Branchville Motor Co. v. Adden

The opinion of the Court was delivered by Mr. Justice Cothran. There were two demurrers, by separate defendants, to the complaint herein, but it will be convenient to treat them as one, as they present the same question of law, namely, whether the remedy provided by the Act of 1929, 36 Stat., 199, for the enforcement of the statutory liability of stockholders of banks to depositors, is exclusive of the previously existing direct remedy of depositors against the stockholders. The Planters’ Bank of Orangeburg closed its doors on November 26, 1929, and, by action of the directors, was placed in the hands of the State Bank Examiner, under Section 3981, Civ. Code of 1922, for a period not exceeding 30 days. On the very next day, November 27th, the present action was instituted by two depositors of the bank, having deposits of $1,100.00 and $700.00, respectively, against 122 *92 of the stockholders, the complaint alleging the insolvency of the bank, practically a creditors’ bill in equity, asking for the appointment of a receiver and a distribution of the funds to be realized from the liability of the stockholders under the Constitution, Article 9, § 18, and Section 3998, Vol. 3, Code of 1922. It will be observed that the action was commenced before the bank examiner could take any steps looking to a liquidation of the bank under Sections 3981 or 3985, or under the ‘Act of 1929, 36 Stat., 199. The defendants demurred to the complaint upon the ground, mainly, that an action against stockholders of an insolvent bank can be maintained only by a receiver appointed under the Act of 1929; in other words, that the remedy provided in that Act, superseded the remedy that the depositors theretofore had. The demurrers were sustained by his Honor, Judge Mann, m a decree dated December 17, 1929, which will be reported. * From it the plaintiffs have appealed. The controlling enquiry is as to the legislative intent in passing the Act of 1929. A natural and safe guide to that intent is the statutory and judicial status of the subject at the time of its enactment. The Constitution, Article 9, § 18, provides: “The stockholders of all insolvent corporations shall be individually liable to the creditors thereof only to the extent of the amount remaining due to the corporation upon the stock owned by them: Provided, That stockholders in banks or banking institutions shall be liable to depositors therein in a sum equal in amount to their stock over and above the face value of the same.” This section was (needlessly) enacted into statute law; that part relating to corporations other than banking corporations, in Section 4351, and that relating to banking corporations in Section 3998 of Vol. 3, Code 1922; the latter being: “The stockholders of all insolvent banks and banking *93 institutions, whether heretofore or hereafter incorporated under Act of Assembly of this state, either general or special, shall be individually liable to the creditors thereof, other than depositors, only to the extent of the amount remaining due to the corporation upon the stock owned by them: Provided, That stockholders in all such banks and banking institutions shall be liable to depositors therein in a sum equal in amount to their stock over and above the face value of the same.” Exactly what the expression “in a sum equal in amount to their stock over and above the face value of the same” means, it is difficult to divine; but the general acceptation appears to have been that, if one owns one share, par value $100.00, his statutory liability is $100.00, and so on. In an early case, Hall v. Klinck, 25 S. C., 352, 60 Am. Rep., 505, under a somewhat similar statutory provision, it was held that any creditor might bring his individual action at law against any stockholder. In the latter case of Parker v. Bank, 53 S. C., 583, 31 S. E., 673, 674, 69 Am. Rep., 888, it was said that that case (Hall v. Klinck) was based upon the peculiar statute therein involved. Applied to the facts in the Parker case, the Court declined to take that view of the provision in the Constitution of 1868, saying: “To leave each creditor to single out for suit one or more stockholders at law would entail a multiplicity of suits, and result in an unequal distribution of the assets for creditors, all of which is prevented by entertaining this proceeding in equity.” The Parker case involved a consideration of a provision in the Constitution of 1868, which went further than that of 1895, in that creditors, whether general creditors or depositors, were entitled to participate in the liability of the stockholders. It was there held, quoting syllabus: “The Court of Equity has jurisdiction of an action by a creditor of an insolvent bank, who sues for himself and all other creditors, to compel payment by stockholders of statutory liability. *94 In several cases since the decision of the Parker case, it has been consistently recognized that under the Constitution of 1895 one or more depositors may bring an action assimilated to a creditors’ bill in equity, against all of the stockholders for the purpose of realizing from them their statutory liability and of distributing it, as would be done in a creditors’ bill proceeding among the depositors entitled thereto. In several succeeding cases it has been held that “the liability of stockholders to depositors-, under the Constitution and statute, is not an asset of the bank, but is the basis of an individual, personal, joint right in the depositors, .with which the corporation or its receiver or its board uf liquidating trustees have absolutely nothing to do.” Johnson v. Adams, 138 S. C., 409; 136 S. E., 885, 887; Ford v. Sauls, 138 S. C., 426, 136 S. E., 888; Bradley v. Aimar, 140 S. C., 14, 138 S. E., 401; Ex parte Fant, 147 S. C., 167, 145 S. E., 34; State v. Bank of Clio, 129 S. C., 109, 123 S. E., 773; Gary v. Matthews, 148 S. C., 125, 145 S. E., 702. Thus stood the constitutional and statutory provisions, relating to the liability of stockholders in banking institutions, and the judicial decisions at the time of the enactment of thé Act of 1929. The constitutional provisions of course have not been changed by statute; the liability remains as it was therein established. Neither in the Constitution nor in the statutory enactment of Section 3998 was there any provision indicating or providing for a remedy by which the depositors