JAMES B. BUTTON, Superintendent of Banks of Arizona, Ex-officio Receiver of the CITIZENS STATE BANK, OF PHOENIX, an Arizona Corporation, Insolvent, Appellant,
THE O. S. STAPLEY COMPANY, a Corporation, Appellee
APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Reversed and remanded, with directions.
Mr. R. G. Langmade, for Appellant.
Mr. M. L. Ollerton, for Appellee.
[40 Ariz. 80] ROSS, J.
The superintendent of banks, James B. Button, acting under the law concerning "Banks and Banking" (chapter 8, Rev. Code 1928 [section 209 et [40 Ariz. 81] seq.]), on July 30, 1930, took over the Citizens State Bank for the purpose of winding up and liquidating its affairs. On December 6, 1930, he filed his complaint against the O. S. Stapley Company, a corporation, for the sum of $2,000 as the owner of record of twenty shares of the stock of the bank, of the par value of $100 per share, allegin therein that "in the judgment of plaintiff the assets of said bank were insufficient to meet its liabilities and lacked in excess of one hundred thousand dollars ($100,000.00) of equaling the liabilities of said bank, excluding its capital stock, surplus and undivided profits; and plaintiff alleges that in his judgment the full one hundred per cent (100%) stockholders' liability upon all of the stock of said bank is necessary to be collected for the payment of the creditors thereof. . . ."
The defendant filed a general demurrer to the complaint, and answered that in August, 1928, it had sold and transferred said twenty shares of stock to E. S. Wakelin, and had indorsed the same in blank and delivered the certificate to one L. L. Steward, secretary and cashier of the bank, to make the transfer on the bank's stock-books. When this answer was filed, plaintiff asked and received permission to amend his complaint to make Wakelin a party defendant. Wakelin filed a general demurrer to the amended complaint, which was sustained; but defendant corporation's demurrer was overruled, whereupon the trial proceeded against it. This defendant objected to the introduction of any evidence by plaintiff upon the following grounds, to wit: "That the complaint . . . fails to state a cause of action against said defendant in that said complaint failed to state that prior to the bringing of said action there had been a judicial determination of the fact of insolvency of the Citizens State Bank and the amount thereof, and for the further reason that said defendant had not been given a [40 Ariz. 82] legal opportunity to contest the insolvency of said bank and the amount thereof," which objection was sustained, and, plaintiff electing
to stand on his complaint, judgment was entered against him. He has appealed from such judgment.
The question involved and the only one argued is suggested by defendant's objection to the introduction of evidence to support the allegations of plaintiff's complaint, and it is whether or not it is necessary under the statutes and Constitution as they now exist to have a judicial determination of the bank's insolvency and the amount thereof before the superintendent of banks can bring suit to enforce the stockholders' liability.
Section 11 of article 14 of the Constitution creates the stockholders' double liability, but it does no more. In other words, it does not prescribe the kind or character of remedy or procedure to be followed to enforce such liability nor when suit shall be brought.These, of course, were left to be prescribed by the legislature. Cowden v. Williams, 32 Ariz. 407, 55 A.L.R. 1059, 259 P. 670, infra. The legislature, in chapter 31, Laws of 1922, section 23, adopts the language of the Constitution fixing the stockholders' liability, and provides that such liability shall be enforced by the superintendent of banks for the benefit of the bank's creditors by an action in the nature of a creditors' suit or by any other available action, but is silent as to when such action may be commenced. While such chapter was the law, in Cowden v. Williams, 32 Ariz. 407, 55 A.L.R. 1059, 259 P. 670, we held that, where the question was as to when the action against stockholders accrued, so as to set the statute of limitations running, that it was upon "a judicial determination of the fact of insolvency." In Dagg v. Hammons, 34 Ariz. 445, 72 A.L.R. 1237, 272 P. 643, decided December 17, 1928, we approved of [40 Ariz. 83] the ruling in the Cowden case. In re Bank of Winslow, 36 Ariz. 507, 287 P. 444, we said:
"While under our decisions [citing the Cowden and Dagg Cases] such a determination is necessary, the method of obtaining it is more or less informal and in most cases, we daresay, can be arrived at from the reports of the receiver [superintendent of banks] showing the assets and liabilities."
In the Cowden, Dagg and Bank of Winslow cases it was determined that constitutional liability of a stockholder was not primary but secondary; that is, the stockholder could not be called upon to pay his double liability until it was judicially ascertained that the assets were insufficient to meet the bank's obligations. It was not intended, although we may have used some language of that import, to say that under the Constitution such determination must be had before suit to enforce its liability could be brought, but that such determination was necessary before judgment could be entered.
The facts in these three cases arose prior to July 1, 1929, the effective date of the Revised Code of 1928. In that revision, section 23 of chapter 31, Laws of 1922, was amended and carried forward as section 227 of the Banking Code. This amended section reads as follows:
"Stockholders' Liability. The stockholders of every bank shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements, of such corporation or association, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares or stock. In case of the dissolution or liquidation of any bank, the constitutional and statutory liability of the stockholders must be enforced for the benefit of the creditors of such bank by the superintendent of banks or by any receiver. The action to enforce such liability shall be commenced within three years after the closing [40 Ariz. 84] of such bank, and may be ...