Clinton Novelty Iron Works v. Neiting

Deemer, J.

1. Corporation publication of notice incorporation. On Junе 5, 1902, there was filed with the recorder of deeds of Cedar county articles of incorporation of the Cedar County Lumber & Manufacturing Company, which were duly signed and acknowledged. These articles were also filed with the Secretary of State on June 16, 1902, and on the same day, to wit, June 16, 1902, the said Secretary of State issued his certificate to the effect that the articles had been filed in his office. The articles named the town of Lowden, in Cedar .county, Iowa, as the corporation’s principal place of business. At the time of filing no newspapers were published in the town of Lowden, and publication of the notice of incorрoration required by law was made in the Durant Star, a newspaper published in the town of Durant, in Cedar county, on June 19 and 26 and July 3 and 10, 1902. Durant is a small town more than twenty miles by wagon road, and more than fifty miles by rail, from Lowden. On July 18, 1902, a newspaper was established at Lowden, -which has been issued ever since, but no publication of notice was еver made in that paper. The town of Clarence is eight miles from Lowden, Stanwood thirteen miles, and Mechanicsville. eighteen miles from Low-den, either by wagon road or rail. The county seat of the county, Tipton, is seventeen miles by wagon road, and twenty-two miles by rail, from Lowden, and the town of Bennett is eleven miles by wagon road, and thirty miles by rail, distant therefrom. In each of these towns one or more regular weekly newspapers of general circulation were published during the yeаr 1902, but no notices of incorporation were published therein. In the county seat town two newspapers of general circulation in Cedar county were рublished, each of them having a large circulation and being official papers; and at Stanwood, a town having a population of four hundred and fifteen аccording to the 1900 census, there was one paper regularly published, which was also an official paper of the county. The population of thе other towns mentioned, according to the census ‍‌​​​‌​‌​​‌‌‌‌​‌‌‌​‌‌‌‌‌‌​‌‌​‌‌​​‌​​‌‌‌‌​​‌​‌‌​​​‍for the year 1900, was as follows: Tipton, 2,513; Clarence, six hundred and seventy-five; Mechanicsville, seven hundred and three; Bennett, two hundred and thirty-eight; and Durant, five hundred and sixty. After September 16th of the year 1902 plaintiff sold to the so-called corporation goods to the amount of $255.15, and, thе account remaining unpaid, it obtained judgment thereon against the corporation in May of the year 1904. Defendant was not one of the original organizers оr promoters of the corporation but acquired stock therein, to the amount of $1,000 on September 9, 1902, for which he paid cash at the par value therеof. On November 20, 1902, the corporation made an assignment for the benefit of its creditors, and in administering upon its assets there was not enough to pay the preferred creditors. At the time the indebtedness to plaintiff was contracted, defendant was a stockholder and director and the secretary of the corpоration.

It further appears from the evidence, which is undisputed, that Lowden is'in the northeastern part of Cedar county on the main line of the Chicago & Northwestern Railway, and that Durant is in the extreme southеastern part of the county on the main line of the Chicago, Rock Island & Pacific Railway, and ‘that to reach Durant from Lowden, by rail, a traveler must go through Clarеnce, Stan-wood, Tipton, and Bennett, thence into another county, where a change of cars must be made, ‍‌​​​‌​‌​​‌‌‌‌​‌‌‌​‌‌‌‌‌‌​‌‌​‌‌​​‌​​‌‌‌‌​​‌​‌‌​​​‍and back to Durant. A branch line of road runs from Clаrence to Tipton, a main line from Tipton to Bennett, a branch from Bennett to •Stockton, and a main line from Stockton to Durant. There is m> testimony as to the extеnt of the circulation of the Durant Star; but the town in which it is published is small, and, located as it is, it is quite likely that its patronage is local and confined to the particular lоcality served. The town itself is near the common corner of Muscatine, Scott, and Cedar counties, and the rail connections between Low-den and Durant are such that in all probability there is little or no business connection between the two places.

