I am unable to agree with the reasoning and conclusion in the opinion upon rehearing of the majority of the court. Owing to the importance of the question involved, as affecting both the state and the defendant, as well as marking the beginning of what I deem a new policy affecting corporations generally, especially the basic principles of the bank guaranty law, I deem it my duty to set forth my views in detail.
In preparing the original opinion I examined the authorities cited by both parties, and made an independent investigation of many others, and reached a conclusion which I believed was unquestionably the law. The opinion was submitted to the full court, and after due consideration was concurred in by all of the members thereof, with the exception of Justice Dunn, and his dissent was not sufficiently strong to induce him to write a dissenting opinion. Whatever doubt existed in my mind as to the soundness of the conclusion reached was removed when the older members of this court heartily concurred therein. The original opinion remained the law of this case for more than three months; and as no new ideas were advanced, and but little additional authority cited, I see no reason to change my views. If the conclusions reached and concurred in by the other justices were sound, and correct principles of law enunciated, they are still sound, and the law announced should remain the law of the case.
I am sure it is the desire of every member of this court to reach a proper conclusion and decide the law as it actually is, regardless of the consequences. We should follow the law as our *Page 240 sovereign guide; the law as announced upon the highest authority; the law as it is written, interpreted, and construed according to its plain letter and true spirit; the law as construed by broad common sense, as applied to the subject-matter under consideration.
The opinion on the petition for rehearing rests almost solely as a basis upon section 16 of the act of the Legislature of 1901, which we designate as the Trust Company Act, and which reads:
"Each stockholder of a company organized under this act shall be individually and personally liable for the debts of the corporation to the extent only of double the amount that is unpaid upon the stock held by him."
While section 37 of chapter 4 of the Session Laws of 1899 of the General Banking Act was considered, yet this whole chapter, regulating the banking business, was dismissed by the court by holding that said section was not broad enough to include stockholders. So far as material here the section reads:
"Any individual, firm, or corporation who shall receive money on deposit, whether on certificates or subject to check, shall be considered as doing a banking business and shall be amenable, to all of the provisions of this act," etc.
In my judgment it is immaterial, so far as the rights of the parties in this litigation are concerned, whether this section ever existed; to reach a proper and just conclusion the issues must be determined upon much broader grounds.
In addition to the fact that the opinion on rehearing is based almost exclusively on section 16 of the Trust Company Act, supra, the conclusion reached shows that the liability sought to be recovered in this case is considered as a penalty fixed by the statute and not one growing out of a contract. Although the writer of the opinion states that the liability is "contractual," yet the conclusion and reasoning show it was considered a penalty. The main authority relied upon in the case of National Park Bank v. *Page 241 Remsen, 158 U.S. 337, 15 Sup. Ct. 891, 39 L. Ed. 1008. In preparing the original opinion of the court my conclusion was that this case was inapplicable for two reasons: First, as set forth therein, that the highest court of New York had held that the liability sought to be recovered against the trustee was not a debt of the corporation, and therefore there could be no recovery against the trustee, as the corporation did not owe the debt. The second reason is that the case proceeded wholly on the theory that the liability sought to be recovered was a penalty, which the record in the case shows was correct. Mr. Justice Brewer, in concluding the opinion, uses the following language:
"And, in the absence of any controlling decisions, we are unwilling to hold that a provision of a general statute imposing a personal liability on trustees or other officers is incorporated into a special charter by a clause therein declaring that the corporation shall possess all the general powers and privileges and be subject to all the liabilities conferred and imposed upon corporations organized under such general act. Something more specific and direct is necessary to burden an officer of the corporation with a penalty for omission of duty."
It will be seen that this was clearly a penalty imposed for the omission of duty by an officer. But suppose the liability sought to be recovered in that case grew out of a contract, in which event it must be held that the defendant assented to the same, then it is clear that the decision and language of Justice Brewer would have been different. The court further proceeds upon the theory that the general laws applicable to the subject did not enter into and become a part of the charter or articles of incorporation under which the Columbia Bank Trust Company transacted its business; and, proceeding under a false premise, necessarily an erroneous conclusion was reached.
It is admitted both by the demurrer and in the brief of counsel for the defendant that the Columbia Bank Trust Company was a banking corporation and was at all times during its existence *Page 242 engaged in the general banking business, and we must assume that it enjoyed all the privileges, rights, and had all the protection of other state banking institutions. On page 47 of the brief of counsel for the defendant, we find this admission:
"I admit that the Columbia Bank Trust Company was a corporation doing a banking business, and in the ordinary sense of the term was a banking corporation."
