Luikhart v. Spurck, 1092.

• Decision Date: 26 July 1932
• Docket Number: No. 1092.,1092.
• Citation: 1 F. Supp. 53
• Parties: LUIKHART v. SPURCK et al.
• Court: U.S. District Court — Southern District of Illinois

1 F. Supp. 53

LUIKHART v. SPURCK et al.

No. 1092.

District Court, S. D. Illinois, N. D.

July 26, 1932.

Covey, Covey & Covey, of Peoria, Ill., for plaintiff.

Bartley & Younge, of Peoria, Ill., for defendants.

BRIGGLE, District Judge.

This is a bill in equity brought by E. H. Luikhart, as general receiver for the State Bank of Nelson, a banking corporation, incorporated under the laws of the state of Nebraska, against certain stockholders, citizens of Illinois, to recover an alleged stockholder's double liability on their stock, as imposed by the Constitution and statutes of Nebraska. Two of the defendants, Anna L. Spurck and Emma C. Halladay, have filed a motion to dismiss the bill, as amended. The question for determination arises on this motion.

The material facts of the case, alleged in the bill and admitted by the defendants' motion, are as follows:

(1) On and before the 27th day of April 1927, the State Bank of Nelson (hereinafter referred to as "the Bank") was a banking corporation, organized under the laws of Nebraska.

(2) On April 27, 1927, upon petition of the Attorney General of the state of Nebraska, in the district court of Nuckolls county, Neb., the bank was adjudged insolvent.

(3) On June 15, 1931, the plaintiff was appointed general receiver of the bank by the district court of Nuckolls county, and, by that decree, vested with full power to enforce stockholders' liabilities.

(4) On April 27, 1927, when the bank was adjudged insolvent, the defendants were stockholders of the bank.

(5) On January 21, 1930, the assets of the bank were sold, but the amount realized was insufficient to meet all the creditors' claims, the deficiency being $25,598.18, which is now sought to be recovered from the stockholders.

The bill also sets forth the pertinent parts of the Nebraska Constitution and statutes, to which reference will later be made.

Although the motion to dismiss sets forth several grounds, defendants by their argument limited themselves to one, and this is the only one with which this opinion will be concerned. This challenges the present plaintiff's right to sue, and raises substantially the question of whether the general receiver of a Nebraska bank, appointed in a state court in Nebraska, may enforce the stockholder's double liability, for the use and benefit of the bank's creditors, against stockholders resident in Illinois. This, it will be seen, is divisible into two distinct propositions: (1) May the general receiver, even in Nebraska, maintain such a suit? and (2) May he do so in a foreign jurisdiction?

The defendants argue that the liability can be enforced even in Nebraska only by a bill brought by one or more creditors for the benefit of all the creditors, or by a receiver appointed specifically for this purpose, on petition of the creditors, and that the general receiver, as such, has no right to enforce this liability. The defendants further argue that, even assuming the general receiver could have sued Nebraska stockholders, nevertheless he has no extraterritorial powers, and cannot sue outside of the jurisdiction in which he was appointed.

The plaintiff contends, on the other hand, that he does have the right to sue in Nebraska, because prior to 1930, both by statute and judicial construction upon the part of the Nebraska Supreme Court, he had been given that right. Furthermore, that in 1930, by amendment to the Constitution of that state, general receivers were expressly given the right to bring this sort of suit, which (assuming it to be a change) is a mere procedural change, and not a substantive change, and hence is applicable in this case, and does not contravene the constitutional provision against the impairment of contract. The plaintiff further asserts that he has the right to bring this suit in Illinois in the United States court because he is not a mere chancery receiver, with no title to the subject-matter of the suit, but is a statutory or constitutional receiver, appointed under the specific provisions of the Nebraska laws, and is vested with such title as does permit his suing in a foreign jurisdiction.

It is conceded by both parties that the law of Nebraska is controlling in the determination of the questions here involved. See Good v. Derr (1931 C. C. A. 7th), 46 F.(2d) 411. The Constitution of that state provided, prior to the amendment of 1930, as follows: "Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors over and above the amount of stock by him held to an amount equal to his respective stock or shares so held, for all its liabilities accruing or existing while he remains such stockholder, and all banking corporations shall publish quarterly statements under oath of their assets and liabilities." Constitution of the state of Nebraska, article 12, § 7.

