Vonglahn v. Derosset

• Decision Date: 30 June 1879
• Citation: 81 N.C. 467
• Court: North Carolina Supreme Court
• Parties: HENRY VONGLAHN and others v. A. J. DEROSSET and others.

81 N.C. 467

HENRY VONGLAHN and others

v.A. J. DEROSSET and others.

Supreme Court of North Carolina.

June Term, 1879.

CIVIL ACTION removed from New Hanover and tried at Spring Term, 1878, of BRUNSWICK Superior Court, before Eure, J.

This action was brought to recover an amount of money alleged to be due the plaintiffs by the Commercial bank of Wilmington on account of deposits made by them with the bank. The bank being insolvent, a recovery is sought against the defendant stockholders by virtue of the personal liability clause in the charter to the effect that in case of insolvency or ultimate inability of the bank to pay, the individual stockholders shall be liable to creditors in sums double the amount of stock by them respectively held. And the court being of opinion with defendants gave judgment accordingly, and the plaintiffs appealed.

Messrs. D. J. Devane and D. L. Russell, for plaintiffs :

The stockholders are liable because by the proper construction of the charter it is stipulated they shall be liable to creditors as well after the expiration of their charter as before. It should be construed strictly in favor of the public. Dwarris on Statutes, 256; Drake v. Drake, 4 Dev., 110; Gildart v. Gladstone, 11 East., 686; Cooley Const. Lim., 394. And the learning in Malloy v. Mallett, 6 Jones Eq., 345, is immaterial, in the view taken by us as to the proper construction of the charter. The debts are not extinguished by the dissolution of the corporation; although no action can then be brought against it, yet relief can be had in equity. 2 Story Eq., § 1252; Angel & Ames on Corp., § 779; Curran v. Arkansas, 15 How., 312; Hightower v. Thornton, 8 Ga., 493; Thornton v. Lane, 11 Ga., 491; Mumma v. Potomac Co., 8 Pet., 281. 2 Kent Com., 307. Therefore the debt is still alive and the court would apply to the plaintiff's demand any property the bank might have. Even if liability of defendants be secondary only, they are not discharged from this subsisting obligation, and the case of Wintry v. Webb, 3 Dev., 27, is not in point. From the opinion of GASTON, J., in Fox v. Horah, 1 Ire. Eq., 358, it is submitted that that case is an authority for plaintiffs. Where principal debtor is discharged by act and operation of law, the party liable secondarily is not thereby discharged. 1 Parsons on Contracts, ch. 2: Ward v. Johnson, 13 Mass., 152. Jones v. Hagler, 6 Jones, 542; Robertson v. Smith, 18 Johns., 459; Nodin v. Battie, 5 East., 147. But the defendants here are principal debtors. Moss v. Averill, 10 N. Y., (6 Selden) 459; 1 Coms. Rep., 47; Hanger v. McCullough, 2 Denio; Angel & Ames on Corp., 611. As to statute of limitations: The cause of action accrued January 1st, 1865. C. C. P., Title 4, ch. 1; Rev. Code, ch. 65. It does not apply to this case. As to second action where cause of action is the same. Long v. Orrell, 13 Ire., 123; Williams v. Council, 4 Jones, 206.

Messrs. Geo. Davis and Stedman & Lattimer, for defendants :

The charter expired on the 31st of December, 1871, and the plaintiffs' claim became extinct. Fox v. Horah, 1 Ire. Eq., 358; Malloy v. Mallett, 6 Jones Eq., 345; Bank v. Tiddy, 67 N. C., 169. In consequence of the decision in Fox v. Horah, an act was passed (Rev. Code, ch. 26, § 5) which continues the corporation in existence for three years and directs how its assets shall be distributed and its affairs wound up. In a late case under a similar statute in Massachusetts it was held that a judgment obtained against a corporation after the three years where no receiver had been appointed, was void; because there was no corporation in existence, showing there is no remedy outside of the statute. Thornton v. R. R. Co., 123 Mass. Rep. None of the cases relied on for plaintiffs intimates that the corporation will be kept alive for the purpose of continuing the responsibility of the stockholders. All the other stockholders are necessary parties. Story's Eq. Pl,, § 169; Crease v. Babcock, 10 Metc., 531; VonGlahn v. DeRosset, 76 N. C., 292. If the corporation is still in existence, being the party primarily liable, it is a necessary party. Adams Eq., 586; Story's Eq. Pl., §§74, 174, et seq; 1 Dev. & Bat. Eq., 438. As to the statute of limitations: Liability of stockholders began when bank ceased to redeem and to do business, (2 Otto, 156,) and that was in 1865, and the cause of action then arose.