The first point that naturally challenges the attention of the court, in view of this clear admission, is: Why should the Legislature make such an unwarranted and inequitable discrimination between banking corporations organized under the Trust Company Act and those organized under the General Banking Act? What was the controlling influence that brought about this legislation that the Legislature should make such an unreasonable discrimination, if in fact it was the intent of that body to relieve stockholders doing a general banking business, and who were members of a banking corporation organized under the Trust Company Act, from a liability imposed upon stockholders of other banking institutions doing exactly the same kind of banking business organized under the general banking law and receiving no more benefits or protection? What were the evils sought to be remedied — the blessings intended to be bestowed.
The only reason which has been suggested is that a trust company was required to have a much larger capital than a bank; yet, if the contention of the defendant be true, trust companies were permitted to transact all the business usually transacted by trust companies, and in addition thereto engage in a general banking business without any additional capital from other trust companies, and receive all the benefits and protection of the general banking law as well as the trust company law, without assuming any of the burdens or assenting to any of the liabilities imposed under the general banking law. This, in my opinion, is too arrow and technical a construction of the statute, and such an *Page 243 intent should not be attributed to the Legislature, if it can be avoided.
The opinion of the court overlooks and ignores certain well-established principles of law, which, if adhered to, greatly simplify the questions involved.
Section 47, art. 9, of the Constitution provides:
"The Legislature shall have the power to alter, amend, annul, revoke, or repeal any charter of any corporation or franchise now existing and subject to be altered, amended, annullel, revoked, or repealed at the time of the adoption of this Constitution, or any that may be hereafter created, whenever in its opinion it may be injurious to the citizens of this state, in such manner, however, that no injustice shall be done to the incorporators."
Section 1255 of Comp. Laws 1909, of the laws enacted by the Legislature of 1893, reads:
"Every grant of corporate power is subject to alteration, suspension, or repeal, in the discretion of the Legislature."
It is undebatable that under this reservation the Legislature could at will make any reasonable amendment to a charter or franchise of any corporation without the consent of the incorporators. It is also a well-settled principle of law that the provisions of every general law applicable to the business or subject-matter of any corporation enters into and becomes a part of the franchise or charter, and that the corporation and stockholders are controlled by and subject thereto. The liability sought to be recovered of the defendant in this case being contractual and not a penalty, section 37 of the General Banking Law of 1899 was broad enough to include both the corporation and the stockholders; or, in other words, I think it was the intent of the Legislature expressed in this section, considered in connection with other provisions, that, before a corporation or the incorporators should receive the benefits and protection of the General Banking Act, it was necessary *Page 244 that they should comply with all of the provisions of that act and, by accepting the benefits and protection thereof, should necessarily assent to the liabilities imposed. But waiving this point, and discussing the proposition as though this provision had never been a part of the general banking law. Prior to 1905 corporations organized under the Trust Company Act were not authorized to receive money on general deposit, but in the latter year this law was amended permitting same.
There are many authorities holding that a corporation receiving money on general deposit is, in the ordinary acceptance of the term, doing a banking business; however, it is unnecessary to waste any time in defining a bank or the banking business, in view of the, admission in this case that the Columbia Bank Trust Company was at all times engaged in the banking business, and in the usual meaning of the term was a banking corporation.
The amendment to the trust company law extended the charter of the Columbia Bank Trust Company, authorizing it to receive money on general deposit, which also had the effect of permitting a general banking business, upon condition, however, that it comply with and be subject to the provisions of the general banking law. Section 11 of the Banking Act of 1899 (section 252 of Wilson's Rev. Ann. Stat., 1903) provides:
"Stockholders of every bank organized under this act shall be additionally liable for the amount of stock held, and no more."
Section 17 of the Banking Act of 1899, (section 258 of Wilson's Rev. Ann. Stat., 1903) provides:
"It shall be unlawful for any individual, firm or corporation to transact a banking business, or to receive deposits except by this act authorized; any person violating any provision of this section, either individually or as an interested party in any association or corporation, shall be guilty of a misdemeanor, and on conviction thereof, shall be fined in a sum not less than three hundred or more than one thousand dollars, or by imprisonment *Page 245 in the county jail not less than thirty days nor more than one year, or by both such fine and imprisonment."
