Court Opinion

ID: 8010265
Source: CourtListenerOpinion
Date Created: 2022-09-09 01:57:24.445424+00
Date Added: 2024-06-11T16:36:02.924214
License: Public Domain

Black, J.
The Washington Savings Bank and Rudolph Kohn brought this suit for themselves and all other creditors of the Butchers & Drovers’ Bank, who should come in and contribute to the expenses of *140the suit, against the defendant bank and some twenty or more stockholders therein, to recover balances due on unpaid stock. The circuit court gave judgment for all of the defendants on the ground that the canse of action was barred by the five years’ statute of limitations, and hence did not consider the other questions presented by the pleadings and evidence. The facts will now be stated with a view only of disposing of this question.
The Butchers & Drovers' Bank was a corporation organized under the laws of this state. It became insolvent and ceased to do a banking business on the thirteenth of July, 1877, owing, at that time about $700,000. The stock consisted of twenty-six hundred and ten shares of $100 each, upon which there had been paid in cash and dividends fifty per cent, and no more. At the commencement of this suit some of the stockholders had paid the balance due upon their stock, and the remaining resident solvent stockholders are made defendants.
Mr. B. M. Chambers was president of the bank for a period of ten years before its suspension, and during the last five years of that time the board of directors held but few meetings. In short, Mr. Chambers managed the business without aid from the directors. He got some of them together on the day the bank suspended. They opposed suspension, but the bank being insolvent he closed the doors.
Mr. Chambers as president of the bank called a meeting of the creditors, and at that meeting he proposed to issue scrip for the outstanding debts, to mature in three years, that is to say, on the first of August, 1880, and to secure the same by a mortgage upon property owned by his wife and sisters, he to go on and close up the business of the bank. The proposition was accepted by nearly all the creditors. The scrip was issued in the name of, and as obligations of, the bank and security given as proposed. The arrangement was made by *141Chambers, as president, without any action on the part of the directors. During the three years Chambers collected in the assets and paid off from $400,000 to $500,000 of the scrip. Shortly after the expiration of that time, the remaining assets were levied upon under executions issued on judgments recovered on the unpaid scrip.
The plaintiff Kohn and one Kelcher were creditors of the Butchers & Drovers’ Bank when it closed, and they received scrip in payment of their debts, thus extending the time of payment for three years. They brought suit against the bank, on this scrip in 1880. Kohn recovered judgment on the twenty-second of December, 1880, for $10,225, and another on the seventh of April, 1881, for $6,230; and in December, 1880, Kelcher obtained judgment for $15,330, which last judgment was assigned to the Washington Savings Bank, the other plaintiff in this case. Executions were issued and were returned milla bona the sixth of June, 1881. Proceedings were then prosecuted against some of the stockholders under section 736, Revised Statutes, 1879, by means of which the plaintiffs collected some $16,000. This suit was commenced on the tenth of October, 1884.
There is this .provision in the bank articles of association: ‘ ‘ The remainder of the stock so subscribed shall be paid upon calls and upon such terms 'as the board of directors hereinafter mentioned may from time to time prescribe.” No call was ever made by the directors.
To repeat, the important dates are :
The bank closed, July 13, 1877; three years’ scrip issued August 1, 1877; plaintiffs sued the bank in 1880; judgments recovered, December 21, 1880, and April 7, 1881; nulla bona return of executions, June 6, 1881; this action commenced, October 11, 1884.
The important question is, when did this cause of action accrue in favor of these plaintiffs and against the defendant stockholders ?
*142The stockholders by the terms of their subscriptions agreed to pay the remainder of their stock at such time as it should be called for by the board of directors. A s between the corporation and a stockholder, the liability of the latter on his unpaid stock does not mature until a call is made, and it is then that the statute of limitations begins to run. Where the officers of the corporation have neglected to make the call and the affairs of the corporation are in the hands of a court, the court may make the call in the interests of creditors, though the stockholders are not made parties to the suit. In such cases the receiver or other officer of the court may collect the unpaid stock subscriptions by_ suits at law against the stockholders, and in such cases the cause of action does not accrue, nor the statute of limitations begin to run, until a call or some authorized demand is made. Scovill v. Thayer, 105 U. S. 143; Glenn, Trustee, v. Semple, 80 Ala. 159; Lehman, Durr & Co. v. Glenn, 87 Ala. 618; Glenn, Trustee, v. Williams, 60 Md. 93; Hawkins v. Glenn, 131 U. S. 319; Wait on Insolvent Corporations, sec. 631.
Where, however, an execution has been issued on a judgment against a corporation and returned unsatisfied, the judgment creditor may, under our statute, have execution against a stockholder to the extent of the amount of the unpaid balance on his stock. R. S. 1879, sec. 736. In such cases the cause of action does not accrue in favor of the creditor and against the stockholder until judgment is obtained and execution returned mil\a bona; and it must follow that the statute of limitations, for all the purposes of such a proceeding, commences to run from that date. Cook on Stock & Stockholders [2 Ed.J sec. 225. In such cases a call upon unpaid stock is not essential; nor is a call necessary when the creditor brings his suit directly against the stockholder under section 745. That section gives the creditor a direct action against a stockholder in case, of dissolution of the corporation.
