[192 U.S. 386, 387] This was a bill filed January 14, 1898, in the circuit court of the United States for the district of Maryland by the Brunswick Terminal Company and others, creditors of the Brunswick State Bank, chartered by the state of Georgia, which failed and was declared insolvent in May, 1893, to enforce, in behalf of its creditors, against the National Bank of Baltimore, a statutory liability equal to the par value of certain shares of stock in the state bank at one time standing in the name of the Baltimore bank.
The case was first heard on demurrer to a plea of the Maryland statute of limitations. The demurrer was overruled, the defense sustained, and the bill dismissed. 88 Fed. 607. On appeal to the circuit court of appeals for the fourth circuit, the decree was reversed and the cause remanded for further proceedings. 48 L. R. A. 625, 40 C. C. A. 22, 99 Fed. 635.
The cause was then heard on the pleadings, and an agreed statement of facts, the parties reserving the right to refer to any pertinent laws or statutes of Georgia, as follows:
The circuit court rendered a decree dismissing the bill. 112 Fed. 812.
An appeal to the circuit court of appeals was taken and that court certified to this court certain questions concerning which it desired instructions for the proper decision of the case. After full argument on the merits this court required the whole record and cause to be sent up for consideration.
Messrs. Henry W. Williams, C. P. Goodyear, W. E. Kay, H. Winslow Williams, and William S. Thomas, for appellants.
Messrs. Frank Gosnell, William L. Marbury, and Allan McLane for appellees.
Statement by Mr. Chief Justice Fuller:
Mr. Chief Justice Fuller delivered the opinion of the court:
The Baltimore bank was a national bank, and was not authorized to permanently invest any portion of its capital in the stock of other corporations, nor did it attempt to do so in this instance. The shares of stock of the Brunswick bank were merely accepted as collateral to a note discounted by the Baltimore bank. They stood, it is true, for a few weeks in the name of the Baltimore bank on the registry of the Brunswick bank, but they were then retransferred to the pledgeor as appeared on the registry, the note having been paid. Complainants became creditors long after the transaction, and were chargeable with notice so far as the Baltimore bank was con- [192 U.S. 386, 390] cerned. But notwithstanding the latter bank only held the shares as collateral, and had returned the pledge in due course on the payment of the loan, the contention is that the bank is under a statutory liability to these subsequent creditors, to the full amount of the shares it had temporarily held as security.
This additional liability of a stockholder depends on the terms of the statute creating it, and as it is in derogation of the common law, the statute cannot be extended beyond the words used.
As to stockholders of the Brunswick bank, such a liability was imposed by the 9th section of the charter, granted in 1889, which provided 'that said corporation shall be responsible to its creditors to the extent of its property and assets, and the stockholders, in addition thereto, shall be individually liable equally and ratably, and not one for another, as sureties to the creditors of such corporation for all contracts and debts of said corporation, to the extent of the amount of their stock therein, at the par value thereof, respectively, at the time the debt was created, in addition to the amount invested in such shares.'
Tested by the language of this section, the Baltimore bank was never under liability to these creditors. For if this national bank could have been regarded as the owner of these shares from August 25 to October 20, 1890, notwithstanding the actual facts and the limitations on its powers, it was not such stockholder, in fact or in appearance, at the time complainants' debts were created. It acquired the stock as pledgee, August 25, 1890, and the note to which it was collateral, having been paid, retransferred it October 20, 1890, the retransfer being regularly entered on the books of the bank. It was after this that the transactions commenced from which the indebtedness to complainants arose, and no element of estoppel was involved.
Nevertheless complainants contend that the Baltimore bank remained liable as a stockholder because it did not give notice of the retransfer under 1496 of the Georgia Code of 1882, reading as follows: [192 U.S. 386, 391] 'When a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability unless he receives a written notice from a creditor within six months after such transfer, of his intention to hold him liable; provided, he shall give notice once a month, for six months, of such transfer, immediately thereafter, in two newspapers in or nearest the place where such institution shall keep its principal office.'
This section was obviously not intended to impose a liability, but to exempt from an existing liability. If any debt had been created from August 25 to October 20, and perhaps as to any debt outstanding on August 25, the Baltimore bank, treating it as a stockholder from August 25 to October 20, might have been held liable because it did not give the statutory notice, but no such case is presented. On the face of this record it is immaterial whether there were any creditors during the six months after the retransfer to give or to receive notice or whether there was any indebtedness incurred prior to August 25, or during the period from August 25 to October 20, 1890
We concur in the views of the circuit court, as thus expressed by Morris, J.:
But it is said that the highest judicial tribunal of Georgia has decided otherwise, and that the circuit court and this court are bound to accept its interpretation of these statutory provisions. Without discussing the exceptions to that rule the inquiry in the first instance is as to what has been actually decided by the supreme court of Georgia in respect of the construction and application of those provisions in circumstances such as exist in this case. We are referred to the cases of Brobston v. Downing, 95 Ga. 505, 22 S. E. 277, decided May Term, 1894; and Chatham Bank v. Brobston, 99 Ga. 801, 27 S. E. 790, decided December Term, 1895, which involved the charter of the Brunswick State Bank.
