Court Opinion

ID: 7973345
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:57:16.728536+00
Date Added: 2024-06-11T16:34:50.252040
License: Public Domain

LOVELY, J.
Action to recover upon the constitutional liability of defendant as the holder of fifty shares of the stock of the Allemannia (formerly Commercial) Bank of St. Paul. The cause was tried to the court, who directed a verdict in favor of plaintiff receiver, provided the jury should find a certain assignment was fraudulent. A verdict for plaintiff was returned. There was a motion for judgment notwithstanding the verdict or for a new trial, which was overruled. This appeal is from that order.
This is the second review of this cause. When it was here before ■on demurrer to the sufficiency of the complaint we held that the defendant corporation was not authorized to purchase and hold stock in the Commercial Bank, but that, having done so, and received dividends *209for a number of years with knowledge of all its stockholders, it was estopped from asserting immunity in a suit to recover the stockholders’ liability under Laws 1899, p. 315, c. 272, when sought to be enforced by the receiver of the insolvent bank. Hunt v. Hauser Malting Co., 90 Minn. 282, 96 N. W. 85.
On this hearing we have been urged to reconsider the conclusion we arrived at in the former decision, wherein the ultra vires character of the acts of the corporation in purchasing the stock were asserted, but held to be unavailing. The learned trial judge on the demurrer denied the liability of the malting company under the rule laid down in California Bank v. Kennedy, 167 U. S. 362, 17 Sup. Ct. 831, with which we did not agree. Our attention has been called to other decisions, and counsel insists that the rule we adopted is not consonant with the weight of authority or sound reason, and would be fraught with injurious consequences. We have, in deference to the earnestness^ of counsel, and in order to repair incorrect views if found to exist, afforded full consideration to the additional arguments advanced on this review, ds well as to the new decisions cited.
While the act of the malting company in the purchase and holding of the bank stock was outside its corporate authority, this would have been a perfectly legal transaction between individuals. The stock-holding was profitable to the defendant. It was concurred in by all its stockholders, and impaired to some extent the bank capital, and we continue to be unable to discover any good reason why, when misfortune came, the malting company should be permitted to deny its liability. It seemed- then, and still seems, to us upon plain principles of justice and right that the corporation could not thus play fast and loose, have the benefits of its stockholdings, and as to the executed contract refuse to bear the burdens when responsibility came to the detriment of the creditors and its associate stockholders. We do not find upon examination that the weight of authority is against our previous conclusion. While there is a difference in the decisions of other states, our view is sustained by a majority in character and standing of the cases in this country bearing upon the question, and upon sound principle we are constrained to adhere to our former convictions.
At the trial of the cause it appeared that the predecessor of the Allemannia Bank had a capital of $500,000, there being five thousand shares *210of $100 each. The bank became insolvent in 1892. An assignee was appointed. It went into liquidation. The stockholders, among whom was the defendant, interested themselves in trying to save what might be realized by a reorganization. A plan for that purpose was adopted, which was to the effect that the stockholders should contribute seventy per cent, of the stock held by each to be turned over to a stock trustee to be sold, and .thereby obtain funds to restore the impaired capital of the concern, and enable it to resume and continue business, subject to the further condition that there should not be a resumption unless $250,000 of the stock so subscribed should be sold by the trustee,' in which case there would remain $100,000 of the capital unsold, which should be canceled when the total capital of the bank would be $400,000. According to this plan each stockholder retained thirty per cent, of his original holding, and might purchase as much or little of the stock in the hands of the trustee as he desired. The defendant contributed seventy shares of its stock, purchasing back twenty, shares of the trustee, whereby it would then hold fifty shares thereof in case of resumption,• and would only be subjected, in case of subsequent failure after the prescribed time, to one-half of the amount of the statutory liability incurred on its original holdings. The plan succeeded. The bank resumed. It ran on for a while, but again became insolvent; and it seems obvious to us that the same grounds which led to the conclusion that the defendant was estopped from asserting its ultra vires acts in defense of the stockholders’ liability applied with equal and more force to the stock still retained as before the reorganization.
The theory that there was a surrender of all the stock, which relieved the stockholders from liability on what is termed a reissue, is extremely technical. It might appear to be reissued in form, but in substance the original liability on one hundred shares of the stock of the malting company had been reduced. Its stock in the bank had been cut down one-half. The stockholders’ liability had also been reduced to the same proportionate extent; and, while there was an apparent reissue of the stock, this was merely formal, and arose entirely from the desire and efforts of the malting company, as well as other stockholders, to protect their interests, whereby the defendant, by a contribution of $2,000, aided in starting the bank again on its feet, replenished its exchequer, *211and gave for the time, at least, a stability to the bank, which it had lost in hopes undoubtedly that further profit might result to it, and that defendant would be relieved from impending liability. That the bank again collapsed, and the day of reckoning finally came, was not, probably, anticipated; but the efforts of the malting company to save that which it was liable to lose evidenced a continuity in act and interest in its stockholdings which it relied upon, and repudiated only when the ultimate misfortune it had attempted to avert arrived, and the processes of bookkeeping by which the formal holdings were changed in asserted character is of no account. The interest of the defendant upon its original investment remained throughout. We are very clear that the learned trial court was right in its conclusion that the liability of the defendant upon the reissued stock was of binding obligation to uphold the stockholders’ liability.
It was objected that at the meeting of the stockholders for the purposes of reorganization, where a resolution to change the name of the bank was adopted, the signature attached to such resolution was not properly authenticated. We deem this to be an exceedingly technical objection, resulting in no prejudice to the defendant whatever. Frpm the entire record there can be no doubt but there were fifty shares of the original stock, though reissued or retained by defendant, and that it continued its original stockholdings after the bank resumed its business, and when its last insolvency was made the basis of the receiver’s action in this suit. It is therefore rightfully held to be liable in this action.
Order appealed from is affirmed.