Mellott v. Love

• Decision Date: 21 January 1929
• Docket Number: 27075
• Citation: 152 Miss. 860,119 So. 913
• Court: Mississippi Supreme Court
• Parties: MELLOTT v. LOVE, SUPERINTENDENT OF BANKS. [*]

119 So. 913

152 Miss. 860

MELLOTT v. LOVE, SUPERINTENDENT OF BANKS. ^[*]

No. 27075

Supreme Court of Mississippi

January 21, 1929

Division B

1. INFANTS. Except for necessaries and in some special cases of fraud, contracts of infants impose no liability which is not voidable at their election.

Contracts of infants impose no liability on them which is not voidable at their election, except those for necessaries, and in some special cases of actual and active fraud.

2 INFANTS. Infant's right to avoid contract is not affected because rights of third parties have supervened.

Right to avoid a contract by infant because of his infancy is not affected by the fact that the rights of third parties have supervened.

3 INFANTS. Disaffirmance of contract made by infant nullifies it and renders it void ab initio.

Disaffirmance of a contract made by an infant nullifies it and renders it void ab initio, and all parties are thereby restored to the status in which they would have been if the contract had never been made.

4. BANKS AND BANKING. Minor stockholder disaffirming purchase after bank's insolvency was not subject to statutory liability (Hemingway's Code 1917, section 3619).

Where infant owning share of stock in bank disaffirmed his purchase thereof after bank's insolvency, he was not subject to statutory liability, under Hemingway's Code 1917, section 3619, by reason of the ostensible stock ownership, in absence of fraud or conduct equivalent thereto.

5. BANKS AND BANKING. Law imposing liability on stockholders of insolvent bank must be strictly construed (Hemingway's Code 1917, section 3619).

Hemingway's Code 1917, section 3619, imposing liability on stockholders of insolvent bank, must be strictly construed in that it creates an additional liability on part of stockholders in derogation of common law.

HON. HARVEY McGEHEEE, Chancellor.

APPEAL from chancery court of Bolivar county, Second district, HON. HARVEY MCGEHEE, Chancellor.

Action by A. L. Mellott, by next friend, against J. S. Love, superintendent of banks. Decree of dismissal, and plaintiff appeals. Reversed and rendered.

Decree reversed.

B. Alexander, Jr., for appellant.

Defendants seem to base their defense mainly upon the proposition that the double liability is purely statutory, and not contractual or quasi-contractual. But see Saussy v. Leggett, 75 Fla. 412, 78 So. 334; McNeill v. Pace, 69 Fla. 349, 68 So. 177; Gibbs v. Davis, 27 Fla. 531, 8 So. 633; Howarth v. Lambard, 56 N.E. 888; Wilson v. Book, 13 Wash. 676, 43 P. 939; Hencke v. Twoney, 58 Minn. 550, 60 N.W. 667; Weitzel v. Brown (Mass.), 112 N.E. 945. The liability is contractual and not statutory. Carroll v. Green, 92 U.S. 509, 23 L.Ed. 738; Howarth v. Angle (N. Y.), 56 N.E. 489; Converse v. Ayer (Mass.), 84 N.E. 98; Anglo-American Land Co. v. Dyer (Mass.), 64 N.E. 416; Pulsifer v. Greene (Me.), 52 A. 932; Olson v. Cook (Minn.), 59 N.W. 635; First Nat'l Bank v. Winona Blow Works (Minn.), 59 N.W. 997; Whitman v. Oxford Nat'l Bank, 176 U.S. 559, 20 S.Ct. 477, 44 L.Ed. 587; Bernheimer v. Converse, 206 U.S. 516, 27 S.Ct. 755, 51 L.Ed. 1163. In a very able and interesting opinion, the United States circuit court of appeals (9th Dist.) held the double liability of a shareholder in a National Bank to be contractual in Aldriche v. McLaine, 106 F. 791.

I presume that it is true that the legislature could, if it chose, legislate that a minor's contract for purchase of bank stock is valid and enforceable, and that the minor is good for his double liability. But to do so since that would be in derogation of the common law, it would have to do so in clear and explicit language and not be implication. To maintain that the legislature did so legislate in this case from the mere fact that the rights of minors are not specifically reserved in the statute seems untenable. If that were true, then a minor, and every other person whatsoever would be liable for almost every species of contract or liability set out in the code. For instance no specific reservation of Minor's rights is made in the Negotiable Instruments Act. If the minor's stock liability is statutory, from the mere fact that his rights are not specifically reserved, then he would be liable for every liability depending in part on some similar statute. The minor's note, given for a Cadillac Automobile, would be enforceable against him under the Negotiable Instruments Law, for instance, if this were the law. The common-law rules cannot be changed by implication in a statute, but the statute must be express and specific in its language to alter the common law. On the general proposition of a minor's liability for the double assessment as a shareholder, see 7 C. J., p. 770, par. 611.

