Citation Numbers: 192 A. 864, 327 Pa. 116
Judges: OPINION BY MR. JUSTICE MAXEY, July 7, 1937:
Filed Date: 5/17/1937
Status: Precedential
Modified Date: 1/13/2023
The claim in litigation against this decedent's estate is that of the receiver of an Illinois bank to enforce the statutory liability of decedent as a stockholder. The claim was allowed by the court below upon adjudication of the final account of the Second National Bank of Titusville, Executor, and it has appealed.
The matter of the claim was referred to an auditor by the court below, after the issuance of a citation to appellant executor. The auditor conducted a hearing, proof being offered in the form of oral evidence and interrogatories. He filed a report, making findings of fact, the substance of which follows:
Decedent died on July 22, 1932, and at the time of her death was the owner of 60 shares of the capital stock of Central Manufacturing District Bank, of Chicago, the par value thereof being $6,000. Fifty shares she had acquired on January 13, 1928, and the other ten on February 1, 1929. A month after her death, on June 24, 1932, the Auditor of Public Accounts of the State of Illinois, whose status as a public officer appears to be similar to that of our Secretary of Banking, ordered the bank's operations suspended and closed its business. A subsequent audit showed the bank was insolvent, and an adjudication to that effect was decreed by the Circuit Court of Cook County, Chicago, Illinois, on August 6, 1932. By this decree the court found that the Auditor of Public Accounts, pursuant to law, had appointed one Leimert as receiver of the bank's property and assets. The latter filed his bond and entered upon the performance of his duties. The court confirmed the appointment and conferred upon the receiver of the *Page 118 closed bank the usual liquidating powers. Subsequently, the claimant herein, Howard K. Hurwith, appellee, was appointed receiver of the bank for the special purpose of enforcing creditors' claims against stockholders arising from their ownership of stock of an insolvent Illinois bank, and he prosecutes the claim involved herein against the executor of the deceased stockholder.
The chief ground for reversal urged by appellant executor is that claimant, as receiver, was not authorized by law to prosecute the claim in a Pennsylvania court, or to receive payment thereof if allowed. Appellant's position is that the right of action is in the creditors of the closed bank alone, under applicable Illinois law, not in a receiver appointed by its courts. It is not denied that decedent was a stockholder at the time when the bank became insolvent and was closed. Prima facie, the liability in question appears to exist. Its creation is provided for by the Constitution of Illinois, 1870, Art. XI, sec. 6, as follows: "Every stockholder in a banking corporation or institution shall be individually responsible and liable to its creditors, over and above the amount of stock by him or her held, to an amount equal to his or her respective shares so held, for all its liabilities accruing while he or she remains such stockholder."
This constitutional provision, though declared by the Illinois courts to be self-executing without the aid of an enforcing statute (Rhode v. State Bank of Beverly Hills, 268 Ill. App.? 578), has nevertheless been implemented by section 6 of the Illinois General Banking Act, which became effective December 1, 1920: Illinois Laws, 1919, p. 224. This section of the statute is almost in identical words with the provision of the constitution quoted. The constitutional liability of the stockholder of a bank, through a purchase of such stock by him and assumption of the status of stockholder, establishes a contractual obligation, and has been held to survive against a deceased stockholder's estate: Heine v. Degen,
The Illinois Banking Act goes further, however, and makes specific provision for collection of the creditors' claims against stockholders. Section 11 thereof confers upon the state Auditor of Public Accounts general supervision over state banks, and authorizes the auditor, if upon examination the capital of the bank appears to have become impaired to such extent that it cannot be reorganized, but must be liquidated, to appoint a receiver of its assets with power to collect claims due it and liquidate its property. Obviously, this was what happened in the case of the Central Manufacturing District Bank, and Leimert was the general receiver appointed by the Auditor of Public Accounts and confirmed by the Cook County Court. The same section of the act then provides: "When any banking association, organized under this Act shall have gone into liquidation under the provisions of this section of the Act, the individual liability of the shareholders provided for by section six (6) of this Act may be enforced by any creditor of such association, by bill in equity, in the nature of a creditor's bill, brought by such creditor on behalf of himself and all other creditors of the association against the shareholders thereof, in any court having jurisdiction in equity for the county in which such bank or banking association may have been located or established. The court in which such suit is instituted may appoint a receiver and require of him such bond and security as seems proper for the purpose of collecting, receiving, and disbursing the amounts due from the stockholders on account of their ownership of the stock of said bank. Said receiver shall have authority upon the order of the court appointing him to employ such auditors and assistants as may be necessary to establish and recover the liabilities of the stockholders, and may, with the approval of the court, enter into compositions with insolvent stockholders, if any. The costs of such proceedings, including reasonable solicitor's fees for complainants' solicitors, and other necessary expenses of *Page 120 collection, may on the order of court be paid out of the funds collected by said receiver. The funds so collected, after the payment of the costs and expenses of collection, including solicitors' fees, shall be distributed according to law among the creditors of said bank in such manner as the court shall direct."
