Where by the charter of a bank, stockholders are "bound
respectively for all the debts of the bank
in proportion
to their stock holden therein," one creditor cannot sue a
stockholder at law (there being numerous other creditors) to
recover the full amount of his debt, without regard to those other
creditors or to the ability of the other stockholders to respond to
their obligations under the charter, and so appropriate to himself
the entire benefit of that stockholder's security and exclude all
other creditors from it. He should proceed in equity, where the
"proportion can be ascertained upon an account taken of debts and
stock, and a
pro rata distribution of the debts among the
several stockholders."
Page 87 U. S. 521
Especially is this so when other parts of the charter indicate
plainly that the exercise of the powers of a court of chancery
which could bring before it all the necessary parties, and adjust
all their rights, was, in a case of insolvency, contemplated.
By an act passed in 1854, the Legislature of Alabama chartered a
bank to be called the Central Bank of Alabama. The capital was
$900,000, divided into shares of $100 each.
The charter made certain provisions in case of the insolvency of
the bank, or of its suspension of payments in specie. They were
thus:
"SECTION 16 (ARTICLE 2). Individual stockholders, having shares
in said bank, shall be bound respectively for all the debts of the
bank in proportion to their stock holden therein."
"SECTION 20. If any debt due from said bank for an amount
exceeding $100, shall remain unpaid for more than ten days after
proper demand, the holder of such debt may file a bill in the
chancery court, of the county . . . in which said bank may be
located, for the settlement of all the debt of the bank, if he
elect so to do, and may, on proof &c., pray an injunction to
restrain the said bank and its officers from paying out, or in any
way transferring or delivering to any person any money or assets of
said bank, or incurring any obligation or debt until such order be
vacated or modified; and if such chancellor shall be of opinion
that the debt is justly due, and that the bank has no just defense
against the demand, and if it shall appear expedient and necessary,
upon the proof presented, in order to prevent fraud and injustice,
he shall grant an order for such injunction, and the said
chancellor shall then proceed to inquire whether the said bank be
solvent or not; and if it shall appear that the said bank is not
clearly solvent, then he may make an order declaring the same to be
insolvent, and requiring its affairs to be wound up and settled;
and, further, if, in his opinion, the safety of the creditors shall
require it, such chancellor may appoint a receiver to take charge
of all the assets of the bank, and to close and settle its
affairs."
"SECTION 21. In case the said bank be found insolvent, and
settlement of its affairs be ordered, the same shall be done
upon
Page 87 U. S. 522
bill filed in said chancery court, under the orders of the court
and rules of chancery, and full distribution shall be made of the
assets according to the rights of all parties; but the holders of
bank notes and obligations issued by the bank for circulation as
money shall be first called in and paid, and shall have priority
over debts due from the bank; and after the assets of the bank are
exhausted, if they be not sufficient to pay all debts and
liabilities, a further call shall be made on the shareholders in
the bank for further payment
of capital, over and above
the sum of $100, of an amount equal to the deficiency, which shall
be apportioned among all the shares of stock; and an order shall be
made by the court for the payment of each shareholder of the sum or
proportion due on his shares of stock; and each shareholder shall
pay the sum so assessed to him severally in proportion to his
stock, which shall be collected by the receiver and applied."
"SECTION 22. The summary remedy in this act, specially given for
settling up and closing the affairs of said bank, shall apply to
the case of insolvency, but shall not be allowed in case of a
suspension only by the bank of specie payment, so long as
suspension shall be sanctioned by the General Assembly; but nothing
in this act shall be
construed so as to deprive a creditor of
said bank from his right to suit in any other appropriate mode of
proceeding, or to prevent the General Assembly from hereafter
regulating, by a general law in relation to banking institutions,
the mode of enforcing and satisfying the rights of creditors of
said bank,
provided, any bill-holder shall also have the
right to move in any court having jurisdiction, or before any
justice of the peace in the city or county in which said bank is
located, as the case may require, for the collection of any bill
the payment of which may be refused."
Of the capital authorized by the charter a certain Pollard took
$20,000, or two hundred shares. In 1865, the bank became insolvent,
and in 1869 had ceased to do any business, having about $700,000 of
bills outstanding and unpaid. In 1872, one Bailey, who had $17,000
of these bills, sued Pollard,
at law, as the owner of two
hundred shares of stock, assuming that he could thus sue him under
the above-quoted section sixteen (article two) of the charter of
the bank, which prescribes, as the reader will remember, "that the
stockholders
Page 87 U. S. 523
shall be respectively bound for all of the debts of the bank in
proportion to their stock holden therein." The declaration
contained averments that the bank had ceased to do business since
1868, and that no demand had been made of the bank for the payment
of the bills, and that a demand had been made of the defendant, who
was a stockholder of the bank during the period the plaintiff had
been the owner. But there was no reference to the other creditors
or the ability of the other stockholders to pay any proportion of
the claim.
The defendant demurred to the declaration, but the court
overruled the demurrer and gave judgment for the plaintiff. From
that judgment the defendant brought the case here.
Page 87 U. S. 524
THE CHIEF JUSTICE delivered the opinion of the Court.
The right of Bailey to maintain his action against Pollard
depends upon the construction to be given to the charter of the
bank. Pollard does not deny his liability to the creditors, but
insists that it cannot be enforced in this manner.
