ON PETITION FOR REHEARING.
[March 28, 1933.] I do not approve the prevailing opinion in this case.
The important and major questions in the instant case were made to rest upon the reasoning and conclusions reached in the case ofGaiser v. Buck (1932), 203 Ind. 9; 179 N.E. 1. The complaint in that case proceeded upon the theory of a double liability of a stockholder in a bank of discount and deposit, under the mandate of the Constitution of Indiana, Art. XI, § 6, and also pursuant to the statute, § 3858 Burns 1926. The language of that opinion, when read in connection with the allegations of the complaint by a creditor to enforce payment by a shareholder of his proportion of the "debts or liabilities" of a bank of discount and deposit, leads to the inevitable result of declaring a "responsibility" of one hundred per cent under the Constitution, and a "liability" of one hundred per cent imposed by statute. The opinion in the instant case refers to the trust company statute (§ 3944 Burns 1926) which defines the shareholder's stock liability, the legal effect of which is the same as § 3858, supra, which applies to banks of discount and deposit. The rule announced in the case ofGaiser v. Buck is followed in the present case and its meaning clarified by the statement that the Constitution, § 6, Art. XI, is the authority for enforcing double liability for the payment of "debts or liabilities" of a bank or banking company, and the statute alone creates the liability and furnishes the remedy for the collection of an assessment for the restoration of the capital stock. The sole premise for declaring liability under *Page 670 the Constitution is the flat statement that § 6, Art. XI, is self-executing. I take the position, first, that § 6 is only self-executing when applied to the systems of banking described in the Constitution, or if § 2 may be so construed as not to be controlled by § 3 as to what the general banking law shall contain, then § 6 is an inhibition on the General Assembly limiting its power over shareholders of banks or banking companies engaged in a different system to the responsibility restricted by this section. Second, the General Assembly having passed a general banking law under which banks and trust companies have been established, and a new class of banks thereby authorized, we must look to the general law for determining the rights and liabilities of the shareholders in such new institutions and enforce them accordingly, unless they are violative of some provision of the Federal or State Constitutions.
In passing, I may say, the prevailing opinion seems to derive comfort and consider important the statement that "the subject of Art. XI is corporations." It will be observed that Art. XI consists of fourteen sections, twelve of which have to do with two systems of banking, and the other two sections, 13 and 14, together consisting of nearly five lines, are devoted to corporations other than banking. I will not take the space for further comment.
Art. XI, supra, includes all of the constitutional provisions in this state on the subject of banking. They express the powers as well as the inhibitions, within their limits, on the General Assembly when engaged in establishing and incorporating banks or banking companies. None of these provisions refer to banks ofdiscount and deposit, although the words "discount and deposit" then in use must have been known to the framers of the Constitution. They must have been cognizant of Art. X, Constitution of 1816, wherein the General Assembly *Page 671 was prohibited from establishing or incorporating "in this State, any bank or banking company, or moneyed institution, for the purpose of issuing bills of credit, or bills payable to order or bearer." "A state bank and branches," however, was permitted. This Article, under certain conditions and limitations, was practically readopted in Art. XI, §§ 1 and 3 of the new Constitution. In January, 1834 (Acts 1834, p. 12), a State Bank with ten branches was established. It was a bank of issue and circulation and was to continue in existence until January 1, 1859. A bank of this character was also permitted under the new Constitution. The last legislation on this subject, prior to the Constitutional Convention of 1851, was in January, 1849 (Acts 1849, p. 18), wherein it was provided that no branch banks were to be established after the expiration of the year 1851. The words "discount and deposit," as I am at present advised, came into use in February, 1837 (Local Laws, 1837, p. 169), when the General Assembly established or chartered the Evansville Trust Company, with authority to engage in many activities. It was "made an office of discount and deposit" with permission to receive cash and other valuable things upon deposit, make loans, discount promissory notes, etc., but it was denied the right to "engage in the business of banking otherwise than in the purchase and sale of bank stock," and providing that all deposits received by it "shall be refunded on demand in specie, or its equivalent," except special deposits. Again, in January, 1849 (Local Laws 1849, p. 439), the Ohio Insurance Company, located in the city of New Albany, was made "an office of discount and deposit," and given a wide business range, including the right to receive cash on deposit and to loan the same, but it was required to refund such deposits on demand in specie or its equivalent, except special deposits. In compliance with the *Page 672 Constitution of 1816, Art. X, supra, both of the above companies were forbidden to issue bills of credit or bills payable as a circulation medium.
