Button v. O. S. Stapley Co.

I regret to state that I cannot concur in the conclusion reached by my associates in this case, although I agree with many of the propositions of law stated in the prevailing opinion. It is because in my judgment the ultimate conclusion as to the disposition of the case reached by them is so contrary to the only possible logical and legal deductions from those fundamental propositions that I think it necessary to record my reasons for disagreement.

They have stated that the liability of a stockholder in an insolvent bank is a constitutional one, and is secondary in its nature. They also, as a necessary corollary, hold that, unless it be proved, first, that the bank is as a matter of fact insolvent, and, second, that the insolvency is of such an extent that it is necessary to levy an assessment on the stockholders to meet it, no judgment can be recovered against any stockholder under the constitutional provision, and that the stockholder must be given an opportunity to contest judicially the liability which is alleged to exist. With these principles I agree most heartily.

We have previously held in Cowden v. Williams, 32 Ariz. 407, 55 A.L.R. 1059, 259 P. 670, Dagg v. Hammons, 34 Ariz. 445, 72 A.L.R. 1237, 272 P. 643, and In re Bank of Winslow,36 Ariz. 507, 287 P. 444, that under the statute as it existed up to 1928 the right of action against a stockholder did not arise until a judicial determination of the fact and extent of the insolvency, and that the statute of limitations did not begin to run till then. The legislature modified the then existing statute by adopting section 227 of the Revised Code of 1928, which is quoted in the prevailing opinion, supra, in full, and it is with the conclusion of the majority of the court as to the effect of the last sentence of that section that I differ.

Their opinion holds that its effect is threefold: (1) To fix a definite time for the beginning of the running of the statute of limitations; (2) to avoid the necessity of having a formal judicial declaration of insolvency before the commencement of a suit against the stockholders; and (3) to alter the rules of pleading by permitting the plaintiff to omit from his complaint the allegation of one of the facts which they state it is absolutely essential for him to prove in order to sustain a judgment against the defendant. So far as the first two propositions stated are concerned, I agree with the prevailing opinion. There is no doubt that the legislature has the power to regulate the procedure to be used in enforcing a constitutional liability so long as that regulation does not substantially alter or enlarge the liability itself. But the fact that it has such power does not raise the presumption that it has used it in a purposeless, illogical, and unnecessary manner.

The common-law system of pleading has grown up through the experience of many centuries, and, except where altered by statutory enactment, is still in force. It is true that Arizona is what is called a "Code state," and that many of the technical refinements of common-law pleading have been abolished. It is also true that the legislature may, if it desires, abolish every rule of pleading, technical or otherwise, but it has always been held that, in the absence of some specific enactment changing the common-law system, the latter is still in force. GreenleeCounty v. Cotey, 17 Ariz. 542, 155 P. 302; Faulkner v.First National Bank, 130 Cal. 258, 62 P. 463; Cole v.Reynolds, 18 N.Y. 74. One of the fundamental principles of common-law pleading also is that a plaintiff must allege in his complaint the existence of every fact which it is necessary for him to prove in order to sustain a judgment. Greenlee County v.Cotey, supra; Union Bank v. Himmelbauer, 68 Mont. 42,216 P. 791; Volker-Scowcroft Co. v. Vance, 36 Utah 348, Ann. Cas. 1912A 124, 24 L.R.A. (N.S.) 321, 103 P. 970; Griffin v.Chicago etc. Ry. Co., 67 Mont. 386, 216 P. 765; West MonroeMfg. Co. v. Town of West Monroe, 146 La. 641, 83 So. 881. I believe no case can be found in all the long array of decisions, English or American, which denies this principle, and I know of no statute which has attempted to modify or abrogate it. And yet this is precisely what my associates say the legislature has done in the section of the statute above set forth. If so, I am satisfied it is the first and only case in the history of American law in which a legislature has made this attempt.

It is admitted that it is not sufficient for a plaintiff to prove that the superintendent of banks merely thinks the bank is insolvent — he must prove that as a matter of fact it is insolvent, and his opinion, unless it be proved to be a fact, will not sustain a judgment. If such be the case, under every principle of pleading, in his complaint he should allege, not as a matter of opinion, but as a matter of fact, that the bank is insolvent, for this is precisely what he must prove.

