Parker v. Carolina Sav. Bank
| Decision Date | 13 December 1898 |
| Citation | 31 S.E. 673,53 S.C. 583 |
| Parties | PARKER et al. v. CAROLINA SAV. BANK et al. |
| Court | South Carolina Supreme Court |
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.
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 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 P. 803). In this case it appears that the 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, 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 if it be conceded that a remedy at law exists under this statute, still jurisdiction in equity is concurrent. To leave each creditor to single out for suit one or more stockholders at law would entail a multiplicity of suits, and result in an unequal distribution of the assets for creditors, all of which is prevented by entertaining this proceeding in equity. The case of Hall v. Klinck, 25 S.C. 352, which held that any creditor might bring his individual action at law against any stockholder, was based upon the peculiar language of the statute involved in that case, which the court construed as fixing a liability to a specified amount upon each stockholder to pay the demand of any creditor. Hence it was held that an action at law might be maintained in that case, but the court did not hold that even under that statute an action in equity might not also be sustained in a proper case. Where the statute provides a remedy in law or equity, that remedy alone should be followed; but, where the statute does not prescribe the remedy to be in law or equity, the remedy may be in either, according to the circumstances of the case, or the nature of the relief desired. In this case not only is there a fund, in which all the creditors are interested, to be collected and distributed, but it appears that some of the stockholders are also creditors; thus presenting conflicting rights and equities for adjustment. It was not necessary that the complaint should show return of nulla bona against the corporation before proceeding to enforce the statutory liabilities--First, because the statutory liability is primary; and, second, because, insolvency being alleged and shown, nulla bona would be a useless proceeding. Bird v. Calvert, 22 S.C. 292.
3. The claims of creditors, who came in under the order of the court and proved the same, are not barred under the two-years limitation of the general corporation act (19 St. at Large, p. 540). The banking act (19 St. at Large, p. 212) prescribes no limitation to actions against stockholders, and in the general corporation act, § 22 (appearing as section 1500, Rev. St.), railroad and banking corporations are expressly exempted from the provisions which include the two-years limitation. By section 130 of the Code it is provided that actions against stockholders of a banking corporation to enforce a liability created by law must be brought within six years after the creation of the liability, unless otherwise provided in the law under which such corporation is organized. It is not contended that the claims were not established within six years after the creation of the liability.
4. The defendant stockholders are liable to the creditors of the bank for a sum equal to the amount of their respective shares, and 5 per cent. in addition thereto. In other words the measure of the stockholder's liability is a sum equal to 105 per cent. of the amount of his stock. Section 6, art. 12, of the constitution of 1868, provides that "the general assembly shall grant no charter for banking purposes, nor renew any banking corporations now in existence, except upon condition that the stockholders shall be liable to the amount of their respective share or shares of stock in such banking institution for all its debts and liabilities upon note, bill or otherwise." Section 4 of the banking act, already quoted, uses the language of the constitution in providing for the liability of stockholders. It is contended that the stockholders' liability, as expressed by the words, "to the amount of their respective share or shares of stock," is limited to the mere loss of their stock. But this construction would give no force to the provision of the constitution and act pursuant thereto, since without any such provision all the corporate property represented by the stock would be liable for the debts of the corporation. Evidently, therefore, the intention was to provide for a liability beyond the mere loss or forfeiture of the stockholder's interest in the corporate property, as this interest is necessarily involved in the liability of the corporation for its debts. By the common law a stockholder is not individually or personally liable for the debts of the corporation; hence the object of such provisions was to create a personal liability of the stockholder, beyond and cumulative to the liability of the corporation itself, thus affording additional protection to the public dealing with the corporation. The extent of this personal liability is not the stock, but the amount of the stock, or the amount equal to the amount of the stock; the stock being referred to merely as a certain and convenient method of designating or measuring the sum for which each stockholder is liable. With few exceptions, this is the construction generally placed upon similar constitutional or statutory provisions. Morse, Banks, § 675; In re Empire City Bank, 18 N.Y. 199, citing Briggs v. Penniman, 8 Cow. 387, and Bank v. Ibbotson, 24 Wend. 473; Root v. Sinnock, 120 Ill. 350, 11 N.E. 339; Pettibone v. McGraw, 6 Mich. 441; Willis v. Mabon, 48 Minn. 140, 50 N.W. 1110; 23 Am. & Eng. Enc. Law, 867. We have no case in our own Reports directly decisive of the question before us, but see Bank v. Blake, 3 Rich. Eq. 225; Terry v. Calnan, 13 S.C. 225. It is also contended that the provision in section 4 of the said banking act, for the 5 per cent in addition to the amount of the stock, is unconstitutional. There would be much force in this contention, if section 6, art. 12, of the constitution of 1868, was self-executing, and stood alone as fixing the liability of the stockholder at a specified sum, in which case the legislature could neither...
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