West v. The Topeka Savings Bank

• Decision Date: 11 April 1903
• Docket Number: 12,895
• Citation: 66 Kan. 524,72 P. 252
• Parties: J. G. WEST v. THE TOPEKA SAVINGS BANK
• Court: Kansas Supreme Court

72 P. 252

66 Kan. 524

J. G. WEST v. THE TOPEKA SAVINGS BANK

No. 12,895

Supreme Court of Kansas

April 11, 1903

Decided January, 1903.

Error from Shawnee district court; Z. T. HAZEN, judge.

Judgment reversed.

SYLLABUS

SYLLABUS BY THE COURT.

1. CORPORATIONS -- Stock Subscription--Limitation of Action. So long as a private corporation is a solvent and going concern the statute of limitations does not begin to run on a stockholder's subscription to its capital stock, to be paid at intervals upon the call of the board of directors, until a call has been made.

2. CORPORATIONS -- Suspension of Business--Limitation of Action. When a private corporation becomes insolvent and suspends active business, or when it closes its doors and ceases all its usual and ordinary business, leaving debts unpaid, the statute of limitations begins to run at once on a stockholder's subscription to its capital stock, to be paid at intervals upon the call of the board of directors and then subject to call, even though no call be made.

3. BANKS AND BANKING -- Savings Banks. The banking law of 1891 superseded the savings-bank act of 1868, and thereafter all savings banks previously organized and engaged in the business of receiving money on deposit were amenable to its provisions.

4. CORPORATIONS -- Calls for Stock Subscriptions -- Legislative Power-Limitation of Action. When a stockholder's subscription to the capital stock of a corporation provides that payments on such subscription shall be made in installments of a certain per cent. as called for by the board of directors, provided thirty days intervene between calls, it is competent for the legislature to divest the board of directors of its discretion to postpone calls beyond periods of thirty days each, and to fix absolutely, within the limits of the contract, the time and amount of such payments. In such case the payments become due at the times prescribed by law, and the statute of limitations begins to run against their collection as soon as default occurs.

5. CORPORATIONS -- Action on Subscription--Pleading. If, in an action by a corporation against a stockholder to recover an unpaid subscription to its capital stock, the petition tenders an issue upon the question of the necessity for the stock call, the stockholder may meet such issue by the allegation of pertinent facts in his answer.

Garver & Larimer, and E. A. Austin, for plaintiff in error.

Overmyer, Mulvane & Gault, for defendant in error.

BURCH J. All the Justices concurring.

OPINION

BURCH, J.:

On May 12, 1901, the Topeka Savings Bank commenced an action against J. G. West to recover on his written subscription to the capital stock of the bank, as follows:

"SUBSCRIPTION TO CAPITAL STOCK OF THE TOPEKA SAVINGS BANK.

"The undersigned, each for himself, hereby subscribes for and agrees to take the number of shares (of the par value of $ 100 per share) of the capital stock of the Topeka Savings Bank of Topeka, Kansas, set against his name.

"Each subscription to be paid in installments of ten (10) per centum of the amount thereof, as called for by the board of directors of said Topeka Savings Bank; provided, however, that at least thirty (30) days shall intervene between calls.

DATE.

SIGNATURE.

ADDRESS.

Shares

Amount.

Memo.

Taken.

1887.

J. G. West.

Topeka, Kas.

10

$ 1,000.

Mch. 30

The petition alleged that the bank was a corporation organized March 11, 1887, for the purpose of receiving and caring for deposits of money; that on March 6, 1896, it ceased to do active business, and borrowed from the Bank of Topeka a sum sufficient to pay all its liabilities, so as to leave the latter bank its sole creditor; and that calls were made on the subscription of West on June 1, 1896, and January 26, 1899, which he failed to pay. Judgment was prayed for the amount in default. The answer contained several defenses, to all of which, except that embodying a general denial, general demurrers were sustained, and the defendant, West, predicates error upon the conduct of the district court in so doing.

The second defense has not been argued either in the brief or at the bar, and need not, therefore, be considered.

