183 A. 610 | Md. | 1936
Lead Opinion
Since these appeals present identical questions of law, they may be conveniently considered together. Broadly stated, their solution depends upon (a) whether or not a receiver can maintain a suit in equity against stockholders of a banking institution of this state to enforce their statutory liability under section 72 of article 11 of the Code, the assessment being one hundred per cent. of the par value of the stock held by them; and (b) if such suit is sustainable in equity, whether it is permissible to divide the stockholders into various groups, and at different times bring separate suits against them for the enforcement of such liability. *159
Appellee, Ghingher, by decree of the Circuit Court for Frederick County, in equity, was appointed to succeed George W. Page as receiver of Central Trust Company of Maryland for the purpose of liquidating its assets in accordance with section 9, article 11 of the Code (as amended by Laws 1933, ch. 529, sec. 1). A petition having previously been filed by the former receiver, showing the necessity of collecting from the stockholders their full statutory liability in order to meet the obligations of the insolvent institution, the equity court passed an order authorizing him to proceed to enforce such liability by suit, either at law or in equity, and in such jurisdictions as he might be advised. Thereafter, in pursuance of such authority, the present receiver filed two separate suits in the Circuit Court for Frederick County, in equity, against certain stockholders of the trust company to enforce such statutory liability, having, at the time of filing each, obtained authority from the equity court to file the same in the form of separate suits. In the first of these (No. 19 on this record) the defendants consist of ninety-five stockholders of the trust company, while the second suit (No. 20) was filed against sixty-five stockholders of the same company. In each of the suits the addresses of the defendant stockholders are given, and while a number of them are residents of Frederick County, some reside in Howard County, others are residents of Carroll County, still others reside in Montgomery County, while the remainder have residences in Washington County. Demurrers to each bill were filed by appellants, all of whom resided beyond the confines of Frederick County, and in each case the principal reason assigned in support of them was that the plaintiff had an adequate and complete remedy at law, and the equity court for Frederick County was, therefore, without jurisdiction. By overruling these demurrers, the chancellors below rejected appellants' contentions, and in effect ruled that the jurisdictional question thus raised by them was without merit. From such orders, these appeals are taken. *160
Obviously, at the outset, it is necessary to consider the statute under which such liability arises and is here sought to be enforced (chapter 219, section 68, Acts of 1910, now section 72 of article 11 of the Code), concerning which the following observation was made by Judge Offutt, speaking for this court, inRobinson v. Hospelhorn,
Moreover, in the recent case of Ghingher v. Bachtell,
"By virtue of this coalescence of statutes, the receiver of a bank, for the first time, was empowered to enforce the liability of its stockholders, collecting their contribution to the common fund, from which he would make distribution to the bank's creditors.
"In view of the inauguration of this new system of liability enforcement, involving a change in the theories *161 of recovery and a corresponding modification of the rules of evidence, the cases which had been decided during the existence of the old practice were no longer controlling."
This act (section 72, article 11), to which these quotations from the cited opinions have reference, is for all practical purposes so nearly identical with section 63, title 12, U.S. Code Ann. (the National Banking Act) as to leave no reasonable doubt that in its enactment the language of the former act was adopted, and it may be inferred that it was done for producing uniformity in liability of the two classes of stockholders. In the absence of any construction of such statute by this court, decisions of the federal courts, construing it over a period of many years, are entitled to great weight, and should be given effect unless they contravene some established policy of the State. Robinsonv. Hospelhorn, supra.
From a consideration of the adjudicated cases under the federal act, of which section 72 of article 11 is the counterpart, these principles have been definitely established:
The liability of the stockholders is several and not joint; and where the assessment is for less than the full amount of such liability the suit may be either at law or in equity, but when the order or assessment is for the full amount of the par value of the stock, the suit against the stockholders must be at law, unless there are special facts existing requiring the interposition of a court of equity. Kennedy v. Gibson (Md. 1869) 8 Wall. 498, 19 L.Ed. 476; Bundy v. Cocke (Ky. 1888)
We quote from the opinion in the case last cited: "These observations clearly imply that the Comptroller, in the exercise of his discretion, may levy successive assessments as they may appear to be necessary. If the power can be exercised only once no reason is apparent why equity should have jurisdiction for the collection of an assessment less than one hundred per cent. If the stockholders' liability is fixed once for all by the first assessment of the Comptroller, the legal remedy for the collection of a ten per cent assessment is as full, adequate, and complete as it is for the collection of the one hundred per cent assessment. The reason why, when the assessment is for one hundred per cent, the proceedings must be at law, and when for a less amount it may be in equity, is obvious. When the full amount is assessed there can be but one suit against each stockholder. He is suable for his full liability at once, and there is no reason for equitable jurisdiction. If a partial assessment is made, there may be other assessments, when the receiver has liberty to sue at law for even a partial assessment, though equity has concurrent jurisdiction to prevent a multiplicity of suits."
