Source: https://supreme.justia.com/cases/federal/us/285/467/
Timestamp: 2019-04-24 11:58:26+00:00

Document:
1. An objection to a state statute upon the ground that it places on a stockholder an obligation to pay assessments not imposed by the statutes in force when he acquired his stock invokes the due process clause of the Fourteenth Amendment, rather than the contract clause of the Constitution. P. 285 U. S. 474.
2. A party making this objection based on the Fourteenth Amendment must show that the statutes existing when his contract was made did not impose the obligation laid by the later statute, and if this is doubtful upon the face of the statutes and for want of an authoritative construction by the state court, the objection will not be entertained. P. 285 U. S. 475.
3. When the statutes in force when a stockholder of a bank acquired his stock make him liable to pay assessments to restore impairments of the bank's capital, the obligation may be enforced, in the absence of an exclusive statutory remedy, by a common law action of debt or its modern equivalent. P. 285 U. S. 476.
4. The mere fact that the statutes defining the stockholder's liability to pay create a special remedy for collecting the assessments by sale of his shares does not imply that this is to be exclusive (the statute not so declaring) and that the more plenary remedy by common law action is withheld. P. 285 U. S. 477.
5. The enactment of a statute specifically authorizing suit against stockholders for deficiencies after sale of their stock to pay assessments cannot be taken as a legislative determination that, under the earlier statutes, no common law remedy for the collection of assessments existed. P. 285 U. S. 479.
6. Mere variations of the remedy, or the creation of new ones, even though more onerous, for the enforcement of preexisting obligation to pay assessments in full, are unobjectionable. Id.
212 Iowa 196, 236 N.W. 10, affirmed.
Appeal from a judgment affirming a recovery by the bank in its suit against stockholders to collect assessments.
Appellee, an Iowa banking corporation, brought suit in the courts of that state to enforce the personal liability of appellant, its stockholder, for an assessment made under the Iowa statutes, which provide for the restoration of any impairment of capital of a bank by assessment pro rata of the stockholders. The case comes here on appeal, Jud.Code § 237, from a judgment of the Iowa Supreme Court sustaining the assessment and upholding the statute, which is assailed as infringing the contract and due process clauses of the Federal Constitution. 236 N.W. 10.
"Should any stockholder neglect or refuse to pay his assessment within ninety days from the date of mailing notice thereof, the board of directors shall cause a sufficient amount of the capital stock held by such stockholder to be sold at public auction to make good the deficiency, after giving ten days' notice thereof by personal service or by posting the same in the bank, and publishing it in some newspaper of the county in which the bank is located, which notice shall recite the assessment made, the amount due thereunder from the stockholder, and the time and place of sale; proof of all which may be made in the manner provided in the preceding section."
"Should the proceeds of a sale under the preceding section of all the stock of any stockholder be insufficient to satisfy his entire assessment liability, he shall be personally liable for the deficiency, which may be collected by suit brought in the name of the bank against such stockholder."
Following the adoption of this later section, the superintendent of banks determined that appellee's capital had been impaired 100 percent, and directed an assessment accordingly. Acting under § 9248, appellee's directors sold appellant's stock for $1 a share, and the present suit was brought to recover the deficiency.
"the articles of incorporation, bylaws, rules, and regulations of corporations hereafter organized . . . shall at all times be subject to legislative control, and may be at any time, altered, abridged, or set aside by law. . . ."
It is insisted that the power thus reserved embraces not only a legislative withdrawal of any grant of immunity to the stockholders of the bank from liability for its debts, but extends to the imposition on them of a new and continuing liability to pay any assessment levied for the restoration of capital of the bank.
was cast upon the stockholder himself, even though the only remedy to enforce the obligation was by the sale of the stock. Consequently, appellant's obligation in the premises had not been increased. He was always obligated to pay the assessment. Of course, if he did not pay, the only remedy under the statute was to sell his stock; yet the obligation to pay was there just the same. Now, under the new legislation, the stockholder's liability has not been increased, but rather the remedy for enforcing that obligation has been changed. Were the remedy a part of appellant's contract, a change thereof would amount to an impairment. Barnitz v. Beverly, 163 U. S. 118; Conley v. Barton, 260 U. S. 677."
