Hill v. . Smathers

AlleN, J. The judgment of Judge Long, properly analyzed, contains these provisions: 1. Judgment absolute against the defendants for the sum of $13,420.50, with interest from 3 April, 1916, on $12,000. 2. Suspension of execution until the plaintiff should make it appear to the court either— (1) That the defendants, or some of them, are endeavoring to- make way with their property; or (2) That C. B. Hill, receiver of the Commercial and Savings Bank, has proceeded with the collection of the assets of such bank, and that the same are not sufficient to discharge the obligations of said bank due to creditors and depositors. 3. An order authorizing the defendants or any other interested party to make W. H. Griffiths' and others parties defendant to this action. The plaintiff moved execution upon the ground that he had proceeded with the reduction of the assets of said bank to cash so far as to ascertain to a certainty that, exclusive of the aforesaid judgment, the assets lack the sum of $17,000 to $18,000 of being sufficient to discharge the obligations due by said bank to its creditors and depositors.' The defendants admitted the deficit of $17,000 to $18,000 but resisted the issuance of execution on two grounds: 1. That every dollar of the assets of said bank must be reduced to actual cash before execution can issue under the terms of said judgment. • 2. That'the term “assets” used in said judgment includes the statutory liability of the stockholders of said bank, and that the receiver, before asking for execution, must first have an assessment laid and collected upon the stockholders. The first position of the defendants is met by the terms of the judgment, which permit execution to issue when the receiver has proceeded fai’ énough to ascertain that the assets will be insufficient to pay creditors, and by the finding, which is not controverted, that this condition exists. The second involves the construction of the judgment of Judge Long, a'nd the ascertainment of the sense in which the word “assets” is used, the defendants contending that it includes the statutory liability of the stockholders. ' The term is broad enough to cover anything which is now or may be available to pay creditors, but as usually understood it refers to the tangible property of the' corporation and not to the liability of stockholders, contingent upon insolvency. *649 It does not include rights and property wbicb do not belong to 'the corporation, and the current of opinion is that the statutory liability is not for the benefit of the corporation, but is an additional security for creditors. “A provision of this character does not' increase the capital or pecuniary resources of a corporation except indirectly, by increasing its commercial credit; its object is merely to provide a security for creditors in addition to the security furnished by the company’s capital.” Mora-wetz Priv. Corp., sec. 869. “It may be stated as a general rule that statutes making stockholders individually liable to creditors, independently of what they owe the corporation on account of their stock, create a right flowing directly from the stockholders to creditors. The sum thus secured to creditors form no part of the assets of the company, but are a supplemental or superadded security for the benefit of creditors.” Thompson Corporations, see. 3560. “The statutory liability of the stockholders is created exclusively for the benefit of corporate creditors. It is not to be numbered among the assets of the corporation, and the corporation has no right or interest in it.” Cook Stock and Stockholders, sec. 218. These excerpts from standard treatises on corporations are quoted and approved in Runner v. Wiggins, 147 Ind., 243, and the court concludes that “The liability provided by statute against the stockholders is not, as we have seen, considered an asset or right of the corporation.” These authorities are very pertinent in the construction of our statute (Rev., sec. 235) which imposes the liability on the stockholders “for all contracts, debts, and engagements of such corporation,” and not for the benefit of the corporation. The subsequent act (Laws 1911, ch. 25), providing for the assessment of the stockholders, is a recognition of the distinction between ordinary assets of the corporation and the statutory liability, and is substantially a legislative construction that the former does not include the latter. It provides for an assessment “whenever any banking corporation chartered by the State shall become insolvent, and it shall appear to the court having jurisdiction of the cause that such assets of such bank are insufficient to discharge its obligations.” Wiry use the word “assets” in this connection, without qualification, if it includes the personal liability of the stockholders? "Why not say “other assets”? The resolution adopted by the directors at the time they agreed to execute the notes upon which the judgment was obtained also sustains this construction of the judgment and the statute. *650 The bank held certain Carter notes which were worthless, and upon complaint being made by the Corporation Commission, the directors executed their notes “in favor of the bank in order to relieve the institution of this amount of paper composing the Carter notes.” If the defendants executed their notes to relieve the bank of the Carter notes, is it not reasonable to assume that one note was substituted for the other, and that the notes of defendants stand as to the bank and its stockkholders as did the Carter notes, which were assets and available to relieve the stockholders of liability ? "We, therefore, conclude that the second position of the defendants cannot be maintained. Affirmed.