149 P. 531 | Or. | 1915
Lead Opinion
delivered the opinion of the court.
“All corporations that expire by limitation specified in their articles of incorporation, or are dissolved by virtue of the provisions of Section 6701, or are annulled by forfeiture or other cause by the judgment of a court, continue to exist as bodies corporate for a period of five years thereafter, if necessary for the purpose of prosecuting or defending actions, suits or proceedings by or against them, settling their business, disposing of their property, and dividing their capital stock, but not for the purpose of continuing their corporate business.”
As to the effect of this statute in a case like the one at bar it is said in the case of Dundee Mortgage & Trust Investment Co. v. Hughes (C. C.), 77 Fed. 856:
“In some of the states where the corporate existence is so extended by statute, express authority is given to prosecute to a final judgment all actions begun by the corporation within the limited period: Franklin Bank v. Cooper, 36 Me. 179; Greenbrier Lumber Co. v. Ward, 30 W. Va. 43 (3 S. E. 227). Under such a law was decided the case of Bewick v. Alpena Harbor Imp. Co., 39 Mich. 700, which is cited by counsel for the plaintiff. In that case the court held that the corporation might prosecute to a close any action commenced within the three-year period of limitation fixed by the statute, but in so holding gave effect to another provision of the law upon the same subject, which provided that no such suit, once commenced, should become abated at any time until brought to a close. There is no such or similar provision in the Oregon law. The statute of this state gives a bare extension of life for a fixed period after the dissolution of the corporation. Without the statute, as we have seen, by the common law, all corporations were defunct from the moment of their dissolution. The statute extends their existence for a further period for a stated purpose. At the expiration of that period it is the logic of the common-law rule that the corporation is as absolutely defunct*36 as it would have been in the first instance had not its life been prolonged by the intervention of the statute. The Supreme Court of Massachusetts has held that a judgment recovered against a corporation after the expiration of a similar period of limitation is absolutely void: Thornton v. Marginal Freight Ry. Co., 123 Mass. 32.”
The doctrine here expressed appears to be in accord with the great weight of authority: 10 Cyc. 1314; 5 Thompson on Corporations, §§ 6550, 6555; MacRae v. Kansas City Piano Co., 69 Kan. 457 (77 Pac. 94); Buck Stove etc. Co. v. Vickers, 80 Kan. 29 (101 Pac. 668); May v. North Carolina St. Bank, 2 Rob. (Va.) 60 (40 Am. Dec. 726); 1C.J.134; 7 R. C. L., §§ 750, 751. This doctrine, it is true, may work hardship in the individual case, but it must not be forgotten that in the case at bar the dissolution of the corporation was voluntary, and no doubt the stockholders weighed the resulting advantages as against the consequent disabilities, so they cannot now complain.
“The court erred in refusing to give the instruction requested by the defendant to the effect that as the plaintiff had been disincorporated prior to the commencement of the action, there was no evidence justifying the plaintiff in maintaining the action and that plaintiff could not recover.”
This assignment simply calls attention'to the fact that the action was commenced after the dissolution, and that was the only matter germane to the present discussion which was then submitted or considered. At the time the first judgment was rendered the lapse of the five-year period was not an issue, and could not be, for no such lapse had then occurred. It follows that the action must be dismissed.
Action Dismissed.
Rehearing
Petition for rehearing allowed October 22, 1915.
Petition for Rehearing.
(152 Pac. 262.)
delivered the opinion of the court.
In a petition for rehearing remarkable for its ability and plausibility, plaintiff questions the soundness of the original opinion dismissing this case. A brief résumé of the circumstances leading up to such dis
“The real estate remaining unsold reverts to the grantor and his heirs, ‘because [in the language of Lord Coke] in the case of a body politic or incorporate the fee is vested in their political or incorporate capacity, created by the policy of man, and therefore the*41 law doth annex a condition in law to every snch gift and grant that, if snch body politic or incorporate be dissolved, the donor or grantor shall re-enter, for that the cause of the gift or grant faileth’: Co. Litt. 136. Goods and chattels, by the common law, were deemed of too transitory and fluctuating a nature to be susceptible of reversionary interests after an estate for life, and, on the death of a corporation, they do not revert to the grantor or donor, but, being bona vacantia, or goods wanting an owner, they vest in the sovereign, as well to preserve the peace of the public as in trust to be employed for the safety and ornament of the commonwealth. Choses in action are under the operation of a different rule. They were rights of the corporation to demand money in the hands of persons by whom it was withheld. They derived their existence from contracts or quasi contracts by which the relation of debtor and creditor was created. When the creditor corporation died, and there was no successor, no representative, the relation of debtor and creditor ceased, and the debt became necessarily extinct. None but the creditor had a right to demand the money, and when his right is gone, the money becomes to all purposes the money of the possessor.”