*143This suit is not, however, founded upon either of these statutes. It is simply a creditor’s bill. It is not even a general winding-up bill. It is conceded on all hands that unpaid stock is a fund which the corporation holds for the payment of its debts, and the object of this suit is to satisfy these unpaid debts out of this fund, the only remaining one of the insolvent corporation. Such a proceeding may be maintained in equity, notwithstanding the statute furnishes other remedies to the creditors. In a suit like this, brought against the corporation and stockholders, it is no defense that the stock is payable upon call of the board of directors and that no call has been made. On this subject it was said in Hatch v. Dana, 101 U. S. 205: “ And it would seem to be singular if the stockholders could protect themselves from paying what they owe by setting up the default of their own agents. But in this case the company went out of business before the complainant obtained his judgment, and it does not appear that since that time it has had any officers who could make the call. * * * However this may be, it is well settled that a court of equity may enforce payment of stock subscriptions though there have been no calls for them by the company,” citing Henry v. Railroad, 17 Ohio, 187, where it is said: “ Y/hen a company becoming insolvent, as in this case, abandons all action under its charter, the original mode of making calls upon stockholders cannot be pursued. The debt, therefore, from that time must be treated as due without further demand.” “This,” says the court in the Hatch-Dana case, “means, of course, as between the debtor and creditor of the corporation. After all, a company call is but a step in the process of collection, and a court of equity may pursue its own mode of collection so that no injustice is done to the debtor. ”
It must, therefore, be held that a call for the unpaid stock was unnecessary to the maintenance of *144this suit. Our statute of limitations applies to equitable, as well as legal, causes of action. With these results, it is insisted by the defendants that this suit could have been commenced on the thirteenth of July, 1877, when the bank ceased to do a regular business, and that the cause of action accrued at that date.
The debt held by one of the plaintiffs and that held by the assignor of the other were due when the bank suspended, but the time of payment was extended until the first of August, 1880, by the issuing and acceptance of the scrip. Until this scrip matured the plaintiffs had no cause of action, either against the bank or stockholders.
But the defendants insist that, as this scrip was issued by the president without any action on the part of the directors, it does not have the effect to stop the running of the statute in favor of the stockholders.
As the corporation was insolvent, it was certainly within its proper corporate powers to make an assignment for the benefit of the creditors, or to make some arrangement with them whereby the assets could be collected and properly applied. This act of the president in procuring an extension of time was, therefore, one not out of, but clearly within, the corporate powers of the company. The objection must, therefore, resolve itself into this inquiry, whether the power to make the assignment had been conferred upon him as president. We are not advised what powers he had by force and operation of the by-laws, if any, the corporation had. The undisputed evidence, however, is that the directors intrusted to, and devolved upon, the president the entire management of the affairs of the bank. This state of things had existed for years prior to the suspension. “ The authority of the subordinate agents of a corporation often depends upon the course of dealing which the company or its directors have sanctioned. It may be established, without reference to the official record of the proceedings of the board, by proof of the *145usages which, the company has permitted to grow up in its business, and of the acquiescence of the board charged with the duty of supervising and controlling the company’s business.” 1 Morawetz on Private Corporations [2 Ed.] sec. 509.
While the act of the president in procuring this extension of time without any act on the part of the directors is an unusual exercise of power, still it must be remembered that the president was for all practical and business purposes the bank, and this too with the knowledge and approval of the directors. We have no hesitancy, therefore, in concluding that' he had the authority to make the arrangement which he did make for an extension of time, and that it is binding alike upon the corporation and its stockholders.
Besides this, it is competent for a corporation to ratify the unauthorized acts of its agents, and the ratification need not be evidenced by a vote or formal resolution of the board of directors. Bank v. Fricke, 75 Mo. 178. Here the bank for three years proceeded to settle up its affairs,*collect and pay out from §400,000 to §500,000 pursuant to the agreement made with the creditors, without a word of objection from the directors or stockholders, so far as we are informed. The arrangement was one highly beneficial to the bank; for it is manifest that thousands of dollars were saved and applied in discharge of debts, which, but for the agreement with the creditors, would have been consumed in fees and other expenses. Where an unauthorized act of an agent of a corporation is clearly beneficial to the corporation, a presumption of ratification will arise from slight circumstances. 2 Morawetz on Private Corporations, sec. 629. A more complete case of ratification could hardly be made out than that disclosed by the evidence in this case.
It must, therefore, be and is held that this scrip constituted valid obligations of the bank, and being *146valid as to the corporation it is binding upon the stockholders. No distinction can be made between the-liability of the bank on this scrip and the liability of the stockholders to pay up their stock subscriptions to discharge these obligations. As before said this scrip did not mature until August, 1880, and until that time the plaintiff had no cause of action against the bank or stockholders. The cause of action did not accrue prior to that date, and, as five years had not elapsed between that date and the commencement of this suit, the plea of the five-year statute of limitations must fail. As to-this defense It is unnecessary to say whether the statute began to run at that date, or when there had been a nulla dona return of the execution.
As some of the defendants, who are administrators, have pleaded the special two years’ statute, it may be proper to say that, in our opinion, the cause of action did accrue, at least, when these executions were returned nulla dona; namely, the sixth of June, 1881. At that time the plaintiffs were in a condition to pursue the remedy pointed out by section 7S6 of the statutes. At that time the assets of the bank had been collected or sold out under executions, so that the corporation no longer existed for the purpose for which it was created, and it was a dissolved corporation for all the purposes of proceeding under section 745 of the statutes. Moore v. Whitcomb, 48 Mo. 543. The plea of the two-year statute is, therefore, well taken.
As stated at the outset the circuit court simply ruled upon the question presented by the plea of the statute of limitations.
We, therefore, reverse the judgment, and remand the cause for further proceedings.
All concur.