With the foregoing state of facts present, with knowledge of the common law, the mischief to be remedied, and like matters, the Constitution was adopted February 10, 1851, and took effect November 1, 1851. Its provisions with reference to "banks or banking companies" were evidently, from the debates, the decided limit of constitutional control of that subject, and were deemed sufficient to meet contingencies that might thereafter arise justifying constitutional restraint. It will hardly be denied that self-executing provisions of Constitutions are the exception and not the rule. At that time the state had two systems of banking — one requiring collateral security for the redemption of its issue, and the other, a bank with branches without collateral security. Wright v. Defrees (1856), 8 Ind. 298, 305.
Conceding that Constitutions, Federal or State, are adopted for future uses based upon past experiences, then we must assume that our Constitution makers, in 1851, in the preparation of our present Constitution pertaining to the subject of banking, had in mind the banking history as also the banking systems in this State then in operation, as well as the service they were furnishing, their probable success or failure, as considerations for their final action. Their final conclusion on the subject, at present important, may be epitomized as follows: Sec. 1. The General Assembly is prohibited from incorporating a bank or banking company or moneyed institution of issue and circulation. Sec. 2. "No banks shall be established otherwise than under a general banking law, except as provided in the fourth section of this article." Sec. 3. "If the general assembly shall enact ageneral banking law, such law shall provide" that certain things shall be done and the procedure *Page 673 to be followed essential to a bank of issue. Aside from the general banking law to which the General Assembly is limited by §§ 2 and 3, it may charter a bank with branches (§ 4), which branches, under § 5, are made mutually responsible for each other's liabilities on all paper credit issued as money. Sec. 6. "The stockholders in every bank or banking company shall be individually responsible to an amount, over and above their stock, equal to their respective shares of stock, for all debts or liabilities of said bank or banking company." Sec. 10. "Every bank or banking company shall be required to cease all banking operations within twenty years from the time of its organization, and promptly thereafter to close its business," and Sec. 12 prohibits the State from becoming a "stockholder in any bank after the expiration of the present bank charter," or lending its credit to any banking enterprise.
In view of these constitutional limitations, the business of banking was confined to individual capital and control. The object of § 6, as evidenced by its relation to the sections which precede and follow it, becomes apparent. Only two systems of banking were constitutionally recognized, one under the general banking law and the other established by a General Assembly charter. Both were banks of issue and free to incur debts or liabilities in addition to those incurred to cash depositors. Sec. 6 was designed to protect the public having dealings with these authorized institutions. At that time there was no constitutional or statutory provision creating the so-called double liability of stockholders in a corporation. Sec. 6 was therefore in derogation of the common law, and it must be strictly construed. The principle governing this section is not unlike that applied to a statute in Clevenger v. Matthews (1906), 165 Ind. 689, 693, 76 N.E. 542, where it is said: "The right *Page 674 here bestowed by the legislature, being in derogation of the common law, to be enjoyed, the plaintiff must bring himself, without excuse, fully within the conditions upon which the right rests."
It will also be noticed that prior to 1851 the incorporated companies authorized to receive cash on deposit and to loan the same were not characterized as banks. In the language of the statute creating them "the same (name of the institution) is hereby made an office of discount and deposit." The business of these corporations was greatly diversified, and only a small per cent of which banks were permitted to do. While it may be said that they had some of the attributes of banks, yet they were not so classified or recognized.
