Opinion
Rehearing Denied Oct. 16, 1940
Hearing Granted Nov. 19, 1940.
Appeal from Superior Court, Los Angeles County; Robert W. Kenny, Judge.
Action by D.W. Bates, as Superintendent of Banking of the State of Iowa and as receiver of the Cedar Rapids Savings Bank & Trust Company of Cedar Rapids, Iowa, against Georgie Blake, to recover an assessment levied against the defendant as the owner of bank stock. From a judgment for the defendant, plaintiff appeals.
Reversed and remanded with directions. COUNSEL
Freston & Files and Ralph E. Lewis, all of Los Angeles, for appellant.
Claire T. Van Etten, of Los Angeles, for respondent.
OPINION
WHITE, Justice.
This is an action brought by the Superintendent of Banking of the State of Iowa to recover an assessment levied against the defendant, residing in Los Angeles county, California, and who was a stockholder of the Cedar Rapids Savings Bank & Trust Company of Cedar Rapids, Iowa. A demurrer to the amended complaint was sustained without leave to amend, resulting in the entry of a judgment of dismissal. The appeal is before us on the judgment roll alone.
There is no dispute as to the facts, which may be epitomized as follows: On January 24, 1933, the Cedar Rapids Savings Bank & Trust Company made application to the Superintendent of Banking of the State of Iowa to take over and operate such bank pursuant to the terms of an Iowa moratorium statute known as Senate File No. 111, published as sections 9283-el to 9283-e6, inclusive, of the Code of Iowa (1935). Pursuant to such application the banking superintendent did take over such management on January 25, 1933, and continued the same until May 3, 1934. During the interim just mentioned the bank by due corporate proceedings obtained a loan of $650,000 from the Reconstruction Finance Corporation, and then entered into an agreement with another bank, the American Trust & Savings Bank, whereby there was formed the Guaranty Bank & Trust Company. Pursuant to this arrangement, the new bank agreed to purchase certain of the assets of the Cedar Rapids Bank and to assume its deposit liabilities, which agreement was consummated May 3, 1934, and resulted in officially closing the Cedar Rapids Bank on that date. Following such transfer of assets the Superintendent of Banking concluded that the Cedar Rapids Bank was then in an unsafe condition, and decided that he should take it over for the purpose of liquidation. In May, 1934, such banking superintendent filed an action in the proper court in the state of Iowa for the appointment of a receiver to liquidate the bank, and the superintendent himself was appointed to act in such capacity by order of the court made May 3, 1934. Approximately a year later, on or about April 27, 1935, such receiver filed in the Iowa court an application for an order authorizing the commencement of an action against the stockholders of the bank, asserting the existence of a deficiency in excess of $200,000 and alleging that an assessment against such stockholders was essential. Following the issuance of the order prayed for, an action was commenced by the receiver in the Iowa court against all stockholders of the insolvent bank. The defendant herein was named in a like capacity in such suit because of the ownership of 104 shares of stock in the bank, subject to a liability under statutory assessment in the sum of $10,400, such an amount being an assessment equal to the par value of the shares she held. What is termed in the Iowa court an "original notice", which corresponds to a summons under California procedure, was personally served upon the defendant in the instant action, but such service was actually made in the state of California. Thereafter, on September 18, 1936, the Iowa court entered its decree reciting all the jurisdictional statutory conditions and that the assessment should be levied against the defendant herein, Georgie Blake, in the sum of $10,400, and instructing the receiver to proceed by appropriate action in the state of California to collect such sum. The complaint filed herein included a transcript duly certified by the clerk of the district court of Iowa of the various pleadings, orders and proceedings in the matter.
