Seymour v. Bank of Minnesota

LOVELY, J. Plaintiffs were appointed by the district court of Ramsey county receivers of the insolvent Bank of Minnesota, a banking institution incorporated under the laws of this state. Its assets are insufficient to meet its obligations, and this action is brought by the receivers to enforce the individual liability of the stockholders, under Laws 1895, c. 145. The plaintiffs claim the right to enforce against each of such stockholders a liability for double the amount of his holdings of stock, which, by reason of the insolvency of many stockholders, and the deficiency of assets, is claimed to be necessary to secure payment of its debts. The defendants resist the enforcement of the double liability, and contend that all but a limited amount of the indebtedness was actually incurred after the provisions of chapter 145 took effect, and that the liability of the stockholders is reduced by the terms of that act from a double to a single liability; and this, as we view it, is the real contention in this case. It was not disputed that, if the statute referred to in all respects applied, it did reduce the liability of the stockholders as claimed; but it was urged by counsel for receivers on the trial below, as well as in this court, that certain provisions of this statute did not control this question, but were in violation of section 13, article 9, of the state constitution, which left the previous enactment (G-. S. 1894, § 2501), providing for a double liability in such cases, in full force. It is also a serious contention by the receivers that -a large part of the indebtedness of the bank, amounting to over $533,000, represented by certificates of deposit allowed and found as claims, were renewals of other certificates that had been issued before August 1, 1895, and that for such reason the liability of the stockholders was not changed by the renewals from a double to a single liability. Upon both of these questions the trial court held adversely to the receivers, and ordered judgment against the stockholders for the indebtedness mentioned above, only for an amount equal to the holdings of each stockholder, which judgment was duly entered. In the judgment it was also ordered that to the extent of $27,000, in round numbers (being indebtedness which accrued previous to August 1, 1895, when the single-liability statute — 221 — went into effect), the stockholders were liable in double the amount of their shares. Both parties have appealed from the judgment to this court, and, in the view which we take of the legal issues presented by the respective appeals, there are three propositions before us for our determination, viz.: 1. Was the act of 1895 constitutionally operative upon the previous double-liability provisions of the banking law of this state? 2. Was the conclusion of the trial court, to the effect that the renewal certificates constituted new obligations subsequent to the act of 1895, supported by the evidence? 3. Was the portion (about $2,000) of the $27,000 indebtedness which accrued between the passage of the act of 1895 and the time when it took effect by its terms a claim that could be enforced a.gainst the stockholders under the single or double liability act referred to? 1. The theory of the receivers is that the Bank of Minnesota, which was organized in 1882, under chapter 33 of the general statutes, was a bank of issue, having a right to put forth its bank notes, and, although it never had in fact exercised that power, it was authorized to do so, and by the provisions of the constitution (article 9, § 13, subd. 3), which imposed a double liability upon its stockholders, it was in terms declared that the general banking law to be provided for thereunder should apply only to banks “issuing bank notes;” whose stockholders should be “individually liable in an amount equal to .double the amount of stock owned by them for all the debts of such corporation or association”; and the question here on this contention simply is whether the provisions of Laws 1895, c. 145, in reducing the stockholders7 liability, conflict with this constitutional restriction. The answer to this question concededly turns upon the effect to be given to the words restricting the liability clause in the constitution to banks “issuing bank notes”; for the organic law does not apply in such restriction to banks of discount and deposit, and if the Bank of Minnesota was not a bank of issue, or its right to issue bank notes was taken from it, the later act upon the subject repealed the former, or those provisions thereof which were incon — 222 — sistent with it. It is a matter of common knowledge, of which this court will take notice, that neither the Bank of Minnesota nor any other bank in this state has issued bank notes since the establishment of the national banking system, and the tax imposed thereby upon the circulation of bank bills as currency; and the Bank of Minnesota at no time since its organization has been a bank, within the literal terms of the organic law, “issuing bank notes.” But it is urged that it might, having the power to exercise this privilege, break the ban, and by issuing its notes exercise that right, for the purpose of asserting its constitutional authority, and creating a subsequent liability thereby. We think that this is probably true, unless by the terms of the act of 1895 the power to issue bank notes has been, by necessary implication, withdrawn and revoked. By the act of 1895 the banking laws of this state are carefully revised, and it is provided by section 1 of that statute that the banks to be thereafter established shall be banks of “discount and deposit,” — not authorizing in any of its provisions, either in terms or impliedly, a right to issue bank notes; and it is further provided in section 29 thereof that “The powers, privileges, duties, and restrictions conferred and imposed upon any bank existing and doing business under the laws of this state are hereby abridged, enlarged, or modified, as each particular case may require, to conform to the provisions of this act.” To give proper scope and effect to this last provision, it must be held to abridge the power to issue bank notes conferred by the law under which the Bank of Minnesota was organized; and the question still follows, does such change restrict the charter or acts of incorporation under which the Bank of Minnesota was incorporated? It may be conceded, for the purpose of argument, that, if the power to issue bank notes had been exercised by the bank, it would not have been within the constitutional authority of the state to abridge or withdraw that right; but we do not think it can be held, upon sound principles of public policy, that an unused power, depending upon legislative sanction, when no contractual relations have been imposed, creates such a vested privilege that it — 223 — cannot be withdrawn by the authority from which it emanated; and when, by the terms of Laws 1895, c. 145, the power to issue bills was withdrawn, the Bank of Minnesota became only a bank of discount and deposit, not controlled by the constitutional restriction referred to, but subject to legislative control; and it follows that its stockholders’ liability might be regulated, reduced, or increased