Court Opinion

ID: 9826440
Source: CourtListenerOpinion
Date Created: 2023-09-01 15:56:33.952478+00
Date Added: 2024-06-11T07:42:03.743948
License: Public Domain

Mr. Justice Fraser:
I cannot concur in the opinion of Mr. Justice Watts. I can state my position more clearly by an illustration. Suppose a bank had a capital of two hundred thousand dollars; deposits of two hundred thousand; general debts, one hundred thousand dollars, and cash on hand, one hundred thousand.
The depositors get from the bank 33 1-3 per cent., or, in round numbers, sixty-seven thousand dollars, and from the stockholders one hundred and thirty-three thousand dollars. The receiver then collects from the assets of thfe bank sixty-seven thousand dollars. This money, being the funds of the bank, the general creditors claim it all, and the Court allows the claim. The general creditors are now paid in full. Unless there is a right of repayment, there is no remedy for the stockholders. Taking the available assets of the bank as one hundred and sixty-seven thousand dollars, the general creditors are entitled to fifty-six thousand dollars, i. e., their one-third of the assets, but they have received one hundred thousand dollars. The stockholders are liable for eighty-nine thousand dollars and have paid one hundred and thirty-three thousand, or forty-five thousand dollars more than their liability. This would make the stockholders’ liability a security for the general creditors, as well as for the depositors. (I write in round numbers.) The stockholder *361is not entitled to be refunded the whole amount he has paid out, but only the excess of his payment over his liability.
As I see it, a different rule would put a premium upon dilatory proceedings on the part of responsible stockholders, and thereby delay the depositors in securing a repayment of their deposits. The manifest, purpose of the Constitution, of making deposits secure and easy to recover, and thereby increasing bank deposits and keeping money in circulation, will be defeated.
Besides that, if the stockholder’s liability is entirely original and independent of the assets of the bank, then the general creditor, under the “two-fund doctrine,” will have the right to come into Court and require the depositor to first exhaust the stockholder’s liability before the depositor can participate in the funds of .the bank.
The disaster will not be confined to the depositors; for if the stockholder is liable to be called upon to pay the full liability for the benefit of the general creditors, then men who have money to invest will not dare to" become stockholders in banks. If the Constitution and statutes had intended to make the stockholders liable directly to the depositors and indirectly to the general creditors, I am satisfied they would not have limited the stockholders’ liability to the depositors. The only way I can see to make the depositors reasonably safe in getting a speedy return of his money, and at the same time to preserve the integrity of the stockholders’ liability, is to do what I think the Constitution and statutes provide, to wit, give the depositors the corporate liability and also the stockholders liability, and, if the stockholders pay more than the circumstances require, then return to them the excess.
Judgment of the Circuit Court affirmed.
Mr. Justice Gage :
I am of the opinion the Circuit Court granted the nondeposit creditors too much when the fund now in issue, about four thousand ($4,000.00) dollars, was *362ordered to be prorated betwixt them and the paying stockholders; that fund belongs exclusively to the paying stockholders ; the nondeposit creditors are entitled to no part of it.
The words of the Constitution of 1895 govern the issue made here; they alone create the individual liability of the stockholder.
“The individual liability of stockholders in a corporation is always a creature of statute.1 It does not exist at common law. The first thing to be determined in all such cases is, what' liability has been created.” Terry v. Little, 101 U. S. 217, 25 L. Ed. 864.
The Constitution of 1895 thereabout is unlike that of 1868; the difference between them is fundamental.
Under that of 1895, no individual liability for a bank’s debts attaches to stockholders of bank, except by the proviso of section 18, article IX.
The case of Parker v. Bank, 53 S. C. 583, 31 S. E. 673, had not then been decided in 1895; and it had not then been determined that stockholders in banks were personally liable under the Constitution of 1868 to all or any of a bank’s creditors. Such liability was both affirmed and denied on the floor of the convention.
When section 18 of article IN was reported by the committee it excluded any liability. (Proceedings Const. Con., 27 Sept., 1895, page 7.)
The convention wisely concluded, that the public which put its money into banks on deposit, generally without interest, and subject toocheck, ought to have it back promptly and it ought to be secure from loss.
Thereby the people would be free to put money into banks for public use instead of into stockings for no use; and thereby depositors would be paid beyond • peradventure.
It is true, the stockholder’s individual liability is primary; he incurred it when he signed the stock subscription; but it is not a liability of any sort to anybody except the deposi*363tors; it is not, by word or by implication, a liability to the note or other creditors of the bank.
If, then, the stockholder did not owe by promise the note or other creditors anything, then the note or other creditors have no right to lay hands on the stockholder’s money.
It is immaterial that the money now at issue is the specific money of the corporation, confessedly derived from its assets. Had it been in the till of the bank aforetime, that is, before the stockholders paid the depositors, it would surely have been paid to all the bank’s creditors, and the stockholders’ payment would have been reduced that much, to wit, by $4,000.00.
If the $4,000.00 had been discovered at the instant of the proposed payment of the stockholders, .then it would have been paid out to the relief of the stockholders by that much.
That it was discovered after the payment by the stockholders cannot alter the case.
It is not worth while to name the remedy by which the stockholder gets back his money; thereby confusion sometimes arises.
The stockholder ought to have it back, because he ought not to have been called on to pay $4,000.00; for the corporation in fact had the $4,000.00 and did not know it.
• I am of the opinion the appellants are not entitled to the reme'dy they pray; and I, therefore, agree with Mr. Justice Fraser and Mr. Justice Hydrick.