156 Ind. 212 | Ind. | 1901
In this action, the appellant sought to charge the directors of the Eagle Knitting Company, a manufacturing corporation organized under, the laws of the State of Indiana, with a liability under the statute for. a debt due to the Beargrass Woolen Mills, to whose rights of fiction. th,e appellant claims to have succeeded, Three
The material allegations of the first paragraph of the complaint are as follows: The plaintiff, the American Credit-Indemnity Company, is a corporation organized under the laws of the State of Indiana; on the 18th day of January, 1893, and long before that time, and up to and including the 26th day of September, 1893, the defendants, excepting the Beargrass Woolen Mills, were officers and stockholders of the Eagle Knitting Company, a manufacturing corporation organized under the laws of the 'State of Indiana; on the 18th day of January, 18’93, the defendants, John W. Ellis, Jedediah M. Hughes, William H. Quaife, and Aaron Work, were members of the board of directors of said Eagle Knitting Company, and constituted a majority of said board; on the 19th day of January, 1893, the said Eagle Knitting Company, by its president and a majority of its directors, as aforesaid, published and caused to be published in the Elkhart Daily Review, a newspaper of general circulation, published in the city of Elkhart, etc., said city being the place where the home office of said Eagle Knitting Company was situated, a statement showing the condition of the said corporation at the close of its business on the 31st day of December, 1892, said statement being as follows: “Statement of the condition of the Eagle Knitting Company, of Elkhart, In
Assets. ' "
Machinery and fixtures .......... $23,547.69
Building1 and real estate........’. . 13,711.46'
Merchandise .....'.............. 24,791.82
Cash .........1................ 1,706.72
Sundry accounts ................ 30,514.10
Total'....................... $94,271.79
Liabilities.
Stock ....................•.....$55,200.00
Bills and accounts............... 39,071.79
Total.....'.....:.......... $94,271-79
“We solemnly swear that the foregoing statement is true to the best of our’ knowledge' and belief. John W. Ellis, J. M. Hughes, W. H. Quaife, Aaron Work. Majority of board of directors. Subscribed and sworn to before me this 18th day of January, 1893. Orville T. Chamberlain, Notary Public.”
The said report was signed .by the president, and a majority of the directors, and was verified by the oaths of the president, directors, and secretary of the said Eagle'Knitting Company; on the 20th day of May, 1893, the Bear-grass Woolen Mills, of Louisville, in the state of Kentucky, relying upon said statement, so published as aforesaid, and believing the same, to be true, at the request of said Eagle Knitting Company, furnished said company goods and merchandise of the value of $3,985.48, the particulars of which are set forth in an account filed with said com-' plaint marked exhibit A; on the 31st day of August, 1893, the said Eagle' Knitting Company'executed its note to the said Beargrass Woolen Mills in the sum of $1,217.30, and said note was taken by the said Beargrass Woolen Mills in
The second and third paragraphs differ from the first in that they allege that the Eagle Knitting Company failed to make and publish the report required by the statute, and that instead thereof it made and published a false and fraudulent report, which was delivered by the Eagle Knitting Company and the said defendants to 'the Beargrass Woolen Mills before the sale of the merchandise by the latter to the former on May 20, 1893, and that by such false statement the said Beargrass Woolen Mills was misled and deceived, to its damage, etc.
The liability attempted to be enforced in this action arises, as it is claimed, from the provisions of.§§5071, 5072, 5073 Burns 1894, §§3863, 3864, 3865 R. S. 1881 and Horner 1897, which are in these words: “5071. (3863..) Every such company shall, annually, within twenty days from the first day of January, make a report which.such company shall cause to be published in some newspaper printed in the county, if any (otherwise, in this State, nearest thereto), which shall state the amount of capital, the amount of assessments made and actually paid in, and the amount of existing debts; which report shall be signed by the president and a majority of the directors, and shall be verified by the oaths of the president and such directors, and secretary. 5072. (3864.) The word ‘annually’, as used in the preceding section, shall be construed to mean once a
The particular clauses of the statute of limitations necessary to be considered on this appeal are these: “The following actions shall be commenced within six years after the cause of action has accrued, and not afterward: * * * Fourth. For relief against frauds.” §293 Burns 1894, §292 R. S. 1881 and Horner 1897. “The following actions shall be commenced within the periods herein prescribed, after the cause of action has accrued, and not afterward: First. For injuries to person or character, and for a' forfeiture or penalty given by statute, within two years.” §294 Burns 1894, §293 R. S. 1881 and Horner 1897. The demurrers to the answers present the question whether this is an action to recover a penalty given by statute, and therefore liable to be barred in two years.
