Case ID: ohio-np-ns_30/html/0220-01.html
Source: Caselaw Access Project
Author: {"author": "Snediker, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Common Pleas Court of Montgomery County.
    State ex rel Fulton, Supt. v. Achey, et al.
    Decided December 23, 1932.
    
      Gilbert Bettman, att’y. gen’l., Raymond L. Poivers, ass’t. att’y. gen’l., Sidney G. Kusxoorm, Daniel W. Iddings, Hubert A. Estabrook, for plaintiff.
    
      Munger & Kennedy, R. C. Fitzgerald, McMahon, Cor-loin, Landis & Markham, Fred Rosemond, H. N. Routzohn, for defendants.
   Snediker, J.

This case is now before the court on several demurrers filed by Francis L. Achey, Eugene Kennedy as trustee for Reba Davidson, Eugene Kennedy, James Turpin, Mabel M. Kennedy, Louise Kennedy, James E. Hall, Jennie E. Hall, and the estate of Edward T. Hall, deceased, Obed W. Irvin, Louise S. and Robert C. Corwin, and the trustees of Ohio Wesleyan University. All of these demurrers are on the ground that the petition does not state facts sufficient to constitute a cause of action against the several defendants, except the demurrer of the Ohio Wesleyan University, which adds that there is a misjoinder of parties defendant, and that there is a defect of parties defendant in that the Union 'Trust Company has not been made such a party, and the demurrer of the Halls, which adds that there is a misjoinder of parties defendant.

This action is brought by the sovereign, the state of Ohio, on relation of Ira J. Fulton, superintendent of banks. The case is for the collection of what is ordinarily spoken of as double liability, which the superintendent claims is recoverable from these and other defendants, because he has ascertained that the assets of the Union Trust Company, of Dayton, Ohio, of which these defendants are stockholders, will be insufficient to pay its debts and liabilities.

Such ascertainment, after the superintendent has taken possession of the bank for the purpose of liquidation, is imposed by Section 710-75, General Code, on such superintendent; and when he has so ascertained, it becomes his duty for and on behalf of the state of Ohio to bring an action under favor of Section 710-95, General Code, to “enforce the individual liability of the stockholders.” That liability is created by Article 13, Section 3, of the Constitution of Ohio, which, for our purposes, reads:

“Stockholders of corporations authorized to receive money on deposit shall be held individually responsible, equally and ratably and not one for another, for all contracts, debts, and engagements of such corporations to the extent of the amount of their stock therein at the par value thereof in addition to the amount invested in such shares.”

So much of Section 3, Article 13, as is here quoted is an exception to what precedes it in that section.

“An exception exempts absolutely from the operation of an enactment. An exception takes out of an enactment something- which would otherwise be a part of the subject matter of it.” Black on Interpretation of Laws, p. 271.

It has been most recently held by the Supreme Court of Ohio in the case of Snider v. The United Banking & Trust Co., 124 Ohio St., 375, that the provisions of Section 3, Article 13, of the Constitution, which relate to double liability, are self-executing and do not require the aid of the legislation found in the General Code to make them enforceable.

The liability so fixed on stockholders is, as stated in the terms of this section, “in addition to the amount invested in' such shares.” In other words, as said by the Supreme Court in the Snider case, it is an additional liability.

Section 3 of Article 13 of the original Constitution of 1851 read:

“Dues from, corporations shall be secured by such individual liability of the stockholders and other means as may be prescribed by law, but in all cases each stockholder shall be liable over and above the stock by him or her owned and any amount paid thereon to a further sum at least equal in amount to such stock.”

Some decisions were rendered under this constitutional provision to the effect that the liability of any individual stockholder was collateral to the principal obligation of the corporation, and to be resorted to by the creditors only in case of the insolvency of the corporation, or where payment could not be enforced against it by the ordinary process of execution.

In 1903 by amendment Section 3 of the Constitution was made to read:

“Dues from, private corporation shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable otherwise than for the unpaid stock owned by him or her.”

The people thus eliminated stockholders’ double liability.

In 1912, by another amendment, Section 3 was made to include the provisions first referred to.

So far as insolvency and collectibility are concerned, this petition states that, that was all determined by the superintendent of banks, under the authority vested in him by the banking code prior to the bringing of this action; and in making that statement he brings, to the attention of the court, a condition which warrants the relief prayed for in the petition. The law is not now as it was at the time of the adoption of the Constitution of 1851, or at the time of the rendition of the decision construing original Section 3. This is not an action of creditors of the Union Trust Company. As we have said, the state of Ohio is proceeding against these stockholders, and has such right and the duty so to do by the present Constitution and the provisions of the General Code.

The Union Trust Company is not a proper party to this case. The responsibility of stockholders for all contracts, debts, and engagements of that company is an individual responsibility, recoverable as we have heretofore decided. As we said in Stake ex rel Fulton v. Achey, 30 N. P. (N. S.) 12, [O. L. B. & R. Nov. 7, 1932], the imposition of the pro rata liability fixed by the constitution requires a joint action against all the stockholders. This has always been the policy of the courts in Ohio with respect to similar cases. We do not, then, find any misjoinder of parties defendant here.