#### BANK OF PINEHURST v. R. A. DERBY.

(Filed 20 December, 1940.)

1. Process § 5—

Where the complaint fails to state a cause of action against the nonresident defendant, the service of process by publication and attachment is void, and the warrant of attachment will be dismissed upon motion of defendant aptly made upon special appearance.

3. Banks and Banking § 16: Constitutional Law §§ 15a, 30 — Purchaser of stock prior to 1935 may not be held personally liable for amount by which sale of Stock fails to realize assessment to make good impairment of bank’s capital.

Plaintiff bank assessed its stockholders to make good an impairment of its capital. Ch. 4, Public Laws of 1921, as amended by eh. 56, Public Laws, Extra Session 1921. Under the provisions of the act it sold defendant’s stock, but the sale failed to realize an amount sufficient to pay the assessment against the stock. This action was instituted by the bank against the stockholder to recover the deficiency as a personal liability of the stockholder under the provisions of ch. 117, Public Laws of 1925 (Miehie’s Code, 219 [f]). It appeared that defendant had purchased the stock prior to the enactment of ch. 117, Public Laws of 1925. *Held:*The Act of 1925, amending the statute by providing for personal liability of stockholders for the amount by which the sale of their stock fails to realize a sum sufficient to pay the assessment, provided a new remedy, and to permit the bank to maintain the action against the defendant stockholder who purchased his stock prior to the enactment of the amendment of 1925 would violate due process of law, Art. I, see. 17, of the Constitution of N. C., sec. 1 of the 14th Amendment to the U. S. Constitution, and would impair the obligations of the contract, U. S. Constitution, Art. I, sec. 10, and further, the Act of 1925 cannot be given retroactive effect, and is, therefore, inoperative as to defendant.

3. Constitutional Law § 4a—

An act of the General Assembly in conflict with the Constitution is void.

4. Statutes § 7—

A statute will be presumed to be prospective in effect, especially if a construction giving it retroactive effect would be in derogation of common *654law rights or would render the statute unconstitutional, and a statute will not be construed to have retroactive operation unless the intent to make it retroactive is expressed in clear, strong and imperative language.

Barnhill, J., concurring in result.

Stacy, O. J., and Winbobne, J., join in concurring opinion.

Appeal by defendant from *Clement, J.,*at May Term, 1940, of Moore.

Reversed.

This is an action brought by plaintiff against defendant to recover $990.00 and interest from 6 November, 1933. The plaintiff contends that defendant was a nonresident of North Carolina and that a valid warrant of attachment was levied on 1,113.24 acres of land belonging to him in Richmond County, N. C. The defendant entered a special appearance and moved to dissolve and dismiss the warrant of attachment.

On motion in the cause, after reciting the facts, the clerk of the Superior Court of Moore County, N. C., rendered judgment, in part, as follows: “It is, therefore, Considered, Ordered and Adjudged by the Court that the motion of the defendant to vacate, dissolve and set aside the Warrant of Attachment issued in this cause for the reasons therein set forth, or for any reason urged by the defendant, be, and the same is hereby denied; and it is further Ordered, Found and Adjudged that said Warrant of Attachment and the levy of the same on the property of defendant by the Sheriff of Richmond County are valid and binding in law.” The defendant appealed from the judgment to the Superior Court.

In the judgment of the Superior Court is the following: “It is now Considered, Adjudged and Decreed by the Court that the judgment or order of said John Willcox, Clerk of the Superior Court, of date July 20, 1938, denying the motion of the defendant to vacate and set aside said Warrant of Attachment be, and the same is hereby affirmed and the motion of the defendant to vacate and set aside said Warrant of Attachment be, and the same is hereby denied and the appeal of the defendant therefrom is hereby dismissed.”

The defendant excepted and assigned error to the judgment as signed and appealed to the Supreme Court.

*U. L. Spence for plaintiff.*

*K. B. Hoyle for defendant.*

Clarkson, J.

This case was here before on appeal. *Bank v. Derby,*215 N. C., 669.

The plaintiff in its brief says: “It is not questioned that when the complaint on its face does not state a cause of action upon which a warrant of attachment may issue the warrant will be vacated upon *655motion of tbe defendant upon a special appearance entered for tbat purpose. In tbe instant case, however, tbe complaint on its face is subject to no sucb infirmity and contains allegations of fact sufficient to award to tbe plaintiff tbe relief prayed for and to support tbe order of publication and tbe notice of publication, of tbe summons and of tbe warrant of attachment.” *S. v. Abbott, ante,*470. If tbe complaint does not state a cause of action, then we need not consider tbe summons and warrant of attachment.

