Hine v. Wright

DISSENTING OPINION. The record in this case discloses that the Peoples Bank of Whitestown, Indiana, was a private bank, organized on or about the 13th day of May, 1929. The appellants were partners, engaged in the business of operating this private bank. Shortly after their organization, this private bank took over the assets of the Peoples State Bank of Whitestown, Indiana, and assumed all its liabilities. This partnership continued to operate this bank until the 20th day of December, 1929, when a receiver was appointed to liquidate the bank.

After approximately two years had elapsed, John P. Hogan and James S. Wright, as creditors and as representatives of all creditors, brought this action against the appellants, as partners and owners of the bank, to recover the amount due them. This action the appellees were entitled to maintain; and the owners of this bank, by engaging in such business, assumed unlimited financial liability for the obligations of the bank.Hall v. Essner (1935), 208 Ind. 99, 193 N.E. 86.

This common-law liability of partners, who engage in the business of operating a private bank, is also recognized by the Supreme Court of Indiana, in the case of Hoffman v. Romack (1937), 212 Ind. 421, 8 N.E.2d 831. In this case, the Supreme Court holds that the creditors of a private bank are not required to wait an indeterminate time for the payment of their obligations, and until the assets of a private bank can be finally liquidated, but recognizes the partnership liability, which rests upon the owners of the private bank to pay their creditors "at once."

In the case at bar, the record discloses that this private bank had been in the hands of a liquidating agent for two years before the appellees filed their suit against the owners of the bank. Various pleadings were filed from time to time thereafter by both parties and, finally, in 1938, nearly nine years after this bank was placed in receivership, the appellants then challenged the right of the appellees to maintain this action, under the theory that the Indiana Financial Institutions Act gave to the Department of Financial Institutions of this State, the exclusive right to maintain such actions.

It is my opinion that the provisions of this statute do not apply to private banks. Our Supreme Court has recently held that the Indiana Financial Institutions Act does not apply to private banks engaged in the process of voluntary liquidation. In the case of Todd v. Brock (1938), 214 Ind. 639, 642,17 N.E.2d 467, our Supreme Court said: "When a private bank, such as we have in the instant case, is solvent and has sufficient assets to pay all its creditors in full then an individual creditor may maintain an action against the partners and shareholders of said bank."

If the common-law liability of partners to pay the debts of a private bank may be immediately enforced against them where solvent institutions are in the process of liquidation, there is much greater reason to permit the immediate enforcement of these obligations against the partners when their banking institution is insolvent.

The majority opinion apparently loses sight of the fact that these appellants are sued as individuals on a partnership liability for which they are jointly and severally liable. It has always been the law that "the creditors of a firm may sue the partners at law, personally, and recover personal judgments against them for the indebtedness owing them by the firm."Lindley v. Seward (1937), 103 Ind. App. 600, 5 N.E.2d 998. As was said by our Supreme Court, in the recent case of Snyder v. Miller (1939), 216 Ind. 143, 152, 22 N.E.2d 985: "The owners are liable as partners and not as stockholders in a banking corporation." See also Borgman, Treas. v. State exrel. Rodenbeck (1937), 211 Ind. 395, 5 N.E.2d 522; Wyncoop,Admr. v. Laughner (1939), 106 Ind. App. 457, 19 N.E.2d 486.

Indeed, the statute upon which the appellants rely as vesting in the Department of Financial Institutions the exclusive authority to enforce their individual liability in this case, only vests in the department the exclusive right to enforce the individual liability imposed by law upon the "shareholders" of a financial institution. Ch. 5, § 14, Acts 1935. The appellants in this case are not sued as shareholders. They are sued as partners. Indeed, the term "shareholder," as used in the act above referred to, is defined in § 1 of the act to mean: "One who is a holder of record of shares of stock in a corporation."

Clearly, the appellants, as partners in the business of operating a private bank, are not shareholders within the meaning of this statutory definition. It is my opinion that the appellants in this case should not be permitted to now escape a suit at the hands of their creditors, by contending that the financial institutions act has changed their legal status from that of partners in the business to that of stockholders in a corporation.

If this action was prematurely brought by the appellees, because of their failure to first petition the Department of Financial Institutions to bring such action, this question should have been raised by a plea in abatement, and, if not so pleaded, must be deemed to have been waived. Pittsburgh, etc., R. Co. v.Schmuck (1914), 181 Ind. 323, 103 N.E. 325. At any rate, the liquidating agent had been in charge of this institution for nine years, and had done nothing to enforce the individual liability of the appellants. Under such circumstances, it would seem useless to now say that he should have been petitioned by the creditors so to do. "The law will not require a person to do a useless thing; . . ." Meshberger v. Thomas (1935),99 Ind. App. 519, 523, 193 N.E. 392.

It is my opinion that the judgment of the lower court should be in all things affirmed.

NOTE. — Reported in 36 N.E.2d 972.