These rules have been, however, materially modified by statutes of the various states, and in some instances by judicial decisions without the aid of statutes, so that it may be taken to be the general rule that upon the extinction of a corporation by voluntary dissolution its real and personal property and assets become the property of the stockholders, but the corporation, as such, does not remain alive for any purpose beyond the limit of five years.
“All corporations that expire by limitation specified in their articles of incorporation, or are dissolved by virtue of the provisions of Section 6701, or are annulled by forfeiture or other cause by the judgment of a court, continue to exist as bodies corporate for a period of five years thereafter, if necessary for the*42 purpose of prosecuting or defending actions, suits or proceedings by or against them, settling their business, disposing of their property, and dividing their capital stock, but not for the purpose of continuing their corporate business.”
Counsel for plaintiff contend that the word “prosecute” means to commence, and in this connection cites Hickox v. Elliott (C. C.), 22 Fed. 13, in which Judge Deady, construing the statute which requires that “every action shall be prosecuted in the name of the real party in interest,” observes:
“In my judgment, the term ‘prosecuted’ is used in this section in the sense of ‘commenced,’ and does not prevent a party from assigning his interest in the subject matter of an action after it has been duly commenced, or require that the assignee shall make himself a party thereto, or dismiss the same and commence ■ another action in his own name. And so the provision appears to have been construed in Garrigue v. Loescher, 3 Bosw. (N. Y.) 578, cited in Wait’s Annotated Code, 115.”
Judge Deady was evidently misled by an erroneous statement as to the effect of the decision in Garrigue v. Loescher, which holds only that an assignee of a chose in action may sue in his own name, and, further, that having sued in his own name, he cannot sustain his title by evidence of an assignment made after he has commenced his action.
In Hickox v. Elliott (C. C.), 22 Fed. 13, the court was dealing with a living plaintiff and a living assignee of that plaintiff, and there can be little doubt that, if the case had presented the aspect of a plaintiff, who had assigned his claim and thereafter died, the court would have abated the suit, or upon a proper showing have directed a substitution. Here we have a case carried on in the name of a plaintiff who is absolutely extinct for any purpose whatever, with no substitu
Reason also supports this construction of our statute, which was evidently designed to remedy the harshness of the common-law rule abating every action and destroying all rights of recovery on behalf of a corporation the moment it became dissolved. Instead of this, the statute allows five years as a reasonable time within which all actions may be brought to a conclusion and the proceeds from them or the judgments themselves be disposed of to the advantage of stockholders and creditors. That the plaintiff, with a large claim against defendant, should have voluntarily dissolved, leaving it unliquidated, or, having dissolved, allowed two of the five years limitation to expire before commencing its action, is certainly due to no harsh feature of the law. It is clear that, had this action been commenced when the cause accrued, or even when the dissolution took place, plaintiff would have had ample time to have concluded it before the expiration of the five years allowed for that purpose. Consequently,
The petition for substitution should be allowed, and our former opinion reversing the first judgment set aside. The matter will then stand for hearing upon the original appeal.
An order will be entered accordingly.
Rehearing Allowed.
Dissenting Opinion
delivered the following dissenting opinion:
It seems illogical to hold that the only means by which the defendant can bring to the attention of the court the fact that the plaintiff corporation is functus officio and so abate the action, five years having elapsed since the corporate dissolution, is first to cause the substitution of the stockholders by whom the action may be perpetuated. The principle embodied in Section 6699, L. 0. L., is that at the end of the five-year period mentioned, the existence of the artificial being called a corporation ceases. It does not die; neither has it any inheritable blood. It is a conventional institution devised by its component stockholders to serve their purposes, and its use by them is controlled and circumscribed by the law, which automatically puts a quietus upon their creature at the expiration of the five years. It is true that as between it and them its property belongs to them, but it is equally true that the transposition from corporate to individual title as affecting other parties must be worked out through corporate
“Suits and actions upon choses in action arising out of contracts sold or assigned by any corporation dissolved by this act may be brought or prosecuted in the name of the purchaser or assignee. The fact of sale or assignment and of purchase by the plaintiff shall be set forth in the writ or other process; and the defendant may avail himself of any matter of defense of which he might have availed himself in a suit upon the claim by such corporation, had it not been dissolved by this act.”
The stockholders do not inherit from their creature. They perpetuate or dissolve it at pleasure, and if they do not acquire title to its choses in action while yet it may transmit-it, they have no causé of complaint, because they have control of the situation up to the limit of five years which they have brought upon themselves. Beyond that it is inert, and cannot be counted upon for any purpose. Otherwise the statute would be ignored, and the corporation prolonged indefinitely. The matter involved stood undenied on the record, and upon the bare suggestion of the fact the court of its own motion ought to have abated the action as it would one on the death of a natural plaintiff where the cause of action does not survive.