It may be contended that we have many cases in which the plaintiff alleges necessary facts "upon information and belief." If, however, these pleadings and cases are examined carefully, it will be found that, while information and belief is stated as thebasis of the plaintiff's allegation, nevertheless the ultimate conclusion which he must allege is the positive existence of the fact which he must prove, and it is almost invariably held that a mere allegation of his information and belief that the fact exists is not sufficient. Sebastian County v. Hocott,141 Ark. 301, 217 S.W. 258; Meeker v. C., R.I. P. Ry. Co., (Mo.App.) 255 S.W. 340; Bank of North America v. Rindge, (C.C.) 57 Fed. 279; Hulse v. Nash, 332 Ill. 500,163 N.E. 792; Swank v. Sweetwater Irr. etc Co., 15 Idaho 353,98 P. 297; Patterson v. Caldwell, 1 Met. (Ky.) 489; Warburton v.Ralph, 9 Wash. 537, 38 P. 140; Prescott Bros. v. Annis, 6 Ky. Op. 289; Nichols Shepard Co. v. Hubert, 150 Mo. 620,51 S.W. 1031.

There are a very few cases which at the first glance seem to hold the contrary, but, on examination of these, it will be found that the real holding of the court is that under the peculiar circumstances of the case the language used would be considered an allegation of ultimate fact and not merely of opinion. Dial v. Gary Tappan, 24 S.C. 572; McFarland v. City of Muscatine, 98 Iowa 199, 67 N.W. 233; Robinson v.Ferguson, 119 Iowa 325, 93 N.W. 350. The logical reason for the rule is the impossibility of traversing an allegation of opinion successfully. If the defendant denies the allegation, he merely denies that the superintendent "believes" the bank to be insolvent, which issue has nothing to do with defendant's liability. Defendant's only possible legal way of raising the question is by demurrer, as was done in the case at bar.

Now, I agree that, if the legislature desires to enact in its regulation of pleading that it is not necessary to allege what must be proved, it has the power to do so, and I further admit that, if the same legislature desires to enact that in pleading the use of the word "black" signifies the condition which has always previously been called "white," it has that power, and the courts will bow to its will. But I submit that, before we attribute to the legislature an intent to depart so widely from the usual rules of pleading and definitions of words, its intent should be signified in the most positive and unmistakable manner. We have frequently held that an absurd construction is not to be attributed to legislative language if there is any reasonable meaning to be drawn therefrom, and this is particularly true when the absurd construction is unnecessary and is useless to carry out any practical purpose.

In the case at bar, the situation which the legislature obviously meant to remedy was the necessity for the superintendent of banks to file two suits, first, to declare the insolvency, and second, to recover the assessment, and not the necessity of his proving the actual insolvency, for this last it could not constitutionally do. It amended section 227,supra, so that unquestionably it is no longer necessary for him to file two suits, but it is utterly unnecessary for the accomplishment of this result that we should also hold that the legislature intended to alter a fundamental rule of pleading or the ordinary meaning of the English language. The only effect of such a statute would be to avoid the necessity of the superintendent's stating specifically that the condition which he must prove positively, to wit, the insolvency of the bank, existed not only in his opinion, but as a matter of fact. Of what purpose or value could such a law be?

I realize that from the standpoint of immediate practical results the question involved is of little moment. If the opinion of the majority is correct, this case will have to be retried; if my view of the law is correct, it will merely be a new case of the same type which will be tried. The trial procedure, the evidence, and the judgment will be the same either way. But, when such is the situation, it seems to me that it is more in consonance with the usual rules of statutory construction for this court to adopt a logical, simple, and reasonable interpretation of the intent of the legislature rather than one which necessarily leads to the conclusion that that body intended to violate every precedent and principle of logical and consistent pleading for the sole purpose, if any, of being different, or else for no purpose at all.

Since a demurrer was seasonably interposed to the complaint, raising the question as to whether it stated a cause of action, and since under every case of which I have knowledge the test of the sufficiency of a complaint is whether, if the pleader proves exactly what he alleges, neither more nor less, he is entitled to a judgment, I believe the trial court properly held the complaint to be insufficient for failing to allege the insolvency of the bank as a fact, instead of an opinion, when it was absolutely necessary to sustain the judgment to prove it as a fact, and not as an opinion, and properly sustained the demurrer. The judgment of the trial court should therefore be affirmed. This would in no manner bar the superintendent of banks from filing another suit in which he stated on information and belief, if he so desired, that as a matter of fact the bank was insolvent, and proceeding to judgment thereon if he could prove his facts, nor would the necessity of filing a new suit delay or hamper him in his recovery in the slightest degree, since the reversal of the judgment as ordered in the majority opinion will require a new trial in any circumstances, before a recovery of judgment.