Citation Numbers: 28 P.2d 649, 145 Or. 487
Judges: Band, Bean, Belt, Kelly, Rossman
Filed Date: 1/16/1934
Status: Precedential
Modified Date: 10/19/2024
Action by Howard E. Hansen, Supervisor of Banking of the State of Washington, liquidating People's State Bank of Walla Walla, against Laura Harris. From a judgment for plaintiff, defendant appeals.
AFFIRMED. REHEARING DENIED. This is an appeal from a judgment in the sum of $1,000 in favor of the plaintiff who is the supervisor and examiner of banking for the state of Washington (§ 10809, Remington's Compiled Statutes of Washington), entered in an action instituted by him against the defendant who is the owner of ten shares of the capital stock of the Peoples State Bank of Walla Walla, Washington (a Washington corporation), of the total par value of $1,000. The Peoples State Bank, according to the plaintiff, was insolvent September 14, 1932, when he, in his above-mentioned capacity, assumed charge of its assets upon its request. Subsequently he levied an assessment of 100 per cent upon all of its capital stock, pursuant to section 3242 Remington's Compiled Statutes of Washington, and still later instituted this action to enforce payment of the assessment levied upon the shares owned by the defendant. *Page 489 The Peoples State Bank of Walla Walla, Washington, is a Washington corporation authorized to conduct a banking business. One Higby Harris, on and prior to the 3d day of January, 1928, that being the time of his death, was the owner of 50 shares of the capital stock of that bank of the par value of $100 each. By the terms of his will, Harris bequeathed ten shares of this stock to the defendant, his widow, which she accepted. She subsequently received and accepted three dividends declared upon the stock, and through a proxy, exercised her right to vote the stock at the annual stockholders meetings. September 14, 1932, the bank by a resolution of its board of directors surrendered control of its affairs to the plaintiff who is the supervisor and examiner of banking for the state of Washington, having been appointed to his office pursuant to the provisions of section 10809, Remington's Compiled Statutes of the State of Washington. The plaintiff, upon investigating the condition of the banks affairs, found it to be insolvent and determined that it was necessary for the stockholders to make payment of the double liability attached to their ownership of stock by the Washington statutes which we shall later mention.
Since the defendant contends that the legislative enactments which authorized the supervisor of banking to levy the assessments in question are invalid, we shall now review these enactments, together with the provisions of the Washington constitution applicable to them. Article XII, § 11, Washington constitution, provides:
"* * * Each stockholder of any banking or insurance corporation or joint stock association shall be individually and personally liable, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation or association accruing *Page 490 while they remain such stockholders, to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares."
The provisions of the Washington banking law applicable to this controversy are 1917 Session Laws, chapter 80, and the amendments thereto. Section 35 of that act which is § 3242 Remington's Compiled Statutes of Washington, provides:
"The stockholders of every bank and trust company shall be individually and personally liable, equably and ratably, and not one for another, for all contracts, debts and engagements of such corporation accruing while they remain as stockholders, to the extent of the amount of their stock therein at the par value thereof, in addition to the amount invested in such shares. Persons holding stock as executors, administrators, guardians or trustees, if such relation of trust shall appear in the stock certificate and on the books of the corporation, or as collateral security or in pledge, shall not be personally liable as stockholders, but the assets and funds in the hands of such trustees constituting the trust shall be liable to the same extent as the testator, intestate, ward, or person interested in such funds would be if living or competent to act and the person pledging such stock shall be deemed the stockholder and liable under this section. Such liability may be enforced by the examiner as soon after taking possession of any bank or trust company as in his judgment the same may be necessary. The failure of the stockholders of any bank or trust company immediately upon possession being taken by the examiner to make good all impairment of its assets shall be conclusive evidence that the enforcement of double liability is necessary."