It will be seen under this section that not a dollar could the Columbia Bank Trust Company receive on general deposit without first complying with all of the provisions of the Banking Act, and it cannot be said that this section only applies to the corporation, and that it does not include the officers and stockholders.
Reading section 37 in connection with section 17, it is clear to my mind that it was never intended that a trust company should engage in the general banking business without it and its officers and stockholders being subject to the general banking law. But, waiving this point, still under the general law and the well-recognized principle of construction, when the Columbia Bank Trust Company, through its officers, filed its articles of incorporation and voluntarily engaged in the general banking business, every provision of the General Banking Act regulating the banking business was applicable to the Columbia Bank Trust Company and became a part of and must be read into its charter. There is but little diversity of opinion upon this proposition.
Quoting from volume 1 of Beach on Corporations, sec. 146, p. 271:
"So all existing statutes or charter provisions imposing additional liabilities upon stockholders for the corporate debts enter into and become a part of contracts between the company and its creditors, and the obligations thereby imposed are not to be impaired by a repeal of the statute or an amendment to the charter; such legislation operating only upon subsequently contracted debts. But when the liability imposed is in the nature of a penalty it may be abolished even in respect to claims arising prior to the enactment of the statute, for there can be no vested right to the enforcement of a penalty."
See Cook on Corporations, vol. 1, sec. 2; Breitung v.Lindauer, 37 Mich. 217; Gregory v. German Bank, 3 Colo. 332, 25 *Page 246 Am. Rep. 760; Fourth Nat. Bank v. Francklyn, 120 U.S. 747, 7 Sup. Ct. 757, 30 L. Ed. 825; Merchants' Ins. Co. v. Hill, 12 Mo. App. 148; Id., 86 Mo. 466.
Quoting from the case of Corry v. Baltimore, 196 U.S. 466, at page 477, 25 Sup. Ct. 297, at page 300, 49 L. Ed. 566, at page 562, it is said:
"Whilst it is true that the liability of the non-resident stockholders in the case before us, as enforced by the laws of Maryland, was not directly expressed in the charter of the corporation, it nevertheless existed in the general laws of the state at the time the corporation was created, and, be this as it may, certainly existed at the time of the extension of the charter. This is particularly the case since the Constitution of Maryland for many years prior to the extension of the charter of the transportation company contained the reserved right to alter, amend, and repeal. From all the foregoing, it resulted that the provisions of the general laws and of the Constitution of Maryland were as much a part of the charter as if expressly embodied therein."
Quoting from the case of Sherman v. Smith, 1 Black, 587, at page 593, 17 L. Ed. 163, at page 167:
"According to the fifteenth section, the association was authorized to establish a bank of discount, deposit, and circulation, 'upon the terms and conditions, and subject to the liabilities, prescribed in this act.' It was not competent for the association to organize their bank upon any other terms or conditions, or subject to any other liabilities, than those prescribed in the general charter. Now, the thirty-second section, which reserved to the Legislature the power to alter or repeal the act, by necessary construction, reserved the power to alter or repeal all or any one of these terms and conditions or rules of liability prescribed in the act. The articles of association are dependent upon, and become a part of, the law under which the bank was organized, and subject to alterations or repeal, the same as any other part of the general system."
In the case of Maine Central Rd. Co. v. State of Maine,96 U.S. 499, 24 L. Ed. 836, Mr. Justice Field, delivering the opinion, stated: *Page 247
"It follows that the limitation of the taxing power of the state to a portion of their net income prescribed in the charters of the old companies ceased upon their consolidation into the Maine Central. When this new company came into existence, it became subject to the provisions of the general law of 1831, which declared that any act of incorporation subsequently passed should at all times thereafter 'be liable to be amended, altered, or repealed,' etc."
From the statutes and the authorities quoted it is celar that every provision of the General Banking Act of 1899 applicable to the banking bosiness became a part of and entered into the charter of the Columbia Bank Trust Company.
On May 26, 1908, there was passed by the Legislature a general law which is properly termed a revising act or a substitution for all the laws governing the banking business in Oklahoma. A quotation from a few of these provisions applicable to this case will show that the defendant is equally liable under this law after it took effect. We must not lose sight of the fact that on the date this law took effect the Columbia Bank Trust Company under the admitted facts was engaged in the general banking business and was, in the usual acceptance of that term, a banking corporation, and so continued to do a general banking business. This law, so far as applicable to the business carried on by the Columbia Bank Trust Company, must be regarded as an amendment to its charter.
