Fidelity Adjustment Co. v. Cook
| Citation | 95 S.W.2d 1162 |
| Decision Date | 30 June 1936 |
| Docket Number | No. 33622.,33622. |
| Parties | FIDELITY ADJUSTMENT COMPANY, a Corporation, Appellant, v. R.M. COOK, CHESTER L. CHARLES, JOHN C. PATTERSON, A.L. COOPER and FRANK W. McALLISTER. |
| Court | United States State Supreme Court of Missouri |
Appeal from Jackson Circuit Court. — Hon. Daniel E. Bird, Judge.
AFFIRMED.
L.L. Watts for appellant.
The title of the act (Laws 1919, p. 227) prescribing penalties upon the officers and/or directors for violation thereof, is in conformity with Section 28, Article IV, Constitution of Missouri. Prior to 1913 if a corporation failed to file a report similar to that required by the above mentioned sections of our present law, the penalty imposed was a fine to be assessed against the corporation. The General Assembly in 1913 repealed the old law and enacted a new one (Laws 1913, p. 167) similar in many respects to the present law.
Don T. Patterson and Elmer B. Silvers for John O. Patterson.
The Act of 1919 is unconstitutional because its subject matter is not clearly expressed in its title. Const. Mo., Art. IV, Sec. 28. (a) The title to the act states, among its purposes, "prescribing penalties on officers and directors." The act prescribes no penalties on officers and directors, but undertakes to raise among them a contractual relationship as partners and impose individual liability for corporate debts. (b) The words "penalty" and "fine" are interchangeable though "penalty" includes forfeitures. Both indicate and are suggestive of punishment. State ex rel. Jones v. Howe Scale Co., 182 Mo. App. 658, 166 S.W. 328. A penalty, strictly speaking, is a sum of money to be paid, or other punishment inflicted, for violation of law, and which the chief executive may pardon. But, in a less strict sense, it may be used to denote a sum to be paid by one for violation of a private contract or duty. In any event, however, it refers to some pecuniary loss or physical punishment to be imposed upon the one penalized. State ex rel. Rodes v. Warner, 197 Mo. 650, 94 S.W. 964. (c) The title to the act states that it is to provide penalties on directors, "who shall attempt to exercise any of the powers, privileges or franchises after the certificate or license has been forfeited and canceled." The act, however, imposes a penalty of misdemeanor upon any person or persons who shall so attempt to exercise such powers, privileges or franchises. On directors as such, it provides no penalty. Its only provision as to directors is to make them liable as partners for corporate debts; and this in case not they but if the corporation itself shall so violate the article (d) Plaintiff's suit is upon an assigned liability. A statutory penalty is not assignable. So, if the liability prescribed by Section 4628 is a penalty, and is adequately described in the title to the act, plaintiff has so right to sue, for there is no assignment to it. A similar statute laying liability on bank directors for deposits received when the bank is insolvent, is held (though penal in its nature) not to prescribe a penalty within the meaning of the law, but an assignable liability. Houston v. Wilhite, 224 Mo. App. 695, 27 S.W. (2d) 772; R.S. 1929, sec. 5381.
R.B. Caldwell, R.S. Eastin and McCune, Caldwell & Downing for R.M. Cook, Chester L. Charles, A.L. Cooper and Frank W. McAllister.
(1) The subject matter of that portion of Section 17, Laws 1919, page 227 (now Sec. 4628, R.S. 1929), upon which this action is based is not clearly expressed in the title to said act and consequently violates Section 28, Article IV of the Constitution of Missouri. Const. Mo., Art. IV, Sec. 28; Woodward Hardware Co. v. Fisher, 269 Mo. 271, 190 S.W. 576; State ex rel. Wells v. Walker, 326 Mo. 1233, 34 S.W. (2d) 124; City of Columbia v. Pub. Serv. Comm., 329 Mo. 38, 43 S.W. (2d) 813; Sec. 4628, R.S. 1929; Laws 1913, pp. 167, 171; Laws 1917, p. 230; Laws 1919, pp. 121, 141, 202, 227, 232, 341, 356, 359, 363, 364, 367, 370, 375, 379, 408, 448, 451, 456, 503, 524(1), 524(2), 620. (2) Section 4628, Revised Statutes 1929, is unconstitutional in that it deprives the respondents of their property without due process of law. Const. U.S. Amend. XIV, Sec. 1; Const. Mo., Art. I, Sec. 30. (a) The scheme set up by Sections 4619 and 4628 for the forfeiture of corporate charters on account of their failure to register, etc., and imposing liability upon directors for the debts of the corporation upon forfeiture, provides that liability shall automatically ensue upon the ex parte declaration of a forfeiture by the Secretary of State without giving the directors notice or an opportunity to be heard. State ex rel. v. North, 304 Mo. 620, 264 S.W. 678; Mathews v. Ry. Co., 121 Mo. 322, 24 S.W. 591; Garden of Eden Drain. Dist. v. Bartlett Trust Co., 330 Mo. 559, 50 S.W. (2d) 627; Lowry v. Rainwater, 70 Mo. 156; Secs. 4619, 4628, R.S. 1929. (b) The exaction prescribed by Section 4628 is utterly unreasonable and excessive. State v. Martin, 193 Ind. 120, 139 N.E. 282, 26 A.L.R. 1386; St. Louis Railroad Co. v. Williams, 251 U.S. 63, 64 L. Ed. 139; Beckler Produce Co. v. Am. Ry. Express Co., 156 Ark. 296, 246 S.W. 1, 26 A.L.R. 1197; Alexander v. Ry. Co., 282 Mo. 236, 221 S.W. 712; Stone v. Wandling, 307 Mo. 160, 270 S.W. 315; Secs. 4628, 4640, R.S. 1929; Cooley, Constitutional Limitations (8 Ed.), p. 743.
