Mitchell v. Hotchkiss

| Conn. | Mar 23, 1880

Loomis, J.

This action was originally brought by the plaintiffs, as creditors of “The Star Tool Company,” a joint stock corporation located at Middletown in this state, against Julius Hotchkiss, then in life but since deceased, to recover the amount of their debt contracted during the period that Hotchkiss as president of the corporation intentionally neglected to comply with the statutory requirements as to filing with the town clerk of Middletown certain certificates showing the condition of the affairs of the corporation. For the purposes of this case it is conceded that Hotchkiss had by his neglect become liable under the statute referred to. But pending the suit and before trial he died leaving a will. The plaintiffs thereupon caused to be issued a scire facias, summoning his executors into court to show cause why they should not be made parties defendant to the suit. The executors appeared and filed a plea in abatement on the ground that the action, originally begun against Hotchkiss, did not upon his death survive against them. To this plea the plaintiffs demurred, but the court overruled the demurrer and dismissed the scire facias, and the question comes before this court for review by the plaintiffs’ motion in error.

There is no statute controlling the question under consideration. The only provision is that found in the General Statutes, p. 421, sec. 6, that “if the defendant in any action shall die before final judgment, it shall not abate if it might originally have been prosecuted against his executor or administrator.” To determine the question whether an action might originally have been brought to chaz-ge the estate of Hotchkiss with the statutory liability referred to incurred by him in his life time, we must invoke the aid of the common law.

The pi’inciples of the common law on this subject are embodied in 'the maxim—“Actio personalis moritur cum, persond.”

The executor represents the person of the testator, and in legal consequence may be said to continue his existence with respect to all his debts, covenants and contract obligations, which became due during his life or after his death, except such as depend on his personal skill, in which is always implied the condition that the contractor is not prevented from completing his contract by the act of God.

But all private as well as public wrongs and crimes are buried with the offender. The executor does not represent or stand in the place of the testator as to these, or as to any acts of malfeasance or misfeasance to the person or property of another, unless some valuable fruits of such acts have been carried into the estate; and this in strictness constitutes no exception to the rule, for the executor in such case cannot be made liable for the tort of his testator, but only for the implied promise which the law raises and allows the injured party to put in the place of the wrong.

In the light of these principles we are called upon to determine the nature of the liability imposed by the statute in question.

By section 17, page 280, of the General Statutes, it is made the duty of the president and secretary of joint stock corporations annually, on or before the 15th day of February- or of August, to make and lodge with the town clerk where the corporation is located, a certificate signed and sworn to by them, showing the condition of its affairs as nearly as the same can be ascertained on the first day of January or of July next preceding the time of making such certificate, stating the amount of paid capital, the cash value of its real and personal estate and credits, and the name, residence and number of shares of each stockholder.

Section 18, which creates the liability on which this action is founded, is in those words :•—“Any president or secretary of such a corporation who shall intentionally neglect or refuse to comply with the provisions of the preceding section, shall be liable for all the debts of said corporation contracted during the period of such neglc-ct.”

Wo do not see how it is possible to construe this statute as creating or attempting to create any contract relation or duty between the creditors of a corporation and its president. The adoption of such a construction would suggest grave doubts as to the validity of the act which should attempt so arbitrarily to make a debtor out of a stranger to the debt, or in other words, to make the debt of one person the debt of another. There was no privity between Hotchkiss and the plaintiffs; they had no transaction with each other, and the former owed the latter no private duty from which a promise might be implied.

The argument for the plaintiffs seemed to be based principally upon the assumption that the officers of a corporation are under some original common law liability to pay all the debts contracted by it while they as officers are in default as to the performance of any of the duties prescribed by statute; that their exemption from personal liability under the corporate organization is not an absolute but only a conditional one.

This reasoning is fallacious. There may be cases where the organization is so defective that creditors need not recognise it as a corporate being at all, in which case the so-called officers or active agents in its business transactions may per;haps under some circumstances make themselves personally ¡liable. But conceding the lawful organization and existence tof the corporation, the existence of all its members, officers ¡as well as stockholders, so far as its transactions are concerned, become merged in the artificial being, so that in contemplation of law they are utter strangers to those who deal ■with the corporation; and as stockholders and officers they .are never liable except so far as the law makes them liable.

The theory of the plaintiffs’ declaration also tends to (Confute the .argument. The action does not profess to be .predicated on rany promise, original or collateral, express or .implied, but is an action on the case founded on the statute. 'There is .nothing in the record to suggest a possibility that the estate -of the testator could in any way have been •increased or benefited ¡by the misfeasance or non-feasance ■complained of.

It seems clear that the,duty to be performed was a public duty, required by public policy for the general welfare. In the language of Mr. Justice -Clifford, in giving the opinion relative to the .identical statute we are considering, in the case of Providence Steam Engine Co. v. Hubbard, 101 U.S., 188" court="SCOTUS" date_filed="1879-11-24" href="https://app.midpage.ai/document/steam-engine-co-v-hubbard-90111?utm_source=webapp" opinion_id="90111">101 U. S. Rep., 188, the act was passed “by the state to enable the business public to ascertain the pecuniary standing of joint stock corporations.”

The wilful neglect .of the prescribed duty was a public wrong invoking the penalty of the statute; and the statute tComes clearly within the definition of a penal one, as given in 2 Bouvier’s Law Dictionary, where it is defined as “ a statute that inflicts a penalty for the violation of some of its provisions.”

