Shaw v. Strong

• Decision Date: 22 July 1936
• Docket Number: No. 5942.,5942.
• Citation: 96 S.W.2d 276
• Parties: SHAW, Banking Com'r, v. STRONG.
• Court: Texas Supreme Court

96 S.W.2d 276

SHAW, Banking Com'r, v. STRONG.

No. 5942.

Supreme Court of Texas.

July 22, 1936.

Error to Court of Civil Appeals of Sixth Supreme Judicial District.

Suit by James Shaw, Banking Commissioner in charge of liquidation of the First State Bank of Wolfe City, against M. Strong. To review a judgment of the Court of Civil Appeals [35 S.W.(2d) 769] affirming a judgment for defendant, plaintiff brings error.

Judgments of the District Court and the Court of Civil Appeals reversed, and cause remanded.

Clark, Harrell & Clark, of Greenville, and Ocie Speer, of Austin, for plaintiff in error.

L. L. Bowman, Jr., of Greenville, for defendant in error.

Carl Runge, of Mason, and J. F. Hair, of Tyler, amici curiæ.

CRITZ, Justice.

It appears from the petition in this case in the district court that M. Strong was a stockholder in the First State Bank, Wolfe City, Tex., a banking corporation duly incorporated under the banking laws of this state; that this bank failed on the 23d day of December, 1927; that on the 30th day of December, 1927, the banking commissioner levied a 100 per cent. assessment against all of the stockholders of such bank, including Strong; that thereafter the commissioner, for a valuable consideration, transferred and assigned Strong's stock liability to another; that such transfer and assignment were duly ordered and confirmed by judgment and decree of the district court of Hunt county, Tex., as provided by law; that Strong has never paid such assessment; and that the plaintiff is now the legal owner and holder of such assessment or stock liability of said Strong, if the aforesaid sale or assignment thereof is now enforceable. The petition contains other allegations, but the ones recited are sufficient for the purposes of this opinion.

When the cause was heard in the district court, a general demurrer to the above petition was sustained on the theory that the stock liability of stockholders in failed state banks was not assignable under the laws of this state as they existed at the time this bank failed and at the times the other transactions here involved occurred. On appeal to the Court of Civil Appeals, the judgment of the district court was affirmed on the same theory. 35 S.W. (2d) 769. The case is before this court on writ of error.

Section 16 of article 16 of our State Constitution, so far as applicable here, provides:

"Sec. 16. * * *

"Each shareholder of such corporate body incorporated in this State, so long as he owns shares therein, and for twelve months after the date of any bona fide transfer thereof shall be personally liable for all debts of such corporate body existing at the date of such transfer, to an amount additional to the par value of such shares so owned or transferred, equal to the par value of such shares so owned or transferred."

R.C.S. of Texas at the time here involved (Vernon's Ann.Civ.St. arts. 453, 454 note, 455) contained the following articles:

"Art. 453. Powers of Commissioner The Commissioner is authorized to collect moneys, claims and debts due to such insolvent bank and to perform such other acts as are necessary to conserve its assets and business, and to liquidate the affairs of such insolvent bank.

"Art. 454. May Sell Property Upon the Order of the District Court of the county in which such bank is located, if in session, or the Judge thereof, if in vacation, the Commissioner may sell or compound all bad or doubtful debts, and may sell real or personal property of such bank on such terms as the Court shall direct.

"Art. 455. Liability of Stockholders The Commissioner may, if necessary to pay the debts of such bank, enforce the individual liability of the stockholders. Suits to enforce such liability may be brought against the stockholders either in the county of the bank's domicile or in the county of the defendant's residence. (Acts 2nd C.S.1909, p. 406; Acts 1927, 40th Leg., p. 292, ch. 205, § 1.)"

It is contended by the defendants in error that under the above constitutional and statutory provisions the "debts" which the commissioner may sell under article 454, supra, are only debts due to the bank, and that the liability of the stockholder on his stock assessment is not such a debt. This contention was sustained by the two lower courts. On the other hand, the plaintiff in error contends that the term "debts" as used in such statute includes stock liability. As we view this record, it is not necessary in this case to decide this question. We will now give our reasons for this conclusion.