The trial court, having sustained the demurrer of defendants R.M. Cook, Chester L. Charles, John O. Patterson, A.L. Cooper and Frank W. McAllister to the petition of Fidelity Adjustment Company, a corporation, plaintiff, and plaintiff having declined to plead further, entered judgment for defendants. Plaintiff appeals.
Plaintiff seeks to recover of defendants $29,118.29 alleged due plaintiff from Pan American Feed Company, a corporation. The petition is in fifteen counts, each based upon a separate note or open account endorsed or assigned for value to plaintiff and is based upon the personal civil liability imposed upon defendants as directors of said Pan American Feed Company under Section 4628, Revised Statutes 1929 (Mo. Stat. Ann., p. 2053).
Defendants filed demurrers to plaintiff's petition putting in issue the constitutionality of said Section 4628. Plaintiff's right to maintain its alleged cause of action against defendants, being purely statutory, under the issues presented, involves a ruling on the constitutionality of said Section 4628; for if unconstitutional no cause of action exists. From the view we take of the case, we perceive no useful purpose to be served by inserting the averments of plaintiff's petition. Summarized, the petition alleges the incorporation of plaintiff; that said Section 4628, setting the same out verbatim, was in full force and effect at all times mentioned in said petition; that the Pan American Feed Company was a corporation; that the charter of said Pan American Feed Company was forfeited January 1, 1930, for failure to comply with the annual registration laws of the State; and that defendants were directors of said Pan American Feed Corporation on, and, pretending to act as directors aforesaid, continued to exercise the powers and privileges of said corporation subsequent to, said date of said forfeiture of said charter. Next, the respective counts of the petition set forth a cause of action against said Pan American Feed Company, some of said items of indebtedness having been incurred prior and other items subsequent to said forfeiture of said charter; and allege that defendants, by reason of the premises and the provisions of said Section 4628, are severally and individually liable to plaintiff for the specific item of indebtedness.
The annual registration laws referred to in the petition are Sections 4613 et seq., Revised Statutes 1929 (Mo. Stat. Ann., p. 2047), requiring the registration of, the filing of an antitrust affidavit and certain other information, and the payment of a registration fee by certain corporations annually. Under the provisions of Section 4619, Revised Statutes 1929 (Mo. Stat. Ann., p. 2049), the corporate rights and privileges of a corporation failing to comply with the provisions of said sections on or before the 31st day of December of any given year "shall be forfeited, and the secretary of state shall thereupon cancel the certificate, or license, of such corporation by appropriate entry on the margin of the record thereof," whereupon all the powers, privileges and franchises conferred upon such corporation shall cease and determine, etc.
[1] One of the constitutional issues common to the demurrers and presented as an issue on this review is that the portion of said Section 4628, upon which plaintiff's cause of action is based, is not clearly expressed in the title to said act as required by Section 28, Article IV, of the Constitution of Missouri.
Section 28, Article 4, of our Constitution provides: "No bill ... shall contain more than one subject, which shall be clearly expressed in its title."
Section 4628, supra, reads (that portion here involved being set forth in italics):
"Any person, or persons who shall exercise, or attempt to exercise, any of the powers, privileges, or franchises of any corporation after the certificate or license of the same has been forfeited and canceled as in this article provided shall be deemed guilty of a misdemeanor, and upon conviction punished as hereinafter provided; and the officers and directors, or principal agent in Missouri, if a foreign corporation, of any corporation which shall so violate the provisions of this article shall be held as partners and become severally and individually liable for the debts of such corporation."
Said Section 4628 was Section 17 of an act appearing in Laws 1919, pages 227-235 [now Secs. 4613-4640, of Art. 1, Chap. 32, R.S. 1929], the word "article" reading in said original law "act" [See Sec. 9807, R.S. 1919, for authority for the change in wording, and Sec. 9822, R.S. 1919].
The title to said Act of 1919 [Laws 1919,...
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