Some of the provisions of the Banking Act of May 26, 1908, applicable here, are as follows:
"And provided, further, that all banking institutions now organized as corporations doing business in this state are hereby permitted to continue said business as at present incorporated; but in all other respects their business, and the manner of conducting the same, and the operation of said bank, shall be carried on subject to the laws of this state, and in accordance therewith; And provided, further, that no bank, except those that have complied with or that may be organized under the laws of this state *Page 248 relating to trust companies, shall engage in any business other than as authorized by this act. And whenever it shall appear from the reports made for the preceding year by such banking corporation that the total deposits are more than ten times the amount of its paid up capital and surplus, deposits of other banks not included, the Bank Commissioner shall have power, and it shall be his duty, to require such bank within thirty days to increase its capital or surplus to conform to the provisions of this chapter, or shall cease to receive deposits."
This provision authorized banks organized under the Trust Company Act and those organized under the general banking law of Oklahoma to continue business on the same basis and subject to all the provisions of the banking law.
Section 320, Comp. Laws 1909, reads:
"There is hereby levied an assessment against the capital stock of each and every bank and trust company organized or existing under the laws of this state for the purpose of creating a depositors' guaranty fund equal to five per centum of its average daily deposits, during its continuance in business as a banking corporation."
This section also recognizes the right of banks organized under the trust company law to continue in business with the same rights and authority and be governed by the same laws as other banks organized thereunder.
Section 323 provides:
"In the event that the Bank Commissioner shall take possession of any bank or trust company which is subject to the provisions of this act, the depositors of said bank or trust company shall be paid in full, and when the cash available or that can be made immediately available of said bank or trust company is insufficient to discharge its obligations to the depositors, the said banking board shall draw from the depositors' guaranty fund and from additional assessments, if required, as provided in section 2 (320 of Comp. Laws 1909), the amount necessary to make up the deficiency, and the state shall have for the benefit of the depositors' *Page 249 guaranty fund a first lien upon the assets of said bank or trust company and all liabilities against the stockholders, officers, and directors of said bank or trust company and against all other persons, corporations, or firms such liabilities may be enforced by the state for the benefit of the depositors' guaranty fund."
Part of section 326 reads:
"After the Bank Commissioner shall" take charge, or "possession of any bank or trust, company which is subject to the provisions of this act," etc.
Section 327 provides:
"Any bank or trust company which has complied with the provisions of this act shall be eligible to act as a depository of state funds, of any fund under the control of the state or any officer thereof, upon compliance with the laws of this state relating to the deposit of public funds."
Section 286 provides:
"Shareholders of every bank organized under this act shall be additionally liable for the amount of stock owned, and no more."
All of these provisions were enacted by the Legislature and became amendments to and a part of the charter of the Columbia Bank Trust Company as fully and to the same extent as if they had been incorporated into the charter itself, and the bank, through its officers and stockholders, by accepting the profits and benefits and operating thereunder, necessarily accepted all of the burdens and assumed all the obligations, imposed by said law.
Section 285, Comp. Laws 1909, provides:
A "violation of any of the provisions of this act by the officers or directors of any bank organized or existing subject to the laws of this state shall be sufficient cause to subject the said bank to be closed and liquidated by the Bank Commissioner and for the annullment of its charter." *Page 250
Section 293, Comp. Laws 1909, of the provisions of the act of 1908, reads:
"It shall be unlawful for any individual, firm or corporation to receive money upon deposit or transact a banking business except as authorized by this act, or by the laws relating to trust companies. Any person violating any provisions of this section, either individually or as an interested party, in any association or corporation, shall be guilty of a misdemeanor and upon conviction thereof shall be fined in a sum not less than three hundred dollars nor more than one thousand dollars, or by imprisonment in the county jail not less than thirty days nor more than one year, or both such fine and imprisonment."
It will be noted that the last section is practically the same as section 17 of the General Banking Act of 1899,supra, but amended by adding the following words: "Or by the laws relating to trust companies."
