Court Opinion

ID: 3424808
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:52:38.254584+00
Date Added: 2024-06-11T09:20:33.500025
License: Public Domain

The appellant sets forth in his petition for a rehearing thirty reasons why, or particulars wherein, he believes the court erred in the decision of this case. The first contention made by 1.  him and by numerous others as friends of the court, is that the court erred in holding that § 6, Art. 11, Ind. Const., § 212 Burns 1926, is self-executing. Amici Curiae, in overzealous support of the petition for rehearing, say:
"This court has obviously erred in holding either (a) that the Constitution is self-executing or (b) that there is a statutory liability. . . . There is no *Page 663 
reason at all why the entire legislative history of the state and the entire judicial history of the state in this regard should not be now dignified, instead of thrown into the ash can, and that can only be done by the withdrawing from the opinions of this court the incorrect assertion that § 6 of Article 11, alone, unaided, can be the basis for a judgment or decree against the stockholders in any proceeding at law or in equity."
In Gaiser v. Buck (1931), 203 Ind. 9, 179 N.E. 1, 3, we stated that § 6, Art. 11, Ind. Const., creates a definitely limited liability on the part of stockholders in banks and banking companies for the benefit of the creditors of such company, that "it is self-executing, there being a manifest intention that it should go into immediate effect and no ancillary legislation being necessary to the enjoyment of the right given or the enforcement of the duty imposed." We further said "It is uniformly held that a constitutional provision imposing double liability on bank stockholders is self-executing." To this last proposition we cited a number of cases from Arizona, California, Illinois, Ohio, Minnesota, Nebraska, South Dakota, Texas, Utah, Wisconsin, and the Supreme Court of the United States, in each of which a constitutional provision quite similar to § 6, Art. 11 of our Constitution was involved. Amici Curiae cite seven cases, each involving the interpretation of constitutional provisions unlike our own, which hold that the provisions there considered were not self-executing. One of the cases, Woodworth v. Bowles (1900),61 Kan. 569, 60 P. 331, pointed out that: "There are constitutional provisions in other states looking to the same end as the one of our own in question, but which, by reason of the difference in language used, have been given a different interpretation from that which ours bears." The Kansas court then quoted the provision contained in the Constitution of Nebraska (which is quite similar *Page 664 
to the Indiana constitutional provision) and said: "In the case of Trust Co. v. Funk, 49 Neb. 353, 68 N.W. 520, the supreme court of that state, in an ably-reasoned opinion, held the provision quoted to be enforceable without supplementary statutory enactment."
There is no "legislative history" or "judicial history" of this state which limits the self-executing force of § 6, Art. 11, Const. All contentions in this regard were fully considered and discussed by the court in its decision of the Buck case, both originally and on the petition for a rehearing, and were also fully re-considered in the decision of this case.
Appellant and Amici Curiae contend that the double liability provision of § 6, Art. 11, Ind. Const., does not include the stockholders of a "loan, trust and safe deposit company," 8.  (A) because such trust company is not a "bank or banking company" and (B) because "the legislature could not by the amendatory act of 1921 superimpose a liability on stockholders in trust companies whose stock was issued prior to 1921." The Angola Bank Trust Company, and all other trust companies doing business in this state were granted authority in 1921 (§ 10, ch. 20, Acts 1921, § 3950 Burns 1926), to exercise the powers and possess the privileges conferred on banks by the laws of the state and under the power thus conferred it did carry on a general banking business. "The legislature has the power to amend an act under which a company was incorporated, . . . and the exercise of such reserved power of the state does not offend any constitutional rights . . . No condition of acceptance is imposed by the act, but if acceptance were necessary it would be implied from the exercise of the powers granted" . . . Denny v. Brady, Rec'r
(1928), 201 Ind. 59, 61, 62, 163 N.E. 489. No question is presented here as to whether the legislature could by the amendatory act of 1921 superimpose *Page 665 
a liability on stockholders in trust companies not doing a banking business. By carrying on a banking business the company in question became a banking company and as such was subject to the regulations of banking companies imposed by the Constitution in relation thereto.