In urging a reversal, appellant first presents for consideration the question of when under the facts alleged and the relevant statutes of Iowa, the applicable period of limitations against the plaintiff herein began. The instant action was filed in the Los Angeles county superior court on February 24, 1937. We are convinced that section 359 of the Code of Civil Procedure is the applicable statute of limitations, and this section prescribes a three-year limitation following creation of the liability. Richardson v. Craig, 11 Cal.2d 131, 136, 77 P.2d 1077. If the statute commenced to run when the Iowa Superintendent of Banking first assumed management of the Cedar Rapids Bank on January 23, 1933, then the action instituted in California in 1937 was outlawed; while should it be determined that the statute started to run from the date when the banking superintendent filed his action for appointment of a receiver to liquidate the bank on May 3, 1934, or upon the filing of the application of the banking superintendent on April 27, 1935, for permission to institute proceedings for the purpose of levying and collecting the statutory assessment against the stockholders, or from the date of the decree of the Iowa court on September 18, 1936, adjudging that a 100 per cent assessment should be levied against defendant herein as a stockholder, then the action under investigation was timely. In construing the California Bank Stockholders’ Liability Act (Stats.1931, p. 338, amended by Stats.1937, p. 627), our Supreme Court, in Richardson v. Craig, supra, decisively held that the liability of the bank stockholder is not "created" when the corporation incurs the debt, or even when the corporation becomes insolvent, but that such "creation" takes place only when the assessment is made. Up to the time when the assessment is levied the stockholder’s liability is regarded as a possibility, becoming a certainty only upon levy of the assessment. In arriving at a determination of the question as to when liability was "created" in the instant case, we must have recourse to the Iowa law and its similarity, if any, to the California law. If the statutes of both states parallel each other, then the reasoning and conclusions of our Supreme Court in Richardson v. Craig, supra, solve the question. The California statute (Deering’s Gen.Laws, Act 652a, sec. 1), so far as it is relevant, reads: "The stockholders of every banking corporation organized under the laws of the State of California shall be held individually liable, equally and ratably, and not one for another, for all contracts, debts and engagements of such corporation, 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 Iowa statute (section 9251 of the Code of Iowa, 1935) recites that: "All stockholders of savings and state banks shall be individually liable to the creditors of such corporation of which they are stockholders over and above the amount of stock by them held therein and any amount paid thereon, to an amount equal to their respective shares, for all its liabilities accruing while they remained such stockholders."
The similarity between the two statutes is at once apparent. True, the Iowa law makes the stockholder liable for debts accruing during the time the stock is held, while the California law simply makes the stockholder liable for debts of the corporation without specifying the time of incurring or the time of accruing of such debts. We hold, however, that the quoted Iowa law does not of itself "create" a liability on the part of the stockholders, but merely establishes the possibility of such liability arising when and if the provisions of other statutes are invoked. Let us therefore now give consideration to section 9252 of the Iowa code, which provides: "Should any such association or corporation become insolvent, its stockholders may be severally compelled to pay such deficiency in proportion to the amount of stock owned by each, not to exceed the extent of the additional liability hereby created."
And section 9253, reading as follows: "The assignee or receiver of any such corporation, or in case there is none, or of his failure or refusal to act, any creditor thereof, may maintain an action in equity to determine the liability of the stockholders, and the amount to which each creditor shall be entitled; and all parties interested shall be brought into court."