Under section 17 of the 1899 Banking Act, supra, a trust company could not then receive money upon deposit without complying with all the provisions of the general banking law. By this amendment a trust company bank, under its charter and under the provisions of the law relating to trust companies, could receive money on deposit without complying with the provisions of the banking law, but could not engage in the banking business without complying with the provisions of this law; otherwise there would be no law governing the banking business carried on by a bank organized under the trust company law.
The following authorities sustain the proposition that the statutes quoted became a part of the charter of the Columbia Bank Trust Company without any formal action on the part of its officers:
Volume 2, Cook on Corporations, sec. 497, reads:
"A statute passed subsequent to the granting of a charter and increasing the liability of the stockholders on the stock for the *Page 251 debts already incurred is unconstitutional and void, unless the Legislature has reserved the right to alter or amend the charter. Under such a reservation the statute is legal and binding, although there are limits even to this reserved power, as will be shown hereafter" — citing Ochiltree v. RailroadCo., 21 Wall. 249, 22 L. Ed. 546; Smathers v. Western Bank,135 N.C. 410, 47 S.E. 893; Stieffel v. Tolhurst, 67 A.D. 521, 73 N.Y. Supp. 1034; McKee v. Chautauqua Assembly, 130 Fed. 536, 65 Cow. C. A. 8.
Section 497, same volume:
"A statutory liability may be applied to existing corporations if they continue to do business" — citingGamewell v. Fire Ins. Co., 116 Ky. 759, 76 S.W. 862; Bay StateGas Co. v. State, 4 Pennewill (Del.) 497, 56 A. 1120; Germerv. Triple State Co., 60 W. Va. 143, 54 S.E. 509.
Section 501:
"Under this reserved power, however, the Legislature, it is held, may impose a statutory liability upon stockholders after they have been incorporated and have gone into business under a charter which does not impose such liability. The exercise of this power by the Legislature in such a case is held to be only a repeal of part of the corporate franchise" — citing Williamsv. Hall, 108 Ky. 21, 55 S.W. 706; McGown v. McDonald, 111 Cal. 57, 42 P. 418, 52 Am. St. Rep. 149; Bissell v. Heath,98 Mich. 472, 57 N.W. 585; South Bay Co. v. Gray, 30 Me. 547;Sleeper v. Goodwin, 67 Wis. 577, 31 N.W. 335.
In the case of New York N New England R. R. Co. v. Bristol,151 U.S. 556, 14 Sup. Ct. 437, 38 L. Ed. 269, the court, speaking through Mr. Justice Fuller, states:
Where a statute provides that any corporation accepting its benefits thereby waives its exemptions from the power of the Legislature to amend its charter, the acceptance of the benefits of such a statute thereby works that change without any formal action on the part of the board of directors or stockholders.
In the case of L. N. R. R. Co. v. State, 154Ala. 156, 45 So. 296, it is stated: *Page 252
A stockholder may be estopped from objecting to an amendment by his express or implied acquiescence therein. Any acts indicating an acceptance by him of the amendment bind him and bar his suit. Acquiescence may sometime grow out of his silence or delay under circumstances that called on him to dissent if he so intended. 2 Cook on Corporations, secs. 503, 504, and a long list of cases cited.
Quoting from 10 Cyc. p. 215:
"The acceptance of an amendment to a charter need not be proved by formal corporate action, but may be established by evidence of users thereunder (that is to say, by action by the corporation which could not be taken properly but for the amendment); and it may be inferred from such acts or omissions as would raise a presumption of acceptance in the case of a natural person. A presumption of acceptance arises where the grant is beneficial to the corporation or to the shareholders. * * * Such an acceptance may be shown by showing the exercise by the corporation of the powers conferred by the amendment, by showing that the corporation has done particular corporate acts authorized by the amendment, but without which said acts would not have been authorized, by the fact that the officers of the corporation have exercised the powers conferred by it, or in general by any acts or omissions done or had by the corporation which are inconsistent with any hypothesis save that of an acceptance of the amendment." A long list of cases cited.
And again:
"Where the new grant is beneficial in its aspect, it is thought very little is required to find a presumption of acceptance."
"And this rule applies when the powers are conferred by a general law which is declared applicable to any one of a class of corporations that may accept its provisions." Goodin v.Evans, 18 Ohio St. 150; Kenton Co. v. Bank Lick Turnp. Co., 10 Bush. (Ky.) 529; U.S. Bank v. Dandridge, 12 Wheat. 64, 6 L. Ed. 552; People v. Law, 34 Barb. (N.Y.) 494; Beals v. Benjamin, 29 How Prac. (N.Y.) 101.