Section 72 of the same act, being § 3279, Remington's Compiled Statutes of Washington, provides:
"Any bank or trust company may place itself under the control of the examiner to be liquidated as herein *Page 491 provided by posting a notice on its door as follows: ``This bank (trust company) is in the hands of the State Bank Examiner.' Immediately upon the posting of such notice the officers of such corporation shall notify the examiner thereof by telegraph and mail. The posting of such notice or the taking possession of any bank or trust company by the examiner shall be sufficient to place all its assets and property of every nature in his possession and bar all attachment proceedings."
Nineteen Hundred Twenty-three Session Laws (Washington), chapter 115, section 9, amends section 60 of the 1917 act (§ 3267 Rem. Comp. Stat.) which had (a) authorized the state bank examiner to direct banks to levy assessments upon their corporate stock whenever (1) the bank had committed any of the offenses mentioned in § 3266 Rem. Comp. Stat. and had hereby rendered its condition unsafe for the further pursuit of banking; (2) whenever the bank's capital or surplus was reduced below the required amount; (3) whenever it had suspended payment of its obligations; and (4) in the event of insolvency; (b) authorized the bank examiner to assume possession of any bank upon the occurrence of any of the above developments. The amendment added the following new provision:
"The board of directors of any such bank or trust company, with the consent of the holders of record of two-thirds of the capital stock, expressed either in writing or by vote of a stockholders' meeting called for that purpose, shall have power and authority to levy such assessments upon the stockholders pro rata and to forfeit the stock upon which any such assessment is not paid, in the manner prescribed in section 8 of this act."
Section 70 of the 1917 act, being § 3277 Rem. Comp. Stat., provides that if the examiner possesses *Page 492 assets belonging to the insolvent bank after he has discharged all claims of its creditors, he shall submit to a meeting of the stockholders for their choice the following two alternative methods for completing liquidation: (1) the stockholders may authorize the examiner to complete the liquidation; (2) they may themselves complete liquidation through an agent selected by themselves.
Since the enactment of the above statutes the office of bank examiner has been abolished and the authority previously possessed by him has been conferred upon an official known as the supervisor of banking. See §§ 10809 and 10893, Rem. Comp. Stat.
Section 69 of the 1917 act, being § 3276 Rem. Comp. Stat., provides:
"No receiver shall be appointed by any court for any bank or trust company, nor shall any assignment of any bank or trust company for the benefit of creditors be valid, excepting only that a court otherwise having jurisdiction may in case of imminent necessity appoint a temporary receiver to take possession of and preserve the assets of such corporation. Immediately upon any such appointment, the clerk of such court shall notify the state bank examiner by telegraph and mail of such appointment and the examiner shall forthwith take possession of such bank or trust company, as in case of insolvency, and such temporary receiver shall upon demand of the examiner surrender up to him such possession and all assets which shall have come into the hands of such receiver. The examiner shall in due course pay such receiver out of the assets of such corporation such amount as the court shall allow."
Article IV, § 6, Constitution of Washington, provides:
"The superior court shall have original jurisdiction * * * of proceedings in insolvency * * *." *Page 493
It will be observed from a reading of the above statutes that they contemplate that the supervisor of banking shall take control of (1) insolvent banks; and (2) any bank upon its request. He may assume control of any bank (1) which has committed any of the offenses mentioned in § 3266 Rem. Comp. Stat. and thereby rendered its condition unsafe; (2) the capitalization or surplus of which is reduced below the required amount; and (3) which has suspended payment of its obligations.
The first contention argued by the defendant is that this statute conflicts with the provision of the Washington constitution above quoted which confers upon the superior courts original jurisdiction over "proceedings in insolvency". In Statev. Superior Court for King County,
"Since time immemorial, courts of equity, under the common law, have had exclusive jurisdiction of causes seeking the appointment of receivers, and any statute designed to oust the courts of their jurisdiction would be in derogation of the common law and therefore to be strictly construed."
