Court Opinion

ID: 6868493
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:57:47.580399+00
Date Added: 2024-06-11T16:05:21.625167
License: Public Domain

HANEY, Circuit Judge.
I dissent.
The Bankruptcy Act, § 63 (11 U.S.C.A. § 103), provides that: “Debts of the bankrupt may be proved and allowed against his estate which are * * * founded upon * * * a contract express or implied.” The statute does not say how much of the foundation of the debt must be contractual. It seems to me that there could be only three possible theories with respect to that question.
First. One possible theory is that when the statute says a debt must be “founded upon a contract,” it means that the debt must be “wholly” or “entirely” founded upon a contract. If that construction is correct, it is clear that the claim before us is not provable. McClaine v. Rankin, 197 U.S. 154, 25 S.Ct. 410, 49 L.Ed. 702, 3 Ann.Cas. 500; Christopher v. Norvell, 201 U.S. 216, 225, 228, 26 S.Ct. 502, 50 L.Ed. 732, 5 Ann.Cas. 740.
Second. Another possible theory is that if any part of the foundation of the debt is contractual in its nature, the claim is provable.
Some of the early decisions of the Supreme Court contain expressions indicating that the liability of a stockholder in a national bank is contractual in its nature. Richmond v. Irons, 121 U.S. 27, 55, 7 S.Ct. 788, 30 L.Ed. 864; Matteson v. Dent, 176 U.S. 521, 525, 20 S.Ct. 419, 44 L.Ed. 571. Neither these cases nor the other cases decided by the Supreme Court say that the liability is “founded upon contract,” but do say that the liability is contractual in its nature.
Other cases indicate that the liability is one founded on both the statute and contract. U. S. v. Knox, 102 U.S. 422, 424, 26 L.Ed. 216; Stuart v. Hayden, 169 U.S. 1, 8, 18 S. Ct. 274, 42 L.Ed. 639; Concord First National Bank v. Hawkins, 174 U.S. 364, 372, 19 S.Ct. 739, 43 L.Ed. 1007; McDonald v. Thompson, 184 U.S. 71, 73, 22 S.Ct. 297, 46 L.Ed. 437.
Still other cases indicate that the liability is “based” on the statute. Keyser v. Hitz, 133 U.S. 138, 149, 10 S.Ct. 290, 33 L. Ed. 531; Scott v. Deweese, 181 U.S. 202, 213, 21 S.Ct. 585, 45 L.Ed. 822; Studebaker v. Perry, 184 U.S. 258, 261, 22 S.Ct. 463, 46 L.Ed. 528.
In McClaine v. Rankin, supra, 197 U.S. 154, 161, 25 S.Ct. 410, 413, 49 L.Ed. 702, 3 Ann.Cas. 500, it was held that a state statute limiting the time within which “an action upon a contract or liability, express or implied, which is not in writing, and does not arise out of any written instrument” was not applicable, but that a statute of limitations providing that “an action for relief, not hereinbefore provided for, shall be commenced within two years after the cause of action shall have accrued” was applicable in an action to recover the liability of a bank’s stockholder. To properly understand this case I refer to the decisions prior to the one handed down by the Supreme Court. The question arose on demurrer, before the circuit court. That court arrived at the result which was later reached by the Supreme Court, saying:
“Furthermore, it seems to me that there is no contract, express or implied, or voluntary assumption of a liability on the part of the defendant, to pay this assessment. A contract must have parties. Two or more minds must meet so as to form an agreement. A promise to bind the promisor must be made to a promisee. A promise made to everybody lacks the element of mutuality essential to give it force as a binding obligation. Therefore I consider that the liability of a shareholder of a national bank to pay an amount equal to the par of his shares of stock is not contractual, but is a conditional liability imposed by the law as an incident to ownership of bank stock. The right of creditors of an insolvent national bank to have the liability enforced for their benefit does not rest upon any actual or constructive promise made to them by any or all of the shareholders to assume liability. At the time of becoming creditors they may not, and usually do not, know who owns the stock; and yet they are entitled to have the liability enforced, if the assets and resources of the bank are not sufficient to meet their demands, because the liability arises by force of the statute, and is not contractual.” (Italics supplied.) Aldrich v. McClaine (C. C.) 98 F. 378, 379.
Upon appeal to this court, the court below was reversed and it was held “that the liability of the defendant in error as a stockholder of a national bank must be held to be not only statutory, but contractual as well.” Id. (C.C.A.) 106 F. 791, 794.
That was the situation when the case came before the Supreme Court. By the latter’s decision, the decision of this court was reversed, and the decision of the circuit court was upheld, the court saying, 197 U.S. 154, at page 161, 25 S.Ct. 410, 412, 49 L.Ed. 702, 3 Ann.Cas. 500, that: “The liability is a *974consequence of the breach by the corporation of its contract to pay, and is collateral and statutory.” It is interesting to note that the writer of the dissenting opinion flatly recognizes that the prior cases holding the liability to be contractual were overruled by the majority opinion, for he states: “To me it seems that this interpretation, whilst overruling the previous cases also originally considered, gives to the national banking act an erroneous construction.”
