Mitchell v. Beckman

California Supreme Court Aug 30, 1883Published

Before: Thornton

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Holding. The court held that stockholders of a commercial bank are liable for the bank's debts, that stock ownership is established by contract regardless of payment or certificate issuance, and that the statute of limitations for stockholder liability begins when the bank ceases payment.

Issues

Whether stockholders are liable for corporate debts when the corporation assumed the liabilities of another entity.
Whether a person becomes a stockholder without full payment or issuance of certificates.
When the statute of limitations begins to run on a depositor's claim against stockholders.
Whether the bank was a commercial bank or a savings bank for purposes of liability.

Disposition. affirmed

Quotations verified verbatim against the opinion

“When the corporation has agreed that a person shall be entitled to a certain number of shares in its capital, to be paid for in a manner agreed upon, and that person has agreed to take and pay for them accordingly, he becomes their owner”

“The statute did not commence running until the bank stopped payment, which was less than two years before the commencement of the action.”

“The Odd Fellows’ Savings and Commercial Bank was a commercial and not a savings bank.”

Synopsis

Appeal from a judgment of the Superior Court of Sacramento County, and from an order refusing a new trial.

On the 1st day of March, 1875, the plaintiff was a depositor in a savings bank styled Odd Fellows’ Bank of Savings. On that day this bank entered into an agreement with another corporation styled the Odd Fellows’ Savings and Commercial Bank, by the terms of which the former corporation transferred all of its assets to the latter, in consideration that the latter should assume the payment of all existing debts and liabilities. The plaintiff’s deposit was, on that same day, and pursuant to this agreement, entered as a deposit credit upon the books of the Odd Fellows’ Savings and Commercial Bank. On the 21st day of September, 1878, the Commercial Bank suspended payment. The defendants were all subscribers to its capital stock, but some of them had not paid the full amount of their subscriptions, and had not received certificates of stock. The other facts are stated in the opinion of the court.

Thornton, J. So much of the opinion of Department Two, in this cause, as follows, is adopted as a correct exposition of the law herein: —

“The complaint in this case alleges that the Odd Fellows’ Savings and Commercial Bank is a corporation, existing under the laws of California, ever since the 10th day of February, 1875, and organized for the purpose of carrying on a commercial banking businsss; that the defendants are subscribers to the capital stock of the bank in amounts specified in the complaint; that on the 21st day of December, 1878, the corporation above named was indebted to the plaintiff in the sum of $6,625.72, upon an account for so much money at and before that time had and received by the said corporation from the plaintiff to and for plaintiff’s use, and at the special instance and request of said corporation, which sum said corporation' thereafter, to wit, at the place and on the day last aforesaid undertook and promised to pay plaintiff when it should be thereunto afterwards requested; that plaintiff has recovered a judgment against the corporation for .that amount, no part of which has been paid; that the defendants were at the time such indebtedness accrued [120]stockholders in the corporation named; that the corporation suspended all business and closed its doors on the 21st day of September, 1878, since which time it has not resumed business,” etc.

The action is brought under the statute, and the allegations in the complaint are sufficient. The case has been argued at great length and with much ability, but it does not seem to us that the points involved are of difficult solution. The main leading facts are that the corporation (the bank) was doing a commercial banking business in the city of Sacramento; that the plaintiff deposited a certain amount of money in it which has never been repaid; that the plaintiff brought an action and recovered a judgment for the amount against the bank, which judgment remains in full force and effect. Whereupon plaintiff seeks to charge the defendants in this action, as subscribers to the capital stock of the corporation.

It appears from the evidence in the case, that plaintiff’s money was originally deposited in the Odd Fellows’ Bank of Savings as early as the year 1873, and that on the first day of March, 1875, an agreement was entered into between the two institutions above named by the terms of which all the assets of the last named institution were assigned and transferred to the Odd Fellows’ Savings and Commercial Bank, and thereupon that institution assumed all the liabilities of the former bank. It is claimed that this assumption of the liabilities of the old bank by the new one Avas void for several reasons. But it is sufficient for us to say on this branch of the case, that the new bank received all of the assets of the old, Avhich Avere sufficient, as appears from the evidence of Samuel Poorman, the president of both corporations, to satisfy all the debts of the old bank. He Avas asked by the court the folloAving question : “ Were all the assets transferred to the new bank, and Avere the assets sufficient to discharge the liability of the Odd FelloAvs’ Bank of Savings ? ” Ans. “ Well, I believe they were more than sufficient. I had been president of the Odd FelloAvs’ Bank of SaArings for a considerable time before that, and was president of the Odd FelloAvs’ Savings and Commercial Bank for nearly three years after that, and Avas familiar Avith the assets and their values.” It may be added, if anything more in this connection

Mitchell v. Beckman

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