C. H. BOLSTA, RECEIVER, FIRST STATE BANK OF CORRELL, v. OTTO BREMER

Minnesota Supreme Court1942-04-10No. No. 33,105

212 Minn. 269

Summary · law.co

Holding. The judgment is affirmed. The trial court properly dismissed the receiver's action because the earlier stockholder assessment proceeding had jurisdiction to finally determine whether the creditor's claim was satisfied, and that determination became res judicata and binding on the present parties.

A bank receiver brought suit to recover assets allegedly transferred fraudulently to the bank's sole stockholder. The trial court dismissed the action, finding that in an earlier stockholder assessment proceeding, the question of whether the creditor had a valid claim against the bank had been fully litigated and resolved against the creditor. The receiver appealed, arguing that the assessment proceeding lacked jurisdiction to make a final determination on the creditor's claim and that the appellate court's prior affirmance did not address that issue.

The court held that the assessment proceeding did have authority to decide whether the creditor had an outstanding claim, because this question directly related to the propriety and necessity of assessing stockholder liability—if no creditor claims remained, there would be no basis to enforce such liability. The court rejected the receiver's argument that the appellate opinion's silence on the creditor claim issue prevented res judicata from applying. A judgment remains binding on the parties regardless of which findings the appellate opinion discusses; once affirmed, all matters determined by the trial court judgment become conclusive until reversed.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

Whether an assessment proceeding has jurisdiction to finally determine whether a creditor's claim against the bank has been satisfied
Whether res judicata applies to trial court findings when an appellate opinion affirms the judgment but discusses only certain issues
Whether stockholder liability can be assessed when no unpaid creditor claims exist

Procedural posture

The receiver appealed from a trial court judgment dismissing the action with prejudice on res judicata grounds based on findings made in a prior stockholder assessment proceeding.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion · public domain

majority opinion

Gallagher, Chiee Justice.

This action was brought by C. H. Bolsta as receiver of the First State Bank of Correll, Minnesota, for the benefit of G. F. Cash-man, the only creditor of the bank, against Otto Bremer, the sole stockholder, to recover assets of the bank alleged to have been wrongfully transferred to defendant in fraud of creditors. From a judgment dismissing the action with prejudice, plaintiff appeals.

The judgment of dismissal was based upon a finding by the trial court that in a proceeding instituted by Oashman under Mason St. 1927, § 8025, et seq., to obtain an assessment against stockholders of the bank, “the issue as to whether or not said Cashman had an unpaid claim as a creditor against said bank was fully litigated and finally determined against said Cashman,” and that “said Cashman and the plaintiff herein are now precluded from litigating said matter again.”

In the assessment proceeding, the present defendant intervened, contending (1) that the statute of limitations had run against the enforcement of stockholders’ liability; and (2) that the receiver was entitled to an equitable setoff against Cashman exceeding the latter’s claim against the bank’s estate. Upon both issues the trial court found for defendant and ordered the assessment proceeding dismissed. Cashman appealed to this court from an order denying his motion for a new trial, and the order was affirmed. However, the court discussed only the question whether the statute of limitations had run, saying (In re Dissolution of First State Bank of Correll, 206 Minn. 250, 252, 288 N. W. 709, 711): “Either issue, if sustained by the record, is obviously sufficient to sustain the conclusion reached by the [trial] court.”

Here, plaintiff argues first that in the assessment proceeding the court lacked jurisdiction to determine finally whether Cashman had an unpaid claim against the bank’s estate. In support of this argument, he cites cases holding that an assessment order does not bind any individual stockholder in respect to defenses personal to himself. Thus it was said in Straw & Ellsworth Mfg. Co. v. L. D. Kilbourne B. & S. Co. 80 Minn. 125, 136, 83 N. W. 36, 39, that a person “sued as a shareholder may show, if he can, that he is not a shareholder at all, or that he is not the holder of so large an amount of stock as is alleged, or that he has discharged his liability, or that he has a claim against the corporation which he may, in law or equity, set off against the claim or judgment in assessment, or he may make any other defense which is personal to himself.” Harrison v. Carman, 149 Minn. 365, 183 N. W. 826; McCabe Brothers Co. v. Farmers G. & S. Co. 172 Minn. 33, 214 N. W. 764. An order for assessment, however, does finally deter mine certain issues, such as, for example, that the corporate shares are assessable. Phelps v. Consolidated V. & E. Co. 157 Minn. 209, 195 N. W. 923; In re Estate of Vogtel, 158 Minn. 106, 196 N. W. 939. By statute it is provided that “such order shall be conclusive as to all matters relating to the amount, propriety, and necessity of the assessment.” Mason St. 1927, § 8027. In the assessment proceeding the trial court found that Cashman was the only creditor. That being so, a decision that his claim was satisfied negatived any outstanding indebtedness of the bank, and hence related to the “propriety and necessity of the assessment,” for there could be no reason to enforce stockholder’s liability if there were no creditors. It follows that the decision in the assessment proceeding is res judicata here.

But plaintiff contends that because this court, in affirming the order of the lower court in the assessment proceeding, confined discussion to the question whether the statute of limitations had run against the enforcement of stockholder’s liability, the finding of the lower court in that proceeding that Cashman’s claim was satisfied is not res judicata here, since there was no review by this court of that finding. Plaintiff’s theory seems to be that, even though the order was affirmed, it is the opinion of the supreme court rather than the findings and judgment of the lower court which determines what issues were decided. In this he is mistaken. Reeves & Co. v. Lamm Brothers, 135 Iowa, 201, 112 N. W. 642; Bussell v. Bussell (3 Cir.) 134 F. 840. It was said in Schoonmaker v. St. Paul T. & T. Co. 152 Minn. 94, 98, 188 N. W. 223, 224: “So long as a judgment remains in force it is binding upon the parties and those in privity with them. Even where an appeal has been taken, the matters determined by the judgment remain res judicata until the judgment is reversed.” State ex rel. Spratt v. Spratt, 150 Minn. 5, 184 N. W. 31. The argument that plaintiff is denied any review by this court of the issue whether the receiver was entitled to an equitable setoff which satisfied Cashman’s claim has no bearing upon the application of the principle of res judicata. 2 Freeman, Judgments (5 ed.) § 635; Johnson Co. v. Wharton, 152 U. S. 252, 14 S. Ct. 608, 38 L. ed. 429; Griffin v. Long Island R. Co. 102 N. Y. 449, 7 N. E. 735; Elk Garden Co. v. T. W. Thayer Co. (D. C.) 206 F. 212; see Schoonmaker v. St. Paul T. & T. Co. 152 Minn. 94, 188 N. W. 223.

Affirmed.