52 Mo. App. 194 | Mo. Ct. App. | 1892
This action was brought by the creditor of a manufacturing corporation, organized under the laws of the state of Iowa but having its chief place of business in Missouri, to charge the defendant as a stockholder of such corporation for a debt, due by the corporation to the plaintiff upon an open account, in the sum of $1,535.50. A trial in the circuit court, before the judge sitting as a jury, resulted in a verdict and judgment for the plaintiff for the
In determining the questions presented by. the appeal, we have had the very best aid from counsel on both sides, not only in the form of oral argument, but also in the form of very elaborate printed statements and arguments. We do not consider it incumbent upon us to go over all the details of these printed statements and arguments in drawing up this opinion, because we are convinced that the judgment must be affirmed upon a consideration of the law of Iowa as established by decisions of the supreme court of that state, when applied to certain undisputed facts shown by the record in this case.
The indebtedness of the corporation to the plaintiff in the sum stated is not controverted upon the pleadings or the evidence. It is averred in the petition and shown by the evidence that, subsequently to contracting the indebtedness sued on, the corporation made an assignment for the benefit of its creditors at St. Louis, Missouri, under the statute of this state; that the assignee has qualified and taken charge of the assets of the corporation; that the plaintiff’s claim has been duly presented to assignee and by him allowed as a demand against the assets of the corporation. A paper inadvertently copied into the record shows that, since the date of the judgment, two payments have been made by the assignee upon the claim. These credits cannot be noticed here, because they could not have been brought to the attention of the trial court; but the defendant may have the benefit of them, if so entitled, as credits on the judgment.
The petition, which is quite full and detailed, bases the right of the plaintiff to charge the defendant with the indebtedness of the corporation on the ground that, although the corporation had become organized as
I. The first proposition advanced in support of this assignment is, that the defendant was not a stockholder in the Eagle Glass & Metal Company (the corporation hereinbefore referred to) at the time the debt was contracted. The record conclusively shows that this assignment is untenable. Laying all other elements out of view, it conclusively appears that, prior to the dates of the contracting of this indebtedness, the defendant purchased one share of the capital stock of the corporation, paying therefor the sum of $1 to qualify him for his office of director, which office he
Aside from this, we understand that this case was submitted to the circuit court on the theory of its being an action at law, as the record recites that the parties waived a jury. If the purchase of this one share were out of the way, the evidence in the record would amply support the conclusion of the circuit judge that the defendant was a stockholder at the time of the contracting of this indebtedness. He was one of the original incorporators, his name having been signed to the articles of incorporation. He was, from first to last, a director and officer. He was one of the active managers. He put money into the concern to further its objects. He signed certificates of stock as its assistant secretary. He was one of the signers of the contract drawn up by the seven corporators and signed prior to the date of the articles of association, describing with the most careful details the manner in which the stock should be disposed of. In fact, the evidence amply justifies the conclusion that he was from first to last a corporator and an active member of the corporation. By the laws of Iowa, a single person may become incorporate. • Iowa Code, 1873, sec. 1088. By those laws, as construed by the supreme court of that state, a corporation for pecuniary gain may exist and do business as such without distributing its capital stock or having stockholders. Johnson v. Kessler, 76 Iowa, 411. The statute under which it is sought to charge the defendant is as follows: “A failure to comply substantially with the foregoing requisitions in relation to' organization and publicity renders the individual property of
Outside of this, the evidence shows that the corporation was organized for the purpose of purchasing from two persons who became its members, William H, Warren and Thomas F. Kennedy, a secret process for ornamenting glass, brass and other metals, known as “the Warren process;” that the value of this process depended on its being kept a secret process; that, prior to the incorporation, a contract was made and signed by all the seven corporators, including Warren and Kennedy and this defendant, in which Warren and Kennedy were parties of the first part and the other five incorporators, including this defendant, were parties of the second part. This contract undertook to provide, as among the associates, for the creation of the future company to purchase and work this secret process, and for the distribution of all of its capital stock. The capital stock was to be worth $2,000,000, divided into shares of $10 each, which shares were to be issued as “fully paid up and non-assessable.” The contract ^recited “And of said shares, the second
II. The next proposition advanced by the defendant in support of this assignment of error is, that this is not a common-law action to charge the defendant with liability as a partner at common law, on the ground that a corporate organization had not been effected, but that it is a statutory action proceeding upon a statute of Iowa. This proposition is obviously sound, and we do not understand that it is controverted. The petition recites, in substance, the formation of a corporation and the creation by the corporation of the indebtedness declared on, and the establishment of such indebtedness against the assets of the corporation, by proving it as a claim before the assignee of the corporation. But the petition also sets up a state of facts which, if true, shows that notwithstanding the formation of the corporation, by reason of failure to perform a certain condition upon which immunity was granted by the statutes of Iowa to the stockholders from the payment of corporate debts, those stockholders were left liable for the payment of such debts. "We pass from this proposition of counsel for the defendant with the concession that the liability of the defendant'must be determined upon a state of