The plaintiffs were barred in three years. Rev. Code, ch. 26, § 5; C. C. P., § 34(2). And if this were not so, the court would supply the defect by analogy to other actions, and establish a bar of three years upon the equity of our statutes. Angel on Lim. § 70; Pigott v. Rush, 4 Ad. and Ellis, 912; Corning v. McCulloch, 1 Coms., 55; Thompson v. Blair, 3 Murp., 588. The former suits in respect to this litigation were not for the same cause of action; the only point of identity is that plaintiff is suing for the same debt, but that will not suffice. Ellis v. Hussey, 66 N. C., 502; VonGlahn v. Harris, 73 N. C., 323; Morrison v. Connelly, 2 Dev. 234; Whitfield v. Hill, 5 Jones Eq., 316. For, if it is held that this is the same cause of action and the plaintiff is not barred, the result would be to let in all the creditors who have never brought any actions; and who therefore ought most clearly to be barred. In reply to the suggestion that the extinction of the debt does not discharge the surety: The distinction is between defences which are inherent to the obligation, and those which are personal to the principal; the former are available to the surety and the latter are not. Ferry v. Burchard, 21 Conn., 597; Swift v. Beers, 3 Denio, 70; Baldwin v. Gordon, 12 Martin (La.), 378.

SMITH, C. J.

The president and directors of the Commercial bank of Wilmington were incorporated and organized under an act of the general assembly, ratified on the 18th day of January, 1847. Its existence as a corporate body expired by the limitation contained in its charter and amendment on the 31st day of December, 1871. One of the clauses of the charter upon which the plaintiffs' claim is predicated is in these words: “In case of insolvency or ultimate inability of the bank to pay, the individual stockholders shall be liable to creditors in sums double the amount of the stock by them respectively held.”

To enforce this liability the plaintiff, Von Glahn, institututed an action in his own name and as a creditor, against George Harris, one of the defendants, and it was held that he could not recover and appropriate to his own individual use, a fund in which all the creditors had an equal and common interest, and that they were necessary parties. Von Glahn v. Harris, 73 N. C., 323. And the same disposition was made of a similar action against another of the defendants at the same term. Von Glahn v. Lattimer, Ibid, 333.

The plaintiff thereupon on the 23rd day of December, 1875, and within the year, on behalf of himself and the other creditors, commenced the present proceeding against the defendants, stockholders, and representatives of deceased stockholders, and the case came before this court upon a demurrer filed by the defendant Kidder.

The demurrer was overruled upon the ground that the defendants having a common defence could not sever in their pleadings, and the cause was remanded. Von Glahn v. DeRosset, 76 N. C., 292.

The present appeal presents several matters of defence, set up in the several answers, some of which are special to the particular defendants and not necessary to be noticed. The common defences relied on by all are,

1. The charter of the bank having by express limitation expired with the year 1871, and the period of three years allowed by law for the settling up of its business thereafter having expired, the indebtedness of the bank and the collateral liability of the stockholders therefor are extinguished and the action cannot be maintained.

2. The action is barred by the statute of limitations and is not within the savings of section 45, C. C. P., modifying section 8, chapter 65 of the Revised Code.

3. The corporation itself and the omitted stockholders are necessary and proper parties.

The insolvency of the bank though denied in the answers was admitted on the trial. We do not propose to examine the merits of the different defences set up to defeat the recovery, but confine our attention to one only which disposes of the case.

In Fox v. Horah, 1 Ire. Eq., 358, a bill in equity was filed to arrest the prosecution of an action at law by the defendant Horah, cashier of the state bank of North Carolina, to recover the amount of a promissory note executed by the plaintiff, as security of J. G. Hoskins for money borrowed of the bank, and drawn payable to its cashier, on the ground that the bank as a corporate body had ceased to exist. The court then consisting of RUFFIN, DANIEL and GASTON, the latter of whom delivers an elaborate and able opinion in the case, sustain the equitable claim to relief, for the reason that since the dissolution there was no legal person in esse entitled to the money when collected, and award a perpetual injunction against the further prosecution of the action at law.

So in Malloy v. Mallett, 6 Jones Eq., 345, this court recognizing the correctness of the doctrine enunciated and enforced in the preceding case, and declaring it to be “a well settled principle of the common law that upon a dissolution of a corporation, its debts became extinct,” hold as a clear deduction therefrom that the liability of a stockholder, which is collateral and subsidiary only to the obligation of the principal debtor, is likewise extinguished by the event which extinguishes the prior legal obligation.

These decisions were made and these conclusions reached after full discussion and careful consideration by as able jurists as ever presided in this court, and our reluctance to disturb them after so long an acquiescence by the profession, could be overcome only by the clearest convictions of their...