It will be observed, however, from a perusal of the above statutes that it is not necessary for a bank to become insolvent before the supervisor of banking may take possession of it. The extensive powers which the statute confers upon the supervisor enable him to assume control before insolvency develops with its ruinous consequences not only to the bank but also to the community in which it is located. Its real purpose is to forestall insolvency. In Hanson v. Soderberg,
"This question has also been decided against appellant's contention by the United States Supreme Court. Bushnell v. Leland,
It is true, as the defendant points out, that the court did not expressly mention Art. IV, § 6, of the Washington constitution, but it is clear from the above quoted portion of its decision that it had in mind the principle of law expressed in that portion of the constitution. In Weatherwax v. Johnson,
It is evident from the above that the federal supreme court has repeatedly held that the power vested in the comptroller to take charge of insolvent banks and administer their affairs through a receiver does not conflict with any constitutional limitation. The supreme court of Washington, as is seen from the above, has three times recognized the validity of the statute now under attack, and our statute which is similar to the federal and Washington statutes, as is seen from the above citation to our decision, has been applied by us as a valid item of legislation. The many decisions above cited are based upon the view that the public welfare demands close supervision over all banking institutions and that the police power sustains *Page 498 these enactments. In fact, society today regards banks as quasi public institutions. The extensive legislation upon our statute books conferring comprehensive authority upon bank departments places banks under the supervision of the state's officials from the day they are organized. As long as a bank's officers maintain it in a sound financial condition the state does not assume direct control over its affairs, but when the bank commits an offense against statutes which are intended to preserve it in a sound condition, or when it approaches insolvency the state's officials may take direct and complete control over its assets. This is done not for the purpose of achieving the objective which is frequently sought by insolvency statutes; that is, the discharge of the debtor so that he can again resume his normal activities and become an economic asset, but for the purpose of facilitating the general welfare by securing for the depositors as speedily as possible a return of their funds. When the depositor has been paid, the state's interest in the corporation, as we have seen from our review of the Washington statutes, is terminated and the stockholders may again resume possession of its assets. It is our belief that the statute is fully sustained by the police power of the state. We find nothing in this provision which conflicts with Article IV, § 6, of the Washington constitution.
The second contention of the defendant submits that since the title of the act does not mention receiverships Article II, § 19, Washington constitution, is violated, which provides:
"No bill shall embrace more than one subject, and that shall be expressed in the title." *Page 499
The title to 1917 Session Laws (Washington), chapter 80, which is the one which the defendant criticizes, is:
"An act relating to banking and trust business; the organization, regulation, management and dissolution of banks and trust companies, providing penalties and repealing certain acts and declaring an emergency."
The appointment of receivers is not the objective which the act seeks to achieve, but is merely one of the means or instrumentalities by which the real objective is attained; that is, the preservation of the solvency of banks and the protection of those who are interested in them. Hence, since the title mentions the dissolution of banks, it was not necessary to mention receiverships in the title. 59 C.J., Statutes, p. 814, § 394; 25 R.C.L., Statutes, p. 858, § 104; Idleman v. State ofOregon, 146 Or. — (
The defendant argues that the power which this statute confers upon the supervisor of banks to (1) take charge of any bank, the affairs of which have reached the conditions mentioned in the statute; and (2) levy stock assessments, deprives the stockholder of his property without affording him the protection of due process of law guaranteed by the fourteenth amendment to the federal constitution. We have already cited and reviewed several decisions, including one of ours, which hold that the state may lawfully empower its bank supervisor to determine the amount which the stockholders of an insolvent bank must contribute upon their postponed liability, and to enforce payment of it. The liability to make this payment is a contractual one which the stockholder voluntarily undertook when he acquired his stock. We quote from *Page 500 Johnson v. Libby,
"Every person who voluntarily becomes a shareholder in a corporation thereby agrees to the terms of its charter, and assumes those obligations which the laws of the state creating the corporation impose upon such shareholders."
