Case Name: State ex rel Fulton, Supt. of Banks, v. Achey et al.
Court: Montgomery County Court of Common Pleas
Jurisdiction: Ohio
Decision Date: 1932-10-18
Citations: 30 Ohio N.P. (n.s.) 12
Docket Number: 
Parties: State ex rel Fulton, Supt. of Banks, v. Achey et al.
Judges: 
Reporter: Ohio nisi prius and general term reports (new series)
Volume: 30
Pages: 12–16

Head Matter:
Common Pleas Court of Montgomery County.
State ex rel Fulton, Supt. of Banks, v. Achey et al.
Decided October 18, 1932.
Estabrook, Finn & McKee, Kusworm, & Shaman, and IdMngs & Iddtmgs, for plaintiff.
R. W. Baggott and Theodore C. Lindsey, for defendants.

Opinion:
Snediker, J.
This case is before the court on demurrers filed to the petition on the grounds, first that there is a misjoinder of parties defendant; second, that the petition does not state facts sufficient to constitute a cause of action.
The allegations of the pleading are: that Ira J. Fulton is the appointed and acting superintendent of banks of the State of Ohio; that on the 81st day of October, 1931, he took over for liquidation, pursuant to Section 710-89 of the General Code of Ohio, the Union Trust Company, of this city, and by such act became vested with the title to and the possession of the property and assets of the Union Trust Company; that the Union Trust Company is a corporation organized and existing under Ohio laws prior to October 31, 1931; that it was engaged in the general banking business until that date, when it was found to be in unsound and unsafe condition for the transaction of its business and insolvent by the superintendent.
In the process of liquidation it was disclosed that the Union Trust Company had an outstanding capital stock of $1,500,000, divided into shares of a par value of $25.00 each. Plaintiff further avers that the existing stockholders' liabilities of the Union Trust Company were incurred after January 1, 1913. Plaintiff further avers that after making a full and complete investigation of the financial condition of the Union Trust Company the superintendent has determined that the assets of the Union Trust Company, plus the full amount which would be realized by reason of the double liability of the stockholders, would not be sufficient to pay its liabilities in full, and it therefore becomes necessary to collect the full amount of the superadded double liability of said shares of stock to apply upon the payment of these obligations. Then follows a list of the stockholders who had not up to the date of the filing of the petition paid such liability and balance due from each thereon, all of them being made parties defendant herein.
The superintendent of banks made demand on each of these defendants for the full amount of the double liability on November 30, 1931 and has since repeated his demands, and those here made defendants have either refused or neglected to pay as demanded. Plaintiff therefore asks that the court determine and fix the statutory double liability of the defendant stockholders made defendants herein in the amount set forth opposite their respective names, and that upon final hearing judgment be awarded in favor of plaintiff against each of the defendants for such amounts with interest, and for all other and further relief which plaintiff is entitled to in the premises.
In connection with these demurrers we should consider the provisions of constitutional and statutory law which relate to the plaintiff's right to recover the double liability here sued upon. Section 3 of Article 13 of the Constitution of Ohio, so far as it is necessary for our case, reads:
" that stockholders of corporations authorized to receive money on deposit shall be held individually responsible, equaly 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."
Section 710-14 of the General Code of Ohio reads:
"All suits or proceedings brought by the superintendent of banks under authority of law shall be brought in the name of the State upon his relation and shall be conducted under the direction and supervision of the attorney general ."
Section 710-75, General Code, is:
"Stockholders of banks shall be held individually responsible, equally and ratably, and not • one for another, for all contracts, debts, and engagements of such bank to the extent of the amount of their stock therein, at the par value thereof in addition to the amount invested in such shares . At any time after taking possession of the bank for the purpose of liquidation when the superintendent of banks ascertains that the assets of such bank will be insufficient to pay its debts and liabilities he may enforce the individual liability of the stockholders."
Section 710-89, General Code, provides:
"The superintendent of banks may forthwith take possession of the business and property of any bank to which this act is applicable whenever it shall appear that such bank
'3. Is in an unsound and unsafe condition to transact its business.."
Section 710-95, General Code, in part reads:
" and may," (the superintendent of banks may) "if necessary to pay the debts of such bank, enforce the individual liability of the stockholders."
Read in connection with so much of the Constitution of Ohio as is here quoted and in connection with the several sections of the statute to which we have referred, we can only find that the allegations of the petition are sufficient to authorize the plaintiff to bring this action to obtain the relief sought. We are not now passing upon any objections which might occur to counsel with respect to the definiteness and certainty of the allegations of the petition. Suffice to say for the purposes of the general demurrer that if the petition does, not state a cause of action, counsel for the defendants, so pleading, have waived and left behind them all right to complain on any such ground. Demurring defendants claim there is a misjoinder of parties defendant, taking the position that the statutory liability of a stockholder is several and not joint; that any action ought to proceed against him alone; and that he may not for the purpose of recovering the amout due on such liability be joined with others in like relation.
The language of the Code, which conforms, of course, to the section of the constitution which authorizes the imposition of the statutory liability, is, as we have quoted.
We understand the - word "equally" there used as intended to mean "share and share alike"; and the word "ratably" could properly be interpreted "pro rata." In other words, there is imposed on the stockholders the obligation to individually pay, with all other stockholders in proportion to the stock held by them, such an amount, in addition to the amount of their stock, as their proper proportion is to the amount of the entire indebtedness unsatisfied and unpaid by other assets of the bank. If any stockholder cannot pay his share his liability may not be satisfied out of a solvent stockholder.
How could such a pro rata imposition of liability be properly and definitely ascertained otherwise than in a joint action against all stockholders? And this has always been the policy of the courts in Ohio with reference to similar cases.
As was said by the Supreme Court in the 17 Ohio State at page 113, 3rd syllabus:
"The suit of a creditor to endorse such liability should, under the statute, be for the benefit of all creditors; and the stockholders whose liability is sought to be enforced have the right to insist on their co-stockholders being made parties for the purpose of a general accounting and to enforce from them contribution in proportion to their shares of stock."
Here the plaintiff representing all interests, brings the action for the benefit of all creditors of the bank and should proceed against all upon whom the liability falls for the payment of the indebtedness.
Like cases are those of: Turnbull v. Pomery Salt Co., 24 Bulletin, 133; Bullock v. Kilgore, 31 Ohio St., 543.
Chief Justice Marshall, in 111 Ohio St., page 139-155, says:
"The liability (double liability of stockholders) under Section 3, Article 13, of the Constitution of 1851, did not, however, rest upon them as individuals but as members of the corporation . The liability is not technically contractual except in the sense that any statutory obligation becomes part of and must be read into a contract to which it applies
There are quite a number of other cases reported in the state where all the stockholders are made parties defendant in one action, and not until the general distress among banks in Ohio was the objection made to that procedure, the sustaining of which by the courts would lead to such confusion as would interfere with the proper enforcement of the constitutional and statutory rights of depositors and creditors. There may be other jurisdictions in which the courts take a different view of like provisions, but that the law of Ohio is as we have just stated is manifest from a very recent case, vigorously contested. We refer to the case of the State of Ohio ex rel I. J. Fulton, Superintendent of Banks, etc. v. Joe Ach, et al. In that case a demurrer on the ground of misjoinder of parties defendant and that several causes of action were improperly joined and that separate causes of action against several defendants were improperly joined was overruled by the Common Pleas Court. Subsequently, the case on being heard by the Court of Appeals on a petition in error filed by Ach was affirmed as to the judgment of the Common Pleas Court. On October 13, 1932, the Supreme Court made its entry overruling the motion to certify the record.
The demurrers are overruled.