may have enforced the liability of the stockholders. Under these circumstances this Court has held as stated, that the proper remedy was a suit in the nature of a creditors’ bill in equity; a remedy which has not infrequently been invoked and sustained; the Court stating at the same time that the remedy could be invoked only by depositors; that the liability was personal to them and no part of the assets of the estate in the hands of a receiver. *95 This Court in more than one instance has entertained, if hot expressed, the regret that the law was such as to require separate proceedings by the receiver and the depositors; that the matters of the administration of the receivership and the collection and distribution of the stockholders’ liability were so closely related as to make it greatly expedient that both should be settled in the same general proceeding; that the method which obtains in the receiverships of national banks was greatly to be preferred. We cannot but think that the same considerations moved the General Assembly to enact the Act of 1929. Neither the statute, Section 3998, nor the Act of 1929 confers upon the depositor an enforceable right; that is accomplished by the Constitution, to which the legislation adds nothing. Until the Act of 1929 was passed the depositor looked to the inexhaustible fountain of equity jurisprudence for his remedy, which, as we have seen, was a suit in the nature of a creditors’ bill in equity. The equitable principles established in England have been here adopted as a part of the common law, and applied to the instance in point upon the ground that, where there is a right, there must be a remedy. It must be conceded that, where there is an existing established right, and an existing remedy, either statutory or at common law, a new statute, recognizing the right and providing a new remedy, will not be held to have superseded the existing remedy unless: 1. There is in the new Act an explicit repeal of the old remedy; or 2. The enforcement of the new remedy necessarily presents a situation incompatible with the continued existence of the old remedy; or 3. It clearly appears that by the new Act the Legislature intended to take over the entire field of operations, to the necessary exclusion of the old remedy. *96 While there is, in the Act of 1929, no explicit negation of the continued existence of the old equitable remedy, from a consideration of that Act, in view of the then statutory and judicial status of the subject it clearly appears that the Legislature intended to radically change the existing method of the administration of insolvent banks, to take over the entire field of operations and to provide a uniform, fair, just, and efficient method of administration by one person, duly elected by the parties most vitally interested and appointed by the Court; that when so appointed such person, duly bonded, under the supervision of the Court as an officer of the Court, should have entire control of all phases of the administration to the exclusion of all other persons. The Act of 1929' makes radical changes in the existing method of the administration of insolvent banks. The changes are so radical as to demonstrate that the Legislature intended, by the Act, to control the entire field of operations, except in a few particulars that were provided for in Sections 3981 and 3985 and were not affected by the Act; Under these Sections there were two distinct statutory proceedings which justified the interposition of the bank examiner in the management of the affairs of a bank. They .arose from different conditions and affected different results. Section 3981 justified the interposition of the examiner upon the request of a majority of the board of directors. It became his duty then “to take and retain sole possesion and control of'the property and business of such corporation for not exceeding thirty days”; within that time the corporation is given the alternative of resuming business, or, with the consent of the examiner, of applying to the Court for an order “authorizing said corporation to liquidate its affairs under the sole supervision and control of the examiner and subject to the order of the said Court.” The Act of 1929 recognizes the right of the examiner to take over the bank under Section 3981, and provides that, *97 if it be decided thereafter to liquidate the bank, the examiner shall notify the depositors and unsecured creditors that the bank is to be liquidated, and shall notify them of a meeting called “for the purpose of electing a receiver and otherwise making provision for the liquidation of the affairs of the said bank.” The Act does not prescribe how the matter of liquidation is to be “decided”; we assume that that part of Section 3981 referring to liquidation was intended to remain of force. The Act then provides for the election and the appointment of the receiver by the Court. As was held in the case of Browne v. Hammett, 133 S. C., 446, 131 S. E., 612, 614, under Section 3981: “* * * While the title to the assets remains nominally in the corporation, the right to the possession of them and the right of disposition is vested in the board of directors as liquidating trustees.” It seems impossible to reconcile this condition with the appointment of a receiver under the Act of 1929 under whicn necessarily the right to the possession of the assets and the right of disposition is vested in the receiver. Section 3985 provides quite a different proceeding. Under it the interposition of the examiner was justified when, upon an examination of the bank, he found that it was insolvent or being dishonestly managed. He was directed then, upon consultation with the State Treasurer and after obtaining an order from the Circuit Judge to that effect, upon due notice, to take and retain possession of all the assets and property of the bank, and then to apply to the Court to have either himself or someone else appointed -receiver to wind up and settle the affairs of the bank. It seems impossible to reconcile this condition with the method provided for in the Act of 1929 for the election and appointment of a receiver, which is made applicable to Section 3985. As a matter of simple justice and right, contemplating the entrapment into which the innocent stockholder has *98 fallen, the loss of all that he has paid for his stock, and the liability to an «assessment of 100 per