Breitung v. Lindauer

• Decision Date: 02 October 1877
• Citation: 37 Mich. 217
• Court: Michigan Supreme Court
• Parties: Edward Breitung v. Benjamin Lindauer and others

37 Mich. 217

Edward Breitung v. Benjamin Lindauer and others

Supreme Court of Michigan

October 2, 1877

Argued June 19, 1877; June 20, 1877 [Syllabus Material]

Error to Marquette. (Williams, J.)

Assumpsit under Comp. L. (1871) § 2858. Defendant brings error. Reversed.

Judgment reversed with costs of both courts.

W. P Healy, G. V. N. Lothrop and Ball & Owen for plaintiff in error, as to the history of the legislation involved, referred to Comp. L. 1857. § 1803, amended in Sess. L. 1867, Act 89, and Sess. L. 1869, Act 70; see Comp. L. 1871, § 2840; also Comp. L. 1857, § 1819, amended in Sess. L. 1865, Act 21; and Comp. L 1857, § 1821, amended in Sess. L. 1875, Act 89. A legislative revision of a subject, operative in itself, repeals all former legislation on it, even though consistent with it. Bartlett v. King 12 Mass. 545; Ellis v. Paige 1 Pick. 45; United States v. Tynen 11 Wall. 92, and cases; Flaherty v. Thomas 12 Allen 434; Com. v. Kelliher 12 Allen 481; Norris v. Crocker 13 How. 438; Leighton v. Walker 9 N.H. 59; Com. v. Kimball 21 Pick. 376; Nichols v. Squire 5 Pick. 168; Titcomb v. Union Ins. Co. 8 Mass. 326. The repeal of a penalty stops any right of action for it, even if the liability is already incurred. Engle v. Shurts 1 Mich. 150; R. R. Co. v. Austin 21 Mich. 390, 411; Thurston v. Prentiss 1 Mich. 201; Butler v. Palmer 1 Hill 324; State v. B. & O. R. R. Co. 12 Gill & J. 399; Morris & Essex R. R. Co. v. Com'r of Railroads 37 N.J.L. 228. The statutory liability imposed by Comp. L. § 2858, is in the nature of a penalty. Van Etten v. Eaton 19 Mich. 194-5; First Nat. Bank v. Price 33 Md. 487; Garrison v. Howe 17 N.Y. 458; Boughton v. Otis 21 N.Y. 261; Merchants' Bank v. Bliss 35 N.Y. 412; Miller v. White 50 N.Y. 139; Bird v. Hayden 1 Robertson 391; Bronson v. Dimock 4 Hun 614; Peele v. Phillips 8 Allen 89; Halsey v. McLean 12 Allen 441; Lawler v. Burt 7 Ohio St. 340; Cable v. McCune 26 Mo. 380; Union Iron Co. v. Pierce 4 Biss. 327; Hill v. Frazier 22 Penn. St. 320; Judy etc. v. Howard 2 Met. (Ky.) 44; Derrickson v. Smith 3 Dutch. 166. And after a statute is repealed, no action founded on it can be maintained. Merchants' Bank v. Stevenson 10 Gray 232; Wiley v. Yale 1 Metc. 553. One who has taken a note in place of his original demand, and having elected to sue upon the note, has recovered judgment, is bound by his election. Galloway v. Holmes 1 Doug. (Mich.) 347; Thompson v. Howard 31 Mich. 309; Wetmore v. McDougall 32 Mich. 276; Shepard v. Cross 33 Mich. 96; Rodermund v. Clark 46 N.Y. 354; Smith v. Baker 8 L. R. (C. P.) 355; Castleman v. Holmes 4 J. J. Marsh (Ky.) 1. Indebtness is merged in the judgment. Bangs v. Watson 9 Gray 212; Handrahan v. Cheshire Iron Works 4 Allen 396.

