Opinion
Rehearing Granted Jan. 6, 1941
Appeal from Superior Court, Los Angeles County; Robert W. Kenny, Judge.
Action by John D. Hospelhorn, receiver of the Baltimore Trust Company, a banking corporation of the State of Maryland, against Morton L. Newhoff and others, to collect assessment levied upon stockholders. From a judgment for defendants, entered after demurrer to complaint had been sustained without leave to amend, plaintiff appeals.
Reversed, with directions to overrule the demurrer.
COUNSEL
Catlin & Catlin and William E. Woodroof, all of Los Angeles, for appellant.
Kornblum & Austrian, of Los Angeles, for respondents.
OPINION
DORAN, Justice.
This is an appeal from a judgment dismissing the action herein, as against respondents, after a demurrer to the complaint was sustained without leave to amend.
The action is one brought by the receiver of The Baltimore Trust Company, a banking corporation of the state of Maryland, to collect an assessment levied under the laws of that state imposing a liability upon stockholders of banks incorporated therein, and was instituted against respondents in California, in the county of Los Angeles, on May 10, 1938.
The complaint alleges that the bank became insolvent on March 4, 1933; that a receiver was appointed January 5, 1935; that on November 13, 1935, said receiver was ordered by the Maryland court to collect the statutory liability of the stockholders of the bank, and that on said date the court also decreed the amount of the assessment and the necessity therefor to meet the stockholders’ liability. Attached as an exhibit to the complaint is a copy of the order of the court fixing the amount of stockholders’ liability and directing the collection thereof. Also alleged is the ownership of stock by respondents at and after the date of insolvency, the amount of the assessment thereon, demand therefor and the failure and refusal of respondents to pay the same or any part thereof.
To this complaint respondents demurred upon the following grounds: (1) That it did not state facts sufficient to constitute a cause of action; (2) that the cause of action was barred by section 359 of the Code of Civil Procedure of the state of California; (3) that said complaint was uncertain in that: (a) It could not be determined from the allegations whether the order made November 13, 1935, was the first adjudication of stockholders’ liability, and whether said order created said liability or was merely to collect an assessment under a liability previously created; (b) it could not be ascertained from said allegations whether the order appointing the receiver of the bank purported to constitute an order directing said receiver to collect the said statutory liability; (c) it could not be ascertained from said allegations what order created said liability or the date when said act or order was performed or made. The court below did not state the grounds upon which the demurrer was sustained.
The sole question raised by appellant is stated to be whether the cause of action herein based on the Bank Stockholders’ Liability Act of Maryland is barred by the provisions of section 359 of the Code of Civil Procedure of the state of California. It should be pointed out that upon an appeal from a judgment entered after the sustaining of a demurrer the only question before the court is whether the demurrer was properly sustained. Moreover, to successfully raise the bar of a limitation of action by demurrer the facts which constitute the bar must affirmatively appear on the face of the complaint. Therefore, as to such a bar in the instant case, this court is merely concerned with the question of whether it appears from the complaint that the cause of action as stated falls within the limitation provided by section 359 of the Code of Civil Procedure, which section provides that actions such as the instant one must be brought within three years after the liability was created.
It is only necessary therefore to decide whether the complaint here shows affirmatively that the stockholders’ liability sought to be enforced was created more than three years before the commencement of the present action, as far as that particular ground of demurrer is concerned.
The liability of the stockholders of the bank to pay an assessment in the instant case is created under the laws of the state of Maryland, and the law of that state must govern in a determination of when such a liability was created. So far as is here pertinent, section 97, article 11, of the Maryland Annotated Code reads: "Stockholders of every bank and trust company shall be held individually responsible, equally and ratably, and not one for another, for all contracts, debts and engagements of every such corporation, to the extent of the amount of their stock therein, at the par value thereof, in addition to the amount invested in such stock. *** and the liability of such stockholders shall be an asset of the corporation for the benefit ratably of all the depositors and creditors of any such corporation, if necessary to pay the debts of such corporation, and shall be enforceable only by appropriate proceedings by a receiver, assignee or trustee of such corporation acting under the orders of a court of competent jurisdiction." (Italics added.)
