Rogers v. Selleck
| Decision Date | 10 November 1928 |
| Docket Number | 26342 |
| Parties | J. W. ROGERS, RECEIVER, APPELLEE, v. H. H. SELLECK ET AL.: NILS LINDQUIST, APPELLANT |
| Court | Nebraska Supreme Court |
APPEAL from the district court for Morrill county: EDWARD F. CARTER JUDGE. Affirmed.
AFFIRMED.
Paul H Eaton and R. O. Canaday, for appellant.
C. M Skiles and I. D. Beynon, contra.
Heard before GOSS, C. J., ROSE, DEAN, GOOD, THOMPSON and EBERLY, JJ., and REDICK, District Judge.
This is a receiver's suit in equity for the benefit of all the creditors of an insolvent state bank against all the stockholders to recover in money and to distribute the entire par value of the stock or the double liability imposed by the state Constitution and by the contracts of subscription.
The insolvent was the Broadwater Bank, a corporation organized under the laws of Nebraska to transact a commercial banking business in Morrill county. The capital stock, paid in full, consisted of 250 shares, each of the par value of $ 100, or $ 25,000 in all. There were 15 stockholders and the individual ownership of shares varied from 1 to 141. Upon insolvency of the bank J. W. Rogers was appointed receiver to wind up its affairs. In the proceeding for that purpose it was decreed that the exact amount justly due from the bank to its creditors was $ 194,116.42; that all corporate property was converted into money and exhausted; that the proceeds were applied on the indebtedness, leaving unpaid $ 141,220.17 in liabilities incurred by the bank while defendants were stockholders. The receiver was directed by the court to bring this suit and did so, alleging in detail the foregoing facts, pleading the double liability imposed by the Constitution, naming the stockholders and indicating the share or shares of each, setting forth multiplicity of actions at law in connection with other grounds of equitable jurisdiction, averring there was no adequate remedy at law, and praying for an order on each defendant to perform his obligation, for judgment in the event of default, for distribution of the collected fund among the creditors and for general equitable relief.
Nils Lindquist, a defendant and a stockholder owning one share of the par value of $ 100, the full amount of his alleged double liability, demurred to the petition in equity herein on the grounds that he is improperly joined with other defendants; that the court is without equitable jurisdiction, and that the remedy of plaintiff, if any, is an action at law against each stockholder.
The demurrer was overruled. Lindquist refused to plead further and judgment was rendered against him for $ 100. From that judgment he has appealed.
Does the petition of the receiver state facts sufficient to constitute a cause of action cognizable in a court of equity? In resisting the 100-dollar claim, based on the liability imposed by the Constitution and assumed in the contract of subscription, is Lindquist, the owner of one share of the insolvent bank's capital stock, entitled as a matter of right to a jury trial in a technical action at law wherein he alone is defendant? These are difficult questions presented by the appeal with argument and citation of authorities on both sides. The nature of the liability created by the Constitution and the remedy of the unpaid creditors of the insolvent bank are subjects of inquiry. According to the allegations of the petition the stockholders are accountable in a proceeding of some kind under the following provision of the Constitution:
"Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors over and above the amount of stock by him held to an amount equal to his respective stock or shares so held, for all its liabilities accruing while he remains such stockholder." Const., art. XII, sec. 7.
Another provision of the Constitution is in this form:
"In all cases of claims against corporations and joint stock associations, the exact amount justly due shall be first ascertained, and after the corporate property shall have been exhausted the original subscribers thereof shall be individually liable to the extent of their unpaid subscription, and the liability for the unpaid subscription shall follow the stock." Const., art. XII, sec. 4.
