Seaborn v. Wingfield

• Decision Date: 05 September 1935
• Docket Number: 3080.
• Parties: SEABORN, BANK EXAMINER AND SUPERINTENDENT OF BANKS, v. WINGFIELD.
• Court: Nevada Supreme Court

48 P.2d 881

56 Nev. 260

SEABORN, BANK EXAMINER AND SUPERINTENDENT OF BANKS, v. WINGFIELD.

No. 3080.

Supreme Court of Nevada

September 5, 1935

Appeal from District Court, Washoe County; H. W. Edwards, Judge.

Suit by E. J. Seaborn, as Bank Examiner and as Superintendent of Banks, in charge of the United Nevada Bank, against George Wingfield. Judgment for defendant, and plaintiff appeals.

Affirmed.is to execute its provisions.

Gray Mashburn, Atty. Gen., H. R. Cooke, Sp. Deputy Atty. Gen., and Harwood & Diskin, of Reno, for appellant.

Geo. B Thatcher, of Reno, for respondent.

PER CURIAM.

The appellant brought this suit in the Second judicial district court to recover a judgment against the respondent in the sum of $103,226, claiming that as a shareholder in said bank to the extent of 2,377 shares of its capital stock he was individually liable thereon to the stockholders and creditors of the bank by virtue of section 12 of the Banking Act of 1911 approved March 22, 1911, and being section 661 of the Nevada Compiled Laws. The complaint contains allegations which, so far as relevant, may be stated as follows: The United Nevada Bank was incorporated as a banking institution and organized under and pursuant to said act. On the 12th day of December, 1932, the appellant, finding the bank to be insolvent, took charge and possession of its property business, and assets, and ever since that time has had charge and possession thereof as bank examiner and superintendent of banks. The respondent, George Wingfield, was one of the incorporators of the bank, and has owned said shares of stock since that time. That section 12 of the banking act of 1911 by which it is claimed respondent's liability arose reads as follows: "The stockholders of any bank organized under this act, shall be individually liable to the creditors thereof, equally and ratably, and not one for another, in addition to the amount of stock owned by them, in a sum equal to the par value of such stock and no more."

The total indebtedness of the said bank on the 12th day of December, 1932, was $1,745,287.60, and the total value of its assets on that date was the sum of $1,571,574.60, leaving a net difference between the amount of liabilities and the value of assets of $173,713.

It is alleged that respondent is liable under said provision notwithstanding the provisions of article 8, § 3, of the Constitution of Nevada, which provides as follows: "Dues from corporations shall be secured by such means as may be prescribed by law; provided, that corporators in corporations formed under the laws of this state shall not be individually liable for the debts or liabilities of such corporation."

Liability in this respect is put upon the ground that Wingfield waived any benefit intended to be conferred by said constitutional provision and is estopped from claiming immunity thereunder by becoming an incorporator of the bank, a stockholder thereof, and by receiving dividends, and for the additional reason that he contracted with the creditors of the bank and such persons as might become creditors to accept the provisions of said Banking Act approved March 22, 1911 (Comp. Laws 1929, § 650 et seq.), including the liability to such creditors provided for in said section.

In due time respondent filed an answer setting up the unconstitutionality of said section 12. The answer was attacked by a motion to strike and demurrer. These were overruled by the court, and judgment in favor of Wingfield was rendered on the pleadings. Hence this appeal.

Appellant contends that the word "corporators," as used in section 3, article 8, of the Constitution, must be held to mean only the original incorporators or organizers; that is, those associates who are the getters-up of the corporation, and, if so construed, said provision of the Constitution is not unconstitutional. On the other hand, respondent is opposed to such a restricted construction. The inferences favorable to their construction of the word "corporators," which opposing counsel have drawn from the constitutional debates, territorial legislation, and Constitution making prior to the adoption of the State Constitution, are of equivocal value. We have found it unprofitable to indulge in similar speculation. We think the word "corporators" appearing in the Constitution must be taken in its general or usual sense to mean a member of the corporation, one of the stockholders or constituents of the body corporate. That such is the general or usual meaning atributed to the word is borne out by the statements of courts, text-writers and lexicographers. In Re Atlantic Mut. Life Ins. Co., 2 Fed. Cas. page 168, at page 169, No. 628, it is said: "A corporator is one who is a member of the corporation, one of the stockholders or constituents of the body corporate."

