Miners' & Merchants' Bank v. Snyder

• Decision Date: 30 November 1904
• Citation: 59 A. 707,100 Md. 57
• Parties: MINERS' & MERCHANTS' BANK OF LONACONING v. SNYDER.
• Court: Maryland Court of Appeals

59 A. 707

100 Md. 57

MINERS' & MERCHANTS' BANK OF LONACONING v. SNYDER.

Court of Appeals of Maryland

November 30, 1904

Appeal from Court of Common Pleas.

Action by the Miners' & Merchants' Bank of Lonaconing against Walter Snyder. Judgment for defendant. Plaintiff appeals. Affirmed.

Argued before McSHERRY, C.J., and FOWLER, BOYD, and SCHMUCKER, JJ.

W Calvin Chestnut and Vernon Cook, for appellant.

William S. Bryan, for appellee.

SCHMUCKER J.

On September 5, 1903, the appellant, as a creditor of the City Trust & Banking Company, sued the appellee at law to enforce his statutory liability as a stockholder of that company for its debts. The defendant pleaded the general issue and a number of special pleas, to which the plaintiff demurred. At the hearing of the demurrer the court, looking to the first error in the pleadings, held that since the passage of chapter 337, p. 597, of the Acts of 1904, the case disclosed by the declaration could no longer be maintained, and sustained the demurrer as to that pleading. A judgment of dismissal was thereupon entered in the case, and from that the appeal was taken.

The defenses set up by the special pleas were not passed upon by the court below, nor is it necessary for us, in view of the conclusion which we have reached, to notice them here. The act of 1904 took away the right theretofore existing in every creditor of a trust company to bring a separate action at law against any of its stockholders to enforce his statutory liability for its debts, and substituted for such action the exclusive remedy of a bill in equity on behalf of all the creditors against all of the stockholders residing in this state, with the privilege to nonresident stockholders to come into the case, and by so doing secure protection from suits against them in other jurisdictions. The act, by its terms was to become operative as of January 1, 1903, and to cause the abatement of all pending actions at law instituted since that date against stockholders to enforce such statutory liability; but the plaintiffs' costs in the abated actions were to become part of the costs taxable in the equity proceeding provided for by the act, if, within 60 days after its passage, such plaintiffs came into that proceeding. This appeal brings up the issue of the validity of that portion of the act in question which relates to actions at law against stockholders instituted before its passage. The appellant contends that that portion of the act is invalid because it attempts to impair the obligation of contracts, in violation of article 1, § 10, of the federal Constitution. It is admitted that the act does not operate directly upon the liability itself of the stockholder, or attempt to change the persons to whom it is due, but it is insisted that the alteration, made in the form of remedy for its enforcement, is such as to substantially impair the value of his liability to the creditor for the corporate debts. It was held by the Supreme Court of the United States in Hawthorne v. Calef, 69 U.S. 10, 17 L.Ed. 776, that a state act attempting to repeal a clause in the charter of a bank making its stockholders liable to the extent of the par value of their stock to its creditors was void as to debts of the bank contracted before the date of its passage, because as to such debts it impaired the obligation of the contract with the creditors within the meaning of the federal Constitution. On the other hand, it was said by the same high tribunal in Tennessee v. Sneed, 96 U.S. 69, 24 L.Ed. 610: "Our own Reports and those of the states are full of cases holding that the Legislature may alter and modify the remedy to enforce a contract without impairing its obligation. *** If a particular form of proceeding is prohibited, and another is left or provided which affords an effective and reasonable mode of enforcing the right, the contract is not impaired." Again, in Fourth Nat. Bank v. Francklyn, 120 U.S. 747, 7 Sup.Ct. 757, 30 L.Ed. 825, the same court, in construing a statute of Rhode Island modifying the remedy to be employed by the creditors of a corporation in enforcing an existing statutory liability of its stockholders for its debts, said: "As it [the statute] does not undertake to annul the liability of the stockholders for the debts of the corporation, but only modifies the form of remedy and the rules of evidence, it is not doubted that it is a constitutional exercise of the power of the Legislature, even as applied to debts contracted by the corporation before its enactment. Hawthorne v. Calef, 69 U.S. 10, 17 L.Ed. 776; Penniman's Case, 103 U.S. 714, 26 L.Ed. 602; Ogden v. Saunders, 25 U.S. 213, 262, 349, 6 L.Ed. 606; Webb v. Den, 58 U.S. 576, 15 L.Ed. 35; Curtis v. Whitney, 80 U.S. 68. 20 L.Ed. 513; Tennessee v. Sneed, 96 U.S. 69, 24 L.Ed.610." The statute construed in Fourth Nat. Bank v. Francklyn, supra, was entitled "An act defining and limiting the mode of enforcing the liability of stockholders for the debts of corporations," and it provided that no person should be imprisoned, or continued in prison, or his property attached, upon a judgment against a corporation of which he was a stockholder. It further required an action of debt to be brought against the stockholder on the judgment against the corporation, and allowed him to make the same defenses to that action that the corporation could have made to the suit against it in which the judgment was obtained. Prior to the passage of that act the Rhode Island law permitted the person and property of the stockholder who was liable for the corporate debt to be taken on execution or attachment issued against the corporation for the debt. The power of a state to modify or change the method of procedure in its own courts for the enforcement of an existing contractual obligation, so long as it does not thereby impair the substantial rights secured by the contract, has frequently been upheld by this court. State, Use of Isaac, v. Jones, 21 Md. 432; Madigan v. Workingmen's Building Ass'n, 73 Md. 317, 20 A. 1069; Wilson v. Simon, 91 Md. 1, 45 A. 1022, 80 Am.St.Rep. 427. In Madigan's Case, it was held that such an act would embrace within its operation actions pending at the date of its passage.