Quoting from the case of St. John v. Iowa Bldg. Loan Ass'n, 136 Iowa, 455, 113 N.W. 866, 15 L. R. A. (N. S.) 508, the court states: *Page 253
"Defendant had two courses open to it: One to quit business and settle up its affairs, and the other to comply with the law, amend its articles, and give to its members the benefit of the new law. It chose the latter course, and, having done so, it is in no position to say that the act under which we did these things is unconstitutional and void. Durfee v. Old Colony F. Co., 5 Allen [Mass.] 230; Greenwood v. Union Freight R.Co., 105 U.S. 13, 25 L. Ed. 961; Union P. R. Co. v. U.S.,99 U.S. 700, 25 L. Ed. 496. * * * Plaintiff expressed no dissent, but allowed the association to go ahead under the amended articles, incurring additional liabilities, paying their premiums, interest, and dues, and taking no steps to enforce their original contract. Under such circumstances, there was either an implied acceptance, or plaintiffs are estopped from denying an acceptance of the provisions of the new or amended articles. Chubb v. Upton, 95 U.S. 765, 24 L. Ed. 525; Danbury N. R. R. Co. v. Wilson, 22 Conn. 435; Sparrow v. Evansville O. R. R., 7 Ind. 369; Moreover, as the amendment in this case was beneficial to the members, assent will be presumed.Commonwealth ex rel. v. Cullen, 13 Pa. 133, 53 Am. Dec. 450;Bangor O. M. Co. v. Smith, 47 Me. 34. * * * Further claim is made that, as defendant's amended articles do not refer to existing contract, they were in no manner changed, and the new law does not apply. This position is also unsound, for it was the Legislature which made the change by the act in question, and, as defendant chose to accept the provisions of that act and to conduct its business thereunder, it cannot be heard to say that existing members may not take advantage of the law."
If, when the General Banking Law of 1908 took effect, the Columbia Bank Trust Company had surrendered its former charter and secured formal articles of incorporation under this law, one would question the liability of defendant in view of the admitted facts. The question arises: Under the law, was this formal act necessary? The officers and stockholders of this bank at the time this law went into effect were engaged in the general banking business as fully and to the same extent as other banking corporations in the state, which they could continue only by conforming to all of the provisions of this law, or could cease the banking business and confine its business solely to that *Page 254 permissible and governed by the Trust Company Law. Under the law, every provision of the General Banking Act applicable to banking entered into and became a part of the charter under which this bank was operating. In fact, the defendant's counsel in his oral argument conceded that the charter of the corporation must be read and construed in connection with the general laws upon the subject. This doctrine is clearly upheld in the case of Memphis Bank v. State of Tennessee,161 U.S. 186, 16 Sup. Ct. 468, 40 L. Ed. 664, for the court stated:
"The effect of a state law giving to a company, having in its charter the right to receive money in trust or otherwise, the right to do a banking business is to grant a new charter to the extent of granting banking powers, and the company, if it avails itself of the privileges mentioned in such law, takes them subject to the constitution and laws then in force."
The Columbia Bank Trust Company received all of the privileges, the protection, and the benefits under this law as fully as if it had secured and filed formal articles of incorporation thereunder, and why should it and its stockholders and officers not be held to have assumed the burdens and assented to the liabilities imposed therein? The difference is a mere matter of form; the substance is the same.
One of the reasons insisted upon by counsel for the defendant upon the petition for rehearing why section 37 of the General Banking Laws of 1899 did not apply to the stockholders is that this section only provides that the "corporation" shall be considered as doing a banking business and shall be amenable to all of the provisions of this act, and hence it was not broad enough to include stockholders; that the corporation is a legal entity, distinct and separate from the stockholders. And this contention is upheld and adopted in the opinion of the court. While, as a general rule, and for many purposes, the corporation is regarded as a separate legal entity from that of the stockholders, yet in recent years, since corporations have so multiplied and grown into *Page 255 every avenue and fiber of our commercial life, and often the incorporators who are the life and strength, and through whom the corporation only can and must act, have sought to take shelter behind the corporation and use it as a means of protection and a shield to perpetrate many wrongs and to hinder and defeat justice, courts have had a tendency to disregard this distinction and denominate it a mere legal fiction; and there is much reason for this position.
