McTamany v. Day

• Decision Date: 11 December 1912
• Citation: 23 Idaho 95,128 P. 563
• Parties: ED. MCTAMANY, Appellant, v. H. L. DAY et al., Respondents
• Court: Idaho Supreme Court

128 P. 563

23 Idaho 95

ED. MCTAMANY, Appellant, v. H. L. DAY et al., Respondents

Supreme Court of Idaho

December 11, 1912

BANKS AND BANKING-STATUTORY CONSTRUCTION-STOCKHOLDERS AND DIRECTORS' LIABILITY-ENFORCEMENT OF-PARTY PLAINTIFF-RECEIVER.

(Syllabus by the court.)

1. Under the provisions of sec. 2745, Rev. Codes, each stockholder of a corporation is individually and personally liable for its debts and liabilities to the full amount unpaid upon the par or face value of the stock or shares owned by him, and any creditor of the corporation may institute an action against any of the stockholders, jointly or severally, and in such action the court must determine the amount unpaid upon the stock held or owned by each defendant and a several judgment must be entered against him for a sum not exceeding such amount.

2. That section does not apply to banking corporations, as the organization, internal management and supervision of banks are provided for by chap. 13, art. 1, of the Rev. Codes beginning at sec. 2968.

3. Sec 2979, Rev. Codes, applies to the liabilities of stockholders of every incorporated bank, and provides that they shall be liable to the creditors of the bank to the amount of their stock at the par value thereof, in addition to the stock held by them; and also provides that such liability may be enforced by an action at law or a suit in equity by any such bank in the process of liquidation, or by any receiver or other person succeeding to the legal rights of such bank.

4. In case of recovery on all or either of the grounds of recovery alleged in the complaint, the amount recovered would be an asset of the bank, and in this case the action should be brought by the receiver.

5. Held, that the provisions of sec. 2732, Rev. Codes, have no application to banking corporations.

6. If the board of directors has declared and paid illegal dividends, the amount paid, if recovered, would be a part of the assets of the bank.

7. If the receiver has failed to do his duty, proper application should be made to the court to compel him to do so or to remove him, as the receiver ought diligently to proceed and recover all of the assets of an insolvent bank and distribute them as provided by law.

APPEAL from the District Court of the First Judicial District for Shoshone County. Hon. W. W. Woods, Judge.

Action to recover from the stockholders and directors of a state bank the balance of a deposit made by the plaintiff in said bank. Demurrer to the complaint sustained and judgment of dismissal entered. Affirmed.

Judgment affirmed. Costs awarded to the respondent.

A. G. Kerns, for Appellant.

Under the law of this state the fraud, misconduct and neglect of the defendants as shown by the allegations of the complaint brings them within the exceptions of the provisions of sec. 2745, Rev. Codes, and deprives them of the protection of the provisions of the constitution and law; and that each of the respondents by reason of his actions and participation in the actual frauds, misconduct and neglect in the management of the bank and participation in the distribution of the $ 132,000 unlawful dividends, became and is personally liable for the amount due the appellant. (Zang v. Wyant, 25 Colo. 551, 56 P. 565, 71 Am. St. 145; 1 Cook on Corp., sec. 200; Terry v. Tubman, 92 U.S. 158, 23 L.Ed. 539; Hodges v. Silver Hill Min. Co., 9 Ore. 200; Moses v. Ocoll Bank, 1 Lea (69 Tenn. ), 398; Stark v. Burke, 9 La. Ann. 341; Baines v. Babcock, 95 Cal. 581, 27 P. 674, 30 P. 776, 29 Am. St. 158; Williams v. Commercial Nat. Bank, 49 Ore. 492, 90 P. 1012, 91 P. 443, 11 L. R. A., N. S., 857; Tate v. Bates, 118 N.C. 287, 24 S.E. 482, 54 Am. St. 719; Solomon v. Bates, 118 N.C. 311, 24 S.E. 478, 54 Am. St. 725; Thomas v. Taylor, 224 U.S. 73, 32 S.Ct. 403, 56 L.Ed. 673.)

C. W. Beale, John H. Wourms and James E. Babb, for Respondents E. R. Day and H. L. Day.

If any suit or action would be permitted against these respondents, it must be upon the part of the receiver. (Bailey v. Mosher, 63 F. 488, 11 C. C. A. 304; Terry v. Tubman, 92 U.S. 158, 23 L.Ed. 539; Pollard v. Bailey, 87 U.S. (20 Wall.) 520, 22 L.Ed. 376; Farmers' & Mechanics' Nat. Bank v. Dearing, 91 U.S. 29, 23 L.Ed. 196; Wilson v. Book, 13 Wash. 676, 43 P. 939.)

Appellant must show in his amended complaint what statutory provisions have been violated by the respondents, and that they knowingly violated them, since the rule of liability fixed or prescribed by these provisions of our banking laws is exclusive, and respondents cannot be held to any other test or rule of liability. (Yates v. Jones Nat. Bank, 206 U.S. 158, 27 S.Ct. 638, 51 L.Ed. 1002.)