The evidence shows that the present claimant, Hurwith, was the receiver appointed under the foregoing section of the act, as special receiver in a representative suit by creditors to enforce the liability of stockholders, and was duly authorized, by the court which appointed him, to prosecute the claim herein. The right of a creditor to bring such a suit is undoubted, the Illinois court has declared, this right being a collective one, as respects all creditors, against all stockholders found to be liable: Heine v. Degen, supra; Elkinv. Diversey Trust Savings Bank,
Several of our own cases have involved the question of the proper party to sue or present a claim in a Pennsylvania court against a stockholder resident in this state. We have taken the view that, unless the law of the state conferring the right of action expressly permits the creditor to sue the stockholder in his own name, such an action cannot be sustained after a receiver, representing, inter alia, creditors, has been appointed in that state. In Cushing v. Perot,
Ball v. Anderson,
In the case before us the right of claimant receiver to present and enforce the admitted liability of decedent, as the owner of the bank stock, is plainly in conformity with our declared policy in enforcing such claims; he is, in fact, the only party who can administer its proceeds, if collected, under forms of equity, in harmony with the rights of all creditors, the persons primarily entitled. The law of the jurisdiction which confers the right and imposes the liability is determinative as to the identity of the party entitled to enforce it: Cushing v. Perot, supra; Ball v. Anderson, supra;First National Bk. v. Darlington,
The only reason advanced by appellant why claimant herein is not entitled to present, enforce and collect his claim in the Pennsylvania court is a single decision of the Supreme Court of Illinois, in Golden v. Cervenka,
That case was decided in April, 1917, several years before the present Illinois General Banking Act, the basis of the instant case, was enacted. We have not been advised as to the provisions of the Banking Act then in force. From a reading of the passage quoted above from the opinion in Golden v.Cervenka, it would appear to have contained different provisions dealing with the *Page 126 collection of stockholders' liabilities. The court refers to the act then in force as authorizing "proceedings by the receiver to enforce the liability of the stockholders to creditors." The reference is plainly to the receiver appointed in the Auditor's suit, who would correspond here to Leimert. As the court aptly says: "The creditors have no control over such suit and are not parties to it. . . . The Auditor represents the creditors only so far as the assets of the bank are concerned." That case decides merely that the Auditor's receiver cannot collect creditors' claims against stockholders.
As to the claimant, Hurwith, he is a receiver appointed, not by the state Auditor, but in a creditors' representative suit, solely for the express purpose of collecting this and other claims against stockholders, by a court of competent jurisdiction in the state where the cause of action arose. The decree of the Chicago court expressly authorizes claimant to prove in the court below the claim now before us. No individual creditor is objecting. Indeed, the creditors undoubtedly are eager to press their claim in precisely the manner in which it is now being urged. The claim admittedly is valid and existing. The sole objection is a procedural one. Claimant was appointed receiver in a representative suit, at the instance of creditors, and solely for the benefit of all of them. As such, he is acting as agent on their behalf, and every equitable consideration demands that the award in his favor be sustained. We have been unable to find any other decision of the Supreme Court of Illinois which bears on the subject at hand, and have been referred to none which deals with the right of a creditors' receiver appointed under the Banking Act of 1920, supra, to sue and recover against nonresident stockholders. We can only conclude that if the question now before us were presented to that learned court, it would find no inconsistency between the provision of the more recent act, permitting a creditors' receiver to sue and collect, and the clause in the Illinois Constitution *Page 127 quoted above, which in Golden v. Cervenka, supra, was held infringed by the old act.
The other assignments of error do not appear to be strongly urged, and we find no merit in them. The evidence offered by claimant was largely in the form of interrogatories addressed to the bank auditor who made the examination of the assets and liabilities of the closed bank and to its cashier. The commission which issued from the court below directing the taking of this testimony was consented to by appellant's attorneys. The accruals of the bank's liabilities during the period when decedent held her stock, necessary to impose liability for its debts, were adequately shown and were taken from the books of the bank by those familiar with them. Nothing more could reasonably be required. When the interrogatories were offered in evidence, only a general objection was interposed on the grounds of incompetency and irrelevancy, without specification as to the reasons therefor. Appellant failed to offer any rebuttal proof whatever, and offered no defense. The assignments of error covering these phases of the case are without weight and are herewith summarily overruled.
The award made by the court below was proper, and its decree is affirmed, costs to be paid out of the estate.