"Obviously, in the case at bar, however, we are not confronted with a case where the remedy became a part of the contractual obligation. There is not a syllable in the statutory contract which in any way indicates that the remedy is a part of the agreement. It was not said by the legislature that there could be no other or different remedy. Hence, it was perfectly proper for the lawmaking body to adopt § 9248-a(1) of the 1927 Code, because such amendatory legislation pertained to the remedy only. The purpose of this legislative enactment was to afford a more appropriate remedy for an obligation already existing against appellant. Ever since becoming a stockholder of the appellee bank, he was obligated to pay any legal assessment made for the purpose of repairing the capital stock. This new legislation simply recognized that obligation and afforded a more complete remedy to enforce the same. No new obligation was created by the amendment, but rather the old was recognized and a better way to enforce it provided."
obligation of a stockholder in the nature of a contract to restore his pro rata share of any impairment of the corporate capital can be said to exist independently of some means or remedy for enforcing it in addition to the sale of his stock.
Nor are we called on to discuss here the suggestion that, even though the sale of the stock was the only means of collecting assessments, the contract and due process clauses do not guarantee appellant against the selection and the application to him of any other remedy reasonably adapted to carrying out the policy and purpose plainly declared by the earlier statute, to require complete restoration of any impairment of corporate capital by assessment of the stockholders. See Henley v. Myers, 215 U. S. 373; League v. Texas, 184 U. S. 156, 184 U. S. 158; Graham & Foster v. Goodcell, 282 U. S. 409, 282 U. S. 426; Milliken v. United States, 283 U. S. 15, 283 U. S. 20 et seq.; People v. Adams State Bank, 272 Ill. 277, 111 N.E. 989; Irvine v. Elliott, 203 F. 82, 96-97. For we conclude that appellant does not sustain the burden which rests on him of establishing that the later statute is unconstitutional because imposing a liability to which he was not subject under the earlier one.
was then enforceable by any appropriate form of remedy. See Pinney v. Nelson, 183 U. S. 144, 183 U. S. 147; Whitman v. Oxford National Bank, 176 U. S. 559; Thomas v. Matthiessen, 232 U. S. 221.
The Supreme Court of Iowa has given no authoritative answer to the question whether, before the Act of 1925, there was any remedy other than sale of the stock by which an assessment might be recovered from a stockholder. In the present case, it did not decide the question, contenting itself with the observation that "the only remedy under the statute was to sell his stock." In two earlier cases, arising long after appellant acquired his stock, it had expressed the view that the only remedy for enforcing the payment of assessments was by sale of the shareholder's stock. See Leach v. Arthur Savings Bank, 203 Iowa, 1052, 1057, 213 N.W. 772; Andrew v. People's State Bank, 211 Iowa, 649, 234 N.W. 542, 546. But in neither was this statement necessary to the decision, nor did it have any bearing on the question actually decided. Both followed the passage of the Act of 1925. In no other cited case has the question been considered.
Where legislation is assailed as impairing the obligation of contract, this Court, in defining the scope of the constitutional immunity, will determine for itself what the contract is for whose protection the immunity is invoked. See Appleby v. New York, 271 U. S. 364, 271 U. S. 379-380. In the circumstances of this case also, where the alleged infringement of the Fourteenth Amendment turns on the asserted nonexistence of a contractual obligation to do that which the challenged statute exacts, appellant must satisfy this Court that he was not so bound. For here, the nature and extent of his obligation depend upon the construction of a local statute which the highest court of the state has indicated by its latest decision is still open for determination. See Brunswick Terminal Co. v.
National Bank of Baltimore, 192 U. S. 386, 192 U. S. 392 et seq.; cf. Broad River Power Co. v. South Carolina, 281 U. S. 537, 281 U. S. 540.
The meaning of the sections now in question must be ascertained in the light of the legislative policy of the state. They are a part of its public laws, dealing with a subject of public concern, the stability and solvency of state banking institutions. See Noble State Bank v. Haskell, 219 U. S. 104, 219 U. S. 111-112; Bank of Oxford v. Love, 250 U. S. 603. Those laws confer on the superintendent of banks full authority to require a bank to restore impairments of its capital. § 9235, Iowa Code of 1927 (§ 1572, Iowa Code of 1873). He may cause its liquidation if it refuses to comply with his order or is in an insolvent or unsafe condition, or the interests of creditors require it to be closed. §§ 9238, 9239, Iowa Code of 1927 (§ 1572, Iowa Code of 1873). The stockholders are made individually liable to creditors, §§ 9251, 9252, Iowa Code of 1927 (§ 1882, Iowa Code of 1897), and any bank, whether its charter has expired or not, may be dissolved by vote of three-fourths of the stockholders, § 9277, Iowa Code of 1927 (§ 1857, Iowa Code of 1897).
amount due from the addressed stockholder;" and that, after 90 days, allowed for the payment of the assessment, his stock might be sold upon an advertisement required to "recite the assessment made and the amount due thereunder from the stockholder." These are phrases importing legal liability. They define an obligation imposed by the statute upon the stockholders to pay the assessments to the bank, see Whitman v. Oxford National Bank, 176 U. S. 559, 176 U. S. 562, by which alone the complete restoration of impaired capital, which is the legislative purpose, could be secured with certainty.