From 7 R.C.L., Corporations, p. 369, § 351, we quote:
"A stockholder by his subscription for stock, or by his acceptance of it, is deemed to agree with the corporation and its creditors that he will perform the obligations and discharge the duties imposed on stockholders by the constitution, the statutes, and the law then in force, and his liability to creditors is held to spring from this contract."
The principle above stated is further expressed and applied inSchramm v. Done et al.,
"The state owes to the public the duty not only of providing for supervision and examination of banks, but the added duty as a matter of public policy, if the conditions warrant, of summarily closing them up and terminating their existence. When the management thereof has brought them into a condition of unsafety or insolvency, the public interest demands that on this condition being ascertained they should not be permitted to further hold themselves out as responsible institutions or be permitted to remain in a position to do so. Police regulations are only effective when provision is made for their prompt and summary execution and summary seizure and liquidation of unsafe banks can fairly and reasonably be justified on the ground of immediate danger to the public welfare in further permitting their business continuance. In this view it cannot be said that initial seizure is not a fair and reasonable measure to be adopted to effect the protection of the public welfare which is designed by it, and, as the only limitation on the power the state imposed under the constitutional amendment is that the regulations it makes shall be of that character, no constitutional right of the appellant has been impaired by such legislation. Nor is the due process of law clause violated because such summary seizure is authorized to be made without action brought and judicial warrant for the taking. Due process of law does not necessarily imply a regular proceeding in a court of justice or *Page 502
after the manner of such courts. As said in Davidson v. New Orleans,
We find no conflict between the statute and the fourteenth amendment.
The defendant, after citing many decisions which hold that the liability to make the additional contribution, upon insolvency, is contractual, argues that since she received these ten shares of stock by devise and not by purchase, she cannot be compelled to pay the assessment. We have already mentioned the fact that after she received the certificate for ten shares as a bequest from her husband's estate, she accepted payment of three dividends (aggregating $360) declared upon the stock, and exercised her right to vote at the annual meetings of the stockholders. In her answer she admits that she "took and received said certificate of stock as a legacy". This occurred July 21, 1928. The bank did not deliver itself into the plaintiff's custody until September 14, 1932, and the assessment was not imposed until after that day. Ever since she received the stock she retained it and still possessed it at the time of the trial. The probating of the estate has long been completed. The circuit court's findings of fact declare the defendant to have been a stockholder of the insolvent bank ever since July 21, 1928.
In support of her contention that she cannot be held liable upon the assessment demanded by the plaintiff, *Page 503
because she acquired the stock by bequest and not by purchase, she cites Williams v. Cobb,
In Turnbull v. Payson,
"Where the name of an individual appears on the stock-book of a corporation as a stockholder, the prima facie presumption is that he is the owner of the stock, in a case where there is nothing to rebut that presumption; and, in an action against him as a stockholder, the burden of proving that he is not a stockholder, or of rebutting that presumption, is cast upon the defendant."
See to same effect Rankin v. Fidelity Trust Co.,
"We must not be understood as saying that the mere transfer of the stocks on the books of the bank, to the name of defendant, imposed upon her the individual liability attached by law to the position of shareholder in a national banking association. If the transfers were, in fact, without her knowledge and consent, and she was not informed of what was so done — nothing more appearing — she would not be held to have assumed or incurred liability for the debts, contracts and engagements of the bank. But if, after the transfers, *Page 505 she joined in the applications to convert the savings bank into a national bank, or in any other mode approved, ratified or acquiesced in such transfers, or accepted any of the benefits arising from the ownership of the stock thus put in her name on the books of the bank, she was liable to be treated as a shareholder, with such responsibility as the law imposes upon the shareholders of national banks."