F. W. Bradshaw and Flowers, Brown & Hester, for appellee.

The question for decision here is whether or not a minor owning stock in a failed state bank is liable for the double stock liability provided by sec. 59 of the Banking Act of 1914. There are three well-recognized guides to be followed in the construction of a statute:

First: The cause or reason for its enactment. It is plainly evident that the reason for the enactment of this statute was to place our banks upon a sound basis and to afford our people protection for their money and their credit. Banks are for the use and benefit of the public and unless the public is afforded legislative protection, the practice of dealing with banks becomes a public danger rather than a public good.

Second: The remedy that the statute affords. It was intended by the legislature that those who undertake to establish and draw a remunerative interest from banks shall be liable to those who place their money with them. It is an equitable protection. Pate v. Bank of Newton, 116, Miss. 666, 77 So. 601.

Third: The intention of the legislature as embodied in the statute. It is evident from a study of the statute that it was the intention of the legislature that everyone owning bank stock should be personally liable under the statute with the exception of "executors, administrators, guardians, or trustees" and the addition of "but the assets and funds in their hands, constituting the trust shall be held to the same extent that the testator, intestate, ward or person interested in such trust fund, would be if living or competent to act," was not added to exempt insane persons and minors from liability but to qualify the exemption of those fiduciary classes mentioned therein, making them liable in their fiduciary capacity and not personally. The appellant contends that this clause implies exemption to minors and insane persons, when it is clear that such is not the intention. It merely explains in what capacity these fiduciaries are liable. Keyser v. Hitz, 133 U.S. 151, 33 L.Ed. 538.

Appellant states that by implication the statute recognizes that insane persons and minors are two classes that do not have capacity to act or hold stock in their own name. In other words he infers that these two classes are exempt under the statute by implication. Then he states that the legislature could hold a minor liable if it chose but not by implication. It seems to us that the more reasonable view to be taken of a statute of this kind which is intended to be a great "catch-all" of liability on a matter of so great importance to public credit is that the exemptions would have to be explicit, as they are in our statute (executors, administrators, guardians or trustees and persons holding stock as collateral security) and that all those who are not so exempt must be held to be liable.

The appellant further contends that the liability depends upon a prior lawful and valid contract of purchase of the stock. We do not believe that this is the correct rule. The liability is a statutory liability that attaches to the ownership of the stock no matter how it is acquired nor by whom. Love v. Lewis, 141 Miss. 120, 106 So. 348; Crippen, Lawrence & Co. v. Laighton, 46 L. R. A. 467; Rice v. Merrimac Hosiery Co., 56 N.E. 114; Terry v. Little, 25 L.Ed. 864; New Haven Horse Nail Co. v. Linden Spring Co., 142 Mass. 349, 7 N.E. 773; Brown v. Eastern Slate Co., 134 Mass. 590; Libby v. Tobey, 82 Me. 397, 19 A. 904; Wing v. Slater, 19 R. I. 597, 33 L. R. A. 566; 35 A. 302; Sayles v. Bates, 15 R. I. 342, 5 A. 497. See Bryan et al. v. Bullock, (Fla.), 93 So. 182; Robinette v. Sterling, 72 Miss. 652, 18 So. 421; Vick v. La Rochelle, 57 Miss. 602. We think that the correct view is that the obligation arises by reason of the statute and not by virtue of a contract and that therefore a minor stockholder is liable in spite of the disability of minority. We think that the Kent v. Love, 141 Miss. 523, 106 So. 772, clearly puts this court on record with those holding this to be true.

OPINION

GRIFFITH, J.

Some time during the year 1918 the appellant, a minor, being then about 7 years of age, purchased a share of stock of the par value of one hundred dollars in the Farmers' Bank of Boyle. In 1921 the bank became insolvent, and the appellee took charge of it for the purpose of its liquidation, as required by the banking laws. At the time the bank was closed the appellant had on deposit in said bank the sum of six hundred forty-nine dollars and fifty-one cents, and when the appellee in due course issued the state depositor's guaranty certificate there was deducted the sum of one hundred dollars, the amount of the stockholder's statutory liability which the appellee claimed should be debited, under section 3619, Hemingway's 1917 Code, by reason of the ostensible stock ownership of the appellant at the time in that amount, so that the certificate issued to appellant was for five hundred forty-nine dollars and fifty-one cents instead of six hundred forty-nine dollars and...