We will now consider, in the light of the principles thus announced, whether Act 1904, p. 597, c. 337, so affects the appellant's contractual rights as to fall within the constitutional inhibition. Chapter 109, p. 153, of the Acts of 1892 (now section 85l of article 23 of the Code of Public General Laws), provides, in reference to trust companies, that "each stockholder shall be liable to the depositors and creditors of any such corporation for double the amount of stock at the par value held by such stockholder in such corporation," but the act is silent as to the form of remedy to be used or the tribunal to be resorted to for the enforcement of the liability. Section 14, p. 632, c. 344, of the act of 1896, by which the appellant was incorporated, provides that "the said corporation shall be subject at all times to the provisions of the act of 1892, chapter 109 and of chapter 279." Assuming, but not now deciding, because not necessary to this case, that this clause in the appellant's charter imposed upon the holders of its stock the same liability to its creditors and depositors that the general law imposed upon holders of the stock of trust companies organized under its provisions, let us see in what attitude the appellant stood toward the stockholders of the City Trust & Banking Company at the date of the passage of the act of 1904. The question here reserved of the true effect of section 14, p. 632, of chapter 344 of the act of 1896 has been argued and will be decided in the case of Murphy v. Wheatley (Md.) 59 A. 704, hereinafter referred to. Act 1892, p. 153, c. 109, which was then in force, created the liability of the stockholders of a trust company for its debts. That particular act has not heretofore been the subject of consideration by us, but we have several times had occasion to construe provisions of the Code and special charters imposing a liability of like nature upon stockholders in manufacturing and other corporations. In those cases we determined that such liability does not constitute a corporate asset enforceable by a receiver of the corporation, but it is a debt due directly by the stockholder to those persons who became creditors of the corporation while he held its stock. We further held that any such creditor could enforce the liability by a separate action against any stockholder from whom it was due, and recover the debt from him to the extent of double the par value of the stock held by him at the time it was contracted. It was thus made possible for the creditor, by the exercise of superior skill and diligence, to secure payment in full of his debt from the stockholder sued by him to the exclusion of the other creditors. Matthews v. Albert, 24 Md. 535; Norris v. Wrenschall, 34 Md. 501; Hammond v. Straus, 53 Md. 10; Attrill v. Huntington, 70 Md. 197, 16 A. 651, 2 L.R.A. 779, 14 Am.St.Rep. 344; Colton v. Mayer, 90 Md. 717, 45 A. 874, 47 L.R.A. 617, 78 Am.St.Rep. 456, and cases there cited.

It thus appears that prior to the...