If no specific remedy of any kind had been provided to compel payment of assessments, there could be little doubt that the effect of these provisions would have been to create an obligation or liability, quasi-contractual in nature, on the part of stockholders acquiring their stock after the enactment, to pay to the bank a sum certain -- that is, the assessment when made, for which the common law affords a remedy in debt or indebitatus assumpsit or its modern equivalent. See Mills v. Scott, 99 U. S. 25; Whitman v. Oxford National Bank, 176 U. S. 559; Flash v. Conn, 109 U. S. 371; Bernheimer v. Converse, 206 U. S. 516, 206 U. S. 529; Price v. United States, 269 U. S. 492, 269 U. S. 500; United States v. Chamberlin, 219 U. S. 250; Meredith v. United States, 13 Pet. 486, 38 U. S. 493; Pacific Mail Steamship Co. v. Joliffe, 2 Wall. 450, 69 U. S. 457; Converse v. Hamilton, 224 U. S. 243, 224 U. S. 253; Farmers' Loan & Trust Co. v. Funk, 49 Neb. 353, 68 N.W. 520. See James B. Ames, Lectures on Legal History, Implied Assumpsit, 149, 161.
method of enforcing the statutory liability to pay assessments. But it is not stated to be exclusive, and its adoption involves no necessary inconsistency with the continued existence of a common law remedy for the recovery of the sum certain fixed by the assessment and declared to be due by the statute. In those instances, where the impairment is more than 50 percent of the capital, the remedy by sale would be insufficient to enforce the liability declared. No reason is suggested why such a remedy should, by mere implication, be deemed exclusive, or why the statute should be so construed by inference as to defeat its obvious purpose or limit or destroy the liability which, in plain terms, it has created.
not intended to be exclusive of applicable common law remedies, by which complete performance might be secured.
Administrative remedies for the collection of taxes, if not made exclusive by statute, do not preclude the recovery of the tax by a common law action of debt. Price v. United States, 269 U. S. 492, 269 U. S. 500; United States v. Chamberlin, 219 U. S. 250, 219 U. S. 262; Dollar Savings Bank v. United States, 19 Wall. 227, 86 U. S. 238-239; Meredith v. United States, 13 Pet. 486, 38 U. S. 493; See Stockwell v. United States, 13 Wall. 531, 80 U. S. 542. And, in general, the liability of stockholders to assessment under local statutes is deemed transitory in nature, enforceable by common law remedies in states other than that of the corporation, although special statutory forms of remedy given by the local statute could not be resorted to elsewhere. See Whitman v. Oxford National Bank, 176 U. S. 559; Hancock National Bank v. Farnum, 176 U. S. 640; Hale v. Hardon, 95 F. 747; Rhodes v. United States National Bank, 66 F. 512; Dexter v. Edmands, 89 F. 467.
The enactment of the statute of 1925, specifically authorizing a suit for the deficiency after the sale of the stock, served to remove any possible doubts and rendered certain what may previously have been thought by some to be uncertain. But it can hardly be taken to be a legislative determination that, under the earlier statutes, no common law remedy could be availed of for the collection of assessments. If not, mere variations of the remedy or the creation of new ones, even though more onerous, for the enforcement of a preexisting obligation to pay assessments in full, are unobjectionable. See Hill v. Merchants' Mutual Ins. Co., 134 U. S. 515; League v. Texas, 184 U. S. 156, 184 U. S. 158; Henley v. Myers, 215 U. S. 373; Conley v. Barton, 260 U. S. 677.
his stock, we cannot say that he was not personally liable for his pro rata share of any impairment of the bank's capital assessed against him while he remained a stockholder, whether his stock was sold under § 9248-a(1) or not, or that the later statute, which provided a remedy for enforcing such liability, infringed his constitutional rights.

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 § 9248