Tbe questions involved in this appeal: Tbe record disclosed tbat tbe defendant, on 1 November, 1919, purchased 10 shares of tbe capital stock of tbe plaintiff, tbe Bank of Pineburst. 10 shares, par value of $100.00 a share — total, $1,000.00. Tbat under tbe impairment statute hereinafter set forth this stock was sold and purchased by plaintiff bank for $10. This action is brought, as alleged in tbe complaint: “Tbat tbe capital stock of tbe plaintiff owned by tbe defendant as aforesaid alleged failed to bring tbe amount of tbe assessment against said stock and against tbe defendant as tbe owner thereof at tbe sale of said stock as aforesaid alleged, and the defendant is due and owing to tbe plaintiff tbe difference between tbe amount of said assessment on tbe stock of tbe plaintiff owned by tbe defendant aforesaid and tbe price said stock brought at tbe sale aforesaid, to wit, tbe sum of $990.00, with interest thereon from tbe 6th day of November, 1933, and tbe plaintiff is entitled to recover of tbe defendant judgment for said sum in this action.” Demand for judgment for said amount.

Tbe act under which plaintiff alleges a personal judgment against defendant is bottomed on an act of tbe General Assembly, 1925, cb. Ill, hereafter set forth: (1) Would tbe maintenance of tbe action so impair vested rights and deny due process as to violate tbe recognized principles of constitutional law? We think so. (2) Is tbe Act of 1925, cb. 117, prospective and not retroactive, therefore inoperative in this aspect, so far as plaintiff is concerned? We think so. We think tbe complaint does not “state facts sufficient to constitute a cause of action.” N. C. Code, 1939 (Micbie), sec. 511 (6).

Section 219 (a), of N. C. Code, *supra:*“Tbe stockholders of every bank organized under tbe laws of North Carolina, whether under tbe general law or by special act, shall be individually responsible, equally and ratably, and not one for another, for all contracts, debts, and engagements of sucb corporations, to tbe extent of tbe amount of their stocks therein at par value thereof, in addition to tbe amount invested in sucb shares, except as otherwise provided. Tbe term stockholders, when used in this chapter, shall apply not only to sucb persons as appear by tbe books of tbe corporation to be stockholders, but also to every owner of stock, legal or equitable, although tbe same may be on *656such books in tbe name of another person; but shall not apply to a person who may hold the stock as collateral for the payment of a debt. Such additional liability as is provided in this section shall cease on July first, one thousand nine hundred and thirty-five, with respect to any shares which may have been or may hereafter be issued. (1921, ch. 4, s. 21; 1933, ch. 159 : 1935, eh. 99, s. 1.)”

The section, *supra,*makes a stockholder personally liable to the creditors of a bank. This is not the present case. This action is brought under N. C. Code, *supra,*sec. 219 (f) : “The commissioner of banks shall notify every bank whose capital shall have become impaired from losses or any other cause, and the surplus and undivided profits of such bank are insufficient to make good such impairment, to make the impairment good within sixty days of such notice by an assessment upon the stockholders thereof, and it shall be the duty of the officers and directors of the bank receiving such notice to immediately call a special meeting of the stockholders for the purpose of making an assessment upon its stockholders sufficient to cover the impairment of the capital, payable in cash, at which meeting such assessment shall be made; Provided, that such bank may reduce its capital to the extent of the impairment, as provided in section 217 (j). If any stockholder of such bank neglects or refuses to pay such assessment as herein provided, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such stockholder or stockholders to be sold at public auction, upon thirty days notice given by posting such notice of sale in the office of the bank and by publishing such notice in a newspaper in the place where the bank is located, and if none therein, a neAvspaper circulating in the county in which the bank is located, to make good the deficiency, and the balance, if any, shall be returned to the delinquent shareholder or shareholders. If any such bank shall fail to cause to be paid in such deficiency in its capital stock for three months after receiving such notice from the commissioner of banks, the commissioner of banks may forthwith take possession of the property and business of such bank until .its affairs be finally liquidated as provided by law. A sale of stock, as provided in this section, shall effect an absolute cancellation of the outstanding certificate or certificates evidencing the stock so sold, and shall make the certificate null and void, and a new certificate shall be issued by the bank to the purchaser of such stock; *but in the event the stock of any stockholder be sold as hereinbefore provided, and the said stock when sold fails to bring the amount of the assessment against said stockholder, then, and in such event, the said stockholder shall be personally liable for the difference between the amount of said assessment and the price brought by the sale of the said stock.”*(Italics ours.) Extra Session 1921, ch. 56, sec. 3; 1925, ch. 117; 1931, ch. 243, sec. 5.