III. The next proposition in support of the assignment, that the court should have granted an instruction for a nonsuit, is that the provisions of the statute law of Iowa have not been complied with, in that the plaintiff has not prosecuted his claim to a judgment against the corporation, and sued out execution against the corporation which execution has been returned nulla tona, showing that he has exhausted his remedy against the corporation, as he would be required to do in order to support a creditor’s bill against the defendant. This argument is based chiefly upon the following section of the Code of Iowa: “In none of the cases contemplated in this chapter, can the private property of the stockholders be levied upon for the payment of corporate debts, while, corporate property can be found with which to satisfy the same; but it will be sufficient proof, that no property can be found, if an execution has issued on a judgment against the corporation, and a demand has been thereon made of some one of the last acting officers of the body for property on which to levy, and if he neglects to point out any such property.” Code of Iowa, 1873, sec. 1083. Similar expressions are also found in sections 1082 and, 1081 of the same body of statutes. We need not set out these statutes in further detail, because they have received a definite ■ interpretation at the hands of the supreme court of Iowa, and that interpretation is opposed to the position of counsel for the defendant in this ease. In Marshall v. Harris, 55 Iowa, 182, the plaintiff was a judgment creditor of the pretended corporation, and had collected a part of his judgment from the corporation, aud sued the defendants as stockholders to recover the balance, on the ground that those organizing the corporation had not complied
The plaintiff in the present case is a judgment creditor of the corporation in the same sense as-was the plaintiff in that case; for he has prosecuted his demand to an allowance before the assignee selected by the corporation itself under the Missouri statute to wind up
But, if any doubt could be left upon this question, it seems to be absolutely concluded by the decision of the supreme court of Iowa in Clegg v. Grange Co., 61 Iowa, 121, which, like the action before us, was an action upon an account to charge the defendants as members of the Hamilton & Wright County G-range Company, described in the petition as an unincorporated company or copartnership. The company had attempted to clothe itself with corporate immunities; but the plaintiff proceeded against its members as partners, upon the ground that they had not become incorporate by reason of having failed to comply with a condition precedent established by the statute, without compliance with which no incorporation could be effected. That condition precedent was, as in the case before us, the publication of the notice required by section 1063 of the Iowa Code of 1873. Instead of publishing a notice stating the facts required by that section, the co-adventurers published a notice which contained merely their articles of incorporation. These articles failed to show the place of transacting business by the corporation, and the time of the commencement and termination of its corporate existence, as required by the statute. For this reason it was held not to be such a notice as complied with the requirements of the statute. Without any extended reasoning upon the ques
There are decisions, in this state and also in other jurisdictions, which would be applicatory to the question before us, if it were not a question which is conclusively governed by the interpretation which the highest court of Iowa has put upon the statutes under which this corporation was organized. An examination of these additional cases would be interesting, though irrelevant. It would probably serve no more than to show that, in respect of this and similar questions, courts have taken a distinction between acts required to be done by corporators in perfecting their corporate organizations, which are conditions precedent
IV. The next proposition advanced in support of this assignment of error is that the statute of Iowa, upon which the action is founded, is penal and not contractual, and that it will, hence, not be enforced in Missouri. The proposition is, of course, well settled that penal statutes are local, and are not enforced on any principle of comity outside of the jurisdiction enacting them. We are of opinion that the statute, under which this action is brought, is not in the nature of a penal statute at all. The classes of' statutes, referred to as penal statutes by counsel for the defendant, are statutes imposing a personal liability, generally upon directors and other officers of corporations and sometimes also upon stockholders for the failure to do certain prescribed things, such as to file certain reports or to give certain notices; or for the doing of certain prohibited things, such as the contracting of corporate debts beyond the prescribed limit, the declaring of fictitious dividends, or the contracting of corporate debts when the corporation is insolvent. None of these statutes have any resemblance to the one before us. As already seen, the construction placed by the supreme court of Iowa upon this statute is that it creates a condition precedent, which must be performed by those who organize a corporation before an immunity from liability for the debts of the corporation attaches. The meaning is that, when the legislature enacted the statute, it said to those desiring to avail themselves of its provisions: “You may become incorporated in the mode herein provided for, and you may exempt yourselves from personal liability for the debts of the corporation which you form, provided you
This becomes even more plain in its application to a corporation like the one before us. Something is said, in the printed argument, submitted on behalf of defendant, as to the right of 'citizens of one state to incorporate under the laws of another for the purpose of carrying on business in their own state; and it is argued that the law on this subject is progressing without definite results as yet. We do not proceed upon the idea, that the gentlemen who, desiring to form a corporation for the purpose of carrying on a manufacturing business in Missouri, found that the incorporation laws of Missouri were not good enough for their purposes, or, for some other reason satisfactory to themselves, determined to procure an incorporation under the laws of a sister state, placed themselves, in respect of their personal liability, in any worse condition than if their plant and place of business had been established in such other state. Such corporations have become the serious concern of the legislatures of many of the states, and in recent years have come to be definitely known as “tramp corporations.” Whatever may be said about them, it is clear that the most that can be said in favor of the franchises, which their