He is one of the stockholders of the bank and Bailey one of its
creditors. Stockholders are, by article two, section sixteen of the
charter, "bound respectively for all the debts of the bank in
proportion to their stock holden therein." The action below was at
law, by one creditor against one stockholder, to recover the full
amount of his debt without regard to the other creditors or the
ability of the other stockholders to respond to their obligations
under the charter. The stock of Pollard, at its par value, exceeds
in amount the debt owing to Bailey, but it is admitted that the
other indebtedness of the bank is very large, and nearly, if not
quite, equal to the entire capital.
Each stockholder is bound for the debts in proportion to his
stock. His liability is not limited to the par value of his stock,
neither is he bound absolutely for the payment of
Page 87 U. S. 525
the full amount of that. He must pay a sum which shall bear the
same proportion to the whole indebtedness that his stock bears to
the whole capital, and is not required to pay more. For the
purposes of this case, it is not necessary to decide what effect
the insolvency of any of the stockholders would have upon the
liability of such as are solvent. It is certain that no stockholder
is liable for more than
his proportion of the debts. This
proportion can only be ascertained upon an account of the debts and
stock and a
pro rata distribution of the indebtedness
among the several stockholders. The proper action, therefore, to
enforce the liability is one in which such an account can be stated
and distribution made. Such an action calls specially for the
exercise of the powers of a court of equity, which can bring before
it all the necessary parties and adjust all their rights. Every
stockholder, when called upon to perform his obligations, has the
right to require that the extent thereof shall then be determined
once for all, as well that which he is under to his associate
stockholders as that to the creditors. Otherwise he might be made
to respond to the creditors under one rule and obtain his relief
from the other stockholders under another. The provision,
therefore, for a proportionate liability is equivalent to a
provision for an appropriate form of equitable action to enforce
it. The case is different from what it would be if the charter had
provided generally that all stockholders should be individually
liable for the payment of the debts. The cases from New York cited
upon the argument, and which are supposed to be in opposition to
the view we have taken, involved the consideration of such a
liability.
But when section sixteen is taken in connection with sections
twenty and twenty-one, it is very apparent that it was the
intention of the legislature only to charge the stockholders upon a
proper account, and in the manner therein provided for. The
intention of the legislature, when properly ascertained, must
govern in the construction of every statute. For such purpose the
whole statute must be examined. Single sentences and single
provisions are not to be
Page 87 U. S. 526
selected and construed by themselves, but the whole must be
taken together.
As has been seen, section sixteen created the liability, but
provided no remedy for its enforcement except by implication.
Section twenty, however, provides in substance that if any debt due
from the bank, exceeding $100 in amount, shall remain unpaid for
more than ten days after proper demand, the holder may file a bill
in the proper chancery court for the settlement of all the debts of
the bank, if he elects so to do, and may, on certain specified
proof, pray an injunction to restrain the bank and its officers
from paying out, or in any manner transferring or delivering to any
person, any money or assets of the bank, or incurring any
obligations until the order is vacated or modified. It further
provides that, upon certain findings, the chancellor shall proceed
to inquire whether the bank is solvent or not; and if, upon such
inquiry, he shall find that it is not clearly solvent, he may make
an order declaring the same to be insolvent and require its affairs
to be wound up and settled, and, under certain circumstances,
appoint a receiver for that purpose. Section twenty-one provides
that if the bank be found insolvent, and settlement of its affairs
ordered, the same shall be done upon bill filed in said chancery
court under the orders of the court and the rules in chancery, and
that full distribution shall be made of the assets according to the
rights of all parties, bill-holders having priority over other
debts due from the bank. After the assets were exhausted, if they
were not sufficient to pay all debts and liabilities, a further
call was directed upon the shareholders for further payment of
capital to an amount equal to the deficiency, which was to be
apportioned among all the shares of stock, and an order made for
the payment by each shareholder of the sum or proportion of his
shares. This apportioned call the receiver was required to collect
and apply.
The individual liability of stockholders in a corporation for
the payment of its debts is always a creature of statute. At common
law it does not exist. The statute which creates
Page 87 U. S. 527
it may also declare the purposes of its creation, and provide
for the manner of its enforcement.
After an examination of the several sections of this charter, it
cannot for a moment be doubted that it was not only the intention
to provide for a proportionate liability, but for a
pro
rata distribution of the fund arising therefrom among the
different creditors, according to their several priorities. Every
provision is entirely inconsistent with the idea that one creditor
could, by an individual suit, appropriate to himself the entire
benefit of the security, and exclude all others. A common fund was
created for the common benefit, to be collected and distributed by
the receiver, who was made the common agent of all. There was no
liability except for the deficiency. That was to be apportioned and
collected for the common benefit.
It was not only to be apportioned and collected, but the mode of
apportionment and the manner of collection were specially provided
for. The liability and the remedy were created by the same statute.
This being so, the remedy provided is exclusive of all others. A
general liability created by statute without a remedy may be
enforced by an appropriate common law action. But where the
provision for the liability is coupled with a provision for a
special remedy, that remedy, and that alone, must be employed.
It follows as a necessary consequence from these premises that
the action of Bailey cannot be maintained, and that the demurrer to
his declaration should have been sustained.
But it is claimed that by section twenty-two, Bailey, as a
bill-holder, had the right to move in the proper court for the
collection of any bill the payment of which had been refused. This
clearly refers to an enforcement of the liability of the bank
itself and not to that of the stockholders.
Judgment reversed and the cause remanded with instructions
to sustain the demurrer to the declaration, and give judgment
accordingly.