*657This section first appeared in tbe Act of 1921, cb. 56, amending tbe Act of 1921, cb. 4. Its provisions are substantially similar to tbe National Banking Act, wbicb was designed principally for tbe purpose of strengthening banks whose capital has become impaired. *Trust Co. v. Burke,*189 N. C., 69. Tbe 1925 amendment added tbe last nine lines, beginning with tbe word “but” after tbe semicolon. This was added to overcome tbe construction placed upon this section by tbe case cited above. Tbe Act of 1931 substituted “commissioner of banks” for “corporation commission” formerly appearing in this section.

This statute creates a new liability and provides a special remedy for its enforcement, viz.: tbe sale of stock if tbe stockholder fails to pay assessment. This remedy is exclusive and actions on proceedings ordinarily available may not be resorted to. So a personal action against tbe stockholder for the difference between tbe price for wbicb tbe stock sold and tbe amount of tbe assessment formerly could not be maintained. *Trust Co. v. Burke, supra.*Tbe effect of this bolding, that a personal action for tbe difference could not be maintained, was destroyed by tbe 1925 amendment wbicb specifically provides for such an action, although tbe general rules laid down for tbe construction of this section still remains applicable.

Tbe defendant purchased bis stock in plaintiff’s bank on 1 November, 1919. Plaintiff is now tbe owner of tbe stock purchased according to law, under tbe impairment statute, *supra.*

In *Trust Co. v. Burke, supra,*at p. 73 (filed 24 January, 1925), *Hoke, J.,*for tbe Court, said: “These suggestions, while to some extent involved in tbe inquiry, are not, as stated, definitely determined upon, and are here only referred to and approved in so far as pertinent, and as they may help to a proper apprehension of tbe question directly presented, to wit, tbe right of plaintiff to have personal judgment against defendant, a stockholder, on tbe assessment in tbe instant case for tbe amount of excess of tbe sum realized from tbe sale of bis entire stock. For tbe reasons heretofore given, we are of opinion that no such recovery can be bad, and tbe judgment overruling tbe demurrer must be reversed.”

To meet this decision, tbe General Assembly on 4 March, 1925, passed tbe following (part of cb. 117) : “‘But in tbe event tbe stock of any stockholder be sold as hereinbefore provided, and tbe said stock when sold fails to bring tbe amount of tbe assessment against tbe stockholder, then, and in that event, tbe said stockholder shall be personally liable for tbe difference between tbe amount of said assessment and tbe price brought by tbe sale of said stock.’ ”

We think the provision of tbe General Assembly making tbe defendant stockholder personally liable for tbe stock purchased 1 November, 1919, in plaintiff’s bank, under tbe Act of 1925, unconstitutional, as *658being retroactive and as impairing and destroying the obligation o£ a contract, affecting vested rights and denying due process.

N. C. Constitution, Art. I, sec. 17, is as follows: “No person ought to be taken, imprisoned, or disseized of his freehold, liberties or privileges, or outlawed or exiled, or in any manner deprived of his life, liberty or property, but by the law of the land.”

U. S. Constitution, Art. I, sec. 10, in part: “No state shall . . . pass any bill of attainder, *ex post facto*law, or law impairing the obligation of contracts, or grant any title of nobility.”

U. S. Constitution, Amendment 14, sec. 1, in part: “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.”

It is well settled that the general laws of the State in force ■ at the time of the execution of a contract enter into and become a part thereof. *Bateman v. Sterrett,*201 N. C., 59; *Rostan v. Huggins,*216 N. C., 386 (388).