For these reasons, I withhold my assent to the conclusion reached by Mr. Justice McBride.
Rehearing
Judgment rendered November 3, 1911, reversed and remanded June 20, 1916.
Rehearing on Original Appeal,
(158 Pac. 175.)
delivered the opinion of the court.
After the opinion rendered in this case by Mr. Justice McBride on October 22, 1915, counsel for defendant submitted a motion to dismiss the cause and questioned the authority of the court to substitute the stockholders of the plaintiff corporation as parties plaintiff.
In its motion the defendant raises two main questions, namely:
(1) “Substitution is unknown except in cases where legal title to the interest of a party in the subject matter of a suit descends and devolves, upon the death of the party, upon the person to be substituted; and the assets, whether realty, personalty or choses in action, of a corporation, do not pass at law on the dissolution of the plaintiff to the stockholders; (2) substitution cannot be permitted except by statute, and there is no statute in Oregon permitting the substitution of stock*48 holders in place of a corporation which dies pending suit to which it is a party.”
It is contended in behalf of plaintiff that upon the death of the corporation without creditors, and without provision being made for the distribution of its assets, the same descends by operation of law to the stockholders, who are the beneficiaries under the trust, and the only persons who have any interest in the property, and that thereby the stockholders become tenants in common of the corporate property and are entitled to all the remedies that the latter have in asserting their ownership to such property.
Section 38, L. O. L., declares that:
“No action shall abate by the death, marriage, or other disability of a party, or by the transfer of any interest therein, if the cause of action survive or continue. In case of the death, marriage, or other disability of a party, the court may, at any time within one year thereafter, on motion, allow the action to be continued by or against his personal representatives or successors in interest.”
Long v. Thompson, 34 Or. 359, 362 (55 Pac. 978), is authority for the proposition that the disability of a party, pending an appeal to the Supreme Court, does not abate the appeal, notwithstanding no application be made for a substitution within a year as required by this section, the statute not applying where death occurs after an appeal has been perfected. "We do not understand that the learned counsel for defendant question the right of the stockholders to any property formerly belonging to the defunct corporation, but their contention in its final analysis is that in order to prosecute the action which was properly commenced and in which a judgment was rendered in the lower court during the existence of the corporation, a suit in equity is necessary to authorize the same. The fact
In Baldwin v. Johnson, 95 Tex. 85 (65 S. W. 171), the corporation, the John Henry Shoe Company, was dissolved and the stockholders attempted to appoint commissioners to wind up their affairs. The commissioners brought an action to recover certain real property, and the court held that they had no capacity to maintain the action. Thereupon the plaintiffs amended their complaint by averring that they were stockholders of the defunct corporation. The trial court instructed the jury that plaintiffs as stockholders had no such title or interest in the property as would permit them to recover, and directed a verdict for defendant. On appeal the court used this language:
"The judge of the District Court correctly instructed the jury that the plaintiffs could not recover as com-, missioners of the John Henry Shoe Company, * * But the property itself, upon the dissolution of the corporation, became the property of the stockholders, each one of whom owned an undivided interest in it in the proportion that his stock bore to the whole capital stock: Harbor Co. v. Manning [94 Tex. 558] (63 S. W.*50 627). In the case cited, Chief Justice G-aines, for the court, said: ‘But in its last analysis the stockholders are the beneficial owners of the assets of the corporation. This proceeding is instituted upon the theory— which we think a correct one—that the shareholders are the ultimate owners of the corporate property, and when the corporation is dissolved, and its creditors are satisfied, they hold title to the assets in proportion to their respective shares.’ The proposition quoted is well sustained by authority and by sound reasoning”—■ citing 2 Perry on Trusts, § 920; How v. Waldron, 98 Mass. 281.
See, also, Pewabic Mining Co. v. Mason, 145 U. S. 349 (36 L. Ed. 732, 12 Sup. Ct. Rep. 887); Lauman v. Lebanon Valley R. R. Co., 30 Pa. 42 (72 Am. Dec. 685).
The defendant’s contention that there is no authority for the substitution of the stockholders as parties plaintiff in accordance with the opinion heretofore rendered is not well taken. For the reasons set forth in the opinion of Mr. Justice Burnett of September 30, 1913 (67 Or. 63 (135 Pac. 539), and the opinion of Mr. Justice McBride, announced October 22,1915 (152 Pac. 262), the first judgment in this action in the lower
Reversed and Remanded.
Dissenting Opinion
delivered tbe following dissenting opinion:
I dissent from the conclusion reached by Mr. Justice Bean allowing substitution, in this action, of the stockholders of the defunct corporation plaintiff. The action ought to have been abated when the matter was first suggested after the expiration of five years from the dissolution of the plaintiff.