Klotz v. First Nat. Bank of Hammond

• Decision Date: 23 February 1922
• Docket Number: No. 11188.,11188.
• Citation: 78 Ind.App. 679,134 N.E. 220
• Court: Indiana Appellate Court
• Parties: KLOTZ et al. v. FIRST NAT. BANK OF HAMMOND et al.

78 Ind.App. 679

134 N.E. 220

KLOTZ et al.

v.FIRST NAT. BANK OF HAMMOND et al.

No. 11188.^*

Appellate Court of Indiana, Division No. 1.

Feb. 23, 1922.

Appeal from Superior Court, Lake County; Jas. A. Wason, Special Judge.

Action by the First National Bank of Hammond and others against Theodore G. Klotz and others. Judgment for plaintiffs and defendants appeal. Affirmed.McMahon & Conroy, of Hammond, for appellants.

William J. Whinery and Jesse E. Wilson, both of Hammond, for appellees.

BATMAN, P. J.

This is an action by appellees, designated as banks and trust companies, six in number, against appellants, and the appellees who are individuals, to recover an alleged liability under section 4947, Burns 1914, by reason of being stockholders in the East Side Trust & Savings Bank of Hammond, Ind., an insolvent trust company, hereinafter designated as the East Side Bank. The complaint is in a single paragraph to which a plea in abatement was filed, based on the ground that all of the assets of said East Side Bank had not been exhausted. A demurrer to this plea having been sustained, an answer in three paragraphs was filed. The first is a general denial. The second alleges facts to show that all of the assets of said East Side Bank have not been exhausted. The third is based on an alleged waiver on the part of said banks and trust companies to assert a statutory liability against the stockholders of said East Side Bank. A reply in general denial was filed to said affirmative paragraphs of answer. Appellants demanded a trial by a jury, which was denied, and thereafter the court, having heard the evidence, rendered judgment in favor of said banks and trust companies, appellees herein. After a motion for a new trial was overruled, this appeal followed, based on an assignment of errors presenting the questions hereinafter determined.

[1][2] Appellants contend that the court erred in sustaining a demurrer to their plea in abatement, but we are not of that opinion. By the provisions of said section 4947, no right of action existed in favor of said banks and trust companies, as creditors, against appellants as stockholders, unless all the assets of said East Side Bank had been exhausted. It was therefore incumbent upon the former to allege and prove such fact in order to recover in this action. The issue as to such fact was properly presented by the answer in general denial instead of a plea in abatement.

Appellants further contend that the court erred in refusing their demand for a jury trial. If the cause is one of equitable jurisdiction, there was no error in the court's action in that regard, even if it be conceded that such demand was properly and timely made. It will be observed that this is not a common-law action, but one based on the following section of our statute with reference to loan and trust companies:

“The stockholders in such corporation shall be individually liable, in addition to their capital stock, in a sum equal to the amount of the same for the payment of any sum which shall at any time remain unpaid, for the satisfaction of any debt or liability which may at any time remain unpaid after the capital stock of such corporation and all its assets may be or shall have been exhausted.” Section 4947, Burns 1914.

[3][4][5] We fail to find any precedent in this state to guide us in determining whether an action prosecuted thereunder, by all the creditors of a loan and trust company against all the stockholders thereof, is an action at law or one in equity. Therefore we must look to general principles, and to the decisions in other jurisdictions, where such principles have been applied under similar statutes for a like purpose for our guidance. An examination of the statute in question discloses that no provision is made for the enforcement of the liability against stockholders provided in said section, and hence courts must recognize such procedure as will be appropriate for the accomplishment of its purpose. Directing our attention to the language used in the section of the statute under consideration, and keeping in mind the evident purpose to be accomplished thereby, it is clear to us that the stockholders collectively are thereby made individually liable, in proportion to the number of shares of stock owned by each, for such a sum, not exceeding the amount of the capital stock, as may be required for the satisfaction of the debts and liabilities which may remain unpaid, after the capital stock thereof and all of its assets have been exhausted. A different construction has been urged, based on the use of the word “any,” in the section of the statute under consideration, in connection with the words “debt or liability.” The use of that word in such connection does not require that said section be given a meaning different from what we have indicated, as it is a well-recognized fact that the word “any” is often used in the sense of “every” or “all,” and will be given that meaning when the fair import of the context requires it. Bouvier's Law Dictionary, vol. 1, p. 205; 2 Am. & Eng. Encyc. of Law, 414; 3 C. J. 232; Ludwig v. Cory (1901) 158 Ind. 582, 64 N. E. 14;Indiana, etc., Co. v. Neal (1905) 166 Ind. 458, 77 N. E. 850, 9 Ann. Cas. 424;White v. Furgeson (1901) 29 Ind. App. 144, 64 N. E. 49;People v. Van Cleave, 187 Ill. 125, 58 N. E. 422. Giving said section the construction we have indicated, it is clear that the whole amount collected from the stockholders thereunder will be in the nature of a trust fund for the benefit of all of the corporate creditors.

[6] Since the action is by all the creditors of said East Side Bank against all the stockholders thereof, except those who have already paid the full amount of their secondary liability under said section, for the collection of only such portion of their liability thereunder as shall not “exceed the respective claims of the plaintiffs in this cause,” an accounting is evidently involved, not only for the purpose of determining the amount due each of the appellees, banks and trust companies, but the amount due from each individual stockholder by reason of his pro rata liability. We thus have a situation which calls for the equity powers of the court, because of the complicated accounts and interests involved, and to avoid a multiplicity of suits, which would result in probable confusion and possible injustice in their ultimate results. As said by the Supreme Court in the case of Horn v. Lupton (1914) 182 Ind. 355, 105 N. E. 237, 106 N. E. 708:

“Law courts are not possessed of the special [statutory] machinery required for dealing with complicated accounts and interests.”

It thus appears that the banks and trust companies, who instituted this action, were without an adequate legal remedy, in the enforcement of the liability of appellants under the section of the statute in question, and hence were clearly within their rights in seeking relief in a court of equity. We are fully sustained in the conclusion we have reached by the following decisions: Terry v. Little, 101 U. S. 216, 25 L. Ed. 864;Pollard v. Bailey, 20 Wall. 520, 22 L. Ed. 376;Cook v. Carpenter, 212 Pa. 165, 61 Atl. 799, 1 L. R. A. (N. S.) 900, 108 Am. St. Rep. 854, 4 Ann. any one of the defendants, it was for the full amount of the preference received, regardless of a similar liability against any other defendant. These facts so far differentiate that case from the one before us as to render it without any controlling influence on the question we have been considering. Certain cases have been cited which appear to hold that where the whole amount of liability of stockholders is sought to be recovered the proceeding must be at law, but where less is required the proceeding may be in equity. However, if this be taken as a controlling factor, still this action may be considered as one in equity, since the amount sought to be recovered is expressly limited to such a sum as shall not “exceed the respective claims of the plaintiffs in this cause.” It will also be observed that in the case of Hale v. Allinson (C. C.) 102 Fed. 790, cited by appellants, the liability of each stockholder had been previously adjudicated to be the full amount provided by statute, and hence no question in which the defendants had a...