Eberts Cadillac Co. v. Miller

• Decision Date: 27 December 1963
• Docket Number: No. 111,111
• Citation: 125 N.W.2d 306,372 Mich. 172
• Parties: EBERTS CADILLAC CO., a Michigan Corporation, Plaintiff and Appellee, v. Jack MILLER, James Miller and Joseph Lynch, Defendants and Appellants.
• Court: Michigan Supreme Court

Page 306

125 N.W.2d 306

372 Mich. 172

EBERTS CADILLAC CO., a Michigan Corporation, Plaintiff and Appellee, v. Jack MILLER, James Miller and Joseph Lynch, Defendants and Appellants.

No. 111.

Supreme Court of Michigan.

Dec. 27, 1963.

Jack R. Clary, Warner, Norcross & Judd, Grand Rapids, for plaintiff and appellee.

Joseph C. Lynch, Reed City, for defendants and appellants

Before the Entire Bench.

CARR, Chief Justice.

This action was commenced in circuit court on May 21, 1962, to enforce the alleged liability of the defendants as officers of a corporation known as Chewning Motors, Inc. The declaration filed in the cause set forth the incorporation of Chewning Motors, further assering that defendants Miller were vice-presidents thereof and that defendant Lynch was the secretary at the time indebtedness was incurred, according to the 1959 annual report of the corporation. As the basis for such liability plaintiff averred that said report was the last one filed by Chewning, which discontinued business in 1961.

Under pertinent provisions of the Michigan general corporation act* it was the duty of the corporation to file its annual report each year on May 15. Having failed to do so for the years 1960 and 1961, the corporation was in default during the period, in which in the course of the business it was continuing, it became indebted to the plaintiff in the sum of $946.75 on open account and the further sum of $8,864.56, the latter amount being evidenced by two checks given by the corporation in payment for two Cadillac automobiles purchased from the plaintiff. The pleading alleged that on presentment for payment the checks were returned for insufficient funds and that neither obligation had been satisfied. Plaintiff, therefore, claimed the right to recover against the defendants under the statute in the sum of $9,811.31.

Defendants filed motion to dismiss the case on the alleged ground that under section 90 of the corporation act it was not seasonably brought, in that filing of the suit was more than two years after the alleged neglect or refusal of defendants to make and file the report. The question presented was, in consequence, whether such period of default began on May 15, 1960, or on May 25 of said year, the statute expressly permitting 10 days of grace from and after the date for filing as specified within which to file the annual report and make payment of the statutory fees required. The motion to dismiss was denied by the circuit judge before whom it was heard, and defendants filed claim of appeal from the order entered. The case has been submitted to us on a joint appendix filed by the parties, and on briefs and oral arguments.

Involved in the determination of the question on the merits are certain sections of the corporation act. The filing of the annual report on May 15 of each year, and the payment of a filing fee and a privilege fee, is required by section 82 of the general corporation act (C.L.S.1956, § 450.82 [Stat.Ann.1963 Rev. § 21.82]). Section 87 of the act (C.L.1948, § 450.87 [Stat.Ann.1963 Rev. § 21.87]) reads as follows:

'Failure to file report; suspension of powers, liability of director or trustee. (1) If any corporation neglects or refuses to make and file the reports and/or pay any fees required by this act within the time herein specified, and shall continue in default for 10 days thereafter, unless the secretary of state shall for good cause shown extend the time for the filing of such report or the payment of such fee, as the case may be, as provided in section 91 of this act, and (2) if such corporation shall continue in default for 10 days after the expiration of such extension, its corporate powers shall be suspended thereafter, until it shall file such report, and it shall not maintain any action or suit in any court of this state upon any contract entered into during the time of such default; but nothing herein contained shall prevent the enforcement of such contract against the corporation by the other party thereto, and during the period of such suspension such corporation may exercise the power of disposing of and conveying its property and may settle and close its business. Any officer or officers of such corporation so in default who has neglected or refused to join in making of such report and/or pay such fee shall be liable for all debts of such corporation contracted during the period of such neglect or redusal.'

Basically the query is as to the significance of the provision of the above section providing for the 10 days of grace within which the report may be filed after May 15 of each year. On behalf of plaintiffs it is insisted that the trial court was correct in holding that the period of default on the part of the corporation, referred to in the final sentence of the section quoted, begins at the expiration of such 10 day period. It is contended, in substance, that such added length of time being expressly allowed for compliance with the statutory requirement there can be no default until the expiration thereof. Under such interpretation the present suit was seasonably instituted. Appellants argue that the corporation was in default from and after the 15th of May, 1960, and that, in consequence, the filing of the suit now before us on May 21, 1962, was too late. On such permise it is argued that the trial judge was in error in denying the motion to dismiss.

The effect of the inclusion in the statute of the provision for the additional period of 10 days within which to file the annual report was before this Court in Vulcanized Products Co. v. Bender, 202 Mich. 346, 168 N.W. 444. Involved there was a provision of P.A.1915, No. 142 (C.L.1915, § 9028), providing for the filing of the annual report of a corporation subject to the act within 60 days after the close of the fiscal year, with the further provision that should such corporation continue in default for 10 days thereafter its corporate powers should be supended. Liability for debts during the period of the default was imposed on directors of any corporation in default who had neglected or refused to join in the of the report. In that case the annual report of the corporation of which defendants had been directors for the fiscal year ending June 30, 1912, was filed on September 11 thereafter. Suit against the directors was instituted September 25, 1914. The question at issue was whether defendants were liable for debts contracted during the 70-day period following the expiration of the fiscal year or only for debts contracted after the expiration of such period and during default. The trial court rendered judgment in favor of the defendants, and this Court affirmed. The basis for such holding is indicated in the following language from the opinion of the Court:

'No portion of the debt for which suit was brought was contracted between the 8th day of September (the last day upon which the report could properly have been filed), and the 11th day of September, the day upon which it was actually filed. The question is presented whether the period of 'such neglect or refusal' starts at the end of the fiscal year or is to be computed from the expiration of the 70 days allowed by the statute within which the directors may properly file their report. It seems clear that the directors are not in default during any of the time allowed by the statute for filing, and that their 'neglect or refusal' commences only after the days of grace have expired.'

The Court in the above case referred to the prior decision in Reuter Hub & Spoke Co. v. Hicks, 181 Mich....