The third and fifth defenses may be disposed of together, and are as follows:

"Third. For a third and further answer and defense hereto, said defendant alleges that said entire contract of subscription set up in said petition, and the total balance unpaid thereon, could, by the terms thereof, have been declared due and called for by the board of directors of the plaintiff in ten months from the date of said subscription, and the whole amount thereof could have been declared due and called for prior to the 1st day of December, 1892; that this suit was not commenced within five years of said last-mentioned date and by reason thereof this action was, at the time of its commencement, wholly barred by the five-year statute of limitations."

"Fifth. For a fifth and further answer and defense said defendant alleges that on the 2d day of March, 1896, said plaintiff, in pursuance of a resolution of its board of directors then passed and adopted, ceased to transact any and all of its usual and ordinary business and permanently closed its doors, and thereafter transacted no business except such as was incident to the winding up of its affairs; that at that time, and for a long time prior thereto, and ever since, said bank was and continued to be wholly insolvent, and it became and was the imperative duty of the board of directors of said plaintiff to have immediately called for the entire amount then unpaid on said subscriptions; that by reason thereof the total amount then remaining unpaid on said contract of subscription became immediately due and payable on March 2, 1896; that this suit was not commenced within five years from said last-mentioned date, and by reason thereof this action was, at the time of its commencement, wholly barred by the five-year statute of limitations."

It is established law in this state that when some preliminary action is an essential prerequisite to the bringing of a suit, and such action rests with the claimant, he cannot defeat the operation of the statute of limitations by long and unnecessary delay in taking the antecedent step; and the statute will begin to run within a reasonable time after the party could, by his own act, perfect his right, which reasonable time will not, in any event, extend beyond the statutory time fixed for bringing the suit. This doctrine has been stated and restated, illustrated and illuminated, applied and reapplied, until it has become a truism. (A. T. & S. F. Rld. Co. v. Burlingame Township, 36 Kan. 628, 14 P. 271, 59 Am. Rep. 578; Rork v. Comm'rs of Douglas Co., 46 id. 175, 26 P. 391; Bauserman v. Charlott, 46 id. 480, 26 P. 1051; Bauserman v. Blunt, 147 U.S. 647, 13 S.Ct. 466, 37 L.Ed. 316; Kulp v. Kulp, 51 Kan. 341, 32 P. 1118, 21 L. R. A. 550; Comm'rs of Graham Co. v. Van Slyck, 52 id. 622, 629, 35 P. 299; Harrison v. Benefit Society, 59 id. 29, 51 P. 893; Bank v. King, 60 id. 733, 57 P. 952; Black v. Elliott, 63 id. 211, 65 P. 215, 88 Am. St. Rep. 239.)

What bearing does it have upon the facts of this controversy? The contest in this case is between the corporation and a stockholder. Under the law the board of directors is clothed with the management of the affairs and business of the corporation. This business is conducted primarily in the interest of the stockholders. The welfare of the corporation, however, requires that the obligation of a stockholder to pay the amount of his subscription be enforced, if necessary, against his will. The board of directors, therefore, occupies a dual relation in reference to the stockholder. It is both agent and adversary. It represents and it antagonizes. It protects and it assails.

In the conduct of the corporate enterprise, in choosing methods, in fixing policies, and administering affairs, the board must be held to act on behalf of the stockholder. It represents him. The determination of the extent to which the capital stock shall be embarked falls naturally within the province of those who are charged with the prosecution and success of the undertaking; and in exercising the power vested in it by law, or by contract, to fix the time and amount of stock calls, the board in a just and proper sense represents the stockholder, as it does in other matters involving judgment and discretion. The stockholder in effect authorizes the board to determine that question for him. Under such circumstances delay in making a call beyond the time in which the board could arbitrarily make it cannot be taken advantage of by the stockholder and his liability upon his subscription continues to subsist. The character of the relationship excludes the application of the statute of limitations.

The other side of the relation, however, is equally important. In a suit begun in the name of a corporation against a stockholder to compel payment of his subscription, the corporation and the stockholder are antagonists. The making of a call is but a step in the process of collection, and in ordering it the board is not the representative of the stockholder, but of the corporation. From the date of his subscription the relation of the subscriber to the corporation is that of a debtor to a creditor. The power and right to render certain the time and amount of payments pertain to the corporation as creditor and the exercise of the function is necessarily adverse to the debtor. To such a status the statutes of limitations do apply. This element of antagonism must invade the relations of the parties whenever the primary duty of the board to corporate creditors constrains it to assume, in the name of the corporation, the strict...