The majority opinion notices the case of Greencastle Township,etc., v. Black (1854), 5 Ind. 557. Turning to page 570, the court, after considering the case of Newell v. The People (1852), 3 Selden 9, and the arguments in that case made as to the legal maxims bearing on the construction of written constitutions, said: "Thus it was urged in argument, and so held by the judges, that the discretion of Courts is more restricted in applying the rules of construction to a plan of government contained in a written constitution, than in the construction of statutes. And the reason is conclusive. Statutes are often hastily and unskillfully drawn, and thus need construction to make them sensible. But constitutions import the utmost discrimination in the use of language. `They are the permanent will of the people, intended for the guidance of posterity.'" The opinion continues with excerpts taken from Gibbons v. Ogden (1824), 9 Wheat. 1, and Purdy v. The People (1842), 4 Hill 384. From the Gibbons case: "The framers of the constitution, and the people who adopted it, must be understood to have employed words in their natural sense, and to have intended what they said," and, in the Purdy case, "If *Page 675 the courts venture to substitute for the clear language of the instrument, their own notions of what it should have been, or was intended to be, there will be an end of written constitutions."
The majority opinion, in my judgment, misinterprets that decision. It fails to take into account any of the rules for construing constitutions as well as statutes. It disregards the admonition that words of a constitution are carefully selected. It lifts § 6 out of Art. XI, thereby eliminating the effect of its continuity with other sections, and then proceeds to make it say what, in the opinion of this court, it should have said in order to apply it to institutions manifestly different from those in existence eighty years ago. It transgresses "a rule generally asserted that words or terms used in a constitution which is dependent upon a ratification by the people must be interpreted in a sense most obvious to the common understanding at the time of its adoption, in the belief that such was the sense and meaning designed." Bishop v. The State ex rel. Griner (1898),149 Ind. 223, 239, 48 N.E. 1038. Courts are only concerned in what the constitution says and not what it should have said. Immediately following the adoption of the Constitution, the public or people of the state, through legislative action, indirectly at least, determined the field covered by § 6,supra. They did not understand that § 6 said it was to apply to any financial engagement however dissimilar it might be to the banking systems then in use, simply because its name might include the word "bank" or words "banking company" or "trust company." Following the acceptance of the Constitution, the people acted promptly through their representatives constituting the General Assembly, and at its first session thereafter passed the act which was approved May 28, 1852, "regulating the business of general banking" (R.S. 1852, p. 152, § 25), and as a part *Page 676 of that law provided that "Every shareholder of any such association shall be liable in his individual capacity for any contract, debt or engagement of such association, to an amount over and above his stock equal to the amount of his shares of such stock." It must be assumed that the personnel composing the General Assembly at that time were well acquainted with the various provisions of the Constitution, which took effect only a few days prior to their meeting, as also the interpretation placed upon them by the people generally. With that knowledge fresh in their minds, they passed the above double liability statute, a useless thing to do had they thought the self-executing provision of § 6 of the Constitution would serve the same purpose.
As further evidence that the people of Indiana did not attribute to § 6 the meaning given to it by the late opinions of this court, the words "bank" and "banking company," or the phrase "bank or banking company," so frequently used in Art. XI, should not be overlooked. They are a feature in each section of the Article, and for aught to the contrary appearing, they must be given the same meaning, regardless of the connection in which they are found. Ryan v. State (1910), 174 Ind. 468; 92 N.E. 340. Their relative application to the particular section and the various sections of Art. XI evinces a purpose to make rules covering the systems of banking then in force, and sanctioned by §§ 3 and 4. As to all such banks or banking companies, § 6 would be self-executing, but I am not ready to concede that court decisions, resting alone upon statutes severally furnishing the procedure in case of the impairment of capital stock and the method and remedy to be pursued in case of individual liability of the stockholder for the payment of debts or liabilities (§§ 5205, 5151, U.S. Rev. Stats.; Delano v. Butler [1886],188 U.S. 634), are authority for holding constitutional provisions self-executing. I *Page 677 cannot agree that the construction placed upon § 6, supra, by the prevailing opinion is supported by decisions of courts in other jurisdictions holding constitutional provisions self-executing, when such decisions are based upon general provisions (Art. 12, § 2, Constitution of Kansas; Art. 12, § 11, Constitution, State of Washington) relative to the liability of stockholders in various corporations.
