Hood ex rel. Morris Plan Bank v. Hewitt

Connor, J. There is no error in the judgment in this action. The judgment is supported by the facts agreed, and by a proper construction of the statute applicable to these facts. Under the provisions of section 1, chapter 121, Public Laws of North Carolina, 1925 (section 225 [o], N. O. Code of 1935), which became effective on 4 March, 1925, the defendant, as a stockholder of the Morris Plan Bank of Greensboro, N. C., owning 44 shares of its capital stock, of the par value of $4,400, is liable, individually, to the extent of the par value of the shares of stock owned by him at the date of the insolvency of said bank, for every contract entered into, for every debt incurred, and for every engagement made by said bank, since 4 March, 1925. This statute was enacted by the General Assembly of this State in the valid exercise of its power to alter, by a general law or by a special act, the law under which the corporation was created in 1916. Const, of N. 0., Art. VIII, sec. 1. The statute is applicable to the defendant in this action, notwithstanding the shares of stock owned by him are fully paid and nonassessable by the corporation. The statute does not affect, or purport to affect, the contract between the corporation and its stockholders with respect to the shares of its stock owned by its stockholder. The liability imposed by the statute upon the stockholders of an industrial banking corporation, organized and doing business under the laws of this State, is for the benefit of creditors of the corporation, and not for the benefit of the corporation itself. The effect of the statute is to impose upon every stockholder of an industrial banking corporation, organized and doing business under the laws of this State, a statutory liability to all persons who shall become creditors of the corporation, after its enactment. The validity of the statute as thus construed is sustained by the decision of this Court in Smathers v. Bank, 135 N. C., 410, 47 S. E., 493. In that case, speaking of chapter 298, Public Laws of North Carolina, 1897 (now section 219 [a], N. C. Code of 1935), the Court said: “¥e hold that the statute should not be so construed as to fix liability upon stockholders for debts contracted or made prior to the amendment of the charter or the statute. The subscription of stockholders constitutes the contract, and the extent of the liability as to debts already incurred is fixed by the terms of the charter as they then exist. Any change in the charter in this respect must be construed to operate prospectively, only. It is well settled that such liability as the stockholder assumes is contractual. Thus construed, we find no constitutional objection to the Act of 1897.” [816] In this case, from 1921, when the corporation, by amendment to its certificate of incorporation, changed its name to “The Morris Plan Industrial Bank of Greensboro,” to 1933, when the corporation, by action of its board of directors, placed all its assets in the hands of the Commissioner of Banks for liquidation, as authorized by statute, the defendant was a stockholder of said corporation. During this time the corporation was engaged in the business of operating an industrial bank, under the laws of this State. The defendant, by the judgment in this action, is required to discharge his statutory obligation to creditors whose debts were contracted after 4 March, 1925, and who relied, as they had a right to do, upon the provisions of the statute for protection in the event the corporation became insolvent. The judgment is supported by the statute, and is, we think, in accord with good morals. Affirmed. Devin, J., took no part in the consideration or decision of this case.