In a Maryland case, concerned with the identical insolvency proceedings which form the basis for the instant action, it has been clearly held that the liability of stockholders under the above-quoted provisions is conditional, contingent and unenforceable until it is needed to pay the debts of the corporation, and that the necessity for imposing and enforcing the liability is a justiciable fact to be ascertained by a court, and that the liability may be enforced "whenever it is judicially established that it is needed to pay the debts of the corporation". Robinson v. Hospelhorn, 169 Md. 117, 179 A. 515, 525, 184 A. 903, 103 A.L.R. 740. Therefore, it is reasonably plain under Maryland law that the liability of stockholders of a bank for an assessment is "created" whenever it has been judicially determined that it is necessary to pay the debts of the corporation.
The complaint herein does not reveal any such judicial determination prior to November 13, 1935, unless it can be held that the appointment of a receiver, as alleged, constitutes such a determination. But it is clear from a reading of the decision in Robinson v. Hospelhorn, supra, that the mere appointment of a receiver cannot be construed as a judicial determination of the necessity of enforcing stockholders’ liability. In comparing another statute, which did not contain the same qualifications, with the one quoted above, the court said, at page 522 of 179 A.: "There the contingency was insolvency; here it is that the liability is needed to pay debts." The Maryland court obviously draws a distinction between mere insolvency and a state of insolvency wherein it is necessary to enforce a statutory liability of stockholders in order to pay debts. Since the complaint in question does not allege any facts which reveal a judicial determination of the necessity of stockholders’ liability to pay debts prior to November 13, 1935, it follows that the bar of the limitation under section 359, Code of Civil Procedure, was not properly raised by demurrer, the facts constituting such a bar not appearing on the face of the complaint.
Undisputed statements contained in the briefs indicate that the necessity of enforcing the stockholders’ liability here in question was adjudicated prior to the date alleged in the complaint and more than three years before the commencement of the instant action. The precise question regarding the same liability sought here to be enforced against respondents was recently before the District Court of Appeal for the Fourth Appellate District in the case of Hospelhorn v. Wanda V. Van Dusen, Cal.App., 104 P.2d 888, 892, wherein it was held that the action was barred by the provisions of section 359, Code of Civil Procedure. However, in the Van Dusen case, supra, such a bar was raised as an affirmative defense and not by demurrer as here, and the question was properly before the court for decision.
There is nothing in the Van Dusen case in conflict with the reasoning herein. In the latter case the court, in considering the question as to when the statute of limitations, viz., section 359, Code of Civil Procedure, commenced to run, held it to be immaterial, under the facts presented, whether the liability arose on the date the bank was taken under custody or at the time the Maryland court made the order requiring the collection, because "under either interpretation more than three years" had expired prior to the filing of the action there considered.
Appellant offers no argument as to the other grounds on which the demurrer was interposed and the same are not covered by the briefs. An examination of the complaint, however, reveals that it meets the test of the sufficiency of allegations in an action of this nature, setting forth as it does the insolvency of the bank, the appointment of a receiver and the judicial determination of the stockholders’ liability and the necessity therefor, together with the necessary allegations as to ownership of stock, amount of assessment, demand and refusal. See, Bancroft’s Code Pleading, sec. 997, and Ten-Year Sup. thereto.
While it is true that some uncertainty may exist in an allegation that an assessment "was necessary to meet the statutory liability", an allegation that the assessment was necessary to pay the debts of the bank being more exact, it cannot be said that any such uncertainty could mislead the defendants and render the complaint subject to demurrer on that ground. The other grounds of uncertainty virtually amount to an objection by defendants that they are unable to ascertain from the complaint whether the cause of action is barred by limitation of time. It is clear from the allegations of the complaint that plaintiff founds his action upon an order of a court made November 13, 1935. If, as a matter of law, the time to commence the action began to run from the date of some other order or adjudication, that was a question to be raised by an affirmative defense. It was not incumbent upon plaintiff to reveal that this cause of action was barred, and he could not mislead defendants by the allegations he has made. It follows, therefore, that the court erred in sustaining defendants’ demurrer.
For the foregoing reasons the judgment is reversed and the court below is directed to overrule the demurrer.
We concur: YORK, P.J.; WHITE, J.