cent, upon its par value, he should not be required to respond to that assessment until it shall-have been ascertained that the necessity, and the extent of it, exists as a supplement to the assets of the broken bank. No one is in a better position than the receiver to ascertain and "declare this necessity. Under the law as it stood at the time of the passage of the Act of 1929, the depositors of an insolvent bank were not required to make a showing of this necessity; they could have brought suit at once, upon the insolvency of the bank. Regardless of this necessity, the stockholders would have been required to pay their assessments and wait for a refund in the event that they had paid in more than was necessary. Buist v. Williams, 81 S. C., 495, 62 S. E., 859; Bird & Co. v. Calvert, 22 S. C., 292; Parker v. Bank, 53 S. C., 583, 31 S. E., 673, 69 Am. St. Rep., 888. The Act of 1929 changed this, and yields to the stockholder the just right of withholding his assessment until the receiver shall have ascertained and declared the necessity and made-demand upon him. This is a clear instance of inconsistency between the law as it formerly was and the Act of 1929. In the case of Buist v. Williams, 81 S. C., 495, 62 S. E., 859, 861, it was held: “Hence, when a bank becomes insolvent, the creditors have two remedies which they may enforce simultaneously: They may sue the bank and have a receiver appointed for the collection of the- assets and application of them to the debts, and at the same time sue the stockholders on their liability.” (The Court manifestly referred to depositors, a class of creditors, and not to general creditors.) This is another instance of inconsistency between the law as it then stood and the Act of 1929. That Act makes particular provision for the appointment of a receiver; its title, in part, is: “An Act to Provide the Manner in Which Receivers of Closed Banks are to be Chosen.” The Act requires *99 the bank examiner to give notice to the depositors and unsecured creditors that the bank is to be liquidated; that a meeting is appointed for the purpose of electing a receiver; the appointment by the Court of such person as receiver, who shall give bond, etc. Can it be urged that, in the face of this explicit direction, the depositors could move for the appointment of a receiver, as they could have done under the Buist v. Williams case? Could there be two receivers, separately appointed, of the same bank? If the Act is exclusive in this respect, why is it not so in reference to the stockholders’ liability ? The one presents an instance of a pre-existing remedy, withdrawn by the Act, as much so as the other. Moreover, as was actually done in this case, the action by the depositors upon the stockholders’ liability could be instituted before the meeting of creditors and depositors could be held under the Act of 1929. Carried to a successful termination a receiver would be appointed to collect the stock holders’ liability, and, like Othello, it could be said of the receiver elected and appointed by the Court under the Act of 1929, so far as the stockholders’ liability is concerned: His “occupation’s gone.” The contention of the appellant is that the remedy afforded by the Act of 1929 is cumulative, not alternative, of the former equitable remedy. Surely the Legislature did not intend after the passage of the Act of 1929, to leave one right (enforcement of the stockholders’ liability) to be enforced by two separate and distinct persons, in either of two separate and distinct actions, one a bill in equity by the depositors, the other an action at law by the receiver. To so hold would be to render Section 6 nugatory and leave the enforcement of the stockholders’ liability in the chaotic and unsatisfactory condition it was before the Act. On the contrary, the conclusion is inescapable that the Legislature intended to adopt a remedial statute to provide *100 an efficient method of liquidating defunct banks for the best interest of depositors and creditors, to give to the receiver a right where none existed before, and to make the remedy afforded by Section 6 exclusive. For this Court so to hold will be to bring order out of chaos and bring about “a just, equitable and beneficial operation of the law.” The rule by which it is determined whether a new remedy for a pre-existing right is exclusive, is thus very clearly expressed in 1 C. J., 990: “Where a statute providing a remedy does not create a new right, but merely provides a new remedy for a pre-existing right, it is ordinarily held that such remedy is not exclusive but merely cumulative, whether the right is one previously enforceable at common law or by virtue of some other statute or constitutional provision, and whether it was previously enforceable at law or in equity, and notwithstanding the new remedy may be preferable to or more efficient than the old. A new remedy will, however, be held to be exclusive if it appears that the Legislature intended to abolish the old remedy and substitute the new, although there is no express provision to this effect.” In Young v Kansas City R. Co., 33 Mo. App., 509, the Court said: “There are three ways in which this may be done: First, by a repealing clause; second, by such repugnance that the two laws may not, in reason, both stand; third, by a revision of the whole subject-matter of the former law which is evidently intended as a substitute for it.” It may be added, what appears to be manifest without such a statement, that the receiver appointed under the Act of 1929 will be subject to the orders of the Court; and if, upon application of a depositor it should be made to appear that the receiver is neglectful of the duty he owes to the depositors in the matter of enforcing the stockholders’ liability, the Court may pass the necessary orders for their protection, even to the extent of removing the receiver and substituting another. It is conceivable that circumstances *101 might arise which would justify the Court in permitting a creditors’ bill by the depositors against the stockholders for their protection, in the event that relief could not be had through the receiver. The judgment of this Court is that the decree of the Circuit Judge be affirmed and the complaint dismissed. Mr. Chiee Justice Watts and Messrs. Justices BeEase and StabeEr concur. Footnotes [*] Reported in dissenting opinion oí Mr. Justice Carter.