In *Hicks v. Kearney,*189 N. C., 316, at p. 319, it is said: “‘There is always a presumption that statutes are intended to operate prospectively only, and words ought not to have a retroactive operation unless they are so clear, strong and imperative that no other meaning can be annexed to them, or unless the intention of the Legislature cannot be otherwise satisfied. Every reasonable doubt is resolved against a retroactive operation of a statute. If all of the language of a statute can be satisfied by giving it prospective action, only that construction will be given it. Especially will a statute be regarded as operating prospectively when it is in derogation of a common-law right, or the effect of giving it retroactive operations will be to destroy a vested right or to render the statute unconstitutional.’ 25 R. C. L., 787; Black on Interpretation of Laws, 252. In *Greer v. Asheville,*114 N. C., 678, it is said: ‘Unless the legislative intent to the contrary is made manifest by the express terms of the statute, or by necessary implication arising out of it, it will, as a rule, be held to operate prospectively only — never retroactively.’ ”

The act in controversy, Public Laws of N. C., 1925, ch. 117, *supra,*did not make it retroactive. If it had, it was unconstitutional. It must be construed prospectively. Wade on Retroactive Laws, sec. 34, is as follows: “Laws construed to be retroactive only when such intention clearly expressed. One of the cardinal rules by which courts are governed in interpreting statutes is, that they must be construed as- prospective in every instance, except where the legislative intent that they shall act retrospectively is expressed in clear and unambiguous terms, or *659such intent is necessarily implied from the language of the statute, which would be inoperative otherwise than retrospectively. This rule rests upon no constitutional limitation of the legislative power, but is a doctrine of the common law, founded upon the recognized injustice of a method of making laws by which the Legislature looks backward to discover past errors to be corrected and past grievances to be remedied. In all retroactive laws there must be an element of surprise, by which the persons whose rights are affected are taken unawares. They are called upon to act in a manner different from what they had been led by the previous state of the law to anticipate. So repugnant is such a system of legislation to our natural sense of justice, that it has been stigmatized as more unreasonable than that adopted by Caligula, who was said to have written his laws in a very small character, and hung them upon high pillars, the more effectually to ensnare the people,” etc.

An act of the General Assembly in conflict with the Constitution is void. *R. R. v. Cherokee County,*194 N. C., 781; *S. v. Brockwell,*209 N. C., 209.

In *Houston v. Bogle,*32 N. C., 496 (504), *Pearson, J.,*says: “It is settled, that the Legislature cannot pass any declaratory law or act declaring what the law was before its passage, so as to give it any binding weight with the courts. A retrospective statute, affecting or changing vested rights, is founded on unconstitutional principles and consequently void. 1 Kent. Com., 455, and the cases cited.” *Booth v. Hairston,*193 N. C., 278.

In *Patterson v. Hosiery Mills,*214 N. C., 806 (812), *Seawell, J.,*in clear language, for the Court says: “Whether the law itself makes the amendment, or as now, confers the power of amendment to the corporation, it will not be construed to operate retrospectively to the detriment of rights already vested under the old charter. *Greer v. Asheville,*114 N. C., 678, 19 S. E., 635; *Fenner v. Tucker,*213 N. C., 419, 196 S. E., 357. A contrary construction of the statute, giving authority to the retroactive provisions of the charter amendment under consideration, would do violence to the Constitution and would compel us to view the proposed action as the taking of property without due process of law.”

For the reasons given, the judgment of the court below is

Eeversed.

BaRnhiul, J.,

concurring in result: The date on which plaintiff purchased the stock in controversy is not alleged in the complaint. Standing alone, the complaint is sufficient, and, ordinarily, the defect in plaintiff’s cause of action relied on by defendant, being latent, would he a matter in defense. However, the court below found as a fact' — -apparently by consent and at least without exception — that the stock was *660acquired in 1919. In deciding the question presented it is permissible, therefore, for us to take cognizance of the fact thus found.

At the time defendant purchased this stock he became liable, in case of insolvency of the plaintiff, under the double liability statute, C. S., 219 (a). Subject to the terms of this section, which has since been repealed, he was the absolute owner thereof free of any claim against him or any right of assessment against the stock by plaintiff.

Ch. 56, sec. 3, Public Laws, Extra Session 1921, as amended by ch. Ill, Public Laws 1925, and ch. 243, Public Laws 1931, is not unconstitutional as stated in the majority opinion. It is not so contended by the defendant. As it creates a new liability and provides a special remedy for its enforcement, it relates only to stock thereafter issued and acquired. That is to say, it operates prospectively — not retroactively. There is no language in the act which seeks to make it otherwise.

As the statute, as amended, is prospective in operation it does not affect defendant’s vested rights in existence at the time of its enactment. Therefore, plaintiff has no cause of action to sustain the writ of attachment issued by the clerk and the service of summons by publication is void. *We*need say this and nothing more.

Stacy, C. J., and 'WiNbobNe, J., join in this opinion.