Court Opinion

ID: 3417601
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:45:00.892583+00
Date Added: 2024-06-11T13:43:36.619435
License: Public Domain

The question in this case is: Can money realized from stockholders of a State bank, in satisfaction of their super-added liabilities, be used for the payment of interest to creditors and for costs and expenses of administration?
The liability of a stockholder for the debts of a bank is fixed by section 6 of article 11 of the constitution. It provides: "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." It has been many times held that this provision is self-executing and determines the limit of a stockholder's liability. A casual reading of it will disclose that he is obligated only for liabilities accruing while he remains a stockholder. Any liability of the bank accrued either before he became a stockholder or after he ceased to be a stockholder, cannot be enforced against him. If a bank becomes defunct and goes into the hands of a receiver, it can make no contracts and incur no liabilities for which it or its stockholders may be held responsible. The rights and liabilities of creditors and debtors of an insolvent corporation *Page 232 
are fixed and determined as of the time of the appointment of a receiver. (Hynes v. Illinois Trust  Savings Bank, 226 Ill. 95.) Whatever charges and expenses are incurred after that time are not obligations of the bank, but are debts of the receivership.
Should a bank occupy a rented building, certain stockholders would be liable for all rent due at the time a receiver is appointed, but no matter how long the bank may be in liquidation and occupy the same premises, the stockholders would not be chargeable with any rent which accrued after the receiver was appointed. This is true with every other item of expense without exception. All debts, charges and expenses, including costs of administration, which accrue after the appointment of a receiver are charges against the receivership. The only obligations for which any stockholder is liable in any manner or form are those which the bank incurred while he was the owner of stock. For example, if a bank failed in 1930 and continued to occupy leased premises, no one could contend that a stockholder, who had disposed of his shares twenty years previously, should be compelled to contribute toward the rent which became due after the receivership. The bank could incur no obligation, and none could accrue against it after a receiver had been appointed.
A stockholder's liability in a defunct State bank is measured by the unsatisfied liability which accrued during the period of stock ownership, subject to the limitation that the stockholder's liability shall not exceed the par value of the stock held by him. In ascertaining the liability of an individual stockholder, the court in which the representative suit is pending must ascertain two primary facts: First, the aggregate amount of liability which accrued while the stockholder held his stock, and, second, the par value of the shares of stock so held by him. Without the existence of unsatisfied claims which accrued while he remained a stockholder, *Page 233 
he is under no liability to the bank's creditors at all. Burket
v. Reliance Bank and Trust Co. 366 Ill. 98.
What are the admitted facts in the instant case? Claims aggregating $105,872.45 were presented to the liquidating receiver and allowed by the Auditor of Public Accounts. The action of the receiver was later approved by the court. The Auditor's receiver realized in cash $102,173.52 from the assets of the bank. It will thus be seen that the assets of the bank lacked only $3698.93 of being sufficient to pay all of the debts and obligations of the bank which existed at the time the receiver was appointed.
The Farmers State Bank of Irvington had a capital stock of $25,000. A representative creditor's suit was instituted and the court fixed the respective liabilities of the stockholders. The receiver in that proceeding collected $24,916.33. After paying the costs, he turned over the remainder, $20,145.26, to the Auditor's receiver.
The Auditor paid seven dividends to the creditors, the last on July 3, 1936. This dividend paid, in full, all of the claims against the bank. It will thus be seen that a large portion of the amount turned over by the receiver in the creditor's suit was absorbed in liquidating claims and paying costs and charges. After the payment of all claims and charges in full, there remained in the hands of the Auditor's receiver cash, bonds and other assets, appraised at $13,433.07. This is the sum he seeks to distribute among the claimants, as interest. Such an order was entered and has been appealed from.
By what right the Auditor's receiver could use more than $3698.93, I am unable to observe. It is of no consequence to say that he paid the money he received from the receiver in the creditor's suit to the creditors. He had no right to use it at all except to the extent of $3698.93. This sum he could use for payment on claims but not for costs and expenses of receivership, or the payment of interest *Page 234 
on claims. Those charges were against the receivership and were in no sense an obligation of the bank and consequently there was no stockholder's liability for them. The statute (Ill. Rev. Stat. 1937, chap. 16 1/2, sec. 11) authorized him to pay costs and expenses, including attorney's fees, but neither the statute nor the constitution makes obligations of that character a liability against a stockholder. They must be paid out of bank assets and not out of contributions from stockholders. Though it may be desirable that all creditors be paid in full, nevertheless, we ought not to do violence to the plain provisions of the constitution and subject stockholders to a liability not imposed upon them. In my view, the majority opinion does this very thing; therefore, I am constrained to dissent from it.
ORR and WILSON, JJ., concur in this dissenting opinion.