5 N.E.2d 479 | Ohio | 1936
The controlling question presented for determination by this court is whether Section 710-75, General Code, is unconstitutional in that "it increases the obligation of the stockholders of a bank beyond that permitted by Section
Article
Section 710-75, General Code, provides: "Stockholders of banks shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of such bank, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such shares. The stockholders in any bank who shall have transferred their shares or registered the transfer thereof within sixty days next before the failure of such bank to meet its obligations, or with knowledge of such impending failure, shall be liable to the same extent as if they had made no such transfer, to the extent that the subsequent transferee fails to meet such liability; but this provision shall not be construed to affect in any way recourse which such stockholders might otherwise have against those in whose names such shares are registered at the time of such failure. In determining the said period of sixty days, the period or periods when any bank is in possession of the superintendent of banks or is operating under any restriction upon the withdrawal of deposits or the payment of liabilities shall be excluded. At any time after taking possession of a bank for the purpose of liquidation when the superintendent of banks ascertains that the assets of such bank will be insufficient to pay its debts and liabilities he may enforce the individual liability of the stockholders."
Section 710-75, General Code, in our opinion, makes no change in bank stockholders' constitutional super-added *183
liability. It neither enlarges nor diminishes it. It does not create new, or extend existing, liabilities. Under the law, a stockholder is liable for all debts of the banking corporation existing while a stockholder. This liability is continuous and is not discharged by subsequent bona fide transfer (Brown v.Hitchcock,
When a stockholder sells his stock to another and the transfer is entered upon the corporation records, such transfer effects a novation, with the consent of the corporation, substituting the transferee for the transferrer, and the transferee succeeds to all the rights, benefits and liabilities of the transferrer as between stockholders. However, as to creditors, a novation cannot thus be effected without the consent of the creditors. The corporation is the unconditional debtor. A stockholder is a conditional debtor. Two debtors cannot effect a novation discharging one another from their obligations to a common creditor. To effect a novation as to a creditor, the creditor's consent must first be obtained. However, since every depositor is a creditor of the banking institution, it is not practical to obtain the consent of each individual depositor. The statutory provision renders the stock transfer ineffective if the bank fails within a period of sixty days following such transfer. In other words, the transfer is effective as to creditors if the bank continues to meet its obligations for a period of sixty days following transfer. The lapse of sixty days operates as a substitute for and has the effect of consent by creditors, and effects a novation as to creditors. This must be deemed to have been the intention of the Legislature.
The intention of the electorate in adopting Article XIII, Section 3, was to protect creditors. That construction must be given which will best protect them. A statute which provides a method by which a stockholder *184 may not easily evade an existing liability does not thereby fix or enlarge upon his liability; nor does it affect substantive rights, but is merely procedural in character.
In Snider v. United Banking Trust Co.,
If Section 710-75, General Code, does not augment or diminish the constitutional rights of creditors, it cannot be said to augment the constitutional liability of stockholders. There cannot logically be an enlargement of one without a corresponding enlargement of the other. Two sides of an equation are equal to one another. The question presented in this case is the inverse of that presented in Snider v. UnitedBanking Trust Co., supra. However, the principle controlling each is the same.
Although Article XIII, Section 3 of the Constitution, is self-executing (Lang v. Osborn Bank,
In Snider v. United Banking Trust Co., supra, this court, with respect to Article XIII, Section 3, said that it is "self-executing and does not require the aid of legislation to make it enforceable. True, it is perfectly competent for the Legislature to provide the machinery for such enforcement, and such machinery has in fact been provided. This legislation is found in Sections 710-1 to 710-189 of the General Code, commonly referred to as the Banking Code."
We find Section 710-75, General Code, to be constitutionally *185 valid, and that the petition of appellee based thereon states a cause of action.
Judgment affirmed.
WEYGANDT, C.J., STEPHENSON, MATTHIAS, DAY and ZIMMERMAN, JJ., concur.
WILLIAMS and JONES, JJ., not participating.