In his motion for a new trial (the overruling of which was assigned as error) the appellant questioned the sufficiency of the evidence to sustain the finding of the court that he "was the owner in his own right of ten shares of the capital stock of said Angola Bank Trust Company." As stated in the original opinion, the appellant presented his evidence fully on this issue and the court found against him on the same. We believe the evidence was sufficient to sustain the finding. There is evidence of the following facts: Claude H. Douglass was employed by the Angola Bank Trust Company for 21 years. Part of this time he was secretary but had been discharged as secretary on instructions of the State Banking Department and for a year had been in charge of the company unofficially as "manager." In the early part of 1927 Douglass talked with appellant, Frank B. Rowley, several times about the purchase of stock in the company and "whether or not he would act as president," the president of the company being ill. Before that time he had talked with a Mr. Beaty about purchasing stock and acting as president. Douglass told Rowley about the condition of the bank — about the large loans. He did not tell Rowley that the company was involved or insolvent, but told him that with proper management and such assistance as Rowley might give, the business could be carried on prosperously. Rowley "finally made up his mind he would act as president and that he would buy $1,000 worth of stock conditionally, with the privilege of returning it in six months if he did not want it." Douglass talked with Mrs. G.R. *Page 666 
(Josie M.) Wickwire, a director of the bank, and then told Rowley that she would sell him the stock. Douglass conducted the transaction between Rowley and Mrs. Wickwire within the next two weeks during which transaction the parties did not meet. He prepared a note for $1,000, which Rowley signed, and then delivered the note to Mrs. Wickwire. She assigned or endorsed her certificate for ten shares of stock in the Angola Bank Trust Company to Rowley, such endorsement irrevocably constituting and appointing Douglass to transfer the stock on the books of the corporation. Douglass took the stock certificate back to the bank, but the stock was never transferred to Rowley on the books of the bank. It was found in a safe in the bank by the receiver when he took charge. At that time the list of stockholders of the bank included Mrs. Wickwire but not Mr. Rowley. The note was in the usual form of promissory notes dated Jan. 20, 1927, and due in six months, with interest at 8%. Written on the back of the note was the following: "The consideration of this note is the sale of ten shares of the capital stock of the Angola Bank Trust Company and it is expressly agreed between the maker and the payee thereof that the said maker is to have the privilege at the maturity of this note to return said stock and receive back this note."
At the meeting of the directors Feb. 5, 1927, Rowley was elected director and president for the ensuing year. After that time he gave attention to the business of the bank and was frequently about the bank. He looked over the notes and sent out notices of past due paper. On Feb. 10, 1927, he presided over a meeting of the board of directors, at which a resolution was adopted authorizing the officers to make a proposal to the State for the selection of the company as a public depository of state funds. He signed the minutes of this meeting as president and thereafter went to Indianapolis and *Page 667 
consulted with someone about having the company selected as a state depository. In appellant's statement of the evidence he sets out a part of his cross-examination as follows: "He was informed he had been elected a director and president of the bank, accepted the duties of the offices and entered upon their performance. His election was reported in the newspapers of the locality. He continued to act as president until the bank closed. Was about the bank looking after its affairs and its general management. He called a meeting of the board of directors for the purpose of passing a resolution to obtain a deposit of state funds. On March 12, 1927, on behalf of the Trust Company, as president, he executed a note for $28,000.00 to the First National Bank of Fort Wayne. He called at the Fort Wayne bank on his return from Indianapolis and was informed the Trust Company had an overdraft and was asked to execute the note to cover it, which he did. From February 5 to March 14, he held himself out as director and president of the Trust Company." In his examination in chief, appellant testified that when he proceeded to examine the securities and assets of the company he found so many notes that he thought were worthless that he called the board of directors together and told them what he had found and the directors "voted to close the bank."
The appellant contends he was not a stockholder because the stock certificate was never delivered to him, and because the stock was not transferred to him upon the books of the corporation, the latter being "necessary to pass the title to appellant and fix his liability as a stockholder." He further says that he was induced by fraudulent representations to enter into the contract to purchase stock, and that as soon as he learned of the fraud and that the bank was insolvent he repudiated the agreement to purchase, and that he can no more be held *Page 668 
to the liability of a stockholder than he could be held liable to pay for the stock. He further contends that Mrs. Wickwire was, and still is, the owner of the stock upon which this action is based and was, and still is, liable for whatever obligations attach to the owner thereof.
The statutes provide that "each director must own at least ten shares of the capital stock," § 3946 Burns 1926, and that "the board of directors, at their annual meeting, shall elect 9.  from their own number a president," § 3948 Burns 1926. Appellant, after purchasing ten shares of stock, entered upon the performance of the duties of director and president and held himself out to the public as such. The creditors of the company had the right to assume that he was a stockholder, and as to them he is estopped, upon the insolvency of the company, to deny the double liability of a stockholder on the ground that fraud was practiced upon him in the sale of the stock. IV Thompson, Corporations (2d Ed.), §§ 4359, 4923, 4884;Robinson-Pettit Co. v. Sapp (1914), 160 Ky. 445, 169 S.W. 869; Commission v. Cosmopolitan Trust Co. (1925),253 Mass. 205, 148 N.E. 609, 41 A.L.R. 658; Holyoke Bank v. Goodman
(1852), 63 Mass. 9 Cush. 576. In Robinson v. Sapp, supra,
is was said:
"In imposing the double liability upon the stockholder, the aim . . . is to secure the creditors of the corporation, and if the real 10.  stockholder could avoid liability simply by neglecting to have the transfer recorded on the books of the corporation . . . the security intended for the creditors would be destroyed. . . . The real owner of the stock should sustain the loss, and if the nominal owner of the stock has it to pay he may in such a case recover from the real owner; but the creditor may look either to the transferrer or the transferee." *Page 669 
We cannot in this action determine any issue between appellant and Mrs. Wickwire.
The petition for a rehearing is denied.
Myers and Travis, J.J., dissent.