Concerning the construction thus placed upon the statute, Mr. France, in his work on Corporation Law (2nd Ed.), observes: "The decisions of the Supreme Court on the statutes have, as a whole, displayed practical good sense; and they have worked out a method which is simple, economical and efficient. The result is that in many states the older methods have been superseded by legislation substantially like that governing national banks."
It will be further observed that, according to these authorities, a distinction is made in the method of enforcement according as the proceedings are taken to recover the full statutory liability of the stockholder or less *163 than this amount, since in the latter situation the case may stand over for further action of the court, should the same be necessary, until the full amount of the liability has been enforced; that in the situation last described there exists the right of contribution between the stockholders. This, it seems to the court, is a sufficient reason, in cases where the assessment is less than one hundred per cent, to justify a resort to equity.
This principle was early recognized by this court, for inMatthews v. Albert (1866)
In view of these considerations, the court has not felt *164 at liberty to construe the decisions mentioned as having the force of binding precedents in upholding suits of this nature in equity, when the remedy at law is adequate and complete.Robinson v. Hospelhorn, supra.
Appellee also bases his right to maintain these suits in equity upon two additional grounds, viz.: (1) That the relief here sought is ancillary or auxilliary to that obtaining in the original proceeding, and since the equity court there acquired jurisdiction over the assets of the trust company, this will be retained for the purpose of deciding all questions in controversy; and (2) under the doctrine of prevention of a multiplicity of suits.
The first of these contentions seems sufficiently answered by the receiver's own conduct in filing two suits, entirely separate and independent of each other and also separate from the original proceeding, to say nothing as to how many other separate suits he intends to bring, such acts conclusively showing that he has not sought the aid of such original jurisdiction. Moreover, if his position is sound, there is no logical reason why he may not sue in equity in Frederick County, in a separate proceeding, every stockholder of the Central Trust Company, notwithstanding he admits that many of the defendants in these suits reside in four other counties. But, in addition to this objection, other considerations to be hereafter discussed suggest themselves.
The answer to the second contention lies in the fact that the statute, apart from the federal decisions, expressly negatives the idea of a joint liability, but plainly states it to be single and entirely disassociated from the liability of any other stockholder. In discussing the doctrine of prevention of multiplicity of suits, Mr. Pomeroy, in his work on EquityJurisprudence (4th Ed.) vol. 1, at page 409, states that to justify its invocation some common relation, interest, or question must exist, and that such a suit must result in the simplification or consolidation of the issues. He concludes that if, after numerous parties are joined, there remain separate issues to be tried between them and the single plaintiff or defendant, *165 nothing has been gained by assuming jurisdiction in equity. See, also, the same work, section 251 1/2 (2), from which we quote: "A bill was filed to collect the amounts previously assessed against the stockholders of a corporation under a statute making them severally and individually liable for its debts to an amount equal to the value of their respective shares. While an inquiry to determine how large the assessment should be should properly be made in equity, `after the rate of assessment has been fixed, and the individual liability of each stockholder has thus been ascertained, the enforcement of such liability is the proper subject of a suit at law, in which the separate rights of the defendant stockholders are distinctly to be considered.'"
This doctrine was expressly approved by the court in Hale v.Allinson (C.C.) 102 Fed. 790, affirmed in (C.C.A.) 106 Fed. 258, and later affirmed in
And even though equity could be considered the proper *166 forum, it does not follow that appellants are compelled to defend the suits beyond the county of their residence, thus depriving them of the right of trial at home where they live and are known, which in turn makes the proceedings more costly to them. See 67C.J., p. 97, title "Venue," where it is said that the general rule requiring actions to be brought in the county of defendant's residence is applicable to suits and cross-bills in equity, unless the proceedings fall within a statutory exception. It is there further stated: "The privilege conferred on a defendant of being sued in the county of his domicile is a valuable and substantial right which is not to be denied upon a strained or doubtful construction of a statutory exception or except in strict compliance with the law on clear and convincing proof, and all doubts are to be resolved in its favor."
These authorities seem especially applicable to the present cases, in one of which, under this doctrine, the receiver elects to bring in ninety-five stockholders and in another sixty-five, each case being separate and distinct from the other and in no way connected with the original suit. It is obvious that in neither case is any defendant concerned in the least with the defense of his codefendants. The liability of each defendant being several, each is entitled to have his case tried without having it affected or prejudiced by consolidation with that of others, with whom he has no interest or contractual relation, with whose defenses he is not concerned, and for whose costs and expenses he should not be held liable, since for the liability of his codefendants he has neither responsibility nor interest.