thereby. Allen v. Walsh, 25 Minn. 543, 548. The right to regulate the banking institutions of the state yields in importance to no other subject of legal control, for the interests involved are vast in their magnitude; they touch every enterprise and reach every hearthstone; and, in view of the varied and extensive interests concerned, there is no other object of state regulation which calls for a more ample exercise of legislative guardianship, or is better justified by the dictates of reason or sound public policy. In view of these large considerations of public importance, we are of the opinion that it was competent for the legislature to revoke the unused authority of the banks in this state to issue their notes for circulation; and that such was the effect of Laws 1895, c. 145, we have no doubt. This conclusion is supported in principle by the high authority of the supreme court of the United States. Pearsall v. Great Northern Ry. Co., 161 U. S. 646, 16 Sup. Ct. 705; Louisville & N. R. Co. v. Kentucky, 161 U. S. 677, 16 Sup. Ct. 714. We have stated our views upon this portion of the case the more fully out of respect for the contention of the able counsel for the receivers, who insist with much force and learning that this is still an open question; but we are satisfied that this controversy has already been considered by this court, and that a careful review of the arguments and opinions in a recent case where these receivers were parties will show that the trial court was right in resting its decision upon the rule of stare decisis. Anderson v. Seymour, 70 Minn. 358, 73 N. W. 171. 2. The trial court held that, of .the large indebtedness of the bank, $533,300.53 represented the amount of certificates of deposit which were renewals of other certificates outstanding prior to August 1,1895, and that with reference to such certificates renewed after that date, when the stockholders’ liability was reduced, there — 224 — was an “unconditional surrender” by each holder, “and the acceptance by him of a new certificate, without other circumstances showing an intent that the old contract should remain in force, which creates a new and independent contract,” and ordered judgment for an amount equal only to the face value of such obligations. The evidence to support this conclusion of the court below shows that the bank was at the time of the renewals open, apparently solvent, and doing business according to the usual custom of banks; that when the old certificates, which were obligations bearing interest for six months, were presented, by their terms they ceased to bear interest; that the holders were given the option to have their money, but that they chose to take new certificates, which bore interest for six months longer. In many cases a part was paid, or the interest only, according to the choice of the holder. In view of the “common understanding” in such cases, the court held that the new certificates evidenced a new contract, upon which the rights of their owners must be based; and the owners themselves, in filing their claims, seem to have adopted that view at the trial, since such claims were rested upon the certificates issued after August 1, 1895. We think the evidence in this respect is sufficient to sustain the conclusion reached by the court below. It is urged, upon the analogy supposed to exist between such certificates and negotiable notes between private parties, that the rule has been established that the giving of a new note does not, without express agreement, discharge the old obligation, which is the law of this state. Geib v. Reynolds, 35 Minn. 331, 335, 28 N. W. 923. But this analogy is more seeming than real, and the parallel ends with the reason for the rule, which is that, in the case of transactions between individuals, new notes for the old debts are mere extensions for the benefit of the debtor solely, and by favor of the creditor; and, in the cases.on this subject in this court where the rule has been applied, it has been held that a new note may be received as a payment, or, to adopt the language of the learned trial judge, as an “independent contract,” if such is the intention of the parties, and that the intention which controls in that respect is to — 225 — be drawn from tbe evidence consisting of tbe circumstances of each case. Keougb v. McNitt, 6 Minn. 357 (513); Goenen v. Schroeder, 18 Minn. 51 (66); Geib v. Reynolds, supra; Combination S. & I. Co. v. St. Paul City Ry. Co., 47 Minn. 207, 49 N. W. 744; Hanson v. Tarbox, 47 Minn. 433, 50 N. W. 474; Wiley v. Dean, 67 Minn. 62, 69 N. W. 629. And it would seem to follow, when the reason for the rule referred to is considered, as well as the circumstances that entered into the transactions of the bank with its certificate holders, that the court would not have been justified in going behind the face of the certificates themselves; for, when such certificate was presented at its counter, the bank was ready in each case to pay it in money, and if the certificate had been presented, properly indorsed, by a mute, without a word, the teller would either have counted out the funds to take it up, or committed an act of insolvency for the bank; or if the certificate holder had taken his money and gone to another bank, and taken a new certificate there, or if at the same bank he had taken his money from the teller, and again returned it for a new certificate, there would be no question as to the nature of such a transaction. Concededly, they would constitute new and independent contracts. And we think this is precisely what the 'certificate holders, with their option to take the money or reloan it for new interest, which they would not have had if the certificates had not been renewed, did, although it was done by a business “short cut,” which implies all that the court below found to be within the “common understanding” prevalent in such cases; and we think, in this respect, the judgment must be sustained. 3. Upon the cross appeal of the stockholders, the claim is made that of the certificate indebtedness which had not been renewed prior to August 1, 1895, amounting to over $27,000, in round numbers, some $2,000 of such certificates were issued after the act was approved (April 15, 1895), but before the day when by its terms it was to take effect (August 1 of same year). The trial court held that upon all certificates issued before the statute took effect the liability of the stockholders was double, as if Laws 1895, c. 145, had not been passed. We think that in this respect the trial court was — 226 — clearly right. It is' true that such creditors entered into their contracts with the bank after the act of 1895 had been approved, and had full notice that it would go into effect on August 1 thereafter; and it is urged for that reason that the act reducing the stockholders’ liability became a part of all contracts entered into with the bank in the meantime. This is plausible, but not satisfactory; for the controlling fact still remains that by the laws of the state in force when the contract was made, and which necessarily became a part thereof, the stockholders were liable for the debts of the corporation in a sum double the amount of the par value of the stock holdings of each. The judgment of the court below is affirmed.