We have been referred to the decision of the supreme court of Missouri in Kritzer v. Woodson, 19 Mo. 327, in support of the proposition, that the liability sought to be enforced in this action is penal. That decision is not at all in point, because the effort there was to subject the directors of a corporation to a liability under a statute for contracting debts in behalf of the corporation in excess of a prescribed limit. Such statutes are generally regarded as penal even as regards directors, and for stronger reasons as regards stockholders. We are also cited to the case of Ochiltree v. Railroad, 54 Mo. 117. In that case there is a dictum by Judge Napton (citing Kritzer v. Woodson, supra, which is not in support of the dictum), that the double liability of stockholders, created by the' constitution of this state of 1865, which was under consideration in that case, was in the nature of a penalty. The mere superadded individual liability of a stockholder to pay the amount of his stock subscription over again, if necessary to liquidate the debts of the corporation when
V. We have endeavored to dispose of these questions perhaps out of their logical order, but in tbe order in wbicb our attention bas been called to them in tbe defendant’s argument. Tbe last question is perhaps tbe one wbicb should have been first disposed of, and wbicb we should not think it necessary to touch upon at all, but for tbe fact that it involves a challenge on tbe part of counsel for tbe defendant. Their contention is that tbe notices published in behalf of tbe Eagle Glass & Metal Company were a sufficient compliance with tbe Iowa statute. That statute reads as follows:
“Sec. 1062. A notice must also be published, for four weeks in succession, in some newspaper as convenient as practicable to tbe place of business.
“Sec. 1063. Such notice must contain: 1. Tbe name of tbe corporation and its principal place of transacting business. 2. Tbe general nature of tbe business to be transacted. 3. Tbe amount of capital stock authorized, and tbe times and conditions on wbicb it is to be paid in. 4. Tbe time of tbe commencement and termination of tbe corporation. 5. By what- officers or persons tbe affairs of tbe corporation are to be conducted, and tbe times at*216 which- they will be elected. * ® *• 7. Whether private property is to be exempt from corporate debts.
“Sec. 1064 (as amended by chapter 23 of the Acts of the Seventeenth General Assembly). The corporation may commence business as soon as the articles of incorporation are filed in the office of the recorder of deeds, and their doings shall be valid if the publication in a newspaper is made, and-the articles recorded in the office of the secretary of state within three months from such filing in the recorder’s office.”
“Sec. 1068. A failure to comply substantially with the foregoing requisitions in relation to organization and publicity renders the individual property of. the stockholders liable for the corporate debts.”
The articles of incorporation, signed by four of the co-adventurers, among them this defendant, bear date as of the twenty-sixth of June, 1889. The notice which was made, and which was intended to comply with the statute, was published in the Daily Gate City, a newspaper printed in Keokuk, Lee county, Iowa, four times at intervals of a week, on first, eighth, fifteenth and twenty-second of September, 1889, all of which days were Sundays. The notice, as published, failed to comply with the statute in the following particulars: First. It stated that “the amount of capital stock shall be $5,000,000 divided into shares of $10 each, to be paid when called for by board of. directors.” As already seen, the capital stock was in point of fact $2,000,000, and the shares were not issued in the ordinary way, to be paid for in assessments or in calls as made by the board of directors, but they were issued as “fully paid up and non-assessable,” and were apportioned by a contract among the co-adventurers antedating the articles of incorporation, under which apportionment a number of them were to be paid for
The notice was also defective in another particular, which obviously grew out of a clerical or typographical error. It recited: “Business was commenced June 28, 1899, and corporation to continue twenty years from said date, renewable from time to time by vote of stockholders.” If this defect stood alone, there would be ground for argument that it involved an obvious typographical error which would
It is argued that the defect in the notice, which consisted in using the number five instead of two in expressing the amount of capital stock of the corporation, making it read five millions instead of two millions, is also to be rejected as a typographical error. It is quite immaterial whether it is a typographical error or not, since there is nothing in the context from which the ordinary reader would or could correct' the error. The statute imposed upon the co-adventurers the obligation of stating “the amount of capital stock authorized,” and they did not state it correctly; and for this reason they did not comply with the statute so as to exempt themselves from personal liability, under the decisions of the supreme court of Iowa already referred to. The case is not different in principle from the case of Clegg v. Orange Co., 61 Iowa, 121, already referred to, where the co-adventurers published their entire articles of incorporation, which articles were themselves defective in not stating the time of the commencement and termination of the corporate existence; for which reason it was held that the members did not become incorporate in the sense which exempted them from the personal liability of partners. The notice, as published, being thus radically defective, it is not necessary to consider whether the publication on Sunday was such a publication as would otherwise have complied with the statute.
These observations seem to dispose of all the arguments advanced in support of the assignment, that the court committed error in refusing the defendant’s instruction in the nature of a demurrer to the evidence, and the judgment is accordingly affirmed.