Pyles v. Carney

Williams, Judge: Upon sustaining in part and overruling in part the separate — 161 — demurrers of a number of tbe defendants to tbe second amended bill filed by B. A. Pyles, special receiver of tbe Exchange Bank of Littleton, against a number of its stockholders, for the purpose of enforcing their individual liability for double tbe amount of their stock, tbe same being alleged to be necessary to pay tbe creditors of tbe insolvent bank, tbe court has certified for our decision a number of questions. Many of them, however, did ñot, and clearly are not such as could arise on tbe demurrer, but can only arise on issues of fact. A copy of tbe written demurrer of defendant A. J. Jones, of the second amended bill and exhibits filed therewith and of tbe court’s order ruling upon tbe demurrer constitute tbe record now before us. Tbe demurrer is general, although it specifies numerous grounds, and if tbe bill states a good cause for relief in any particular and is not lacking in proper parties, tbe demurrer should be overruled. Trough v. Trough, 59 W. Va. 464, and Wheeling v. Telephone Co., 82 W. Va. 208. Tbe bill purports to make parties all living, resident and solvent persons, who are now, or have been at any time in tbe past, stockholders in tbe bank, when any part of its present liabilities arose, for which tbe bill seeks to bold them liable, avers when they acquired tbe stock and bow many shares and tbe par value thereof, and, in case they transferred any or all of them, when, to whom and bow many shares were transferred, and if their assignees again transferred any of them, to whom and bow many shares, thus giving a complete history of tbe ownership and various transfers of all tbe stock in tbe bank from its incorporation in March, 1903, under tbe laws of West Virginia, as a bank of discount and deposit, down to July 8, .1913, when its doors were closed by tbe commissioner of banking and it ceased to do business; and avers that on tbe date last named plaintiff was appointed receiver for it by the commissioner of banking, acting with tbe advice and consent of tbe Governor; that be qualified in tbe manner required by law and took charge of its assets and has endeavored to reduce them to cash, and has in fact so reduced about all tbe available assets; that by virtue of an order of tbe banking commissioner, made after an inspection of the receiver’s accounts, be has paid three dividends, one of 40%, an — 162 — other of 35%, and a third of 12%% to the bank’s creditors, after first paying $686.22 preferred claims; that much of the assets, amounting to $19,505.65, are worthless, exhibiting a list thereof with the bill; that after applying all available assets, including what is yet' remaining in his hands, the funds will fall short of the bank’s liabilities by something over $23,000. It avers the captalization of the bank to be $25,000, divided into shares of $100 each, all of which was subscribed and paid in full except $2,800, which was subscribed, but not paid. It is thus apparent that, in order to pay its creditors in full, if even that will suffice, it is necessary to collect from the-stockholders, on account of their individual liability, an amount equal to the par value of their stock. The bill avers that F. A. Blum was at One time the owner of thirty-two shares, twenty-seven of which he acquired from one J. F. Gallagher on the 11th of June, 1910, and five on the same date from one Fred O. Funk, all of which he held until the 21st day of June, 1910, at which time he assigned them to one Joanna Blum, who held and owned said shares from the 21st to the 25th day of June, 1910, when she transferred sixteen of them to the defendant A. J. Jones, and sixteen to the defendant Friend Cox; that both F. A. Blum and Joanna Blum have departed this life, and no personal representative has ever been appointed in this state to represent either of their estates. It is not averred that, at the time of their death, they were non-residents," and the fact that no, personal representative has been appointed for either of them is not a legal excuse for failing to bring their interests into the suit. The receiver should have had their estates committed to the sheriff of the county for administration, as provided by the statute. Section 10, chapter 85, Code. This the receiver, as representing the bank’s creditors, had the right to do and should have done. The double liability of the stockholders is an asset in the hands of the receiver to be administered for the benefit of the creditors. Benedum v. First Citizens Bank et al., 72 W. Va. 124; Clark, Trustee v. Bank of Union. 