Speaking on this subject, Mr. Coon on Corporations, sec. 6, states:
"But there are occasions where the courts will ignore the corporate existence and will hold that its acts are the acts of its stockholders, and vice versa, the same as in a partnership. The New York Court of Appeals said: 'We have of late refused to be always and utterly trammeled by the logic derived from the corporate existence where it only serves to distort or hide the truth.' Anthony v. American Glucose Co., 146 N.Y. 407 [41 N.E. 23]."
Mr. Thompson in his work on Corporations, vol. 1, sec. 10, speaking of the separate entity of corporations from stockholders states:
"This separate existence is to a certain extent a legal fiction. Whenever necessary for the interest of the public or the protection or enforcement of the rights of the membership, courts will disregard this legal fiction and operate both upon the corporation and the persons composing it." See Morawatz on Private Corporations, sec. 227.
The Supreme Court of Ohio, in the case of State ex rel. v.Standard Oil Co., 49 Ohio St. 137, 30 N.E. 279, 15 L. R. A. 145, 34 Am. St. Rep. 541, recognized this distinction when it stated:
"So long as the proper use is made of the fiction that a corporation is an entity apart from its stockholders, it is harmless, and, because convenient, should not be called in question; but where it is urged to an end subversive of its policy, or such is the *Page 256 issue, the fiction must be ignored, and the question determined, whether the act in question, though done by shareholders (that is to say, by the persons united in one body), was done simply as individuals and with respect to their individual interests as shareholders, or was done ostensibly as such, but, as a matter of fact, to control the corporation and effect the transaction of its business in the same manner as if the act had been clothed with all the formalities of a corporate act."
And again the court continued:
Other courts have recognized this doctrine that the so-called legal entity of a corporation is artificial and that the corporation is a fictitious person, and will be so recognized and treated when necessary to the ends of justice. State v.Milwaukee R. R. Co., 45 Wis. 579. The New York Court of Appeals recognized this doctrine and said of it: "The abstract idea of a corporation, the legal entity, the impalpable and intangible creation of human thought, is itself a fiction, and has been appropriately described as a figure of speech" — citing Peoplev. North River Sugar Ref. Co., 121 N.Y. 582, 24 N.E. 834, 9 L. R. A. 33, 18 Am. St. Rep. 843; Anthony v. American Glucose Co.,146 N.Y. 407, 41 N.E. 23; Des Moines Gas Co. v. West, 50 Iowa, 16; Kellog v. Bank, 58 Kan. 43, 48 P. 587; 62 Am. St. Rep. 596; C. R. R. Co. v. Miller, 11 Mich. 166, 51 N.W. 981;Terhune v. Bank, 45 N.J. Eq. 344, 19 A. 377; Booth v. Bunce,33 N.Y. 139, 88 Am. Dec. 372; Brundred v. Rice, 49 Ohio St. 640, 32 N.E. 169, 34 Am. St. Rep. 589; First Nat. Bank v.Trebein, 59 Ohio St. 316, 52 N.E. 834; Web Co. v. Dienelt,133 Pa. 585, 19 A. 428, 19 Am. St. Rep. 663.
This court cannot afford to go on record announcing an unconditional rule to be applied under all circumstances, to the effect that a corporation is a legal entity, separate and distinct from its stockholders and officers, as the language in the opinion would import.
In this case it makes but little difference whether that rule is adhered to or not, so far as the rights of the parties are concerned, as they could and should be disposed of upon other grounds; yet it may well be considered a step towards putting in *Page 257 force a policy in this state which, if followed up, might in years to come result in much harm.
There is yet another well-recognized principle of law, somewhat related to those already referred to, which if adhered to must render the contention of the defendant untenable. It is settled beyond controversy that where there is a law authorizing a corporation to engage in the banking business, and parties organize themselves together, assume the status of a corporation, and hold themselves out to the world as such, those who contract and deal with them as such corporation, when sued on such contract, will be estopped from defending on the ground that they were not incorporated, or that it was irregularly organized; and likewise those holding themselves out as an organized corporation are estopped from defending or asserting that, as a matter of fact, they are not incorporated. It has been asserted that there is no contention of this kind in the case at bar, and therefore this argument and authority is inapplicable. It is contended, however that notwithstanding the officers and stockholders of the Columbia Bank Trust Company engaged in the banking business the same as other state banks, and conformed to all of the provisions of the banking law during the time it was in existence, yet, inasmuch as it was organized under the Trust Company Act, its stockholders cannot be held liable under the provisions relating to the double liability of stockholders, under the general banking law. In principle there is no reason why the law of estoppel should not apply to the stockholders in the latter instance as in the first.
