185 Mo. App. 659 | Mo. Ct. App. | 1915
This is a suit to enforce against defendants Yoder and Larkin, as original stockholders in the defendant Stag Mining Company, a corporation, the collection of an unsatisfied' judgment against that corporation. A demurrer to the petition -was sustained.
The matexial facts admitted by the demurrer are these: That the clefendaxxt Stag Mining Company is
Two questions are thereby presented for our con-sideration: First whether a judgment creditor can avail himself of the remedy provided against stockholders for failure to pay their stock subscriptions when the judgment arises from tort; second, whether under our present statute, Acts of 1911, p. 149', the capital stock being paid in property at a fixed valuation and so stated in the articles of incorporation, a’judgment creditor can show that the property is not of the value fixed and thereby that the stock subscription is not fully paid. It is just to remark that we are much assisted in the proper solution of these propositions by the able and exhaustive briefs of counsel for either side wherein the authorities pro and con are ably and exhaustively collected, discussed and distinguished.
As to the first of these propositions, it will be found that most of the authorities agree that the proper solution depends largely on the intent and wording of the constitutional and statutory provisions of the various States imposing liability on the stockholders for unpaid obligations of the corporation. We may grant that such obligations are contractual and grow out of the stockholders’ voluntary subscription of stock. Yet, the laws of the State authorizing the cor
An early and leading case on this subject, and one cited in many of the authorities hereinafter referred to, is Cable v. McCune, 26 Mo. 371, 72 Amer. Dec. 214, which arose under the statute of 1845, making stockholders liable for the ‘ ‘ debts ’ ’ of the corporation ‘ ‘ then existing” and thereafter “contracted” for failure to publish an annual notice showing “the existing debts of the corporation.” The demand sued for grew out of a tort of the corporation. It will be first noted that this statute does not deal with unpaid stock subscription, but, imposes a penalty on the stockholders for -failure to publish the required notice. The court held this statute to be penal and not remedial and this, as we shall see, is an important distinction. The court further held that the statute then under consideration, being strictly construed, by its terms iinposed a liability for a limited kind of demands only, to-wit, those arising from contract and not for tort. In discussing this matter, the court said: “The question, however, here is, what class of demands is embraced within the words ‘debts contracted?’ Our Legislature did not go the length which others have in fixing the liabilities of the stockholders of these manufacturing corporations. They did not enact, as in many other States it is enacted, that the stockholders should be responsible for every liability established against the corporation, and which its assets turned out insufficient to meet. Such statutes as these, creating a general and determined liability not dependent on circumstances, becoming as it were a part of the very essence of the charter, may reasonably admit of a very different construction from a law which seems to recognize the general principle of individual irresponsibility subject to a very limited exception, and only ventures to hold out such responsibility as a penalty for a failure on the part
Since these decisions we have adopted a new constitution and new statutes, and it is important to note the new provisions. Section 9, article 12 of our Constitution, reads: “Stockholders, Extent of Liability. — Dues from private corporations shall be secured by such means as may be prescribed by law, but in no case shall any stockholder be individually liable in any amount over or above the amount of stock owned by him or her. ’ ’ The statute particularly invoked in this suit, enacted to carry out this provision of the Constitution, provides: “If any execution shall have been
The case of Carver v. Braintree Man. Co., 2 Story, 432, written by one of our most eminent jurists, which is cited and distinguished in the Cable v. McCune case, supra, construed a statute providing that “every person who shall become a member of any manufacturing corporation' shall he liable in his individual capacity for all debts contracted during the time of his continuing a member of such corporation,” as is pointed out in Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038, and Justice Story, holding this to he a remedial statute, construes the word “debts” as equivalent to the word “dues,” and the word “contracted” as equivalent to the word “incurred,” and. thus construed to be broad enough to include demands based on torts. Other courts, including those of Massachusetts, have since held that this is a strained construction put on
Our Supreme Court, in the Cable v. McCune case, supra, cited and followed the case of Heacock v. Sherman, 14 Wend. 58, a New York case, which construed a statute making stockholders liable “for all debts contracted by the said corporation” to the amount of the stock he may hold “at the time the debt accrued,” and that any person having “any demand” might sue such stockholders individually. That court said that the word “demand” was broad enough to include damages arising from tort, hut that the whole statute shows that only “debts contracted” were intended to be included and that it did not cover damages arising for tort. So that both the cases thus cited by out Supreme Court hold that the word “dues” and “demands” are broad enough to include damages for torts and should he so held unless restricted by other words and the context. Our Supreme Court also said, in the case just cited, that it did not perceive any reason for a distinction in the kinds of liabilities imposed on stockholders; and it is apparent that the court held that only contract debts were included in the statute then construed because the same was penal and so limited the liability by its terms.