Wm. H. Parks, Geo. W. Hayden and Mitchel & Pratt for defendants in error. The joint and several liability of directors for debts contracted by their corporation during the period of their neglect to file reports is not a penal, but a contract liability which they must be considered to have assumed voluntarily, Lockhart v. Van Alstyne 31 Mich. 76; it is on the same footing as the liability of stockholders for corporation debts, which is one of contract, Hawthorn v. Calef 2 Wall. 10, and the directors are therefore principals and co-debtors with the corporation. Conant v. Van Schaick 24 Barb 96; Harger v. McCullough 2 Den. 119; Corning v. McCullough 1 Comst. 47; Moss v. McCullough 7 Barb. 295. The constitutional prohibition against impairing the obligation of contracts covers implied contracts, Fletcher v. Peck 6 Cr. 133; Planters' Bank v. Sharp 6 How. 301; Dartmouth College Case 4 Wheat. 518; Ogden v. Saunders 12 id. 213-341; a change in the statute cannot affect a vested right of action for the recovery of money paid for liquor sold in violation of the liquor law, Peters v. Goulden 27 Mich. 171, and the right to recover actual damages for the neglect of railroad companies to fence their roads is secure from legislative attack. Bay City & E. Sag. R. R. Co. v. Austin 21 Mich. 390. The Legislature can create implied contracts from the future voluntary acts of individuals, Streubel v. Mil. & Miss. R. R. 12 Wis. 67. And the directors' liability, as one of the securities to the corporate indebtedness, cannot be impaired, Bronson v. Kinzie 1 How. 311; nor can an implied obligation of indemnity, Boyle v. Zacharie 6 Pet. 635. A penal liability is illustrated in Maryland v. B. & O. Ry. Co. 3 How. 534. But when a penal statute is also meant to give security or compensation to creditors, the right it establishes rests on equitable principles and cannot be taken away, Dash v. Van Kleeck 7 Johns. 477. The repeal of § 2858 takes away both the right and the remedy. Curran v. Arkansas 15 How. 304. The New York decisions relied on by plaintiff in error must have regarded the statutes under which they were rendered as unlike ours, Rochester v. Barnes 26 Barb. 657, and it does not follow that because the liability may be treated as penal for the purpose of the New York statute of limitations, it is entirely devoid of substantial rights and may be abrogated at will, McCoon v. N. Y. C. & H. R. R. R. Co. 7 Lans. 75; Bonnell v. Wheeler 1 Hun 332. The liability sought to be enforced against the directors in this case is not based upon a judgment, but upon the original debt of the corporation, for which they are made liable, Bohn v. Brown 33 Mich. 257; Deming v. Puleston 55 N.Y. 655; Parrott v. Colby 6 Hun 55.

OPINION

Marston, J.

This action was brought to charge the defendant, plaintiff in error, for an indebtedness of the Michigan Iron Company, contracted while the defendant was a director thereof, because the directors of such corporation had failed to file certain reports as required by a general law of the State, relating to mining and manufacturing corporations.

A brief statement of facts will better enable us to comprehend the several questions raised in this case.

During the years 1873 and 1874 the corporation purchased from Lindauer, Levy & Co., and their successors, Lindauer Bros. & Co., of Chicago, certain goods, and the same not having been paid for, the corporation, June 10th, 1874, executed and delivered to plaintiffs its three notes, each for the sum of $ 1202.85, payable in 30, 60 and 90 days respectively, leaving a balance at that date still unprovided for. August 3d, 1874, the corporation purchased another bill of goods amounting to $ 127.50, and on the 12th day of August it gave another note for this new bill and the amount of the old bills not included in the three notes previously given. This last note was given for the sum of $ 1322.44, and was dated June 4th, 1874. Upon the same day, August 12th, two of the first three notes were taken up, and a new note for the amount thereof given. Each note drew ten per cent. interest.

The defendant, Breitung, was a stockholder and attended and presided over the annual meeting of the stockholders of the corporation in 1872. He was also present at the annual meeting held July 29th, 1874, but it did not appear that he attended either the stockholders' or directors' meetings intermediate those dates. It also appears that he was elected a director at the annual meeting held in June 1872, and held the position of director, having been regularly elected a director again in 1873 and 1874, until July 29th, 1874. The directors failed to make and file a report as required by section five of chapter 25 of the Compiled Laws, during the years 1872 or 1873, and until July 29th, 1874, when a report was filed. All this appears from the finding of the court. The court also found that "the only excuses bearing upon the causes of the neglect aforesaid, to file the reports required by section five, are those given by a majority of the directors in their testimony, which were that they did not think of it; that they had no active intention to violate the law; that the general management was left with the secretary and treasurer H. J. Colwell, and the directors usually interfered only when the general manager asked their advice. The same excuses were given in the testimony of this defendant for his neglect. The court in its finding farther says, "I find that the directors did forget to file the reports mentioned, and also find that the subject of filing these reports during the time of the neglect mentioned did not occur to the majority of the directors, including this defendant." Also "I find that forgetfulness of duty or an impression that another will discharge a duty which the law devolves on both alike, or a quiescent reserved intent to do nothing wrong, will not excuse from an active incumbent duty." And again, "I find that under the statute the neglect or refusal was an intentional one." Of course, these last are conclusions of law from the facts previously found, and are not finding of facts, although so called. The court also came to the conclusion that the company's promissory notes having been given for the merchandise, and judgments afterwards obtained upon such notes against the company, and no explanatory evidence having been introduced with reference thereto, it must therefore be considered that the notes paid for the merchandise, and that the indebtedness was contracted when the notes were given, and upon this view excluded the note of August 12th given for $ 2431.29, but allowed the others, except the amount of $ 127.50 for goods purchased in August, which was excluded. We are of opinion that the court erred in excluding the note given August 12th for $ 2431.29, to take up the two notes of June 10th, 1874, which were given for goods previously purchased. The general and well settled rule in this State is, that acceptance of the note of the debtor is not a payment, unless so agreed to by the parties, of the...