72 W. Va. 491; and Dunn v. Bank of Union, 74 W. Va. 594. For the reason that the Blum estates were not before the court the demurrer was properly sustained. All resident stockholders, if living, or their personal repre — 163 — sentatives in case of tbeir death, who are liable to any creditor of the bank, should be made parties, unless their insolvency or some other good reason is alleged for not making them parties. It is a familiar rule of equity practice, needing no discussion or citation oh authority, that all persons to be affected by the court’s decree or interested in the proceedings should be made parties to the bill. This rule, of course, includes the representatives of those parties who are dead. The reason for applying that rule here is apparent because of the apportionment of liability necessary to be made among the several owners, at different times, of some or all of the same shares of stock, during which time distinct portions of the bank’s liabilities severally arose. This adjustment should be made and the amount each stockholder should pay determined in one suit. But the court also held that the right to enforce .the individual liability of the stockholders was barred as to all the bank’s liabilities, on which a right to sue it had accrued more than five years before the commencement of this suit. The bar of the statute is assigned as one of the grounds of demurrer. In equity practice the statute of limitations and laches may he raised by demurrer. Thompson v. Whitaker Iron Co., 41 W. Va. 574; Lambert v. Ensign Mfg. Co., 42 W. Va. 813; and Bragg v. Wiseman, 55 W. Va. 330. But the individual liability of a stockholder to the bank’s creditors for an amount equal to the par value of his stock is not a primary but a secondary liability, being in the nature of a guaranty, and limitation does not begin to run against it until the necessity for payment of the same is ascertained and the stockholder so notified, which must be done within a reasonable time. 3 Michie on Banks & Banking, 881; Flynn v. Bank, 104 Me. 141; Terry v. Tubman. 92 U. S. 156; McClain v. Rankin, 107 U. S. 154; and Long v. Bank, 90 N. C. 405. Section 12, chapter 104 of the Code, then applies the five year limitation. The bill avers that the bank was closed on July 8th, 1913, and the present suit was brought in March, 1918, some months before the limitation had run. Hence the court erred in respect to the second reason given for sustaining the demurrer. Read in connection with the exhibits therewith filed the bill shows that it is necessary for the stockholders to respond to the — 164 — full amount of their double liability, and that even in that event there will not be sufficient funds to discharge all liabilties. As soon as it was ascertained that payment of their individual liability was necessary to satisfy the creditors, the banking commissioner ordered the receiver to notify them to pay the same and he did so. The liability then became a liquidated demand and began to bear interest from that date. See authorities above cited. The bill avers that certain of the stockholders responded to the call of the receiver and have already paid 100% of'the par value of the stock held by them. In those instances the receiver has no right to demand payment from any other person who may have been at any time a holder of the same shares of stock, as the purpose of the Constitution, Art. 11, Sec. 6, and the statute, Sec. 78a (3), Ch. 54, in those cases is fully met. It was never the purpose of the legislature or the framers of the Constitution to make the aggregate amount of the individual liability of all the stockholders more than the par value of all the capital stock. This liability is to be apportioned, where the same stock has been held by different persons at different times, according to liabilities accruing while they were owners thereof. In other words, only $22,200 of the stock having been subscribed and paid for (the remaining shares although subscribed never having been paid for nor assigned, and the original subscriber being insolvent) the receiver has no right to recover from the stockholders more than $22,200. The statute, Sec. 81a (7), Ch. 54, authorizes the commissioner of banking to enforce double liability of stockholders by a suit instituted either in his own name or the name of a receiver appointed by him. In such suit a non-resident stockholder may be omitted,' as the purpose of the suit is to get' a money decree, and in the case of a non-resident served only by order of publication, or personally served with summons out of the state, would be unavailing. The statute above cited provides that non-resident stockholders may be sued either where they reside or where service of process.may be had upon them. The bill on its face shows that many bad loans were made by the bank, some for large amounts, and it is insisted in brief of counsel that the bill is bad because, it thus appears that the — 165 — receiver should have sued the directors for the mismanagement of the bank, before calling on the stockholders for their double liability. That is a matter which can not arise upon the demurrer, the receiver may have some good reason for not suing the directors for negligence. The bill does not even allege who the directors were. The stockholders themselves or the creditors have the right to sue the directors, if they be so advised. Benedum v. First Citizens Bank, supra; and Clark, Trustee v. Bank of Union, supra. For the reasons herein given the court’s ruling upon the demurrer is sustained in part and overruled in part, and this decision will be certified to the Circuit Court of Wetzel County. A'ffirmed in part. Reversed in part. Certified bade.