In Collins v. Caldwell,
In her next assignment of error the defendant argues that she should have been permitted to offset against the plaintiff's claim the amount which the bank owed her upon her deposit account. She cites no authority which directly supports her contention. But in all similar situations that have come to our attention the courts have refused to allow a set-off, pointing out that the shareholder's claim as a depositor is against the insolvent corporation, while his debt is in favor of the creditors. The following authorities so hold: Duke v. Force,
In her next assignment of error the defendant argues that the court erred when it failed to find that one C.S. Moody, who was supervisor of banking for the state of Washington, when this action was instituted by him, was guilty of a contempt of court by instituting another action shortly after the defendant filed her answer, in the state of Washington, based upon the same cause of action that constitutes the foundation of this action. The commencement of the Washington action was accompanied by the levy of a writ of attachment upon property owned by the defendant in the state of Washington, including her deposit *Page 508
in the insolvent bank. When the Washington action was instituted the defendant moved that Moody be required to show cause why his conduct should not be deemed a civil contempt of our courts. The circuit court's refusal to take the requested action is assigned as error. The contempt proceedings bear the same caption as those of this cause and make no mention of the state of Oregon as a party. We pointed out in State ex rel. Hewson v. Hewson,
Finally, the defendant charges that error was committed when the court declined to bar counsel, other *Page 509 than the attorney general of Washington, from prosecuting this action. Art. III, § 21 of the Washington constitution, provides:
"The attorney general shall be the legal adviser of the state officers, and shall perform such other duties as may be prescribed by law."
Section 112 Rem. Comp. Stat. provides:
"The powers and duties of the attorney general in relation to actions and proceedings in the courts shall be: * * *. 2. To institute and prosecute all actions and proceedings for or for the use of the state, which may be necessary in the execution of the duties of any state officer. 3. To defend all actions and proceedings against any state officer in his official capacity in any of the courts of this state or the United States."
In Kennedy v. Gibson,
"The receiver is the agent of the United States, and according to the 56th section of the Act, this suit should have been conducted by their attorney. But this provision is merely directory. The question which arises is between the United States and its officers. The rights of the defendants are in no manner concerned, and they cannot be heard to make the objection, that this duty of the local law officer of the government has been devolved upon another. It is to be presumed that there were sufficient reasons to warrant this departure from the letter of the law."
We find no reason in this contention for disturbing the judgment of the circuit court.
The above disposes of all contentions advanced by the defendant. We have not mentioned all of the authorities cited in the exhaustive brief of defendant's counsel but all of them have received careful study.
Affirmed.
RAND, C.J., BEAN, BELT and KELLY, JJ. concur. *Page 510
Coffin Brothers & Co. v. Bennett , 48 S. Ct. 422 ( 1928 )
Casey v. Galli , 24 L. Ed. 168 ( 1877 )
Turnbull v. Payson , 24 L. Ed. 437 ( 1877 )
United States v. Knox , 26 L. Ed. 216 ( 1880 )
Keyser v. Hitz , 10 S. Ct. 290 ( 1890 )
In Re Chetwood , 17 S. Ct. 385 ( 1897 )
Rankin v. Fidelity Insurance, Trust & Safe Deposit Co. , 23 S. Ct. 553 ( 1903 )
Weatherwax v. Johnson , 161 Wash. 80 ( 1931 )
Collins v. Caldwell , 29 F.2d 329 ( 1928 )
Williams v. Stone , 25 F.2d 831 ( 1928 )
Aronson & Co. v. Pearson , 199 Cal. 286 ( 1926 )
State Ex Rel. Hewson v. Hewson , 129 Or. 612 ( 1929 )
In Re Idleman's Commitment , 146 Or. 13 ( 1933 )
State Bank of Portland v. Gotshall , 121 Or. 92 ( 1927 )
Flash v. Conn , 3 S. Ct. 263 ( 1883 )
Bushnell v. Leland , 17 S. Ct. 209 ( 1897 )
Burgess v. Seligman , 2 S. Ct. 10 ( 1883 )
In Re Cashmere State Bank , 169 Wash. 258 ( 1932 )
Howarth v. . Angle , 162 N.Y. 179 ( 1900 )