Parker v. Carolina Sa

• Court: United States State Supreme Court of South Carolina
• Writing for the Court: JONES
• Citation: 31 S.E. 673,53 S.C. 583
• Decision Date: 13 December 1898
• Parties: PARKER et al. v. CAROLINA SAV. BANK et al.

31 S.E. 673
53 S.C. 583

PARKER et al.
v.
CAROLINA SAV. BANK et al.

Supreme Court of South Carolina.

Dec. 13, 1898.

Corporations — Existence — Judicial Notice — Banks — Stockholders—Personal Liability— Equity—Execution — Limitations — Set-Off— Assignments— Equitable Mortgages — Ultra Vires.

1. In an action against a domestic corporation created by public act, its corporate existence need not be alleged, since the court will take judicial notice of its existence.

2. Under Act Dec. 24, 1885 (19 St. at Large, p. 212) § 4, making stockholders of a bank liable to the amount of 5 per cent, of their stock in addition thereto for its debts, every creditor has an interest in the liability of every stockholder; and hence equity has jurisdiction of a suit for an accounting of the assets, and to enforce the liability, in the absence of a statute pointing out a different course, though a legal remedy also exists, since a resort to the legal remedy would entail a multiplicity of suits.

3. Under Act Dec. 24, 1885 (19 St. at Large, p. 212) § 4, making stockholders of a bank liable to the amount of 5 per cent. of their stock in addition thereto for its debts, a return of execution nulla bona is not a condition precedent to a suit to enforce the liability, where the bank is insolvent, since execution would be a useless proceeding.

4. And such return is not necessary in any event, since the statutory liability is primary.

5. Creditors of an insolvent bank are not barred from enforcing the stockholders' liability under the two-years limitation of the general corporation act (19 St. at Large, p. 540), since section 22 (Rev. St. § 1500) exempts banks from its provisions, and the banking act (19 St. at Large, p. 212) prescribes no limitation as to actions against stockholders, and Code, § 130, fixes a limitation of six years as to such actions, to enforce a liability created by law.

0. Const. 1868, art. 12, § 6, making stockholders of a bank liable to the amount of their stock for its debts, does not limit the liability to the loss of the stock, but makes it an addition thereto.

7. Const. 1868, art. 12, § 6, provides that the general assembly shall grant no banking charter, except on condition that the stockholders shall be liable to the amount of their stock for the bank's debts; section 4 provides that dues from corporations shall be secured by such individual liability and other means as may be prescribed by law; and section 5 provides that all laws passed pursuant to it shall provide for fixing the personal liability of stockholders under proper limitations, etc. Held, that section 6 does not prohibit the legislature from imposing a greater liability than the amount of stock, since the provision is not self-executing.

8. Under Act Dec. 24, 1885 (19 St. at Large, p. 212) § 4, making stockholders of a bank liable to the amount of 5 per cent, of their stock in addition thereto for the bank's debts, stockholders cannot set off claims due them by the bank against their statutory liability, since their liability is to the creditors.

9. And for the further reason that such setoff would result in a preference.

10. Under Rev. St. § 1529 (20 St. at Large, p. 47), providing that no transfers of stock shall be valid, except between the parties, until regularly entered on the books, a stockholder does not escape his statutory liability by transferring his stock without so entering it.

11. A general assignment by a bank, executed by proper officers by resolution of the directors, is not governed by Rev. St. § 1524 (19 St. at Large, p. 543), providing for a corporation's securing debts by mortgage by vote of the stockholders.

12. Under Rev. St. § 1524 (19 St. at Large, p. 543), authorizing a corporation to secure its debts by mortgage by vote of the majority of the stock, the deposit of title deeds by the president without authority does not create an equitable mortgage.

13. A mere deposit of title deeds as security for a debt does not create an equitable mortgage on the land.

Appeal from common pleas circuit court of Abbeville county; O. W. Buchanan, Judge. Suit by William H. Parker and others against the Carolina Savings Bank and others. There was a decree for plaintiffs, and defendants appeal. Modified.

Graydon & Graydon, Buist & Buist, Frank B. Gary, Tribble & Prince, De Bruhl & Lyon, Simons, Seigling & Cappelmann, and L. W. Perrin, for appellants.

W. H. Parker, Quattlebaum & Cochran, and J. N. Brown, for respondents.

JONES, J. This is an action by certain creditors, suing on behalf of themselves and all other creditors, against the assignee of the Bank of Lowndesville and its stockholders, for an accounting of the assets of the bank, and to enforce the statutory liability of stockholders for the debts of the bank. From the decree of the circuit court the defendant stockholders appeal, on numerous exceptions, which mainly raise questions which will be considered and disposed of as follows:

1. The circuit court properly overruled the oral demurrer of the Carolina Savings Bank, that the complaint did not state facts sufficient to constitute a cause of action, in not setting out in the body of the complaint that said bank is a corporation doing business under the laws of this state. In the title of the case the defendant is styled, "Carolina Savings Bank, a Corporation under and by Virtue of the Laws of the State of South Carolina"; and in the 20th paragraph of the complaint it is alleged that "the defendants above named * * * were, as appears from the books of said bank, stockholders in said Bank of Lowndesville, each in the amount

[31 S.E. 674]

set out as follows, to wit: Carolina Savings Bank, 50 shares, " etc. The circuit court held that this was a sufficient allegation of corporate existence. Whether this would be so In a case wherein it is essential to allege corporate existence, may be doubtful; but in this case, clearly, the ruling is correct. There are numerous authorities or cases to the effect that in an action by or against a corporation, in which it was designated by a corporate name, there was no necessity to allege the creation or existence of the corporation. See note to Miller V. Mining Co. (Idaho) 35 Am. St. Rep. 291, 292 (s. c. 31 Pac. 803). In this case it appears that the "Act to amend and renew the charter of Carolina Savings Bank, " approved December 20, 1893, is made a public act. The validity of the act not being in question, the court would take judicial notice of the fact of defendant's corporate existence. Such fact, not being issuable, need not be alleged. The rule which requires that, in an action by or against a corporation, its corporate existence be shown, does not apply to a domestic municipal corporation or a domestic private corporation created by a public act. Bliss, Code Pl. § 246.

2. The court of equity has jurisdiction to entertain this suit, and the pleadings show a case for equitable relief. The Bank of Lowndesville was incorporated February 16, 1891, under the provisions of the act of December 23, 1886 (19 St. at Large, p. 540), and thereby became subject to the act to provide for and regulate the incorporation of banks in this state, approved December 24, 1885 (19 St. at Large, p. 212). Section 4 of this act provides, "The stockholders of said bank shall be liable to the amount of their respective share or shares and five per cent. thereof in addition thereto for all its debts and liabilities upon note, bill or otherwise." Under this statute all the stockholders are liable to the extent named for all the debts of the corporation. Every creditor has an interest in the liability of every stockholder. Thus, a common fund is created, in which all the creditors are interested. Unless there is something in the statute authorizing a different course, the natural and appropriate remedy is in equity, to realize and distribute this common fund. The Bank of Lowndesville is alleged and shown to be insolvent, and its creditors and stockholders are numerous. Even of it be conceded that a remedy at law exists...