.Is it not reasonable to suppose, therefore, that the framers of the new Constitution had in mind these decisions of our Supreme Court and chose the very word “dues,” which it was held would include tort damages as well as contract debts, and omitted all limiting words such as “contracted” or “accrued,” which, when applied to “debts,” at léast in penal statutes, limits the same to those arising ex contractu? This constitutional provision is mandatory on the Legislature and we do not think the Legislature has in any manner narrowed the “dues,” which, by the constitution, are to be secured by the individual liability of the stockholders by the statutory provisions above quoted.
There are a number of decisions supporting these views in construing similar constitutional and statutory provisions of other States. The case of Rider v. Fritchey, 49 Ohio St. 285, 15 L. R. A. 513, arose under a constitutional provision almost exactly like ours, except that the liability of a stockholder is for an amount equal to his stock over and above any amount unpaid thereon. The court held this provision to be remedial and not penal and that the word “dues” includes judgments for torts. The court concedes that where the liability is imposed as a penalty for the omission to perform some act required by statute, as was the case in Cable v. McCune, supra, the weight of the authorities is the other way.
This case is followed in Flenniken v. Marshall, 43 S. C. 80, 28 L. R. A. 402, arising under an identical constitutional provision, and it is there held that the constitutional provision requiring the “dues” of a corporation to be secured by stockholders’ liability is mandatory and that the statutes enacted to carry out this provision, though using the word “debts,” will be held to have used, it in a broad sense to include damages for torts as well as debts by contract.
Henley v. Myers, 76 Kan. 723, 93 Pac. 168, 17 L. R. A. (N. S.) 779, is a well considered case arising under a constitutional provision using the word ‘ ‘ dues ’ ’ and very similar to ours and a statute enacted thereunder imposing on stockholders liability “to the creditors” for any unpaid subscriptions, and, in addition thereto, an amount equal to the par value of the stock owned by them, such liability “to be considered as asset of the corporation in the event of insolvency.” The court noted the apparent conflict in the authorities and said: “Manifestly the question whether a stockholder must respond to a demand of the character here involved (tort) depends upon the language of the constitutional or statutory provisions in virtue of which the liability is asserted. The decisions for the most part turn upon the force to be given to the word ‘debt.’ While the statute under consideration does not use that word, much the same effect is produced by its employment of the term ‘creditors’ to describe those for whose benefit the remedy is furnished. (Citing cases) . . . Nearly all of these cases are controlled by one or the other of these two reasons: (1) That the statute to be construed is penal, the stockholder’s liability being incurred only as a penalty for. some act or omission of the directors, and on that account a strict construction is required; (2) that the statute uses some expression beyond the mere word ‘debt’ — for instance, ‘debt contracted’ — indicating that only contractual obligations are within its purview. Neither of these reasons can have any application here. The statute quoted is clearly remedial, and, beyond the bare use of the word ‘creditors,’ there is nothing in its language to suggest a limitation of its
There is much authority for holding that where the liability imposed on stockholders, as here, goes no further than to enforce unpaid stock subscriptions, the remedy is remedial, the amount collected is an asset of the corporation and inures to the benefit of all judgment creditors whether based on tort or contract. Thompson Corporations, Vol. 4, sec. 4845, states the rule as to the liability of stockholders for unpaid stock subscriptions in the following language: “It ought to be conceded that in actions to enforce the stockholder’s statutory liability for any amount due on his stock subscription that the term ‘debt’ or ‘indebtedness’ should include a judgment against a corporation in an action for tort.” .The rule is stated thus in 10 Cyc. 684: “A judgment against a corporation is certainly a debt of. the corporation without reference to the question whether it was founded upon a tort or