It will be observed that since 1852 the General Assembly has made many changes in the banking law of this State. In 1855 (Acts 1855, p. 23, § 25) the banking law of 1852 was repealed (Wilson v. Tesson [1859], 12 Ind. 285), but the identical section of the 1852 act pertaining to double liability of shareholders was readopted as a part of the new law. It must be kept in mind that banks of discount and deposit came into existence by virtue of the act of 1873, p. 21. Sec. 13 of this act provided that "The shareholders of each association formed under the provisions of this act, shall be held individually responsible for all contracts, debts and engagements of such association made, contracted or incurred during the time such persons were the owners of a portion of the stock therein, at the par value thereof, in addition to the amount invested in such shares." This statute was amended in 1895 (Acts 1895, p. 202) and again in 1919 (Acts 1919, p. 834; § 3858, supra), and was the law in force governing statutory liability of bank shareholders at the timeGaiser v. Buck and Rowley v. Pogue actions were commenced. This latter enactment, insofar as the same is at present important, provides that "The shareholders of each bank or association formed under the provisions of this act shall be individually liable to an assessment of not to exceed one hundred per centum (100%) of the par value of their respective shares of capital stock, . . ., same to be levied and collected as hereinafter provided when such assessment is required *Page 678 for the payment of the debts or liabilities of such bank (my italics) or association or to restore the capital stock thereof. . . . Whenever the capital stock of such bank or association is reduced by impairment or otherwise below the amount required by law or by its articles of association and by certificate of increase or decrease of capital stock, as the case may be, the board of directors shall, at a called meeting or any other meeting, the purpose of which shall have been stated in writingand notice duly served upon said directors (my italics) as hereinafter provided more than five (5) days prior to the holding of such meeting, make assessment upon each and every such owner or holder of such stock of such association for an equal amount on each and every share of such stock so owned or held and in an amount or to the extent of not exceeding one hundred per centum (100%) of such capital stock, as may be required for suchpurposes (my italics) and the board of directors of such association shall immediately, upon making such assessment, give notice thereof to each and every such stockholder, in writing, personally or by registered letter, at his last and usual place of residence, as disclosed by the books and records of such association, setting forth in such notice the amount of such assessment and the time given within which to pay such assessment, which time for such payment shall not be less than thirty (30) days nor more than sixty (60) days, and such board of directors failing to make and collect such assessment or failing to carry out the conditions of this act, the auditor of the State of Indiana (now bank commissioner) . . . (may do so), and for (on) failure or neglect of such auditor (bank commissioner) to carry out the provisions of this act, the attorney-general of the State of Indiana shall make such assessment as heretofore provided and collect the same as hereinafter provided or institute proceedings for the appointment of a *Page 679 receiver for such association and wind up its affairs as provided by law, and such assessment, when so made, shall constitute a lien on such stock to the amount and extent of any and all unpaid balance due on such assessment, including the necessary costs incurred as heretofore or hereinafter provided, and which lien shall attach and be binding until enforced, but not exceeding a period of two (2) years, and which assessment may be collected and such lien may be enforced by said association, either by an action at law or by a refusal to transfer such stock on the books of such association or by sale of such stock as hereinafter provided." Then follows the procedure for the sale of the stock in case that remedy is pursued, and the manner of disposing of the proceeds arising therefrom.
From the language used in this statute, the General Assembly's obvious intention may be drawn in support of conclusions material to the question here involved, that is to say: (1) individual liability of shareholders to an assessment of 100% may be levied when necessary to pay debts or liabilities or to restore capital stock; (2) in case of "such assessment" to pay debts or liabilities, the same procedure — "hereinafter provided" — shall be followed as that provided for in case an assessment is made to restore capital stock, the statute saying, "as may be required for such purposes"; (3) on failure of the board of directors to make and collect such assessment to pay debts or liabilities of such bank or association, the bank commissioner may do so; (4) "such assessment," referring to the assessment to meet individual liability, when made, "as may be required for such purposes," upon notice to such shareholders, will constitute a lien upon such shareholders' stock for a period not exceeding two years, and among the remedies provided by "which assessment may be collected" is "by an action at law." I take it that the General Assembly, *Page 680 by the use of the words "by an action at law," in view of the statute making the shareholders individually liable, meant what at common law is known as a personal action in a court of justice for the recovery of private or civil rights.