In one respect this case is ruled by Berkson v. Anderson, 115 Iowa, 674, wherein it is said, regarding the publication of the notice of inсorporation: “ The statute provides that a notice must be published in some newspaper as convenient as practicable to the principаl place of business of the corporation. . . . The word ‘ convenient ’ has many definitions; but, as used in this statute, it seems to us but one thought in relation thereto could have been in the minds of the makers.of the law. The requirement that the notice be published in some newspaper as convenient as practicable to the рrincipal place of business of the corporation means that it shall be published in the nearest or most handy paper suitable therefor. Any other cоnstruction of the language used, in view of the general context, would be strained and unnatural. . . .We must hold, however, that the publication of the notice under consideration was not in substantial compliance of the law; otherwise, no limits can be prescribed in which-such a notice may not be legally pub-listed. . . . The publication of the notice before us, not being in substantial compliance of the statute as to place, must be held to be no notice at all, and consequently nо protection to the defendants.” In view ‍‌​​​‌​‌​​‌‌‌‌​‌‌‌​‌‌‌‌‌‌​‌‌​‌‌​​‌​​‌‌‌‌​​‌​‌‌​​​‍of the facts before us, it seems that it would hardly be possible to find a newspaper more remote from Lowden than the one in which the notice in the instant case was published; and, applying the rule in the BerTcson case to this, it is clear that defendant is liable, unless it be for the matters to which we shall now refer.

It is first said that no notice was required until three months after the certificate was issued by the Secretary of State (C'ode, section 1614), and that the cоrporation made an assignment within the three months allowed for the publication. This proposition is based upon a mistake in the abstract, which was correсted before the submission of the case. We now have certified the certificate of the Secretary of State, which was*issued June 16, 1902. This is conclusive upon thе proposition.

2. Same: individual liability of stockholders. II. Next it is argued that, as defendant was not an organizer or promoter of the corporation and in no way responsible for the failure tо give proper notice, he cannot be beld personally liable. But it will be observed that defendant became a member of the organization within the three months allowed for the publication of a proper notice, that he was one of the directors and an officer of the corporation, and that plaintiff sold the goods after defendant acquired his stock. Plaintiff ‍‌​​​‌​‌​​‌‌‌‌​‌‌‌​‌‌‌‌‌‌​‌‌​‌‌​​‌​​‌‌‌‌​​‌​‌‌​​​‍sold its goods after the expiration of the three months for the publication of the notice, аnd had the right to suppose that proper notice had been given. At least, its sale,was not during the period allowed for the giving of notice, and therefore there are no equities in defendant’s favor. There is no showing that defendant did not know all the facts connected with the organization of the corporation аt the time •he became a member or when plaintiff sold it the goods. Whatever the rule might be as to an innocent purchaser after the expiration of the timе for publication of notice, defendant is in no position to urge that there are equities in his favor which will relieve him. He is only relieved from individual liability because he was a member of a de jure corporation which limited liability of its members to the amount of stock subscribed and paid for. If the corporation was not legally organized, he was liable under the facts disclosed under our statute, which provides that for failure to substantially comply with the requirements as to notice, etc., the individual property of the stockholders shall be liable for the corporate debts. See Code, section 1616. Our conclusions find support in what is said in Seaton v. Grimm, 110 Iowa, 145, and in the cases therein cited.

The trial court was in error in directing a verdict for ‍‌​​​‌​‌​​‌‌‌‌​‌‌‌​‌‌‌‌‌‌​‌‌​‌‌​​‌​​‌‌‌‌​​‌​‌‌​​​‍the defendant, and its judgment must be, and it is, reversed.

Case Details

Case Name: Clinton Novelty Iron Works v. Neiting

Court Name: Supreme Court of Iowa

Date Published: May 17, 1907

Citation: 111 N.W. 974

Court Abbreviation: Iowa