Woodbine Sav. Bank of Woodbine v. Shriver

• Decision Date: 24 June 1929
• Docket Number: No. 39479.,39479.
• Citation: 226 N.W. 374
• Parties: WOODBINE SAV. BANK OF WOODBINE v. SHRIVER.
• Court: Iowa Supreme Court

226 N.W. 374

WOODBINE SAV. BANK OF WOODBINE

v.SHRIVER.

No. 39479.^a1

Supreme Court of Iowa.

June 24, 1929.

Appeal from District Court, Iowa County; H. D. Evans, Judge.

Action by savings bank to recover from a stockholder upon an assessment to restore impaired capital of said bank. From a judgment in behalf of the plaintiff, the defendant appeals. Reversed.Wallace & Claypool, of Williamsburg, for appellant.

Bolter & Murray, of Logan, and Hatter & Harned, of Marengo, for appellee.

FAVILLE, J.

The appellee was incorporated as a savings bank, under the laws of this state, May 6, 1891. Twenty years later, to wit, May 11, 1911, the bank was reincorporated. In February, 1920, the capital stock was increased from $30,000 to $50,000. The appellant was the owner of 26 shares of stock in said bank. Ten of said shares were acquired about the time of the original incorporation, to wit, May 18, 1891. Ten more shares were acquired April 16, 1906. Six and one-sixth shares were acquired February 14, 1917. The certificate therefor was surrendered, and a new certificate for six shares, representing however the same stock, was issued June 8, 1925. On February 15, 1927, the capital stock of said bank was impaired to the extent of 100 per cent. thereof, and on said date the superintendent of banking of the state determined that said capital stock was so impaired and ordered the board of directors of said bank to collect an assessment against the stock of said bank in the amount of 100 per cent. The proper proceedings were taken, notices were given of the assessment, and on or about the 4th day of October, 1927, due notice of the time and place of sale of appellant's stock was had, and on the 17th day of November, 1927, appellant's said shares of stock were duly offered for sale at public auction and were sold by the appellee for the sum of $1 per share, or a total of $26. This action is brought to recover from the appellant the deficiency between the amount of said assessment and the said $26, to wit, the sum of $2,574. It is conceded by all parties that the said assessment is predicated solely on the provisions of chapter 181 of the Acts of the Forty-First General Assembly, which became effective March 13, 1925, and which is now embodied in section 9248a1 of the Code of 1927. No question is raised but that the stock of the appellant was subject to an assessment by reason of impairment of the capital stock of the appellee bank. Chapter 29 of the Acts of the Twenty-Fifth General Assembly, providing for such assessment, became effective May 5, 1894. This statute was carried into the Code of 1897 in sections 1878, 1879, and 1880. Said sections are substantially embodied in the Code of 1927 in sections 9246-9250. These several statutes, as they existed prior to the enactment of chapter 181 of the Acts of the Forty-First General Assembly, provided for an assessment to be made against shareholders of a savings bank to replace the impaired capital of such a bank. The sole provision, however, in the statutes as they then existed, for the enforcement of such an assessment, was that a sufficient amount of the capital stock held by a stockholder could be sold at public auction after proper notice to satisfy said assessment. It was under these statutory provisions that the appellant held his stock prior to the enactment of chapter 181 of the Acts of the Forty-First General Assembly. Said statute placed a new liability upon the holder of said stock in the event of an assessment to replace impaired capital. Not only could the stock of the stockholder be sold to satisfy such an assessment, but a personal liability was created for the balance of said assessment above the amount for which the stock sold. Chapter 181 amended the existing statute by adding thereto the following: “Should the proceeds of a sale hereunder of all of the stock of any stockholder be insufficient to satisfy his entire assessment liability he shall be personally liable for the deficiency, which may be collected by suit brought in the name of the bank against such stockholder.”

At the time the appellant became the owner of his shares of stock the then existing law imposed no personal liability on the stockholder to replace the impaired capital of such a bank. Leach v. Arthur Savings Bank, 203 Iowa, 1052, 213 N. W. 772.

