1. Where the charter of a bank contained a provision binding the
individual property of its stockholders for the ultimate redemption
of its bills in proportion to the number of shares held by them
respectively, the liability of the stockholders arises when the
bank refuses or ceases to redeem and is notoriously and
2. Such insolvency having occurred prior to June 1, 1865, an
action against a stockholder, not commenced by Jan. 1, 1870, is
barred by the statute of limitations of the State of Georgia of
March 16, 1869.
MR. JUSTICE HUNT delivered the opinion of the Court.
The plaintiff, a citizen of Georgia, brings his action to
recover from Mrs. Tubman the sum of $5,400. He alleges that he
holds the circulating notes of the Bank of Augusta, Ga., to that
amount, and that the defendant was, in June, 1862, and thenceforth,
a holder of three hundred and seven shares of the stock of that
bank, of the nominal value of $100 per share.
The Bank of Augusta was chartered Dec. 27, 1845, and its charter
contained the following provision:
"SEC. 3. That the individual property of the stockholders in
said bank shall be bound for the ultimate redemption of the bills
issued by said bank in proportion to the number of shares held by
them respectively, and, in case of a failure of said bank, all
transfers of stock made within six months prior to a failure of
Page 92 U. S. 157
on the part of said bank to redeem its liabilities in specie
when required shall be void, and the private property of the
individual or individuals transferring said stock shall be liable
for the redemption of the bills of said bank, as above stated."
The defendant pleaded the statute of limitations, alleging that
all of the banknotes sued on were issued by the Augusta bank prior
to June 1, 1865, and that, before that date, the bank had become
insolvent, unable to meet its liabilities, had voluntarily stopped
payment and ceased to do business, and so continued down to the
time of the plea. To this plea the plaintiff demurred. The circuit
court rendered judgment for the defendant on this plea, from which
the plaintiff brings his writ of error to this Court.
The statute of limitations of the State of Georgia was passed on
the 16th March, 1869, and is as follows, so far as this action is
"SEC. 3. And be it further enacted that all actions on bonds or
other instruments under seal, and all suits for the enforcement of
rights accruing to individuals or corporations under the statutes
or acts of incorporation, or in any way by operation of law, which
accrued prior to 1st June, 1865, not now barred, shall be brought
by 1st January, 1870, or the right of the party, plaintiff or
claimant, and all right of action for its enforcement, shall be
"SEC. 6. That all other actions on contracts, express or
implied, or upon any debt or liability whatsoever due the public,
or a corporation, or a private individual or individuals, which
accrued prior to the 1st June, 1865, and are not now barred, shall
be brought by 1st January, 1870, or both the right and the right of
action to enforce it shall be forever barred. All limitations
hereinbefore expressed shall apply as well to courts of equity as
courts of law, and the limitations shall take effect in all cases
mentioned in this act, whether the right of action had actually
accrued prior to the 1st June, 1865, or was then only inchoate and
imperfect, if the contract or liability was then in existence."
The plea demurred to alleges, and it is to be here assumed to be
true, that the banknotes held by the plaintiff had been issued by
the bank prior to June 1, 1865, the time specified in the
limitation act just quoted. It is further alleged and to be taken
as true that prior to that time the bank had become
Page 92 U. S. 158
notoriously insolvent, unable to meet its liabilities, and had
ceased to do business.
The question is whether the right of action now sought to be
enforced had, on or before June 1, 1865, by means of these facts,
accrued to the plaintiff. If it had, the present action is barred
by the statute, for it can hardly be contended that this is not one
of the actions embraced within the terms of the statute.
The plaintiff insists that no cause of action against the
stockholder existed on the 1st of June, 1865, and not until the
bank had made its assignment in 1866, its affairs had been
administered, and a demand of payment of the bills had been made
upon the bank, and had been refused. His fourth point is this:
"4th, that the liability of said defendant stockholder (had not
attached, and did not attach, under said charter) to pay said bank
bills before the assignment of said bank and the assets of said
bank had been administered and applied to payment of its debts, and
did not attach until demand for payment was made on said bank
bills, and therefore said action did not accrue before the first
day of June, 1865, but accrued since the assignment of said bank,
and the administration of the assets, establishing the ultimate
liability of said stockholders, and since the breach of contract to
pay on demand -- to-wit, on the day of commencement of this
In this point, the plaintiff alleges that the defendant's
liability did attach when the assets of the bank had been
administered and demand of payment made upon the bank, and that the
defendant was not liable until that time.
