Breitzke v. Bank of Grand Prairie

• Decision Date: 19 June 1916
• Docket Number: 69
• Citation: 187 S.W. 660,124 Ark. 495
• Parties: BREITZKE v. BANK OF GRAND PRAIRIE
• Court: Arkansas Supreme Court

187 S.W. 660

124 Ark. 495

BREITZKE v. BANK OF GRAND PRAIRIE

No. 69

Supreme Court of Arkansas

June 19, 1916

Appeal from Prairie Chancery Court; John M. Elliott, Chancellor affirmed.

STATEMENT BY THE COURT.

This suit was instituted by the appellee against the Hazen Creamery Company, a corporation, and appellants, the president and secretary, respectively, of such corporation to foreclose certain mortgages and to obtain a personal judgment against the appellants for certain sums amounting in the aggregate to $ 5,000, evidenced by a promissory note for that sum dated March 10, 1914. After setting out the different items of indebtedness that constituted the aggregate sum of $ 5,000, for which the note was executed by the creamery company to the appellee, giving the dates and amounts, it was alleged in the complaint that the appellants as president and secretary of the corporation, neglected to comply with the statute requiring them to file a certificate showing the financial standing of the corporation of which they were officers in the years 1913 and 1914, and that the indebtedness sued on accrued during the period of such neglect.

Appellants denied that they had failed to comply with the statute as alleged, and denied that the indebtedness to the appellee was contracted during the period of any neglect or refusal on their part; and denied that they were indebted to the appellee in the sum sued for. They further set up that the note sued on was for indebtedness of the creamery company to the appellee that existed before appellants became officers of the creamery company, and that said indebtedness was not contracted during any period of default on their part to file the certificate showing the condition of the financial affairs of the corporation of which they were officers. They further set up that the note in suit was executed by the appellants as president and secretary of the corporation only after the appellee had agreed with the appellants that it would not hold them personally liable for the debt or any part thereof; that but for such agreement they would not have signed the note sued on. They further set up that the creamery company was incorporated in April, 1912, and that default was made in filing the statement as required by the statute in August, 1913, by the then president and secretary of the company; that appellants were elected to their respective offices October 8, 1913, and that they were not required by law to file any certificate with the county clerk of Prairie County until August 15, 1914; that the debt for which the note was given was contracted prior to August 15 1914; they further alleged that prior to February 15, 1914, the sum of $ 1,000 was already due the plaintiff, evidenced by a promissory note executed long prior to the time when the appellants became officers of the creamery company; that prior to February 15, 1914, the sum of $ 3,051.38 of the indebtedness evidenced by the note sued on was due the appellee in the form of an overdraft, and that only $ 948.62 of the note in suit was contracted after February 15, 1914. They alleged therefore that if they were liable at all under the law, their liability would only be for the sum of $ 948.62. They further set up that appellee was estopped by representations made by its officers at the time of the execution of the note in suit to the effect that they would not hold appellants liable as officers for the indebtedness sued on.

The testimony shows that appellants Breitzke and Kumpe were elected president and secretary, respectively, of the creamery company October 8, 1913. At that time the company owed the bank the sum of $ 1,000, evidenced by a note, and the further sum of $ 1,476.06 in overdraft. After appellants became officers of the company its overdrafts on the bank varied, increasing and diminishing from time to time. Kumpe, the secretary, testified that "at lots of times the overdraft was cut down to practically nothing, but they made a new overdraft each month. The 20th of the month was pay day. On that day they would have the overdraft taken up--everything covered--and they would issue checks which would cause another overdraft. The checks would be issued for the pay roll of the month preceding the 20th. At times they would pay out on the 20th, and there would be times that there would be no overdraft until the pay roll came in and they would make a new overdraft. That occurred between October 8, 1913, and March, 1914."

It was shown that as early as October 20, 1913, after appellants became officers of the company, the overdrafts were reduced to as low a sum as $ 140.38. On February 15, 1914, the company owed the bank a note in the sum of $ 1,000 and an overdraft in the sum of $ 3,051.38, making a total indebtedness of $ 4,051.38, and interest, which had been contracted prior to that date. The sum of $ 491.03 was contracted after February 15, 1914, and prior to March 10, 1914, the date when the note in suit was executed. The note, as stated, covered all prior indebtedness of the company to the bank, with accrued interest as of that date. It was admitted that the note represented a valid indebtedness of the company to the appellee.

The court rendered judgment against the creamery company for the amount sued for, and also rendered a judgment against the appellants for the sum of $ 4,360, amount of principal and interest from March 1, 1914, to date of decree. Appellants seek by this appeal to reverse the judgment.

Decree affirmed.

Richard M. Mann and Price Shofner, for appellants.

1. Appellants were not personally liable. The period of "neglect or refusal" to file the certificate required does not begin with the election of the president and secretary nor end with their resignation. Kirby's Digest, §§ 848, 849; Acts 1909, p. 643; 68 Ark. 433; 75 Id. 107; 101 U.S. 188; 133 P. 681; 2 Morawetz on Priv. Corp. (2 ed.), § 908; 88 Ind. 254; 107 F. 188; 96 Ark. 268; 114 F. 290. This period did not begin until August 15, 1914.

2. Appellee is estopped by its agreement not to hold appellants personally liable.

Trimble & Williams, for appellee.

1. Appellants are clearly personally liable. The $ 4,000 was a new indebtedness contracted by overdrafts after they assumed their offices, and they failed to file the certificate required by law. The act is not penal, and hence strictly construed. 95 Ark. 330; 68 Id. 436; 2 Thompson on Corp. (2 ed.), § 1781; 96 Ark. 273; 75 Id. 111; 21 N.Y. 264.

2. No estoppel is shown.

WOOD J. KIRBY, J., dissenting.

OPINION

WOOD, J., (after stating the facts).

(1) The Hazen Creamery Company (hereafter, for convenience, called company) was incorporated March 16, 1912, under the provisions of chapter 31 of Kirby's Digest. Under the law it is the duty of the president and secretary of every business corporation, annually on or before the 15th day of the months of February or August, to file with the county clerk of the county in which the company transacts its business a certificate showing the condition of the financial affairs of the corporation on the first day of January or July next preceding, in the particulars specified in section 848 of Kirby's Digest. A failure or refusal upon the part of the president or secretary of a corporation to comply with the above provisions renders them jointly and severally liable for all debts of the corporation contracted during the period of any such neglect or refusal, and they are also guilty of a misdemeanor, punishable by a fine of $ 500, for each and every day that they neglect to comply with the above provisions. Act 222, Acts of 1909, page 643.

In Griffin v. Long, 96 Ark. 268, 131 S.W. 672 concerning this statute, we said: "The reason of the statute is to require corporations to make such public showing of their affairs as will enable those dealing with them to determine whether they can safely give them credit." And in Beekman Lumber Co. v. Ahern, 75 Ark. 107, speaking of this act, we said: "There is nothing in the act that requires an officer who has neglected to file the statement within the time named in the act to wait until after the first day of the next succeeding July or January before filing the statement. On the contrary, as the act declares that, upon the failure to file the statement, within the time named, the officer becomes liable for all debts of the corporation contracted during the period of such neglect, we are of the opinion that it was the intention of the law to make it to the interest of the officer to file the statement at as early a date as possible, when he discovers his oversight, and when he does file such statement, even though it be after the dates named in the act, that he is not liable for debts thereafter contracted by the corporation until he...