I. The validity of said chapter 181 as applied to the appellant is attacked on the ground that it impairs the obligations of appellant's contract as a stockholder in said bank. It is contended, however, by appellee that the statute in question is valid because of the reserved power which the Legislature has over corporations, as found in section 12, article 8 of the Constitution of Iowa. Said section 12 of article 8 is as follows: “Subject to the provisions of this article, the General Assembly shall have power to amend or repeal all laws for the organization or creation of corporations, or granting of special or exclusive privileges or immunities, by a vote of two-thirds of each branch of the General Assembly; and no exclusive privileges, except as in this article provided, shall ever be granted.”

It is stipulated of record in this case that at the time of the convening of the Forty-First General Assembly of Iowa there were 108 duly elected and qualified members of the House of Representatives and 50 duly elected and qualified members of the Senate, and that upon the passage of the said act in question, in the House of Representatives there were 64 affirmative votes, 5 negative votes, and 39 absent or not voting, and that on the final vote cast in the Senate there were 28 affirmative votes, 9 negative votes, and 13 absent or not voting; so that, under the stipulation, it clearly appears that the act in question did not receive a two-thirds vote of each branch of the General Assembly at the time it was passed. Therefore, if the act in question be construed to be one that comes within the purview of section 12 of article 8 of the Constitution (a question which we do not determine), still said section of the Constitution has no applicability because the act was not adopted by such a vote of the General Assembly as is required by said provision of the Constitution.

[1] II. It is contended that the act in question is valid because of the reserved power vested in the Legislature over corporations, as provided in section 8376 of the Code of 1927. At the time the appellee bank was organized and appellant acquired his stock therein, there was in force section 1619, Code 1897 (Code of 1927 as section 8376). Said section is as follows: “The articles of incorporation, by-laws, rules and regulations of corporations hereafter organized under the provisions of this title, or whose organization may be adopted or amended hereunder, shall at all times be subject to legislative control, and may be at any time altered, abridged or set aside by law, and every franchise obtained,used, or enjoyed by such corporation may be regulated, withheld, or be subject to conditions imposed upon the enjoyment thereof, whenever the general assembly shall deem necessary for the public good.”

The so-called reserved power retained by the General Assembly by the constitutional provision, section 12, article 8, and by section 8376 of the Code of 1927, has been adopted in various forms by the several states. These provisions are not identical in phraseology, in the various Constitutions and statutes. They are all the outgrowth of the decision of the Supreme Court of the United States in the famous Dartmouth College Case, 4 Wheat. 518, 4 L. Ed. 629. It was therein held that a charter from a state to a corporation was a contract within the meaning of the federal Constitution forbidding a state to pass any law impairing the obligation of contracts. The suggestion of Mr. Justice Story in the concurring opinion filed in that case in regard to a reserved power to amend articles of incorporation was the inspiration for the constitutional and statutory provisions referred to. They have been the fruitful source of much litigation, and of many divergent decisions. Said section 8376 first appeared in our statutes as section 1090 of the Code of 1873. It reappeared in the Code of 1897 as section 1619, and in the Code of 1924 and the Code of 1927 as section 8376. There has been no change in said section through any of these Codes. The appellee bank was organized originally under chapter 60 of the Acts of the Fifteenth General Assembly, which was “an act to Provide for the Organization and Management of Savings Banks.” The re-incorporation was by so-called “amended and substituted articles of incorporation” which were executed on May 10, 1911, and they recited that the corporation was organized as a savings bank under chapters 10 and 12 of title 9 of the Code of 1897. Said section 1619 of the Code of 1897 was a part of said title 9, and hence was applicable to said corporation at the time appellant acquired his stock. Also at said time sections 1878 and 1879 of the Code of 1897 were in effect providing for an assessment to restore impaired capital of a bank and for the sale of stock to satisfy such assessment.

With this situation before us we are confronted by two questions: (1) Is said chapter 181 (Code 1927, § 9248a1) within the reserved power of the Legislature? And (2) is it applicable to the appellant? In St. John v. Building & Loan Ass'n, 136 Iowa, 448, 113 N. W. 863, 15 L. R. A. (N. S.) 503, we said: “But a corporation under our laws has no absolute right to do business in this State, and its articles of incorporation are at all times subject to amendment by the General Assembly. Conditions may at any time be imposed upon a corporation and enforcement thereof assured by revoking their privileges in the event of noncompliance.”

The terms of this statute are very broad. For the purposes of this case we assume that the “franchise” therein referred to is the general franchise of the...