Following this decision, it was said in Christopher v. Norvell, supra, 201 U.S. 216, 225, 26 S.Ct. 502, 50 L.Ed. 732, 5 Ann.Cas. 740, that the liability was “created by the statute.” The latest expression of the Supreme Court is found in Forrest v. Jack, 294 U.S. 158, 162, 55 S.Ct. 370, 371, 79 L. Ed. 829, 96 A.L.R. 1457, where it is said: “The liability of stockholders is based upon the statute, 12 U.S.C.A. § 64.”
Therefore, I believe that if the provision of the Bankruptcy Act is construed to mean that a claim is provable if any part of the foundation of the debt is contractual, then the early decisions stating that the liability is contractual, must be considered as overruled by McClaine v. Rankin, supra, Christopher v. Norvell, supra, and Forrest v. Jack, supra. ° The Sixth Circuit seems to entertain this view, for in Laurent v. Anderson (C.C.A.) 70 F.(2d) 819, 823, it is said: “The stockholder’s double liability is not contractual, but is imposed by statute as an incident of ownership.” The Eighth Circuit seems to entertain the same view, for in Page v. Jones (C.C.A.) 7 F.(2d) 541, 544, it is said: “The double liability of a shareholder of a national bank under section 9689 [12 U.S.C.A. § 64] for the payment of its debt is entirely statutory.”
The text-writers seem to be in accord with this view. In Magee on Banks and Banking (3d Ed.) 87, § 68, it is said: “A stockholder’s liability arises and exists by force of the statute and is not contractual.” In 7 Michie on Banks and Banking 56, § 73, it is said: “The liability of a stockholder of a national bank to assessment on the bank’s insolvency is one created by statute. * * * Furthermore, individual liability of a stockholder is contractual in its nature although there is no direct contract with any one, and it arises by force of the statute. * * * ” In 2 Morse on Banks and Banking (6th Ed.) 1401, § 675, it is said: “The liability of a shareholder in a national bank to an assessment on his shares is not a contractual liability, but arises by force of the statute authorizing the assessment.” And in 7 C.J. 769, § 606, it is said: “This liability * * * is held to arise purely by force of the statute, and not to be contractual in its nature.”
This court has apparently adopted this view, for in Drain v. Stough, 61 F.(2d) 668, 669, 87 A.L.R. 490, it is said: “The obligation to the bank’s creditors, although arising out of an implied contract of the decedent stockholder, is a statutory obligation.” And in the recent case of Donald v. Bird, 85 F.(2d) 663, 664, this court said, speaking of actions to recover the liability of a stockholder in a national bank: “These are not actions for debt, but are actions to enforce a liability created by statute.”
Third. The third possible theory is that the provision of the Bankruptcy Act permits filing of a claim for a debt, if the greater part of the foundation of it is contractual in its nature.
It seems to me that the majority opinion attaches over emphasis to the fact that the instant claim may be said in some aspects to partake of, or exhibit some of the characteristic elements of a contract.
The real question is not “does the instant claim in some particulars resemble a contract,” but rather is the instant claim “founded upon a contract” ? I am inclined to think that the statute requires that we look to the essence of a claim, rather than to an incident thereof, in order to determine whether or not it is “founded” upon contract.
I believe the language of the cases shows that the contractual incidents of the liability are only subordinate, and are lesser in extent to the portion of the foundation which is statutory.
In McClaine v. Rankin, supra, 197 U.S. 154, 162, 25 S.Ct. 410, 412, 49 L.Ed. 702, 3 Ann.Cas. 500, it is said that the liability is “enforceable only according to the Federal statute, independent of which the cause of action does not exist.” And in Christopher v. Norvell, supra, 201 U.S. 216, 228, 26 S. Ct. 502, 506, 50 L.Ed. 732, 5 Ann.Cas. 740, it is said:
“Without the statute she could not be made liable individually for the debts of the bank at all. No implied obligation to contribute to the payment of such debts could arise from the single fact that she became and was a shareholder. Her liability for the debts of the bank is created by the statute, although in a limited sense there is an element of contract in her having become a shareholder; and the right of the *975receiver to maintain this action depends upon, and has its sanction in, the statute creating liability against each shareholder, in whatever way he may have become such. There have been cases in which there appeared such elements of contract as were deemed sufficient, in particular circumstances, to support an action. [Citations.] But that fact does not justify the contention that an action upon an assessment by the Comptroller is not based upon the statute.”
I believe this is sufficient to show that the greater part of the foundation of the liability is the statute “independent of which the cause of action does not exist.” McClaine v. Rankin, supra, 197 U.S. 154, 162, 25 S.Ct. 410, 412, 49 L.Ed. 702, 3 Ann.Cas. 500. And that liability exists against a shareholder “in whatever way he may have become such” (Christopher v. Norvell, supra, 201 U.S. 216, 228, 26 S.Ct. 502, 506, 50 L. Ed. 732, 5 Ann.Cas. 740) ; or in other words, the liability exists whether one becomes a shareholder by contract or in some other manner.