The amendment to this section in 1930 provides, immediately after the above-quoted portion: "The stockholders shall become individually responsible for the liability hereby imposed, immediately after any such banking corporation, or banking institution shall be adjudged insolvent, and the receiver of said corporation or institution shall have full right and lawful authority, as such receiver, forthwith to proceed by action in court to collect such liabilities. * * *" Constitution of the state of Nebraska, article 12, § 7, as amended (see Session Laws 1931, c. 165).

The statutory provision as to stockholder's liability is: "Every stockholder in a banking corporation shall be individually liable to its creditors, over and above the amount of stock by him held, to an amount equal to his respective stock or shares so held, for all its liabilities accruing while he remains such stockholder." Compiled Statutes of Nebraska 1922, § 8015.

The statutes of Nebraska relating to receivers provide that:

(1) Upon certain enumerated conditions, when the department of trade and commerce shall have reason to believe that a bank is in an unsound condition, the department may immediately take possession of and conduct the affairs of the bank pending an investigation. Session Laws 1929, p. 164, c. 38, § 16.

(2) "Upon determination of insolvency of any bank by the Secretary of the Department of Trade and Commerce, and failure of the owners thereof to restore solvency within the time and in the manner provided by law, or upon violation of the laws of the state by the bank, the Secretary shall report the facts to the Attorney General, who shall apply to the district court of the county in which the bank is located * * * for a decree determining such insolvency or violation of law, and the appointment of a receiver. * * * If upon such hearing the court, upon evidence presented, finds the bank insolvent or that it has so failed to comply with the laws of the state as to authorize the closing thereof by the Department of Trade and Commerce, decree shall be entered and the bank ordered liquidated." Session Laws 1929, p. 162, c. 38, § 10.

(3) "The Secretary of the Department of Trade and Commerce shall be the sole and only receiver of failed or insolvent banks, and shall serve as such without compensation other than his compensation as Secretary of said Department." Session Laws 1929, p. 163, c. 38, § 11.

(4) "Every receiver immediately upon taking possession shall proceed to collect all debts, assets and claims belonging to such bank, and upon order of the district court, or judge thereof, may sell or compound all bad or doubtful debts, and on like order may sell all the real and personal property of such bank upon such terms as the court or judge thereof may direct; and may, if necessary, enforce the liabilities of stockholders, officers or directors." Compiled Statutes 1922, § 8038.

As heretofore indicated, the instant case involves two general questions: (1) Does the general receiver of a Nebraska bank have any right at all to enforce the stockholder's double liability, even if the suit is brought in Nebraska; and (2) assuming such a right to exist in Nebraska, may the receiver enforce the liability in a foreign jurisdiction? The first question is again divisible into two parts: (a) The status of the law of Nebraska prior to the constitutional amendment of 1930 to article 12, § 7; and (b) the present status of the law, subsequent to that amendment.

First, then: Did the general receiver, as the law of Nebraska existed prior to 1930, have the right to recover this stockholder's liability, even in Nebraska?

By what appears to be the majority rule in other jurisdictions, outside of Nebraska, the general receiver of a corporation cannot enforce the statutory or constitutional double liability imposed upon the stockholders of a corporation for corporate debts, since such liability is not regarded as a corporate asset, but as a right solely in favor of the corporation's creditors. 23 Ruling Case Law, p. 119; Ballantine, Private Corporations, § 223; Thompson on Corporations, vol. 7, § 5178.

Cook, on Corporations, vol. 1, p. 691, states: "The Statutory liability of the stockholder is created exclusively for the benefit of corporate creditors. It is not to be numbered among the assets of the corporation, and the corporation has no right to or interest in it. * * * Accordingly a receiver of an insolvent corporation has no power to enforce such a liability as this" — citing cases, but citing Farmers' Loan & Trust Co. v. Funk (1896) 49 Neb. 353, 68 N. W. 520, to be later referred to, to the contrary.

Clark and Marshall, Private Corporations, vol. 3, pp. 2567-2569, contains this statement: "In the absence of provision to the contrary, the individual liability for corporate debts imposed upon the stockholders of a corporation by a charter, statutory, or constitutional provision is solely for the benefit of and directly to creditors, and they only can enforce the same. * * * Of course, special statutory provisions may change this rule, * * * and it may be...