The facts upon which he claims the benefit of this legal result
he alleges in his complaint as follows:
"And your petitioner avers that the said president, directors,
and company of the Bank of Augusta afterwards -- to-wit, on the
sixth day of January, A.D. 1866 -- assigned and conveyed, for the
benefit of its creditors all of its property, both real and
personal, its choses in action, claims and demands of every kind
whatever for the payment of its debts, in redemption of its bills,
and so far as it could do so by its own act, and for all the
purposes of the payment of its debts in the enforcement of the
collection thereof, by suit or otherwise, and for the purpose of
its creation, has become
Page 92 U. S. 159
and is a dissolved corporation; that it has no place of
business, rendering a demand for payment of said bills and a suit
against said corporation wholly futile and useless."
There is in the complaint no allegation that payment of the
bills has ever been demanded of the bank, but presentment for
payment is excused on the ground that the condition of the bank
rendered a demand useless. There is no averment that a judgment had
been obtained against the bank, or that a suit had been commenced
upon the notes. It is excused on the ground that it had assigned
all of its property, and was substantially dissolved.
There is no averment that its assets had been administered and
applied to the payment of its debts in any other manner than that
it was insolvent, and had made an assignment of its property.
The plaintiff's allegations fall far short of what, in his
points, he insists is necessary to constitute a cause of
The concurrence of the facts alleged in the complaint and in the
manner indicated brings into operation, as he insists, the
provision of the charter that the individual property of the
defendant is bound for the redemption of the bills of the bank, and
authorizes the present suit against the defendant.
Upon the theory of the complaint before us, the ultimate
redemption, for which the property of the stockholder is by statute
made liable, is not that amount or proportion remaining after the
assets of the bank have been applied, so far as they will go, in
payment of the bills, for there is no averment that the trust under
the assignment has been closed or that a large proportion of the
amount due upon the bills will not be paid from that source. The
plaintiff, in his present suit, insists that the liability of the
defendant has accrued to him for the reasons, 1st, that the bank
did, in 1866, assign all of its property for the payment of its
debts; 2d, that thereby, for all purposes of the payment of its
debts, it has ceased to exist as a corporation; and 3d, that a
demand of payment and a suit against the bank for the recovery of
the bills would be useless. These facts create a liability, he
insists, which justify a suit against the defendant commenced in
1872. If they do not, he shows no cause of action in his
Page 92 U. S. 160
He has, however, demurred to the defendant's plea, which averred
that the same facts existed, and justified the commencement of a
suit on the first day of June, 1865; in other words, that his right
of action had accrued prior to June 1, 1865, and that the same is
barred by the statute quoted.
Thus, when the plaintiff avers that the bank made an assignment
of all its property, and thereby ceased to exist as a corporation,
the defendant makes an equivalent averment when he alleges that
before the first day of June, 1865, the bank had notoriously
stopped payment and ceased to transact business, and has
thenceforth so continued. When the plaintiff alleges that for the
reasons stated a demand upon the bank for payment, or a suit
against it, would be useless, the defendant makes an equivalent
averment when he alleges that on the first day of June, 1865, the
bank "had become notoriously insolvent, and unable to meet its
It seems to be quite clear that the same allegations made by the
plaintiff to show that he had a cause of action when he brought
this suit in 1872 are found in the plea he has demurred to,
alleging that the cause of action was in existence on the first day
of June, 1865. If his complaint is good, the plea is good; if the
plea is bad, the complaint is bad.
A demurrer seeks the first fault in pleading, and it is with the
plaintiff that the first error exists, if error there be.
We are of the opinion also that the facts alleged in the plea
are sufficient to make it a good plea -- in other words, that the
cause of action, so far as there is a separate and distinct right
of action in favor of each bill holder, was in force on the 1st of
We are of the opinion that it is not necessary first to exhaust
the assets of the bank by legal proceeding. The case is not so much
like that of the guaranty of the "collection" of a debt, where the
previous proceeding against the principal debtor is implied, as it
is like a guaranty of "payment," where resort may be had at once to
the guarantor without a previous proceeding against the principal.
Wadsworth v. Wadsworth,
11 Wend, 100; 17 id.
2 Pars. on Bills and Notes, pp. 142, 143.
A judgment and execution unsatisfied are evidence of
Page 92 U. S. 161
of inability to collect. They are, however, evidence only, and
the fact may be established as well by other evidence, among other
modes, by an assignment and continued suspension of business, or
other notorious indications. Camden v.
3 How. 533; Reynolds
12 Pet. 497; 2 Am.Lead.Cas.
We think the liability for the "ultimate redemption" of the
bills, if properly enforced, arises when the bank refuses or ceases
to redeem, and is notoriously and continuously insolvent.
Kimber v. Bank of Fulton,
49 Ga. 419, is a decision
directly in point by the Supreme Court of the State of Georgia.
The case of Pollard v.
20 Wall. 520, is an authority against the
maintenance of a separate action by one creditor who seeks to
obtain his entire debt to the possible exclusion of others
similarly situated. The proper proceeding is in equity, where all
the claims can be presented, all the liabilities of the
stockholders ascertained, and a just distribution made.