The sections quoted must be considered together. Hastings v. Barnd, 55 Neb. 93, 75 N.W. 49; State v. German Savings Bank, 50 Neb. 734, 70 N.W. 221; Bodie v. Pollock, 110 Neb. 844, 195 N.W. 457; State v. Farmers' State Bank, 113 Neb. 497, 203 N.W. 629. The terms of the constitutional provisions are by construction embodied in the contracts of subscription for bank stock and the liability imposed upon and assumed by the stockholders is contractual, but cannot be enforced until the exact amount justly due in all cases of claims has been ascertained and the corporate property exhausted. Bourne v. Baer, 107 Neb. 255, 185 N.W. 408; State v. Banking House of A. Castetter, 116 Neb. 610, 218 N.W. 584. The double liability inures to the benefit of unpaid creditors, and not to the bank in its corporate capacity. Hamilton Nat. Bank v. American Loan & Trust Co., 66 Neb. 67, 92 N.W. 189. In effect the constitutional provision imposing a double liability upon bank stockholders in a state bank requires them, in connection with the subscriptions for stock, to make contributions to a trust fund for the benefit of unpaid creditors in the event of insolvency, and the action to enforce their obligations must be prosecuted by one creditor for the benefit of all or by the receiver. Pickering v. Hastings, 56 Neb. 201; Van Pelt v. Gardner, 54 Neb. 701, 75 N.W. 874; German Nat. Bank v. Farmers & Merchants Bank, 54 Neb. 593, 74 N.W. 1086; Hastings v. Barnd, 55 Neb. 93, 75 N.W. 49. In enforcing the contractual obligations the receiver, acting under directions of the court, is a proper party to bring the necessary action, whatever its nature. State v. Farmers' State Bank, 113 Neb. 497, 203 N.W. 629.
It is conceded by counsel for Lindquist that a suit in equity for the benefit of all the creditors against all the stockholders would be a proper remedy, if the par value of the stock or the maximum liability imposed by the Constitution exceeded the unpaid indebtedness of the bank. What is thus conceded is in harmony with a recognized rule of equity jurisdiction. It is confidently asserted, nevertheless, that an action at law against the individual stockholder is the exclusive remedy where judgment for the maximum liability or for the entire par value of the stock is sought, as in the present case. Is the nature of the remedy changed from equity to law merely because a recovery for the full par value of the stock is sought instead of a less amount? On that question the utterances of this court are not harmonious and there seems to be a diversity of opinion elsewhere.
Lindquist insists that his obligation is several, not joint; that there is no community of interest in law or fact between him and other stockholders joined as defendants; that, sued as an individual for a specific sum of money, he has a right to a jury trial where he alone is defendant; that all the stockholders cannot be joined in equity to prevent a multiplicity of suits. There is a view of these propositions in which the remedy and the convenience of the unpaid creditors seem to be overlooked.
The stockholders united in a common purpose to procure from the state a charter to conduct a commercial bank with permission to deal with the public in an enterprise affected with a public interest. It required the joint action of all subscribers for stock to accomplish that purpose. They gave to their banking corporation joint credit to the extent of the subscriptions. In addition to the $ 25,000 paid for the capital stock the stockholders assumed a contractual obligation imposed by the Constitution in the nature of a secondary liability or guaranty for the payment of $ 25,000 to the creditors in the event of insolvency and the exhausting of the corporate assets, if the bank's indebtedness in that sum should remain unpaid. In view of the facts alleged in the petition and admitted by the demurrer, the secondary obligation or double liability is as binding as the primary agreement to pay for the stock in the first instance.
There is more to plaintiff's case than the invoking of equity to prevent a multiplicity of suits. Enforcement of the liability imposed upon all the stockholders for the purpose of creating a common trust fund for the protection of all the creditors and for distribution among them, each to receive only a partial payment on his claim, are questions for determination in this suit.
If each stockholder in the present case has a right to a separate jury trial, the creditors, or the receiver for them, will be required to bring fifteen suits, three within the jurisdiction of a justice of the peace; seven others within the jurisdiction of the county court; five others within the jurisdiction of the district court. In connection with the constitutional provisions Lindquist bound himself by contract to contribute $ 100 to the trust fund. In a separate action at law for that sum the forum of original jurisdiction would be the court of a justice of the peace. From judgment on a verdict there Lindquist would have the right of appeal to the district court. Another jury trial would follow in the usual...
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