Therrell v. Reilly

Davis, J. In a suit at law brought to collect a bank stock asessment, the defendant filed a plea to the declaration setting up that the bank, being incorporated under the laws of Florida, the charter limited the amount of capital stock to a sum not exceeding $100,000.00 and that in violation of the laws of the State, the bank had undertaken to increase, and had increased, its total capital stock above the charter limit, without amending its charter, and that the stock upon which the suit had been brought was stock which *807 had been issued by the bank in excess and in violation of its charter limitation, and without compliance with the law, by reason of which fact it was ultra vires and void, and did not authorize the assessment sued on. The replication to the plea setting up that defendant was estopped to interpose such defense, went out on demurrer. The writ of error is taken from the final judgment entered in defendant’s favor on the plea of ultra vires. Briefly sumarized, the replication which was held bad, alleged that while the stock of defendant had been issued by the bank in excess of the amount limited by its charter, and had been issued without an amendment to the charter of the bank authorizing the increase in the bank’s capital stock, nevertheless, defendant was estopped to plead that fact in defense of a bank stock assessment made against her under Section 6059 C. G. L., 4128 R. G. S., because the bank had done all the acts necessary to validly issue such increased amount of stock, including the authorization thereof by a two-thirds vote of the stockholders and certification of that fact to the Secretary of State, and "had only failed to comply with the law in the single particular of not amending its charter, though holding itself out to the public and enjoying the public patronage of a banking institution having the amount of capital stock of $1,000,000.00 instead of $100,000.00. The plea also alleged additional facts tending to show that the defendant should not be allowed to prevail under her plea, because she had assumed, under color of authority, without objection of any officer of the State, the status of a bank stockholder of the kind recognized by statutory and organic law in-the State of Florida, in which capacity she had participated in the affairs of the bank as if a legal stockholder thereof, as well as had accepted benefits from *808 said stock and 'dividends paid ’by the bank- thereon,' by reason of all of which it was alleged that she should be held estopped in law to deny her status as a stockholder in so far as the rights of the liquidator, after insolvency, acting for the benefit of creditors was concerned, in suing to recover an authorized stock assessment levied by the Comptroller against all stockholders of the defunct Bank of Bay Biscayne. We might well reserve the judgment on the authority of what was said by us in our recent case of Randall v. Mickle, 103 Fla. 1229, 138 So. 14, 141 Sou. Rep. 317, concerning the exact proposition on which the propriety of the replication in this case ought to have been upheld by the court below. In the case just cited, this Court said in disposing of a petition for rehearing filed in that case after its original disposition as reported in 138 Sou. Rep. at page 14: “Bank stockholders, who, under color of authority, have accepted benefits from or exercised status of stockholder for considerable time without objection, are estopped to question legality of issuance of stock, to avoid double liability, as against intervening rights of third persons who relied on apparent status of stockholders (Comp. Gen. Laws 1927, Sec. 6059).” What was said in that case was not mere obita dicta, because it was necessary for us to say what we did in order to dispose of the petition for rehearing which had been filed. See Parsons v. Federal Realty Corp., 105 Fla. 105, 143 Sou. Rep. 912, eleventh headnote. But be that as it may, the previous opinion in Randall v. Mickle, supra, is a recent one, and the question involved is of such far reaching importance, that we have reexamined the entire subject in the light of the oral argu *809 merits made, and the briefs filed in this case, thereby treating the point as one 'still open for primary consideration. We do so in order to avoid the evil consequence suggested by counsel for defendant in error that for us to blindly adhere to an erroneous rule, merely because it has been declared in recent earlier decision, tends to enshrine and perpetrate the dead error of yesterday so that it may become the living law of today. See Ellison v. Georgia R. R. Co., 87 Ga. 691, 13 S. E. 809, where an interesting discussion of the maxim, “Feat justitia ruat caelum¡’ will be found. Estoppel is a doctrine for the prevention of injustice. It is for the protection of those who have been misled by that which upon its face was fair, and whose character as represented, parties to the declaration will not, in the interest of justice, be heard to deny. And it has always been held in the case of both public and private corporations that when a corporation has the lawful authority to do an act * on the condition that certain facts exist, or with the understanding that certain acts have been done, and the law entrusts the power to, and imposes the duty upon, its officers to ascertain, determine and represent the existence of such facts upon which the public is entitled to rely in its dealings with the corporation, the representation of the acts will estop the corporation and its privies, as against those dealing with it bona fide on the faith of the fact purporting to exist, from proving its falsity