If § 6, Art. XI may be, by construction, declared self-executing as to banks of discount and deposit and trust companies engaged in a field of operation not regarded as the business of banking when our Constitution was adopted, then it should be remembered that there is no constitutional provision for its enforcement. The manner of enforcing liability was left entirely to the discretion of the General Assembly. I don't mean to say that § 6 could not be enforced for the omission suggested, but I do insist that the General Assembly, by the 1919 enactment, did provide the procedure for the enforcement of such stockholders' contingent liability, and the method of procedure thus adopted is absolutely controlling. In neither of the cases to which this opinion is directed was there an attempt to follow the procedure pointed out by the statute, and for that reason the complaint in each case was insufficient to state a cause of action. I must not be understood as saying that shareholders of a bank or trust company who voluntarily assess themselves for the purpose of restoring capital stock, or for the payment of debts or liabilities, will be protected from an assessment made in compliance with an order of either the bank commissioner or a court through its receiver. Nor am I unmindful that courts of other jurisdictions have held, in effect, that the General Assembly is inhibited from increasing a shareholder's restricted constitutional liability or lessening his responsibility fixed by a self-executing provision of the Constitution and necessary for the payment of debts or liabilities. As I have said, those decisions rest upon general and unrelated constitutional provisions as well *Page 681 as statutes, unlike ours, for the regulation and supervision of banks and trust companies. It is the application of the statutes for the enforcement of the assessment that gives rise to the debatable question. I take it that the intention of the General Assembly must govern. This being true, the plain wording of the statute making shareholders "individually liable to an assessment" of 100% of the par value of their capital stock "for the payment of the debts or liabilities . . . or to restore the capital stock thereof" means what it says, one assessment of 100% "as may be required for such purposes" — debts or liabilities or to restore capital stock. The General Assembly, by this statute, has also provided by what power and for what purpose "such assessment" may be made. The power "to levy such assessment," and the application of the proceeds arising therefrom, is primarily confided to the sound business judgment of the bank commissioner who is an uninterested party other than for the best interest of all concerned, and head of the department of banking, which, by the act of 1919, was made a department of the state government and given the exclusive administration of state banks. State exrel. v. Superior Court (1931), 202 Ind. 589, 596,177 N.E. 322.
The statement in the prevailing opinion that the statute, § 3858, refers to a bank as a going concern, and § 6, Art. XI, to a bank in liquidation, is the result of construction. Neither of these sections speak of a bank in liquidation.
I will notice one other question — action prematurely commenced. There was no showing that the bank commissioner had determined the individual liability of such shareholder and ordered the assessment as provided by the statute for the payment of debts and liabilities, which payment had been refused. To my way of thinking, the additional responsibility of stockholders in a *Page 682 bank or trust company is what may be regarded as a liability sub-added, and as some courts say, as surety, and others, as a guaranty for the payment of debts and liabilities. Supporting the theory that such liability is secondary, see Flynn v. AmericanBanking Trust Co. (1908), 104 Maine 141; Button v. O.S.Stapley Co. (1932), 9 P.2d ed.) (Ariz.) 1010; Cowden v.Williams (1927), 32 Ariz. 407; Wilson v. Book (1896),13 Wn. 676; Kirschler v. Wainwright (1917), 255 Pa. St. 525, 534; Muri v. Young (1926), 75 Mont. 213; Pyles v. Carney (1919), 85 W. Va. 159, 163; Marshall v. Sherman (1895),148 N.Y. 9, 20; Hirshfeld v. Bopp (1895), 145 N.Y. 84, 92;Toucey v. Bowen (1855), 1 Bissell 81; Hanson v.Donkersley (1877), 37 Mich. 184; Wright v. McCormack (1866), 17 Ohio 86, 95.
In conclusion, it is my opinion that the alleged self-executing provision of the Constitution does not apply to the facts disclosed in the case of Gaiser v. Buck, or in the instant case, but that the general banking law to which I have referred obtains to make the shareholders of banks of discount and deposit or trust companies engaged in banking activities individually liable to the par value of the stock held by them respectively for the payment of debts and liabilities thereof, when the assessment for that purpose is made in compliance with statutory authority.