as to the affairs of the bank at the time and prior to the date of the transfer. But persons holding stock as executors, administrators, guardians or trustees, and persons holding stock as collateral security, shall not be personally liable as stockholders, but the assets or funds in their hands constituting the trust shall be liable to the same extent as the testator, intestate, ward or person interested in such trust fund would be if living, or competent to act, and the person pledging such stock shall be deemed the stockholder and liable under this section.’

The amendment of 1915 to such section is as follows: ‘Such liability shall accrue and become due and payable as to the stockholders of any bank forthwith, upon the commissioner of banking taking possession of the property and business of such bank under the provisions of the statutes,and may be enforced by him, in an action brought in his name, in the circuit court of the county in which such bank is located. In the event of the liquidation of such bank, the stockholders who shall have discharged such additional liability shall, after the payment of expenses and the claims of creditors, be entitled to reimbursement on account thereof out of any remaining property of such bank before the same in distributed among its stockholders.’ Wis. Stat. 1931, p. 1824.

Section 220.04 of the Statutes, so far as pertinent here, is as follows: ‘220.04 * * * (3) When any banks shall be in the hands of the commissioner and an assessment shall be made against the stockholders thereof to enforce payment of the double liability, the commissioner or his duly appointed deputy or agent shall have the right to prosecute an action in a foreign state to enforce such liability against a stockholder residing in such foreign state.’ Wis. Stat. 1931, pp. 1801, 1802.

A general and special demurrer to the special count was interposed by the defendant. The demurrer was overruled. The defendant abided by his demurrer and was defaulted. The common counts were abandoned. Evidence was heard only as to the amount of damages as to the case made by the special count.

The banking laws of Wisconsin were revised in 1903. Provision was made for a state banking department. The office of commissioner of banking was created, and section 221.42, supra, was adopted. Provision was also made for the enforcement of the stockholder's liability by section 10 of chapter 1 of the Banking Act (Laws Wis. 1903, c. 234, subc. 1, § 10), as follows: ‘If after the expiration of one year from the closing of any incorporated bank it shall appear to the receiver thereof that the assets of such bank are insufficient to pay its liabilities, it shall be the duty of such receiver to immediatelyinstitute proper proceedings, in the name of the bank, for the collection of the liability of the stockholders of such bank; all sums so collected to become a part of the assets of such bank, and to be distributed pro rata to the creditors thereof in the same manner as other funds. No action by any creditor against any stockholder of such bank for the recovery of such liability shall be maintained unless it shall appear to the satisfaction of the court that the receiver has failed to commence action as herein provided.’ This section was repealed in 1909 (Laws Wis. 1909, c. 396). The Banking Act was at the same time amended by placing the liquidation of banks and the enforcement of stockholders' liability exclusively in the hands of the commissioner of banks and abolishing the necessity of a receiver. The act was left without procedure being prescribed for the enforcement of the stockholders' liability until the amendment of 1915.

It is earnestly urged by the defendant that the amendment of 1915 impairs the obligation of contract and does not afford it due process of law. To sustain its contention that the amendment of 1915 violates the inhibitions against the impairment of the obligation of contract as provided by sections 2 and 14 of article 2 of the Illinois Constitution, the defendant cites Schwenker v. Bekkedal, 204 Wis. 546, 236 N. W. 581, 582. That case was decided in 1931. The question was not raised in that case as to the effect of the amendment on the liability of a stockholder who acquired his stock prior to the 1915 amendment. The court in the course of its opinion did discuss the Wisconsin Banking Act of 1903 and followed the rule as applied to the Banking Act of 1903 theretofore announced in Cleveland v. Burnham, 64 Wis. 347, 25 N. W. 407, that in interpreting a bank stockholder's liability under the statute of 1858 in order to fix the liability of the stockholder, and before such liability matured, it was necessary to determine two factors: (1) The whole amount of the par value of all the stock held by all stockholders; and (2) the amount of the deficit to be paid after exhausting all the assets of the bank-and then apply the rule that each shareholder contribute such sum to such deficit as will bear the same proportion to the whole amount of the deficiency as his stock bears at par value to the whole amount of the capital stock of the bank. The court in the Schwenker Case further stated in its opinion that the words ‘equally and ratably, not one for another’ were manifestly taken from the National Banking Act, and cited United States v. Knox, 102 U. S. 422, 26 L. Ed. 216, in support of the construction of the stockholders' liability. From this statement in the opinion in Schwenker v. Bekkedal, supra, the defendant argues that the 1903 Wisconsin act fixing the superadded liability of a stockholder in a bank was taken from the National Banking Act, and that the liability of the defendant for bank stock purchased by the decedent prior to 1915 is covered by the construction of the National Banking Act as...

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