The Supreme Court of the United States in the case just referred to, after full discussion, unhesitatingly pronounced this statute a penal one, to be strictly construed as such, and if penal it necessarily follows that the action upon it will not survive the death of the person for whom the penalty was intended, and the executors are not liable. 8 Williams on Executors, 6th Am. ed., bottom page 1729; Hambly v. Trott, Cowp., 372; United States v. Daniel, 6 How., 11" court="SCOTUS" date_filed="1847-12-30" href="https://app.midpage.ai/document/the-united-states-v-james-and-john-g-daniel-executors-of-beverly-daniel-late-u-s-marshal-86432?utm_source=webapp" opinion_id="86432">6 How., 11.

The view we have taken is well supported by numerous authorities from other jurisdictions.

In Moies v. Sprague, Admr., 9 R. Isl., 541, an action was brought to charge the estate of Byron Sprague, deceased, with certain statutory liabilities incurred by the deceased as a stockholder, director and president of the Union Horse Shoe Company, upon certain promissory notes given by the company to the plaintiff or held by him. The third count was for a liability incurred by the decedent as president of the corporation under sections second and third of chapter 128 of the statutes of the state then in force. Section 2d required the president and directors to make a certificate within ten days after the last installment of capital should be paid in, stating the amount of capital so fixed and paid in, and lodge it with the town clerk for record. Section 3d provided that “ if any of said officers shall refuse or neglect to perform the duties required of them as aforesaid, they shall be jointly and severally liable for all the debts of the company contracted after the expiration of said ten days and before the certificate shall be recorded as aforesaid.” After full consideration it was decided, (Durfee, J., giving the opinion,) that the liability alleged, as founded upon the statute referred to, did not give a cause of action which survived the person affected by the liability or which constituted at law a valid claim against his estate. This statute is so similar to our own that it is impossible to make any distinction in principle between the third count in that case and the present action.

Under a statute of the state of New York, providing that “on failure of any company within twenty days from the first of January to make, publish and file an annual report, all the trustees of the company shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall he made,” it has been held repeatedly that the act was penal and could not be extended by construction to cases not fairly within its language. Garrison v. Howe, 17 N. York, 458; Boughton v. Otis, 21 N. York, 261; Chambers v. Lewis, 28 N. York, 454. In Shaler & Hall Quarry Co. v. Bliss, 34 Barb., 309" court="N.Y. Sup. Ct." date_filed="1861-05-06" href="https://app.midpage.ai/document/shaler--hall-quarry-co-v-bliss-5460093?utm_source=webapp" opinion_id="5460093">34 Barb., 309, it was held that the liability of the trustees under the statute referred to was of the nature of a penalty or punishment for the omission of a duty. In Bank of California v. Collins, 5 Hun, 209, the trustees of the La Abra Silver Mining Company (a corporation) failed to publish an annual report as required, and suit was brought against them on the statute ; one of the defendants died pending the action, and the question raised was whether it could be revived against his estate. And although the statutes of New York at the time provided for the survivorship of all actions for wrongs done to the property, rights or interests of another person, (except slander, libel, assault and battery, and false imprisonment, and actions on the case for injuries to the person of the plaintiff or to the person of a testator or intestate,) yet it was held that, as the action depended entirely upon the omission to file the annual report, the act had no relation to any right, property or interest of the plaintiff, and was not a wrong done to his property, but was only an act invoking a penalty for a violation of a duty to the public and not to any private person, and that it could not be revived against the estate of the deceased trustee.

In Reynolds v. Mason, 54 How. Pr. R., 213, the defendant was a trustee of the Mason Manufacturing Company, and had neglected to file annual reports, and an action was brought on the statute, 3 Edm. R. S., 733, sec. 12. The plaintiff died, and the administrator petitioned the court for leave to continue the suit in his name, but it was held to be a personal action to enforce a penalty, that did not survive.

In Halsey v. McLean, 12 Allen, 438, a creditor of a New York corporation brought a suit in Massachusetts against a trustee residing there, founded on the New York statute referred to. It was held that the suit could not be sustained because the statute was penal and had no extra-territorial operation.

In Breitung v. Lindauer, 37 Mich., 217" court="Mich." date_filed="1877-10-03" href="https://app.midpage.ai/document/breitung-v-lindauer-7928669?utm_source=webapp" opinion_id="7928669">37 Mich., 217, a statute provided that if the directors of certain corporations intentionally-neglected to make certain annual reports of the condition of such corporations they should be liable for all the debts of the corporation contracted during the period of neglect, and the court held that the liability imposed was in the nature of a penalty, and could not be enforced after the repeal of the clause imposing it, even if incurred before.

Under a similar statute of Indiana the court in Union Iron Co. v. Pierce, 4 Biss., 327" court="None" date_filed="1869-05-15" href="https://app.midpage.ai/document/union-iron-co-v-pierce-8638127?utm_source=webapp" opinion_id="8638127">4 Biss., 327, came to the same conclusion, and held that a repeal of the statute after the commencement of a suit for a debt so contracted defeated the action.

In Bturges et al. v. Burton et al., 8 Ohio St. R., 215, the directors of the Sandusky Bank were made by the charter personally liable to the creditors if the debts of the bank exceeded twice the capital paid in, and it was held to be a penalty to vindicate a violation of law.

In Lawler et al. v. Burt, 7 Ohio St. R., 340, an act prohibiting certain associations from issuing bank paper, and making the stockholders liable in their individual capacity for the whole amount of the paper so issued, was held to be a liability in tort in the nature of a penalty and not a liability in contract.

In Irvine v. McKeon, 28 Cal., 472, an act making the directors of a corporation liable for the excess of debts over the amount of capital stock paid in, was held to creaín a forfeiture or impose a penalty, and therefore to be strictly construed.

There is no error in the judgment complained of.

In this opinion the other judges concurred.