to defeat a claim of liability based upon the assumption that the representation is true. See Note 11, Eng. Rul. Cas. Law 67; 10 R. C. L. page 704, et seq. When a corporation is acting within the general scope of *810 the powers conferred upon it by the Legislature, the corporation, as well as persons contracting with it, may be estopped to deny that it has complied with the legal formalities, which are prerequisite to its existence or to its action, because such prerequisites might in fact have been complied with. Central Transportation Co. v. Pullman Palace Car Co., 139 U. S. 24, 11 Sup Ct. 478 (488), 35 L. Ed. 55. On the same principle, when a bank has been once duly and legally chartered under the law, and there exists on the books a provision in the statutes under which such bank can, by complying with certain legal formalities, increase its capital stock by voting for such increase and by amending its charter, so as to show the amount of the increase, persons who have become record holders of shares of stock actually issued by such bank, and who have participated in its affairs and drawn benefits from it in the form of dividends and other distributions or payments of value, so received by them in the status of a stockholder, will, as to creditors and depositors in case of insolvency of the bank, become estopped to deny that the bank had complied with the legal formailties, which were prerequisite to a valid increase in the amount of capital stock because as to the general public, uninformed to the contrary, such prerequisites as are required by the statute to effect an increase in the amount of capital stock, might in fact have been complied with. In this connection it is pertinent to call attention to the fact that there is no law in this State which prohibits a bank to be capitalized to an amount of one million dollars, nor does any statutory provision forbid the doing by a bank of exactly what was done by the Bank of Bay Biscayne in regard to increasing its capital stock in the way and to the amount it did, had the formalities of the law for doing it *811 been complied with. Every formality is shown to have been complied with, except the bare circumstance of amending the charter by observing a certain course of procedure required to be followed in order to make the amendment showing an increase in capital stock legal. Section 6060 C. G. L., 4129 R. G. S., makes the stockholders of a bank liable for all the bank’s debts, as if they were members of a general partnership and not stockholders of a corporation, if a bank transacts business until it has been first duly authorized by the proper State officers so to do. To hold that a transaction by a bank or business done by it while it holds itself out as being supported by more capital stock than was technically authorized by legal formality, imposes no liability whatsoever on ostensible stockholders who participate in and enjoy the benefits of a stockholder ea nomine, would be an incongruous anomaly that would fritter away the protection of the enactment of the stockholders’ added liability was intended to afford, in cases of insolvency. Section 6092 C. G. L., 4155 R. G. S., provides for the publication of bank statements which of necessity would be required to show, and which the Court judicially knows do, in every instance, show, the amount of outstanding capital stock liability the bank has, based upon the number of shares that have been issued by it. The publication of such information is required for the benefit of the public. When published, the public has the right to rely upon the published statement as to the amount of stock outstanding, being true as published. And those who acquire stock in a bank, enjoy its benefits, and permit the bank to be held out in such published statements, as having stock of a represented total amount, have little standing in a court of justice to be heard to aver the contrary, after the bank has *812 become insolvent and they have been sued to compel them to respond to the liability of a real stockholder. We do not understand the Federal cases and cases from other jurisdictions which have been cited to this Court in the able brief of counsel for defendant in error, as really holding contrary to the true principle of the rule we have just stated. Properly construed, the cited cases will be found to deal with a different situation from that which this case presents. But if it must be conceded that their holdings are in truth and in fact directly contrary to our own as made in this'case, we regard such holdings as unsound, and refuse to follow them to the extent of perpetuating in this jurisdiction the error of a rule so unjust and so detrimental to the public welfare, as to declare that a bank stockholder can do what no other wrongdoer is in law permitted to do, that is, retain the benefits of an illegal action to which he is a party, and at the same time repudiate and escape from a concomitant contractual liability arising out of the same ostensible status that made possible the realization by him of a stockholder’s benefits. The demurrer to the replication to the defendant’s plea was erroneously sustained in view of what we have heretofore said in Randall v. Mickle, 103 Fla. 1229, 138 So. 14, 141 Sou. Rep. 317, which opinion we now follow and reaffirm, for reason herein discussed. Reversed and remanded. Whitfield, P. J., and Terrell, J., concur. Buford, C. J., concurs in the opinion and judgment. Footnotes [*] In this case the statutes authorized the bank to increase its capital stock by complying with certain requirements, and following certain steps by way of procedure for doing it.