As originally adopted, section fifteen of the act for the incorporation of manufacturing and mining companies, and companies for mechanical, chemical, and building purposes, approved May 20, 1852, read as follows: “Section 15. If any certificate or report made, or public notice given, by the officers of any such company, as required by this act, shall be false in any material representation, or if they shall fail to give such notice, or make such report, all the officers who shall sign the same, knowing it to be false, or
The section of the act of 1852 just quoted was a' copy of §12 of the general act of 1848 of Néw York for the formation of corporations for manufacturing, mining, mechánical, or chemical purposes, and was highly penal in its nature. The mere failure to make the required report, 'or the making of a false report, rendered the officers signing the same, knowing it’ to be false, or failing to 'make' the report, liable for all the debts of the company contracted while they were stockholders, or officers thereof. It was not necessary that' any one should be deceived^ misled,' of injured by the false report, or the failure to make a report; The liability attached at once, and to its full extent, as a penalty for the default or malfeasance of' the officers, and" its measure was the entire indebtedness of the corporation contracted while the delinquent directors and officers were stockholders or officers of the corporation'. But in 186'9, §15 of the act of 1852 was amended so as to remove its harsh and punitive features. The act as amended provided' that if any report should be false in any material representation, or if the officers should fail to 'make such reportj and any person or persons should be misled or décéived by such false report, or on account of' such failure to make such report, then the officers signing the report knowing it to be false, or failing to make it, should be jointly and severally liable for all damages resulting from such failure on their part, while they were stockholders in such company. Acts 1869 (s. s.), p. 89. In Union Iron Co. v. Pierce, 4 Biss. 327, it was held that §15 of the act of 1852 was penal, but that the right to recover penalties incurred under it was extinguished by the amendment of 1869, because the latter was utterly inconsistent with it, and gave a different remedy. In its amended form, as section fifteen
In Merchants Bank v. Bliss, 35 N. Y. 412, it is said: “The liability of these defendant’s arose only from 'their violation of the directions of the séctions above quoted from the act under which the corporation was formed; not from their personal contract. * * * Under these sections, the trustees are declared to be jointly and severally liable for all the debts of the company, in case of a violation of their provisions. The liability, it must be observed, is not limited to the injury or damage sustained by the creditors in consequence of the violation; but upon failure to file'the report, or upon making a prohibited dividend,' however’ small or trifling the amount, the trustees áre subjected to the payment of the whole amount of’ the dbb’ts of the company then existing, and for’ all that shall be contracted, in the one case before the report shall be made, and ini the other while they shall respectively continue in office'. These provisions appear to be severely punitive, inflicted on grounds of public policy, for the protection of creditors, and the prevention of frauds upon the public in respect to the' financial condition of such corporations. ' It is clear that the liability of the trustees is not imposed as an in: demnity, because it has no' relation to the actual loss ’ or injury Sustained by the’ party in whose favor the action is given. The action depends wholly upon the statute. There never was any such remedy, or cause of action, in "whole or in part, at common law. If any action could
In Veeder v. Baker, 83 N. Y. 156, the court say on p. 160: “That such an action is a penal action, is no longer open to question in this court. The statute imposes upon the officers of such a company, as a penalty for a false report, liability for the debts of the company.”
In Stokes v. Stickney, 96 N. Y. 323, the court clearly discriminates between penal and remedial actions: “Since that decision [Merchants Bank v. Bliss, 35 N. Y. 412] the subject of actions under that section of the statute has frequently been under the consideration of this court with the uniform conclusion that the actions therein provided for are penal in character, and are not in any respect based upon the theory of affording compensation to the injured party for damages sustained by reason of the omission complained of.”
Steam-Engine Co. v. Hubbard, 101 U. S. 188, 25 L. Ed. 786, in which the Supreme Court of the United States characterized such enactments as penal, was founded upon a statute of the state of Connecticut making the officers of the corporation liable for all the debts of the corporation contracted during the period in which the officers were in default.
In Huntington v. Attrill, 146 U. S. 657, 13 Sup. Ct. 224,
The action given by section fifteen ¡of the act for the incorporation of manufacturing companies for. issuing a false report of the financial condition of the corporation is one which might have been maintained at common law, where
It is claimed, however, on behalf of the appellee, that the • complaint does not state facts sufficient to constitute a cause of action, and that, even if the answers were bad, they were goód enough for a bad complaint. There was neither-a demurrer to the complaint, nor a motion to make its averments more-.certain, and, as it specifically charged that the published'report was wholly false, and was known by the 'defendants'to be so; that it was intended -to deceive and mislead the Beargrass Woolen Mills Company, and the public, and.was seen-.and relied upon by said company; that said Beargrass Woolen Mills Company was thereby misled and deceived, and induced to extend credit to the Eagle Knitting Company; and that in consequence thereof the Beargrass Woolen Mills Company was damaged, — we must regard the pleading as sufficient, at least, to require an answer. Clow v. Brown, 150 Ind. 185; Real Estate Co. v. Macy, 147 Ind. 568; Cleveland, etc., R. Co. v. Wynant, 100 Ind. 160.
Judgment reversed, with direction to sustain demurrers to answers, and for further proceedings in conformity with this opinion.