Elon Banking & Trust Co. v. Burke, 189 N.C. 69 (1925)

Jan. 24, 1925 · Supreme Court of North Carolina
189 N.C. 69

ELON BANKING & TRUST COMPANY v. J. W. BURKE.

(Filed 24 January, 1925.)

1. Statutes — Rights and Remedies — Special Remedies.

Where a statute creates a new right or liability and provides a special remedy for its enforcement, the remedy thus prescribed is exclusive, and actions or proceedings otherwise and ordinarily available may not be resorted to.

2. Same — Banks and Banking — Corporation Commission — Assessments— Sale of Stock — Personal Judgments.

Where the shareholders in a State bank have voted an assessment among themselves to make good a deficiency in its capital stock, at a meeting called for that, purpose under the direction of the Corporation Commission, according to the amendment to our general banking laws of 1921, the statutory remedy provided where one of its stockholders fails *70to pay the assessment against Mm is by the sale of his stock, and there being no other statutory remedy, a personal judgment in the bank’s action may not be maintained, when the stock has failed to bring the amount of the assessment at the sale.

, Civil ACTION beard on demurrer to complaint before Cranmer, J., at September Term, 1924, of AlamaNOE.

Tbe complaint and prayer for judgment are as follows:

Tbe plaintiff, complaining of tbe defendant, alleges:

“1. Tbat tbe plaintiff is a corporation duly organized and existing under tbe laws of tbe State of North Carolina, and having its principal place of business at Elon College, N. C., and tbat tbe defendant is a citizen and resident of Guilford County, N. C.

“2. Tbat tbe plaintiff corporation is engaged in tbe banking business and is amenable to tbe banking laws of tbe State of North Carolina.

“3. Tbat tbe defendant is a stockholder in said bank and is a bolder of ten shares of tbe capital stock of said bank, each share being of tbe par value of $50.00. Tbat said defendant has held said stock since tbe first day of July, 1919.

“4. Tbat on tbe 1st day of November, 1923, tbe Corporation Commission of tbe State of North Carolina, ordered tbe officers and directors of tbe Elon Banking & Trust Co., to levy an assessment of 100 per cent on all stockholders for tbe purpose of strengthening tbe capital stock of said bank, which bad become impaired by reason of a robbery and other losses; said assessment to be paid within 60 days from tbe date of said order and tbat in pursuance of said order, tbe plaintiff through its officers and agents, and stockholders, levied an assessment of 100 per cent upon all stockholders. and this defendant was given notice of tbe order issued by tbe said Corporation Commission and demand was then made, and has been made at various times since then upon him to pay tbe 100 per cent assessment on bis ten shares of stock but be has failed and refused to pay said assessment.

“5. Tbat in accordance with chapter 56 of tbe Public Laws of North Carolina, tbe Extra Seásion of 1921, tbe stock of this defendant was canceled and sold to tbe highest bidder for cash at public auction, as required by tbe above statute and said stock when sold brought $10.00, leaving a balance due plaintiff by this defendant of $490.00.

“Wherefore, plaintiff prays judgment against tbe defendant for tbe sum of $490.00 with interest thereon from tbe 1st day of January, 1924, for tbe cost of this action to be taxed by tbe clerk and for such other and further relief as tbe plaintiff is, in law and equity, entitled to receive.”

Defendant demurred for tbat said complaint does not state a valid cause of action against defendant. Judgment overruling demurrer and giving defendant 30 days to answer. Defendant excepted and appealed.

*71 Carroll & Carroll for plaintiff.

Wharton & Koonts, Hines & Kelly for deféndcúnt.

HoKE, C. J.

In chapter 56, Laws of 1921, Extra Session, our General Banking Act was amended in several respects, that contained in section 3 of said chapter being as follows:

“Section 3. Add another section between twenty-five and twenty-six, to be marked 25a, as follows: 'The Corporation Commission shall notify every bank whose capital shall have become impaired from losses or any other cause and the surplus and undivided profits of such bank are insufficient to make good such impairment, to make the impairment good within sixty days of such notice by an assessment upon the stockholders thereof, and it shall be the duty of the officers and directors of the bank receiving such notice to immediately call a special meeting of the stockholders for the purpose of making an assessment upon its stockholders sufficient to cover the impairment of the capital, payable in cash, at which meeting such assessment shall be made: Provided, that such bank may reduce its capital to the extent of the impairment, as provided in chapter four, section eleven, Public Laws one thousand nine hundred and twenty-one.
“ 'If any stockholder of such bank neglects or refuses to pay such assessment as herein provided, it shall be the duty of the board of directors to cause a sufficient amount of the capital stock of such stockholder or stockholders to be sold at public auction, upon thirty days notice given by posting such notice of sale in the office of the bank and by publishing such notice in a newspaper in the place where the bank is located, and if none therein, a newspaper circulating in the county in which the bank is located, to make good the deficiency, and the balance, if any, shall be' returned to the delinquent shareholder or shareholders.
“ 'If any such bank shall fail to cause to be paid in such deficiency in its capital stock for three months after receiving such notice from the Corporation Commission, the Corporation Commission may forthwith take possession of the property and business of such bank until its affairs be finally liquidated as provided by law.
“ 'A sale of stock, as provided in this section, shall effect an absolute cancellation of the outstanding certificate or certificates evidencing the stock so sold, and shall make the certificate null and void, and a new certificate shall be issued by the bank to the purchaser of such stock.’ ”