The defendants- have cited a number of cases, some of which have been noted, as holding a contrary view. [Bohn v. Brown, 33 Mich 257; Tilley v. Coykendall, 71 N. Y. Supp. 457; Ward v. Joslin, 105 Fed. 224; Doyle v. Kimball, 52 N. Y. Supp. 195; Schrader v. Bank, 133 U. S. 67, 33 L. Ed. 564; Brown v. Trail, 89 Fed. 641; Kelly v. Fourth of July Min. Co., 21 Mont. 291, 53 Pac. 959, 42 L. R. A. 621; Child v. Iron Works, 137 Mass. 516, 50 Am. Rep. 328; Savage v. Shaw, 195 Mass. 571, 81 N. E. 303; Avery & Son v. McClure, 47 So. 901, 22 L. R. A. (N. S.) 256; Old Colony Boot & Shoe Co. v. Adams Co., 67 N. E. 870, 871; Esmond v. Bullard, 16 Hun. 65, 68.] Several of these cases are -discussed and distinguished in the cases heretofore cited in this opinion. Space forbids that we should ■discuss and distinguish each one separately. A reading of the cases will show that many of them are founded on statutes which are penal and impose on the ■stockholder a liability over and above his stock subscription for some dereliction of the corporation or its officers. Most of them will be found to be based on ■statutes which, by the use of certain terms-, show that the same is intended to embrace only a certain kind of liability and in favor of contract creditors. In many ■of them the amount collected from the stockholders is not an asset of the corporation but goes directly or indirectly to a designated class of creditors. This point is, therefore, ruled in favor of the plaintiff.
We have serious doubts whether under the mandatory provision of our Constitution the Legislature has power tó provide that the capital stock of a corporation may be paid in property at a fixed valuation regardless of its real value. [Kelly v. Fourth of July Min. Co., 21 Mont. 291, 53 Pac. 959, 42 L. R. A. 621, 635; Security Trust Co. v. Ford, 79 N. E. 474, 476.] We certainly should not impute to it an intention to do so unless forced thereto by the plain provisions of some legislative act. The act of 1911, p. 148, amending section 3339, Revised Statutes 1909, which-is claimed to accomplish this result, provides: ‘£ The articles of agreement shall set out: . . . the number of shares into which it is divided, and the par value thereof; that fifty per cent, of the authorized capital stock thereof has been in good faith subscribed and actually paid up in lawful money of the United States or in property of the full value thereof, and is in the custody of the persons named as the first board of directors or managers; . . . Provided, that if any part of the capital stock is paid in property, the articles of agreement must give an itemized description of such property, setting out the cash value of each item thereof, and such itemization shall show: (a) if such property be real estate, the exact'description by metes and bounds and location of such real estate, and the actual cash value of each tract; (b) if such property be personal property, such itemization shall give the location of each class of personal property and the actual cash value of each class of personal property.
Defendants contend that as our statutes, sections 2975 and 3340, Revised Statutes 1909, provide that a copy of the articles of incorporation shall be filed with the Secretary of State and recorded in the county where the corporation is located, such record gives constructive notice to all the world of the fact that the stock is fully paid in property of the value given. Defendants then rely on a line of cases holding that where a person deals with a corporation, knowing that it has accepted certain property in full payment of stock, he is estopped to claim that the stock is not fully paid up. [Berry v. Rood, 168 Mo. 316, 334, 67
The case will, therefore, be reversed and remanded, with directions to set aside the judgment on demurrer and overrule the same and proceed in accordance with this opinion.