Paine v. Stewart

Butler, J. We are all satisfied that the rulings of the court below in this case were correct, and that the verdict should stand. It appears from the motion to have been conceded or found by the verdict, that the plaintiff purchased from the bank of St. Paul, which was organized under the laws of Minnesota, a draft upon Ketchum & Sons, of the city of New York, which was dishonored, and which if properly executed constituted a valid claim against the bank. By the laws of Minnesota the stockholders of the bank were liable individually for the debts of the bank, to an amount equal to double the amount of stock owned by them respectively. At the time the draft was purchased the defendant was a stockholder in the bank to the amount of five hundred dollars. The plaintiff after said draft was protested (the bank having become insolvent,) demanded payment of the defendant as a stockholder, so liable individually; and the defendant requested delay, promising not to transfer his stock. It further appears that the individual liability aforesaid continued by law for twelve months after a transfer of the stock and no longer. The defendant, after requesting delay and promising not to transfer his stock, did transfer it fraudulently and without consideration, and more than one year elapsed after such transfer before suit was commenced. It also appears that the laws of Minnesota which authorized the organization [528] of the bank contained a provision in the following words, namely, “ Contracts made by any bank or banking association established under the provisions of this act, and all notes and bills issued and put in circulation as money, shall be signed by the president and cashier thereof.” It did not appear that the plaintiff had taken any steps to recover the amount paid for said draft except to request payment of the bank, and it did appear that there were other stockholders of said bank living in this state. On this state of facts the defendant claimed,.in the first place, that he was not liable because the suit was not brought within one year after a transfer of the stock, and requested the court so to charge the jury ; but the court did not so charge. In that the court was right. The delay in commencing the suit was directly induced by the promise of the defendant that he would not transfer his stock and deprive the plaintiff of the rights which he then had to institute the suit. Under such circumstances the transfer was wrongful and fraudulent, and as against the plaintiff inoperative. Middletown Bank v. Magill, 5 Conn., 70. The defendant further claimed that he was not liable for the payment of said draft, or the monies mentioned therein, because it was not signed by the cashier of said bank as required bylaw,and that no different usage could lawfully exist; and requested the court so to charge the jury. The court did not so charge, and in that we are satisfied there was no error. The clause in the statute of Minnesota upon which the claim of the defendant was based, does not appear to have received a judicial construction in that state ; but it is obviously copied from the general, banking law of New York, and, as contained in the latter, has received a judicial construction by the courts of New York, and also in this court. In Saford v. Wyckoff, 4 Hill, 442, it was determined in the Court of Errors that the requirement extended only to paper intended to circulate as money, and that a draft signed by the cashier only (the purchase money of which came to the possession and use of the bank,) constituted a valid claim [529] against the bank. And see also Barnes v. Ontario Bank, 19 N. York, 152. The same construction was given to the clause by this court in Kilgore v. Buckley, 14 Conn., 362. The court below correctly conformed to those decisions. The defendant claimed, in the third place, that if the draft was valid, the action could not be sustained against him alone. It must be conceded that such an action is in some respects anomalous, but we think it must be sustained. The act of Minnesota, which authorized the organization of the bank, constituted it a corporation, and gave the stockholders corporate powers, and imposed upon them coi’porate liabilities, but it also imposed upon them individual liability to a limited amount and in general terms. These obligations were independent and both absolute. In some of the states the legislature, when imposing such individual liability upon members of corporations, have prescribed conditions and contingencies upon which it should take effect. The legislature of Minnesota did not do so. By the 24th section of the law they provided that the private property of stockholders should not be levied upon for the payment of corporate debts, while corporate property could be found with which to satisfy the same, and made a return of “ nulla bona ” on execution a sufficient proof that corporate property could not be found. But in that they did not say that the liability should not accrue until the corporation became insolvent. They simply restrained the right to enforce it by levy of execution so long as there was corporate property which could be levied upon. The liabilities then are independent and coexistent and the individual liability does not spring into existence upon the insolvency of the company. It is operative upon the stockholders while such, and for one year after they cease to be such, substantially as if no corporation existed legally and the debts had been contracted on their behalf as an association of individuals. Such has been the view taken of similar provisions in corporate charters in this state. Southmayd v. Russ, 8 Conn., 52 ; Middletown Bank v. Magill, 5 id., 28 ; Dem [530] ing v. Bull, 10 id., 409 ; and see Corning v. McCullough, 1 Comst., 47. . The inconveniences attending such a condition-of things, and the hardship of making every individual stockholder thus primarily liable as an individual, were urged in Deming v. Bull, as they have been in this case, and were there disposed of as they must behere, by saying that having voluntarily placed themselves in that condition for the sake of gain, the stockholders must abide the inconveniences and loss that may be incident to it. ■ How then may such stockholders be sued ? The principles adopted in the cases cited would seem to lead logically to the result that suit must be brought against the stockholders (if at all as individuals) precisely as in other cases of copartnership or joint associated liability, and that if a defendant would take advantage of any nonjoinder' of parties he must plead in abatement. . Rut it was holden in the case cited from 24 Wendell, of Bank of Poughkeepsie v. Ibbotson, that the stockholders were severally and not jointly liable. That decision is not placed on the ground that the term individual imports a several.liability, but on the ground that their interest and consequent liability being unequal and limited, & joint judgment cannot be rendered against all; and there is force in the. reason assigned. It is immaterial how we decide the question in this particular case, for not .having pleaded in abatement, the.defendant is without remedy in any view of the case which can be taken. It is however important to the profession and to the public that the rule be settled, and, as required for the convenience of all parties and by the necessity of the case, although a departure from the general principle, we. follow the rule adopted in that case. The suit was therefore properly instituted against the. defendant alone. The fact that bill-holders of the bank were entitled to a priority of payment cannot in any way avail the defendant. Provision is made in the law for the payment of the bills by the auditor of the state with the avails of the securities in his hands, and non constat that they were insufficient. If demand had been made of the defendant by the receiver for [531] the amount for which he was made individually liable, for the purpose of paying the holders of the circulation of the bank a deficiency which the stocks in the hands of the auditor did not pay, and. he had paid over for that purpose to the receiver, and set the fact up in his defense, he would have been in a condition perhaps to make that question. Nothing of the kind appeared, and he was in no condition to make it on the trial, and is in no condition to be heard upon it now. The defendant further asked the court to charge that there could be no recovery in the action without evidence of a judgment recovered against the bank, and an attempt by execution to collect the same ; relying on the 24th section of the act of the state of Minnesota concerning corporations, which is as follows: — “ In none of the cases contemplated in this chapter can the private property of stockholders be levied upon for the payment of corporate debts, while corporate property can be found with which to satisfy the same ; but it will be sufficient proof that no property can be found if an execution has issued on a judgment against the corporation, and a demand thereon made of some one of the last acting officers of the body for property on which to levy, and if he neglects to point out any such property.” We are of opinion that the evidence that the bank was insolvent, and all its property had gone into the hands of a receiver, was sufficient proof that no property could be found, and excused an effort to collect by suit against the bank. Proof of the fact that no property can be found is not confined to an unsuccessful demand on execution. That is one mode of proving the fact, and it is declared by the statute to be a sufficient mode. But any other sufficient evidence may be given; and the vesting of all the property in a receiver, and the withdrawal of it thereby from the reach of an officer, is sufficient. The court properly declined to charge as requested. These views dispose of both the motions, and the superior court must be advised to render judgment on the verdict. In this opinion the other judges concurred.