And the question presented on the record is whether the assessment made pursuant to this amendment and for the purposes therein contemplated will in any event constitute a personal liability of the stockholder or is the remedy restricted to a sale of the holder’s stock as *72therein directed. A perusal of the amendment will disclose that in so far as same confers upon the bank the power to make the assessment, its provisions are substantially similar to that provided in the National Banking Act, 6 Federal Statutes, Annotated, sec. 5205, designed principally for the strengthening of banks whose capital has become impaired, and the Federal cases construing the latter act are to the effect that no personal liability is contemplated or provided for. These decisions proceed upon the principle very generally accepted, that where a statute creates a new right or liability and provides a special remedy for its enforcement such remedy is to be regarded as exclusive and actions or proceedings ordinarily available may not be resorted to. Fourth National Bank v. Francklyn, 120 U. S., p. 747; Pollard v. Bailey, 87 U. S. (20 Wallace’s), p. 520; Hulitt v. Bell, 85 Fed., p. 98. Our own decisions are in full recognition of the principle. S. v. R. R., 145 N. C., pp. 495-529, and authorities cited, and their proper application to the amendment justify and require the interpretation that a bank acting under its provisions may only proceed by sale of the stock and that a personal action to enforce collection is not allowed.

We are not inadvertent to the expression in the amendment that the assessment is “payable in cash,” but to our minds that merely means that the amount is presently due, and its payment may be presently enforced, but only by the methods the statute specifies, to wit, a sale of the stock.

As to both the State and Federal statutes, the true position, we think, is very well stated in 7 C. J., p. 768, as follows:

“The statute provides for an assessment on the stockholders in case of an impairment of capital, and for proceeding to collect such assessment from delinquent stockholders. Such an assessment must be made by the stockholders themselves, and an assessment by the directors without action by the stockholders is void. If a stockholder will not comply, enough of his stock to pay the assessment may be sold, but no action will lie against the stockholder personally on such assessments.”

It may be well to note that in the case of Taylor v. Everett, 188 N. C., p. 247, where the subject in some of its aspects was very learnedly discussed by Associate Justice Connor, and in which a recovery as on a personal liability was upheld, the decision was made to rest on the mutual and express agreement of the defendants to that effect, and the question of personal liability as imposed by the statute was not passed upon or determined.

It is suggested that in Smathers v. Bank, 135 N. C., pp. 410-418, this Court has held that the Legislature may not impose an additional liability of this kind on stockholders in behalf of existent creditors. A recurrence to that opinion, however, will disclose that the Court did *73not, and did not intend to, pass on tbe extent of tbe legislative power under its reserved right of amendment in our Constitution to impose burdens of tbis character, but only said that tbe act there in question should be so construed as to give only a prospective effect. Tbe matter is not further pursued, nor is it determined, for tbe reason that tbe suit here is not primarily for tbe benefit of creditors, nor are they directly before tbe Court. On tbe contrary, it appears that such an assessment can only be made by tbe bank itself and for its benefit, on authority given by a vote of tbe stockholders; apparently, it is a conditional privilege, extended by tbe Corporation Commission to banks whose solvency is threatened, but whose assets afford reasonable promise of recovery, and to be carried out according to tbe terms and requirements of tbe law. Thus an assessment must be made within sixty days, and, as stated, it is to be presently due. By one of tbe later clauses of tbe amendment it is provided, in effect, that if any such bank shall fail to cause to be paid in tbe deficiency for three months after tbe notice given, tbe Corporation Commission shall take possession of tbe property and business until its affairs are liquidated.

In Delano v. Butler, 118 U. S., p. 634, the United States Supreme Court, construing tbe Federal statute, has said that it is in addition to and entirely distinct from tbe stockholders’ liability to creditors, as in case of insolvency; and it would seem, from a consideration of tbe amendment in connection with tbe provisions of tbe general law, that if tbe deficiency is not paid in three months, as required, that in some instances tbe entire scheme might well be held to have failed and tbe affairs of tbe bank wound up, as on an original case of insolvency. Such a result may have been in effect attained by a decision of tbe Supreme Court of Georgia involving a construction of tbe Federal statute referred to, and wherein it was held, on a sale of stockholder’s entire stock to pay such an assessment, it must bring tbe full amount of tbe assessment, or tbe sale is void. Bank v. Fouche, 103 Ga., p. 851. These suggestions, while to some extent involved in tbe inquiry, are not, as stated, definitely determined upon, and are here only referred to and approved in so far as pertinent, and as they may help to a proper apprehension of tbe question directly presented, to wit, tbe right of plaintiff to have personal judgment against defendant, a stockholder, on tbe assessment in tbe instant case for tbe amount of excess of tbe sum realized from tbe sale of bis entire stock.

For tbe reasons heretofore given, we are of opinion that no such recovery can be bad, and tbe judgment overruling tbe demurrer must be

Eeversed.