A creditor cannot maintain the action. (Anderson v. Speers, 21 Hun, (N. Y.), 568, National Bank v. Dillingham, 147 N.Y. 603, 42 N.E. 338, 49 Am. St. 692; American Grocery Co. v. Flint, 5 A.D. 263, 39 N.Y.S. 153; Moulton v. Connell-Hall-McLester Co., 93 Tenn. 377, 27 S.W. 672; Tradesman Pub. Co. v. Knoxville Car Wheel Co., 95 Tenn. 634, 32 S.W. 1097, 49 Am. St. 943, 31 L. R. A. 593; Bauer v. Parker, 82 A.D. 289, 81 N.Y.S. 995.)

An action against directors should be in equity and not by a single creditor. (Winchester v. Mabury, 122 Cal. 522, 55 P. 393.)

Where corporation is insolvent, a single creditor cannot maintain action, but it must be brought by receiver in equity for all creditors. (John A. Roebling's Sons Co. v. Mode, 1 Penne. (Del.) 515, 43 A. 481; Siegman v. Maloney, 63 N.J. Eq. 422, 51 A. 1003; Crandall v. Lincoln, 52 Conn. 73, 52 Am. Rep. 560; Dykeman v. Keeney, 10 A.D. 610, 42 N.Y.S. 488, 160 N.Y. 677, 54 N.E. 1090.)

As to all of the grounds of recovery alleged, it is an asset of the bank, and any action therefor should be brought by the receiver. Hart v. Hanson, 14 N.D. 570, 105 N.W. 942, 3 L. R. A., N. S., 438, where one of the grounds was deposits received during insolvency. (Chester v. Hilliard, 36 N.J. Eq. 613; Zinn v. Mendel, 9 W.Va. 580; Emerson v. Gaither, 103 Md. 564, 64 A. 26, 7 Ann. Cas. 1114, 8 L. R. A., N. S., 738; Bosworth, Receiver, v. Allen, 168 N.Y. 157, 61 N.E. 163, 85 Am. St. 667, 55 L. R. A. 751; Fisher v. Parr, 92 Md. 245, 48 A. 621; Yates v. Jones Nat. Bank, 74 Neb. 734, 105 N.W. 287; Tiffany on Banks and Banking, 304.)

J. E. Gyde, for Respondent S. A. Easton.

An action at law or in equity should be brought against the delinquent officer or stockholder by the receiver and not by a creditor. (5 Thomp. Corp., 2d ed., sec. 5171; Hart v. Hanson, 14 N.D. 570, 105 N.W. 942, 3 L. R. A., N. S., 438; Killen v. Barnes, 106 Wis. 546, 82 N.W. 536; Utley v. Hill, 155 Mo. 232, 55 S.W. 1091, 49 L. R. A. 323; Wilson v. Book, 13 Wash. 676, 43 P. 939; Watterson v. Masterson, 15 Wash. 511, 46 P. 1041; McLaughlin v. O'Neil, 7 Wyo. 187, 51 P. 243; Gores v. Day, 99 Wis. 276, 74 N.W. 787.)

James A. Wayne and John P. Gray, Amici Curiae, cite no authorities.

SULLIVAN, J. Stewart, C. J., and Ailshie, J., concur.

OPINION

SULLIVAN, J.

This is an appeal from a judgment of dismissal, which was rendered upon the court's sustaining demurrers to the amended complaint, the plaintiff electing to stand upon his amended complaint. The action was brought against the directors of the State Bank of Commerce, located at Wallace, in Shoshone county, to recover an indebtedness due from said bank to the appellant, McTamany, in the sum of $ 1,605, upon a balance of account for money deposited in said bank.

It is alleged in the complaint that said bank suspended business and closed its doors on the 12th day of May, 1911; that the defendants were shareholders in said bank and the number of shares belonging to each is also alleged in the complaint that the plaintiff commenced depositing money in said bank on January 24, 1910, and the last deposit was made on May 9, 1911; that at the time the appellant commenced to deposit, all of said defendants, except E. R. Day, were directors of said bank and continued as such until the failure of the bank; that on July 24, 1910, the defendant, E. R. Day, was elected a director and continued as such until the failure; that on the 12th day of May, 1911, said bank closed its doors and suspended business, and on the 13th of May following, the State Bank Commissioner of Idaho made application to the proper court, in writing, charging said bank with insolvency and mismanagement, and prayed for a receiver, whereupon a receiver was appointed and entered upon the discharge of his duties as such; that thereafter said receiver was removed by the court and one Wilson was appointed in his stead and entered upon the discharge of his duties as such receiver; that said Bank of Commerce was at the time of the commencement of this action and at all times since January 24, 1910, has been insolvent, and that each of the defendants, as stockholders and directors of said bank, "knew or by the exercise of reasonable diligence and care, could have known, that the said State Bank of Commerce was insolvent during the whole of said period; that on May 13, 1911, the plaintiff commenced an action in the proper court against the State Bank of Commerce to recover judgment for said sum of $ 1,605, with interest and costs, and that such proceedings were thereafter had in said cause that the receiver of said bank was substituted as defendant in said cause, and thereafter on July 21, 1911, judgment was rendered in said cause in favor of the plaintiff and against the receiver for the sum of $ 1,608.90, and that no part of said judgment has been paid except the sum of $ 481.50, which sum was paid by the receiver of said bank, and it is alleged on information and belief that the directors of said Bank of Commerce, during the period from April 28, 1906, to and including July 24, 1910, did unlawfully declare and pay from the funds of...