It is clear from the statute that, notwithstanding the Columbia Bank Trust Company was organized under the Trust Company Act, yet it is equally clear that, under the law relating to banking, it was authorized to engage in the general banking business the same as other state banks. The officers and stockholders did actually conduct a general banking business during its existence, in conformity to the general banking laws. It and its *Page 258 officers and stockholders received the protection of this law and contributed to the support of the guaranty fund; they permitted the bank commissioner to pay its debts from the guaranty fund, which had been contributed by all the state banks, to the amount of at least $200,000 and how much more the record does not disclose. Having received the protection, the fruits, and benefits of this law, and having operated under same, when the state seeks to collect the liability provided for thereunder they should be estopped from asserting that they were not organized under the banking law, but were only liable as provided for in the Trust Company Act. The principle of estoppel has been enforced in every court against individuals assuming similar positions towards each other, and has been enforced by this court against individuals under the same state of facts, and why it should not be applied in the present case I am unable to discover. This doctrine is sound, just and equitable, and supported by both reason and authority.
In the case of Casey v. Galli, 94 U.S. 680, 24 L. Ed. 170, the Supreme Court of the United States laid down the rule as follows:
"There is another ground upon which both pleas must be held bad. Where a shareholder of a corporation is called upon to respond to a liability as such, and where a party has contracted with a corporation and is sued upon the contract, neither is permitted to deny the existence or the legal validity of such corporation. To hold otherwise would be contrary to the plainest principles of reason and of good faith, and involve a mockery of justice. Parties must take the consequences of the position they assume. They are estopped to deny the reality of the state of things which they have made * * * and upon which others have been led to rely. Sound ethics require that the apparent, in its effects and consequences, should be as if it were real, and the law properly so regards it." — citing Eaton v. Aspinwall, 19 N.Y. 119; Cooper v.Shaver, 41 Barb. (N.Y.) 151; Camp v. Byrne, 41 Mo. 525;Railroad v. Wilson, 22 Conn. 435; Ellis v. Schmock, 5 Bing. 521; McFarlan v. Ins. Co. 4 Denio (N.Y.) 392; Rector v. Lovett, 1 Hall (N.Y.) 213; Wolcott v. Dooley, 4 *Page 259 Allen (Mass.) 402; Eppes v. Railroad, 35 Ala. 33; Hamtramck v.Bank, 2 Mo. 169; Jones v. Type Foundry, 14 Ind. 89; Med. Int.Co. v. Harding, 11 Cush. (Mass.) 285; Hughes v. Bank, 5 Litt. (Ky.) 47; Nav. Co. v. Neal, 3 Hawks (N.C.) 520.
Quoting from the case of Aultman v. Waddle, 40 Kan. 201, 19 P. 734:
"Further than that, these stockholders are not in a position to impeach the irregularity of the organization of the corporation, or to deny their liability as stockholders herein. Having organized themselves as a corporation, transacted business, and held themselves out to the world as such corporation, they cannot, when proceeded against, * * * set up as a defense that the preliminary steps in the organization were irregular" — citing Thompson on Liability of Stockholders, sec. 887.
1 Thompson on the Liability of Stockholders, sec. __________:
"Where the corporation whose existence is to be proved operates so as to derive its franchise from the general law, proof of its existence for the ordinary purpose of litigation is sufficiently made by showing a general law under which it might exist, and by showing the exercise on its part of a franchise which it might properly have acquired by an organization under the general law."
Many more authorities might be cited, but it is unnecessary.
In principle, there is no reason why the rule of estoppel should not be applied to the officers and stockholders of the Columbia Bank Trust Company and the defendant estopped from defeating the liability sought to be recovered by reason of the acts of the officers and stockholders in this banking institution having conducted its banking business under the general law, of which this provision is a part.
The opinion of the court upon the petition for rehearing proceeds upon a wrong theory, overlooks the basic principles underlying the points involved, and the conclusion reached is erroneous.
The judgment of the trial court should be reversed. *Page 260