Under our state banking laws insolvent banks are liquidated by the banking commissioner, but under the jurisdiction and supervision of the district court. In such instances the commissioner is the receiver by operation of law, but he must act under orders and decrees of the district court. A state bank in liquidation becomes a judicial proceeding in such court. Undoubtedly the bank and its stockholders and creditors, as such, are in law all parties to this statutory district court proceeding. Under article 454, R.C.S.1925 (Vernon's Ann.Civ. St. art. 454 note), the commissioner had the authority under the orders of the district court to sell the debts and assets of the bank. In such instances the orders and decrees of the court are judicial and not subject to collateral attack. Chapman v. Guaranty State Bank (Tex.Com.App.) 267 S.W. 690. When the power of the district court was invoked in this instance, to order and confirm the sale of this stock liability, such court was called on to perform a judicial act. It did order and confirm such sale. It therefore did perform a judicial act. When the district court was petitioned to order and confirm such sale, it necessarily had to judicially determine if the thing petitioned to be sold was subject to sale under our banking law. As already stated, the court did order and confirm such sale. It therefore did judicially determine that the thing or liability sold was subject to sale. All parties at interest, the bank, the bank stockholders as such, and the bank's creditors as such, were parties to the proceeding. They were, and are, therefore all bound by such decrees, in this a collateral attack.

For the reasons stated, we are of the opinion that the Court of Civil Appeals erroneously decided this case. The judgments of the district court and of the Court of Civil Appeals are accordingly reversed, and the cause remanded.

CURETON, Chief Justice (concurring).

I concur in the judgment entered by my associates in this case. I am also strongly inclined to the view that the opinion upon which that judgment is based is a sound one. However, I am of the opinion that the district court had the power to enter the decree entered by it, and, if so, there can be no doubt as to the correctness of the judgment here entered by the court.

The one question here involved is whether or not the banking commissioner was authorized by law to sell the stockholder's liability levied against the defendant in error as a stockholder of the first failed bank, the First State Bank of Wolfe City, under the orders of the court, to the second failed bank, the First State Bank, Wolfe City, Texas. The Court of Civil Appeals held that the right did not exist, and affirmed the judgment of the trial court. 35 S.W.(2d) 769.

The case is before us by writ of error. I am of the opinion that the judgments of the district court and Court of Civil Appeals are erroneous, for reasons now to be stated.

Prior to November, 1904, state banking institutions were prohibited by the Constitution of the state. However, by the constitutional amendment adopted November 8, 1904, and proclaimed December 9, 1904, their creation was authorized. This amendment became section 16, article 16, of the Constitution, and reads:

"The Legislature shall by general laws, authorize the incorporation of corporate bodies with banking and discounting privileges, and shall provide for a system of State supervision, regulation and control of such bodies which will adequately protect and secure the depositors and creditors thereof.

"Each shareholder of such corporate body incorporated in this State, so long as he owns shares therein, and for twelve months after the date of any bona fide transfer thereof shall be personally liable for all debts of such corporate body existing at the date of such transfer, to an amount additional to the par value of such shares so owned or transferred, equal to the par value of such shares so owned or transferred.

"No such corporate body shall be chartered until all of the authorized capital stock has been subscribed and paid for in full in cash. Such body corporate shall not be authorized to engage in business at more than one place which shall be designated in its charter.

"No foreign corporation, other than the national banks of the United States, shall be permitted to exercise banking or discounting privileges in this State. (Sec. 16, Art. 16, adopted election November 8, 1904; proclamation December 29, 1904.)"

Under this amendment it became the duty of the Legislature to authorize the creation of banking corporations. In the performance of this duty, however, the section itself sets forth certain mandatory limitations, some of which were: (1) That they should provide for a system of state supervision; (2) that the system so provided "will adequately protect and secure the depositors and creditors thereof"; (3) that each shareholder should be "personally liable for all debts of such corporate body" in an amount additional to and equal to the par value of his shares.

It is to be noted that the shareholders' liability provision is in broad, general terms, and makes the shareholders "liable for all debts"; not to the creditors jointly or in severalty, but simply liable "for all debts." As to who might enforce this liability, when it might be enforced, and how it might be enforced, are not specified in the organic act; but these were left for...