The court delivered no opinion in Brobston v. Downing, but the first headnote by Bleckley, Ch. J., was in these words: 'With or without a clause in the charter restricting the personal statutory liability of stockholders to the [192 U.S. 386, 393] amount of stock at its par value at the time the debt in question was created, the liability exists and continues for any debt incurred by the corporation at any time until the stockholder who claims to be exempt by reason of having sold and transferred his stock before the debt was created has given notice of such sale, conformably to 1496 of the Code. Lumpkin, J., concurring dubitante.'
This does not in terms refer to stock which has been held as collateral, and retransferred on payment of the loan.
In the second case there was no opinion of the court, but the following headnotes appear:
These were followed by four other head-notes, which need not be set forth.
Of the three members of the court, Mr. Justice Lumpkin and Gober, J., filed an explanatory opinion, in which, after giving the 9th section of the Brunswick bank charter, and 1496 of the Code of 1882, they stated: [192 U.S. 386, 394] 'In the case of Brobston v. Downing, 95 Ga. 505, 22 S. E. 277, this court in effect decided that a stockholder in this bank was individually liable for his pro rata part of the debts of the corporation created before he became a stockholder, as well as for a like proportion of the indebtedness incurred by it while he held his stock. This decision controls the present cases. Upon a review of it, duly allowed, Chief Justice Simmons and Justice Lumpkin are of the opinion that it should be affirmed; and Judge Gober, being thus bound by it, of necessity concurs in the judgments now rendered. He is nevertheless of the opinion that in dealing with the cases reported in 95 Ga. Supra, the court, in so far as it held that a stockholder of this bank could be made liable for any debt created by it before he actually became a stockholder, misconstrued that portion of the bank's charter which is quoted above. If free to do so, he would hold that, under the language just referred to, the individual liability of a stockholder of this corporation is limited to such debts only as were contracted during the time be was an owner of stock and up to the date when, relatively to such liability, he legally severed his connection with the corporation. We all agree that any such owner, although he may have transferred his stock, would still be bound, under the above-cited section of the Code, for whatever liability the charter fixed upon him, unless he gave the notice provided for by that section.
As the reference was to the increase of the number of justices from three to six, which followed soon after, we think this explanation indicated that it was contemplated that 'the whole matter would be open for review,' before the new bench, if another case arose. The power to re- examine would exist, and these remarks were evidently intended to suggest that in the circumstances it might be properly exercised. And this, although the point of disagreement was confined to the question whether liability attached in respect of indebtedness created
Sections 1, 2, and 6 of the act of 1894 are as follows:
Sec. I. Be it enacted by the general assembly of the state of Georgia, etc., That from and after the passage of this act, whenever a stockholder in any bank or other corporation is individually liable under the charter, and shall transfer his stock, he shall be exempt from such liability by such transfer, unless such bank or other corporation shall fail within six months from the date of such transfer.
Sec. II. Be it further enacted, That the stockholders in whose name the capital stock stands upon the books of such bank or other corporation at the date of its failure shall be primarily liable to respond upon such individual liability; but upon proof made that any of said shareholders at the date of the failure are insolvent, recourse may be had against the person or persons from whom such insolvent shareholder received his stock, if within a period of six months prior to the date of the failure of such bank or other corporation.
Sec. VI. Be it further enacted, That all laws and parts of laws in conflict with this law be, and the same are, hereby repealed. [192 U.S. 386, 396] before the particular stockholders sought to be charged became such.
We conclude, therefore, that the questions before us have not been so definitively determined by the state court as to entitle such determination to be adopted and applied in this case. And this conclusion is confirmed by other considerations. The foregoing decisions were rendered in 1894 and 1895, and the Baltimore bank was not a party to the litigation and was never within the jurisdiction of the Georgia courts. The transaction with this bank occurred in 1890, and fully terminated October 20 of that year.
When it took the collateral shares in its own name, it seems to us that it had the right to assume that it ran no risk of incurring liability by virtue of the terms of the charter of the Brunswick bank for indebtedness created after, in the ordinary course of business, it ceased to hold the stock, and that it could not reasonably have supposed that 1496 of the Code of Georgia was intended arbitrarily to make all who might have held the stock of the Brunswick bank from time to time liable for every transaction during twenty years (the period of limitations), after they had ceased to be stockholders.
There had been no such ruling in respect of the statutory liability imposed by the charter of the Brunswick bank on its stockholders when the loan was made and paid, and the cases cited from Georgia reports prior to 1894, all of which we have carefully examined, dealt with different provisions, and involved different considerations.
The charter of the Brunswick bank was granted in 1889, at which time 1496 had been in force for many years, and its application could only extend to the liability imposed by the charter,-namely, liability for indebtedness created while the relation of stockholder existed. The words 'at the time the debt was created,' must be held to have been providently inserted as words of limitation, and cannot be rejected nor rendered inefficacious by the prior law, which only applied to the actual situation, and did not control it nor purport to do so. [192 U.S. 386, 397] The question is not whether all stockholders remained such if notice were not published, but whether the liability as stockholders, as to subsequent transactions, continued in spite of the termination of that relation, and that question is answered by the explicit terms of the 9th section of the charter.