Pollard v. Bailey

ERROR to the District Court for the Middle District of Alabama.

By an act passed in 1854, the legislature of Alabama chartered a bank to be called the Central Bank of Alabama. The capital was $900,000, divided into shares of $100 each.

The charter made certain provisions in case of the insolvency of the bank, or of its suspension of payments in specie. They were thus:

'SECTION 16 (ARTICLE 2). Individual stockholders, having shares in said bank, shall be bound respectively for all the debts of the bank in proportion to their stock holden therein.

'SECTION 20. If any debt due from said bank for an amount exceeding $100, shall remain unpaid for more than ten days after proper demand, the holder of such debt may file a bill in the chancery court, of the county. . . in which said bank may be located, for the settlement of all the debt of the bank, if he elect so to do, and may, on proof, &c., pray an injunction to restrain the said bank and its officers from paying out, or in any way transferring or delivering to any person any money or assets of said bank, or incurring any obligation or debt until such order be vacated or modified; and if such chancellor shall be of opinion that the debt is justly due, and that the bank has no just defence against the demand, and if it shall appear expedient and necessary, upon the proof presented, in order to prevent fraud and injustice, he shall grant an order for such injunction, and the said chancellor shall then proceed to inquire whether the said bank be solvent or not; and if it shall appear that the said bank is not clearly solvent, then he may make an order declaring the same to be insolvent, and requiring its affairs to be wound up and settled; and, further, if, in his opinion, the safety of the creditors shall require it, such chancellor may appoint a receiver to take charge of all the assets of the bank, and to close and settle its affairs.

'SECTION 21. In case the said bank be found insolvent, and settlement of its affairs be ordered, the same shall be done upon bill filed in said chancery court, under the orders of the court and rules of chancery, and full distribution shall be made of the assets according to the rights of all parties; but the holders of bank-notes and obligations issued by the bank for circulation as money shall be first called in and paid, and shall have priority over debts due from the bank; and after the assets of the bank are exhausted, if they be not sufficient to pay all debts and liabilities, a further call shall be made on the shareholders in the bank for further payment of capital, over and above the sum of $100, of an amount equal to the deficiency, which shall be apportioned among all the shares of stock; and an order shall be made by the court for the payment of each shareholder of the sum or proportion due on his shares of stock; and each shareholder shall pay the sum so assessed to him severally in proportion to his stock, which shall be collected by the receiver and applied.

'SECTION 22. The summary remedy in this act, specially given for settling up and closing the affairs of said bank, shall apply to the case of insolvency, but shall not be allowed in case of a suspension only by the bank of specie payment, so long as suspension shall be sanctioned by the General Assembly; but nothing in this act shall be construed so as to deprive a creditor of said bank from his right to suit in any other appropriate mode of proceeding, or to prevent the General Assembly from hereafter regulating, by a general law in relation to banking institutions, the mode of enforcing and satisfying the rights of creditors of said bank: Provided, Any billholder shall also have the right to move in any court having jurisdiction, or before any justice of the peace in the city or county in which said bank is located, as the case may require, for the collection of any bill the payment of which may be refused.'

Of the capital authorized by the charter a certain Pollard took $20,000, or two hundred shares. In 1865 the bank became insolvent, and in 1869 had ceased to do any business, having about $700,000 of bills outstanding and unpaid. In 1872, one Bailey, who had $17,000 of these bills, sued Pollard, at law, as the owner of two hundred shares of stock, assuming that he could thus sue him under the above-quoted section sixteen (article two) of the charter of the bank, which prescribes, as the reader will remember, 'that the stockholders shall be respectively bound for all of the debts of the bank in proportion to their stock holden therein.' The declaration contained averments that the bank had ceased to do business since 1868, and that no demand had been made of the bank for the payment of the bills, and that a demand had been made of the defendant, who was a stockholder of the bank during the period the plaintiff had been the owner. But there was no reference to the other creditors or the ability of the other stockholders to pay any proportion of the claim.

The defendant demurred to the declaration, but the court overruled the demurrer and gave judgment for the plaintiff. From that judgment the defendant brought the case here.

Mr. J. A. Elmore, in support of the ruling below:

1. The declaration was properly held to be sufficient. The bank having ceased to act and being without funds and indebted, was in law deemed to be dissolved, so far as to give the remedy afforded against the shareholders to the creditors of the corporation.

This dissolution, or insolvency, being proved, the liability of the stockholders, as declared by its charter, became absolute, and there was no valid objection to its enforcement at law. Various cases in New York settle this.

The election to go into equity must be at the election of the creditors, and the difficulty of the stockholder in protecting himself beyond the statute liability has never been suggested as a ground for proceeding in equity.

The liability is made by the charter several and direct, and not collateral. The measure of damages is different in each case, depending on the number of shares held; each stockholder is responsible to the amount of stock held by him.

Whenever a statute imposes a legal obligation upon one party to pay money to another, the person to whom the payment is to be made may maintain an action of debt, or assumpsit, for the money.

2. Though the charter of the bank in this case gives the creditor a particular remedy, it at the same time, by its twenty-second section, expressly provides that nothing therein contained shall be construed so as to deprive a creditor of the right to sue in any other appropriate mode of proceeding. And the concluding part of the section gives a billholder a right to move in any court for the collection of any bill. We direct attention particularly to these clauses.

Mr. J. A. Campbell (a brief of Mr. G. W. Goldthwaite being filed), contra.

The CHIEF JUSTICE delivered the opinion of the court.