Sawyer, Circuit Judge, in Re Lady Bryan Min. Co., Fed. Cas. No. 7,978, a case arising in Nevada, speaking for the court, said: "A 'corporator,' as understood both in the law respecting corporations, and in common speech, is 'one who is a member of a corporation.' (Bouv. Law Dict. and Webst. Dict.) That is to say, one of the constituents, or stockholders, of the corporation. I do not know that the word has ever been used in any other sense."

The dictionaries referred to define the word as stated.

In the state of Illinois at the time of the decision in Gulliver v. Roelle, 100 Ill. 141, the sixteenth section of the General Insurance Law of 1869 read: "The trustees and corporators of any company organized under this act shall be severally liable for all debts or responsibilities of such company, to the amount by him or them subscribed, until the whole amount of the capital of such company shall have been paid in, and a certificate thereof recorded as hereinbefore provided."

A section of the Constitution provided: "Dues from corporations, not possessing banking powers or privileges, shall be secured by such individual liabilities of the corporators, or other means, as may be prescribed by law." Const. 1848, art. 10, § 2.

Construing the word "corporators" as used in the statute and Constitution, the Illinois court said: "It can scarcely admit of a doubt that the general and popular meaning of the word 'corporator' concurs with the highest lexicographical authority,--that it means a member of a corporation. * * * And there can be no doubt that such is the sense in which the term is used in the 2d section of article 10 of the constitution of 1848." See, also, Shufeldt v. Carver, 8 Ill.App. 545.

"A corporator is one who is a member of a corporation; one of the stockholders or constituents of the body corporate." 2 Words and Phrases, First Series, p. 1623.

In the ordinary sense of the term, "corporator" is used synonymously with "stockholder." Thompson on Corporations, vol. 4 (2d Ed.) p. 1298. See Zabriskie v. Cleve., Col., & Cinn. R. Co. et al., 23 How (U. S.) 381, 16 L.Ed. 488, Louis Snider's Sons' Co. v. Troy, 91 Ala. 224, 8 So. 658, 11 L. R. A. 515-518, 24 Am. St. Rep. 887, and Schramm v. Done, 135 Or. 16, 293 P. 931-936, for use of the word in that sense.

The case of Chase v. Lord et al., 77 N.Y. 1, presented by appellant, is contra to the current of authority. Concerning this case, however, we may say, that the wording of the New York statute furnished a basis upon which reasonable minds might differ as to the correct construction. Three of the seven judges joined in a strong dissenting opinion, in which it was said: "The word 'trustees' as used here, means directors, and the word 'corporators' means members of the corporation. These two words commonly have such meaning when used in relation to corporations."

In view of the commonly accepted meaning of the word "corporator," we are led to believe that the framers of the Constitution, among which were some very able lawyers, were familiar with that meaning. It would seem, too, to be quite unlikely that they intended to ignore that sense of the word and employ it in a restricted sense. To so construe it would be most technical, and constitutions are not to receive a technical construction. Constitutions do not deal in particulars, and the makers would hardly be unduly solicitous for the protection of a class so relatively few and unimportant as the getters-up of a corporation. If the framers of the State Constitution intended to impose a double liability on stockholders, they probably would have expressed that intention in the clearest language, especially when such liability is in derogation of the common law.

It is worthy to note as bearing on the probabilities of the case that, at the first meeting after the adoption of the Constitution, no provision was made for the individual liability of a stockholder in the corporation law then enacted. This omission is more significant when it is remembered that at the first, as well as at other, sessions of the Legislature, there were many members who were prominent members of the Constitutional Convention. State v. Glenn, 18 Nev. 34-43, 1 P. 186. A further significant circumstance is revealed by the fact that almost half a century elapsed before provision for a stockholders individual liability was attempted to be incorporated in the corporation law. It is also to be observed that, since the adoption of the act of 1911, notwithstanding bank failures have happened in this state prior to the instant case and such banks were unable to pay their depositors, no bank examiner, state banking board, Attorney General, or any creditor or depositor of any such bank has sought heretofore to charge the stockholders with individual liability to the creditors or depositors by reason of section 12 of said Banking Act. On the contrary, the appellant has heretofore recognized the...