State ex rel. Stone v. Union Stock Yards State Bank

• Decision Date: 10 April 1897
• Citation: 70 N.W. 752,103 Iowa 549
• Parties: STATE EX REL. STONE, ATTORNEY GENERAL, v. UNION STOCK YARDS STATE BANK ET AL. (COOK, INTERVENER).
• Court: Iowa Supreme Court

103 Iowa 549

70 N.W. 752

STATE EX REL. STONE, ATTORNEY GENERAL,

v.UNION STOCK YARDS STATE BANK ET AL. (COOK, INTERVENER).

Supreme Court of Iowa.

April 10, 1897.

Appeal from district court, Woodbury county; G. W. Wakefield, Judge.

The defendant bank became insolvent, and the present suit was instituted, under the provision of the law (Code, § 1572), to wind up the bank, and distribute the assets among the creditors. To that end a receiver was duly appointed, who took possession of the property of the bank, and proceeded in the discharge of his duties. The receiver was appointed June 26, 1893, and in October, 1894, he made a report of his doings, and of the condition of the bank estate, showing an estimated deficit of $99,059.22. From the report it appeared that, of the $250,000 of outstanding stock of the bank, $50,000 was uncollectible. The receiver asked an order for an assessment, based on such estimates, of 75 per cent. against the stockholders of the bank, under the provisions of chapter 208, Acts 18th Gen. Assem. No creditor or stockholder was made a party to the proceeding in which the order was asked. The order was granted making the assessment, with authority to the receiver to proceed to use all legal means to collect the same, by suit or otherwise. Intervener herein is a stockholder, and upon notice from the receiver of the assessment, and a demand for payment, she presented her petition of intervention, in which she claims that the court had not jurisdiction to make the assessment; that the assessment was erroneous, because premature, and not supported by adequate and proper proceedings; and that the act creating the liability was unconstitutional and void. She asked, as relief, that the order of assessment be set aside, and that the receiver be directed to take no further steps or proceedings thereunder. The court sustained a demurrer to the petition, and the appeal is by the intervener from such ruling. Affirmed.Kean & Sherman, for appellant.

Swan Lawrence & Swan, J. S. Lothrop, and Black & Goodwin, for appellee.

GRANGER, J.

1. The question is first presented whether the court, in an ex parte proceeding, can make a valid assessment on the stockholders. Much depends on the effect to be given to the assessment when made. If it is to have a conclusive effect,--that is, if it is to have the effect of an adjudication so as to preclude an inquiry thereafterinto its correctness in any essential particular,--we think it cannot be done. But, if such an assessment is only intended for, and to have the effect of, an ascertainment by the court of probable conditions, with the right of a stockholder to take issue and have his liability judicially determined whenever there is an attempt to enforce the assessment, then we think such an assessment can properly be made. This is no more than to say that the court may, from the record, aided by other information, determine prima facie the extent of the fund necessary to discharge the liability of the stockholders under the act, and, upon such a determination, authorize the collection of the same, when, in a suit to enforce such payment, the stockholders may contest his liability unaffected by such determination. We regard the assessment in this case no more than such a determination, and with no other legal effect than as we have stated. Of this determination or assessment appellant was notified. She thus had the opportunity to investigate and know of her liability, and make payment, without cost, if she thought herself liable, or, if not, to contest her liability without prejudice from the assessment made. Such a procedure seems to be in accord with good business judgment, and without a disadvantage in the preservation of legal rights. In a quite recent case in Washington, to be hereafter cited, speaking of such liabilities under the laws of the different states, in considering a method of procedure under a law similar to ours, it is said that some statutes “provide the mode of enforcing the right; others leave it for the judiciary to work out the method,”--and the case adopts a method designed to give effect to the spirit of the law in that state, as no method of procedure is prescribed. The same is true of our law. It is also to be said that preliminary assessments, varying in form and method, are of general observance, where liabilities of such a nature are to be enforced. Our statute creating the liability is section 1, c. 208, Acts 18th Gen. Assem., as follows: “That all stockholders or shareholders in associations or corporations organized under said chapter one aforesaid, for the purpose of transacting a banking business, buying or selling exchange, receiving deposits of money, or discounting notes, shall be individually and severally liable to the creditors of such association or corporation of which they are stockholders or shareholders, over and above the amount of stock by them held therein, to an amount equal to their respective shares so held for all its liabilities accruing while they remained such stockholders; and should any such association or corporation become insolvent, and its assets be found insufficient to pay its debts and liabilities, its stockholders may be compelled to pay such deficiency in proportion to the amount of stock owned by each, not to exceed the extent of the additional liability hereby cre ated.” The case of Insurance Co. v. Hildreth, 55 Iowa, 248, 7 N. W. 573, may seem not to be in harmony with our conclusion in this case. An assessment was held in that case to be an adjudication, and void, where the stockholder was not made a party. An examination of that case shows a purpose in making the assessment, because of a form of notice, and the character of the assessment made, to fix a liability of the stockholder by the assessment. The action was to recover on the assessment as fixing the liability of the stockholder. It is therein stated that “the plaintiff claims in his petition that the defendant is bound by the assessment made against him.” With our construction of the order of assessment in this case, that case is clearly distinguishable, for, in an action to recover, the assessment will serve only as a guide to the amount of recovery.

2. There is also a claim that, before the stockholders can be made liable under the act in question, the assets of the bank must be exhausted; that is, as we understand, all the assets in the hands of the receiver must be applied, and the liability is for the deficiency. We have no doubt that the deficiency measures the extent of the liability of stockholders under the act; but we do not concur in the claim that the assets must first be applied, so that the receiver has no part of them on hand. It is likely true that, pending the collection, conversion, and application of the assets, the precise deficiency cannot be known, and if the thought is that the only right of the creditors of the bank is to have the exact liability of each stockholder first determined, and that amount, and that only, collected, we cannot concur in it. Section 2 of the act is important in this connection. It is as follows: “Should the whole amount for which the stockholders are made individually responsible as provided by section one of this act be found in any case to be inadequate to the payment of all the debts of any such association or corporation, after the application of its assets to the payment of such debts, then the amount due from such stockholders on account of...