We cannot agree with respondent that under the Iowa law the creditor has a direct remedy against the stockholder. His only prerogative is akin to that of an assignee or receiver of an insolvent corporation, viz., to maintain an action in equity "to determine the liability of the stockholders, and the amount to which each creditor shall be entitled". The stockholder is under no obligation to pay unless and until the court shall have determined his liability and the amount thereof. While a cause of action accrues to enforce the stockholder’s liability when insolvency ensues to the corporation, the liability is created only when all interested parties are brought into court and a judicial decree determines its existence, the amount thereof, and the time when such liability must be met by the stockholder. So in the case at bar, we find that the plaintiff superintendent of banking, named as receiver for the insolvent Iowa bank, filed with the Iowa court a petition in equity against the stockholders of such insolvent bank to collect their statutory assessment. In his petition the receiver, among other things, prayed that the court determine the question of assets and liabilities of said bank, and that the court levy an assessment against each stockholder upon the shares of capital stock held by such stockholder. Pursuant to such application the Iowa court did levy a 100 per cent assessment against defendant Georgie Blake on the stock owned by her and fixed the amount of said assessment at $10,400. The decree of the Iowa court then directed the superintendent of banking, as receiver, to "proceed forthwith, with such action or actions in or out of the State of Iowa, and especially in the State of California, as are necessary to recover and collect said assessment *** so levied herein against said defendant Georgie Blake". The Iowa procedure differs only in mechanical details from our California procedure, but in its essence it is the same. In our state the superintendent of banks proceeds without the interposition of a court. The superintendent himself determines the necessity for an assessment and the amount thereof. He gives the requisite statutory notices, and goes to court only when default occurs in payment of the assessment. In Iowa the facts are presented to the court in an equity proceeding, and the court determines the amount of the assessment and levies the same. We therefore hold that under section 359 of the Code of Civil Procedure, the time limitation commenced to run when by decree of the Iowa court on September 18, 1936, the assessment against respondent herein was levied, and that it was by such levy that her liability was "created". Therefore the instant action was filed well within the statutory time. Such is not only the holding of our Supreme Court in Richardson v. Craig, supra, construing the California Bank Stockholders’ Liability Act, which, as heretofore stated, is similar to the Iowa act, but the same conclusion was arrived at by the Ninth Circuit Court of Appeals in Johnson v. Greene, 88 F.2d 683, which dealt with liability under the National Bank Act, which legislation is substantially the same as the liability established by both Iowa and California law.
What we have herein said disposes of respondent’s claim that the action of the bank in seeking the protection of the Iowa moratorium act entitled Senate File No. 111 conclusively proved its insolvency as of the date of such action on the part of the bank. This for the reason that it is not the insolvency of the corporation which "creates" the stockholder’s liability. As was said in Richardson v. Craig, supra [11 Cal.2d 131, 77 P.2d 1080], "the possibility of liability which confronted the bank stockholder when the bank failed became a certainty when the assessment was levied".
Respondent finally contends that the demurrer was properly sustained because the Iowa judgment obtained against respondent was void in California by reason of lack of jurisdiction over the person of respondent, who was personally served with process in California. In support of this claim respondent directs our attention to the provisions of section 9253 of the Iowa statute, which makes it necessary that all parties interested "be brought into court". It is conceded that personal service of process upon defendant Georgie Blake outside the state of Iowa has the same force and effect, and that the same jurisdiction is thereby acquired, as would be the case if the service were by publication. Such service, of course, would not clothe the Iowa court with jurisdiction to render a personal judgment against defendant Georgie Blake. The fallacy of respondent’s argument lies in the fact that the suit brought in California is not predicated upon the theory that the Iowa court had rendered a judgment for $10,400 against Georgie Blake which could be enforced in this state as a personal judgment. The assessment proceedings in the Iowa court did not establish a judgment against the stockholder, but merely established the basis upon which a subsequent suit to recover a money judgment against the stockholder might be predicated. The stockholder is not deprived of his property without due process of law through the assessment proceeding. He is free to assert any defense he has against being required to pay the assessment in the subsequent suit brought to enforce such payment. We have no hesitancy, therefore, in saying that personal service upon respondent in California, concededly equivalent to a valid service by publication, met the requirements necessary to confer jurisdiction upon the Iowa court, not to enter a personal judgment against her, but sufficient to justify such court in decreeing the necessity for and amount of the assessment as to her. Bates v. Cooley, 187 Wash. 489, 60 P.2d 23. The decree of assessment entered by the Iowa court must therefore be given full faith and credit in the courts of California. Chandler v. Peketz, 297 U.S. 609, 56 S.Ct. 602, 80 L.Ed. 881.
The judgment is reversed and the cause remanded with directions to the court below to overrule the demurrer.
We concur: YORK, P.J.; DORAN, J.