Gaus v. Switzer

• Decision Date: 10 April 1890
• Citation: 24 P. 18,9 Mont. 408
• Parties: GAUS et al. v. SWITZER et al.
• Court: Montana Supreme Court

24 P. 18

9 Mont. 408

GAUS et al. v. SWITZER et al.

Supreme Court of Montana

April 10, 1890

Appeal from district court, Lewis and Clarke county; WILLIAM H HUNT, Judge.

Action by Louis Gaus and others against Jacob Switzer and others. Judgment was rendered for plaintiffs, and defendants appealed.

Fletcher Maddox and Casey & Smith, for appellants.

F. N. & S. H. McIntyre, for respondents.

BLAKE C.J.

This appeal has been taken from the judgment of the court below which was entered upon the pleadings. The complaint alleges in substance, that the Helena Pressed Brick Company was a corporation, which had been organized under the laws of the territory of Montana, and had its principal place of business in Helena, and was doing business in the counties of Lewis and Clarke and Jefferson; that Switzer et al., the defendants, were at all times the trustees of the corporation, and discharged the duties of the office; that the corporation was indebted June 12 and 21, 1889, at said Helena, to various persons, in certain sums, which are enumerated, and the plaintiffs by purchase acquired these claims; that said accounts have not been paid, "and the plaintiffs further say that the said corporation, the Helena Pressed Brick Company, did not, within twenty days from the 1st day of September, 1889, make, and have not, at any time since said date, made, a report stating the amount of its capital stock and of the proportion of the same actually paid in, and the amount of the existing debts of the said company at the period last aforesaid, or at any time subsequent thereto; nor did said company cause any such report to be signed by its president, nor verified by the oath of its secretary, nor to be filed in the offices of the recorder of Lewis and Clarke and Jefferson counties, nor to be published in either of said counties; and the said defendants, and also said company, wholly neglected and refused, during said period of twenty days from September 1, 1889, and have ever since neglected and refused, to cause such report to be made, signed, and verified, filed, printed, and published in conformity with the provisions of section 460, p. 728, div. 5 of the Compiled Statutes of Montana territory, and they, the said company, and the said defendants, as such trustees, have at all times neglected and refused, and still do neglect and refuse, to comply with the provisions of the said statute." The answer denies "that, at the times mentioned in plaintiff's complaint, the Helena Pressed Brick Company was a corporation existing or doing business under or by virtue of the laws of Montana territory, having its principal place of business in the city of Helena, Lewis and Clarke county, Montana territory, or any other place, or that it had any place of business at all, or that it was doing business in Lewis and Clarke county and Jefferson county, or any other place." The answer alleges "that on or about July 13, 1888, the said the Helena Pressed Brick Company was duly incorporated under the laws of Montana territory, and commenced doing business in the counties of Lewis and Clarke and Jefferson, in said territory; (2) that on or about December 14, 1888, the said corporation was solvent, and that thereafter said corporation was at no time solvent; (3) that in the month of April, Jacob Switzer, Albert Kleinschmidt, Fletcher Maddox, Frank L. Sizer, and G. V. Hallett, were trustees of said corporation; (4) that at said time, namely, in the month of April, 1889, the said the Helena Pressed Brick Company were involved in large pecuniary losses and liabilities, and were unable to pay its debts; *** that the enterprise of manufacturing brick at their yards had proved an entire and hopeless failure, and the company was at such time hopelessly insolvent; that at said time, July 15, 1889, said company executed a note and mortgage to Jacob Switzer for $11,192.05, due by it to him. *** Its means at said date of carrying on business were exhausted, and it had turned over to said Jacob Switzer all its property and machinery, so that he might, by some possible means, work out from its property and the conducting of the same some portion of the amount due him. At this time the corporation was entirely abandoned, and all profits or losses of the company in its business was at the profit or loss of said Jacob Switzer, and no one else. That thereafter no officers or trustees of said company exercised any corporate act or function in the business of said corporation, and thereafter manifested no intention to resume business thereof, but abandoned same entirely, and said Switzer purchased all property of said company thereafter, and the same belongs to him irrevocably." The complaint was filed September 24, 1889, and prayed for judgment for said sums against the said trustees, the appellants herein. No replication was made to the answer.

The section of the statute which is referred to in the complaint is as follows: "Sec. 460. Every such company shall annually, within twenty days from the 1st day of September, make report, which shall be published in some newspaper published in the town, city, or village, or, if there be no newspaper published in said town, city, or village, then in some newspaper published nearest the place where the business of said company is carried on, which shall state the amount of capital, and of the proportion actually paid in, and the amount of existing debts, which report shall be signed by the president and a majority of the trustees, and shall be verified by the oath of the president or secretary of said company, and filed in the office of the clerk of the county where the business of the company shall be carried on; and if any of said company shall fail to do so, all the trustees of the company shall be jointly and severally liable for all debts of the company then existing, and for all that shall be contracted before such report shall be made. No liability shall attach to any trustee, or board of trustees, by virtue of the provisions of this section, for a failure to cause to be published in a newspaper the report in this section mentioned, if, within the time herein mentioned, said trustee, or board of trustees, or company shall annually cause said report to be filed in the office of the county clerk and recorder of the county in which the business of the said company is carried on, as declared in its certificate of incorporation." Comp. St. div. 5. The complaint states facts which are sufficient to establish the obligation, under the statute, of the trustees of the Helena Pressed Brick Company to pay its indebtedness. Does the answer plead a defense which shields the appellants from this liability? The question is presented to this court for the first time, and the vast number and manifold character of the corporations within the state, and the conflict in the decisions upon some of the propositions which are relevant to the inquiry, demand a careful review of the authorities. It is the general rule that this law is penal, and must be construed strictly. Steam-Engine Co. v. Hubbard, 101 U.S. 191; Chase v. Curtis, 113 U.S. 457, 5 S.Ct. 554. Mr. Morawetz, in his valuable treatise on Private Corporations, considers the subject, and makes the following appropriate comments: "It is not always quite clear what the courts mean to express by saying that statutes of this character are 'penal;' and that they impose upon the directors a 'penal liability.' *** Nor is the liability of the directors under these statutes penal in the sense in which the word ·penal' is used in criminal law; it is not a penalty or fine imposed by the state for the infraction of a public law. *** The statutes imposing this liability establish a new rule of private right,--a rule which, although unknown to the common law, may be founded on sound principles of justice and expediency. The only reason why this liability is called 'penal' appears to be that it does not exist at common law, and is neither created by contract, nor given as compensation for a direct and immediate wrong done by the directors to the creditors of the company." Volume 2, (2d Ed.) § 908. Even with this understanding, "in construing penal statutes, we must not, by refining, defeat the obvious intention of the legislature." Potter's Dwar. St. 247. The law before us is clothed in clear and concise terms, and we think that the same end will be attained by the application of any canon of interpretation. There should be no difficulty in carrying out "the true intent and meaning of the legislative assembly." Under certain conditions the statute, in effect, declares that the trustees of the Helena Pressed Brick Company "shall be jointly and severally liable for all the debts of the company then existing, and for all that shall be contracted before such report shall be made." There are no exceptions in this clause, and there does not appear to be any obscurity in the scope of the liability of the trustees if the words "shall be understood and construed according to the approved and common usage of the language." Comp. St. div. 5, § 202. There has been no change in the board of the trustees of the Helena Pressed Brick Company since its organization. The appellants were its officers when the debts mentioned in the pleadings were...