Prior to the enactment of the California statute in question, there existed in California a statute and constitutional provision imposing liability on corporate shareholders. In Coombes v. Getz, 285 U.S. 434, 52 S.Ct. 435, 76 L.Ed. 866, this liability was held contractual, because of California decisions so construing the provision. This court in Walker v. Woodside, 164 F. 680, 681, held that a claim for such liability was provable in bankruptcy. See, also, Shell Co. of California v. Dunn (C.C.A.9) 19 F.(2d) 318. These constitutional and statutory provisions were repealed.
It is now argued that the decisions construing the liability as contractual as it existed prior to repeal of the provisions mentioned established a state policy which is controlling in construing the new statute. The answer is that evidently the state wished to change its policy, for it copied a provision of the federal statutes creating a statutory liability. Both parties concede that the 'California statute before us is practically identical to the provision imposing liability on stockholders of a national bank, 12 U.S.C.A. § 64. Further, the Supreme Court of California has said so. Rainey v. Michel, 57 P.(2d) 932, 940, 941, 105 A.L.R. 148. Under such circumstances, the rule in California is as stated in Southern Pac. Co. v. Superior Court, 27 Cal. App. 240, 150 P. 397, 403, 404:
“But it is evident that the system of regulation of freights and fares provided in the Constitution and statutes of California, to which we have referred, has been modeled upon the federal act for the regulation of commerce between the states. This being so, it will be assumed that the people of California, in enacting the same or similar terms of their written law intended to express the same meaning as that established as the true meaning of the law from which these laws of the state have been derived.”
See, also, People v. Norcross, 71 Cal. App. 2, 234 P. 438. This principle was approved by the Supreme Court of California in Union Oil Associates v. Johnson, 2 Cal. (2d) 727, 43 P.(2d) 291, 295, 98 A. L.R. 1499.
In view of this principle of law, the construction placed on some other statute is neither analogous nor important in the consideration of the present statute.
The claim for liability has been held not to be a provable claim by the Third Circuit, in Brown v. O’Keefe (C.C.A.) 85 F.(2d) 885, decided September 24, 1936. The majority opinion has, I think, misconstrued the effect of that decision. The material facts are identical. The stockholder was adjudicated a bankrupt. Thereafter an assessment was levied, and the stockholder received a discharge in bankruptcy. Suit was brought to recover the assessment. The first defense was that the bankrupt was not the owner of the stock but that the stock passed to the trustee upon the adjudication of the bankrupt. The majority opinion in the instant case says: “The court held that the discharge in bankruptcy did not prevent future assessments upon shares which had never passed to the trustee in bankruptcy.” I am not in accord with this construction, for the opinion in Brown v. O’Keefe, supra, shows that the appellate court merely quoted the trial court, saying: “It is not necessary to discuss this defense as defendant in his brief consents, that it be stricken.” The other defense was “that his discharge in bankruptcy was a bar” to the suit. The Third Circuit thereupon affirmed the judgment of the lower court (Slaughter v. Brown, 16 F.Supp. 494, 498), and approved the following language used by the trial court, that:
“The doctrine of the McClaine Case is controlling; that the obligation of the defendant did not arise out of contract, ex*976press or implied, but was in the nature of a statutory liability. * * * ”
The same conclusion was reached in Anderson v. Akers (D.C.Ky.) 11 F.Supp. 9. See, also, Holman v. Clark (D.C.Mich.) 48 F. (2d) 253.
I conclude that the claim before us cannot be allowed against the bankrupt estate, and that “it is a liability created by the statute, because the statute is the foundation for the implied contract.” Platt v. Wilmot, 193 U.S. 602, 613, 24 S.Ct. 542, 546, 48 L.Ed. 809.
In the stipulated facts, it is said that appellee took charge of the assets of the Bank of San Pedro for liquidation, prior to the bankruptcy of Sherer, which was on January 21, 1935. The precise date is not mentioned. In appellee’s brief it is said that the bank “closed its doors in March, 1933, and remained in conservatorship under the State Bank Act (St.Cal.1909, p. 87, as amended) until December, 1934, at which time the Superintendent of Banks took possession for liquidation purposes.” In the stipulated facts it is said that the bankrupt had been the owner of 2602 shares of the bank’s stock “for many years prior” to the time when appellee took charge of the assets. It is thus indicated that the bank was incorporated prior to August 14, 1931, and that the bankrupt acquired his stock- prior to that time. Under the doctrine of Rainey v. Michel, supra, the bankrupt is liable under the existing statute for “debts incurred subsequent to August 14, 1931,” only. What I have heretofore stated regarding the claim of appellee, is applicable only to a claim as justified under the holding in Rainey v. Michel, supra.