The fact that the stockholder's liability is an asset of the corporation, enforceable by the receiver, does not per se make the claim one which is cognizable in equity, for concededly promissory notes and overdrafts of the institution which have come into the receiver's hands are likewise assets of the corporation, with the collection of which he is chargeable, but would it be contended that he could, by instituting a single suit, in equity, enforce their *167 collection? This would prevent a multiplicity of suits, yet, as observed by Pomeroy, supra, the defendants would have no community of interest, and their liability would be several. Likewise in these cases the decree against each of appellants would separate him from all other defendants and would be against him in personam for the amount of his liability and his costs, and execution or attachment upon such decree would be against him alone and upon his own property. These considerations seem a sufficient test in distinguishing between a legal and equitable remedy, and in such cases the convenience to the receiver acting under a court of equity is not to be weighed against the right of the individual.
Nor is this conclusion affected by the decision in Bartlett v.Smith,
Other grounds suggest themselves in favor of the legal rather than an equitable remedy in these cases, principal among which is the right of the individual to have a trial by jury in cases involving issues of fact in civil proceedings. Maryland Constitution, art 15, sec. 6; Article 5, Declaration of Rights. Concerning this right, Mr. Justice Story, in Parsons v.Bedford, 3 Pet. 433, 446, 7 L.Ed. 732, 736, said: "The trial by jury is justly dear to the American people."
While it was held in Capron v. Devries,
For these reasons, it follows that in these cases there exist no problems of a nature requiring a resort to equity, and, the remedy of the receiver for the enforcement of the stockholder's liability being adequate at law, there was error in the passage of the orders overruling the demurrers, and the same must be reversed.
Orders overruling demurrers in Nos. 19 and 20 reversed, withcosts to appellants in each case.
Dissenting Opinion
Ninety-five stockholders are made defendants to this first bill, sixty-five to the second, and nearly as many suits at law would be necessary to enforce in that jurisdiction the liability of all of them, suing jointly those who hold stock jointly. With the insolvency of their corporation, and the deficiency to be made up by these stockholders, determined in the receivership proceeding, there would be, as it seems to me, no material differences in questions remaining to be settled in the suits at law, if, indeed, there would be any questions. The books of the corporation determine who are stockholders. Kerr v. Urie,
The question is finally one of taking sides in the unfinished debate on the sufficiency of avoidance of a multiplicity of lawsuits as a sole ground of equity jurisdiction. And it is a question of importance beyond the decision of this case.Pomeroy, Equity Jurisprudence (4th Ed.) secs. 255 to 271, and 2333; 45 Harvard Law Rev. 1297 etc.; 24 Yale Law Journ. 642.
In an equity case under a similar statute on liability directly to creditors for the amounts of unpaid subscriptions, Act of 1872, ch. 325, now embodied with amendments in section 77 of article 23 of the Code, a statute which specified no forum for enforcement, Judge Alvey, *170
for the court, said: "It is well settled that a creditor may proceed in equity, upon an established or admitted claim, against a stockholder or stockholders, to enforce his or their liability to an insolvent corporation, for the amount remaining due upon his or their subscription to the stock, although no account is asked to be taken of the other indebtedness of the company."Crawford v. Rohrer,
In Matthews v. Albert,
The unanimous concession was, presumably, found in decisions in other states, rendered from near the beginning of the last century, when provisions in general statutes or special charters were enacted to retain more or less of the liability for debts which incorporators would have had if in business as partners. Some of those decisions held that the alternative of numerous suits at law furnished in itself a ground for resorting to equity. Bank of Poughkeepsie v. Ibbotson, 24 Wend. (N.Y.) 473, 479, cited by this court in Norris v. Johnson,
If in the earlier Maryland decisions the court contemplated that equity would have jurisdiction only for the purpose of adjusting the relative rights, the fact appears to have been lost sight of in the later decisions quoted. And my understanding is that since 1910 suits on the double liability of trust company stockholders or bank stockholders have been brought in equity, and that, besides those in the two cases before the court at this term, others are now pending in the lower courts. And counsel have stated to the court here that the quoted expressions of the court appearing to sanction the course have been relied on.
These statements of the law, furnishing guides to trial courts and attorneys, should not be abandoned unless there should be some serious disadvantage in following them. There seems to me to be a serious disadvantage in following the alternative practice, especially since the numbers of stockholders in corporations have increased so greatly, as is evidenced here. This increase presents the problem as a modern one. If the expressions quoted from our earlier cases were departures from accepted principle, the fact would seem to be unimportant, for an improvement in procedure which has gained a footing in actual practice is one we may accept, even though originating in a departure. Nelson v.Chesapeake Const. Co.,
In Gray v. Citizens' Gas Co.,
