Globe Pub. Co. v. State Bank of Nebraska at Crete

• Decision Date: 06 June 1894
• Citation: 41 Neb. 175,59 N.W. 683
• Parties: GLOBE PUB. CO. ET AL. v. STATE BANK OF NEBRASKA AT CRETE ET AL.
• Court: Nebraska Supreme Court

41 Neb. 175

59 N.W. 683

GLOBE PUB. CO. ET AL.

v.STATE BANK OF NEBRASKA AT CRETE ET AL.

Supreme Court of Nebraska.

June 6, 1894.

Syllabus by the Court.

1. A suit pending to enforce a right or remedy conferred solely by statute is abated by the unconditional repeal of such statute before judgment rendered in such suit. Bennett v. Hargus, 1 Neb. 419, followed and reaffirmed.

2. A penal statute is an act by which a forfeiture is imposed for transgressing the provisions of the act. It may also be remedial in one part, and penal in another. The effect, and not the form, of the statute, is to be considered; and if its object is clearly to inflict a punishment on a party for doing what is prohibited, or failing to do what is commanded to be done, it is penal in its character. Diversey v. Smith, 103 Ill. 378, followed.

3. When a law prescribes what the liability of a stockholder in a corporation to the creditors thereof shall be,––as that the shareholder shall be liable for double the amount of his stock, or for a sum equal to the amount of his stock, or for the amount remaining unpaid on his stock subscription,––such law is one prescribing the liability of a stockholder in a corporation de jure, as, without an express statute, a stockholder in such a corporation would not be liable for any debt of the corporation whatever.

4. When such a statute so prescribes and fixes the amount for which a stockholder in a corporation shall be liable, it is intended to be a limitation upon the stockholder's exemption from liability for the debts of the corporation, which, but for the law, he would enjoy.

5. When such a statute is in force, and persons organize themselves into a de jure corporation, such statute is incorporated into, and becomes a part of, the charter of such corporation; and the stockholders thereof impliedly assent and agree that their liability for the debts of the corporation shall be as fixed by such law.

6. Such a statute, and the rights of creditors acquired thereunder, are contractual in their nature.

7. Where a statute provides that, until certain things are done by persons forming a corporation,––such as the filing of its articles of incorporation in the office of a public officer,––the stockholders of such corporation shall be liable for the debts thereof, such a statute is declaratory of the common law.

8. Until the requirements of such a statute have been complied with, a de jure corporation does not exist, and the stockholders thereof are jointly and severally liable for the debts contracted by such voluntary unincorporated association of persons; and such a statute, and the rights of creditors acquired thereunder, are contractual in their nature.

9. Where a law commands corporations to do certain acts, as to publish annually a notice of their indebtedness, such a law is addressed to the stockholders of corporations de jure; and when such statute declares that all the stockholders thereof shall be liable for the debts of the corporation in case it fails to comply with the requirements of the statute, then the law is designed as punishment of the stockholders for a violation of the law, and is penal.

10. Abbott v. Smelting Co., 4 Neb. 416, and White v. Blum, Id. 555, reaffirmed. Howell v. Roberts, 45 N. W. 923, 29 Neb. 483, and Coy v. Jones, 47 N. W. 208, 30 Neb. 798, overruled.

11. Where persons attempt, in good faith, to incorporate themselves into a valid corporation, and such a corporation actually enters upon the discharge of corporate functions, and so continues for a considerable time, unchallenged by the state, persons who contract with such a corporation cannot hold the stockholders thereof liable on such contract because it transpires that, by some mistake or oversight, the corporation had never become a technical de jure corporation.

12. Section 136 of chapter 11, Gen. St. 1873, repealed by an act approved April 6, 1891, was penal.

13. The word “ascertained,” in section 4, art. 12, of the constitution, means “judicially ascertained;” and to “judicially ascertain” the amount due from a corporation to a creditor thereof means to have the finding and judgment or decree of a court as to such amount.

14. The creditors of a de jure corporation have no right of action against the stockholders thereof until they have reduced their claims against the corporation to judgment, and until execution issued upon such judgment has been returned wholly or in part unsatisfied.

15. Such a creditor's cause of action does not accrue until the return, unsatisfied in whole or in part, of an execution issued on a judgment rendered in his favor against the corporation for the corporate debt.

Error to district court, Saline county; W. G. Hastings, Judge.

Action by the State Bank of Nebraska at Crete and others against the Globe Publishing Company and others. Judgment for plaintiffs, and defendants bring error. Reversed.

Robt. Ryan, James W. Dawes, and Abbott & Abbott, for plaintiffs in error.

Chas. Offutt and Charles S. Lobingier, for defendants in error.

RAGAN, C.

The State Bank of Nebraska at Crete, Neb., sued the Globe Publishing Company and the stockholders thereof in the district court of Saline county to recover the amount of a promissory note owing by said Globe Publishing Company to the said State Bank. Both the bank and the Globe Publishing Company were domestic corporations, having their principal places of business in said Saline county. The bank had a verdict and judgment, and the stockholders of the publishing company bring the case here for review.

The liability of the stockholders of the publishing company for the debt due from it to the bank was based on the failure of the publishing company to publish an annual notice of its existing debts, as provided by section 136, c. 11, Gen. St. 1873, in force at the time the debt sued for here was contracted. That section is as follows: “Every corporation hereafter created shall give notice annually in some newspaper printed in the county or counties in which the business is transacted, and in case there is no newspaper printed therein, then in the nearest newspaper in the state, of the amount of all the existing debts of the corporation; which notice shall be signed by the president and a majority of the directors; and, if any corporation shall fail to do so, all the stockholders of the corporation shall be jointly and severally liable for all debts of the corporation then existing, and for all that shall be contracted before such notice is given.” After this suit was brought, but before judgment was rendered therein, the legislature repealed this section 136, without a saving clause. The argument of counsel for plaintiffs in error now is that the repeal of said section abated this action. Whether this is true depends upon the nature of the statute repealed. If it was a statute contractual in its nature; if the right of action acquired by the bank against the stockholders of the publishing company by virtue of said statute, and the corporation's violation thereof, was a vested right,––then the repeal of the statute could not and did not take it away. But, if the statute repealed was penal in its nature, then its repeal abated the action.

1. A suit pending to enforce a right or remedy conferred solely by statute is abated by the unconditional repeal of such statute before judgment rendered in such suit. Bennett v. Hargus, 1 Neb. 419;Knox v. Baldwin, 80 N. Y. 610;Manufacturing Co. v. Beecher, 97 N. Y. 651;Gregory v. Bank, 3 Colo. 332;Breitung v. Lindauer, 37 Mich. 217;Yeaton v. U. S., 5 Cranch, 281;Norris v. Crooker, 13 How. 429.

2. Was this a penal statute? This question must be answered by the authorities.

In 1848 the legislature of New York enacted a statute governing manufacturing corporations. Section 12 of that act was as follows: “Every such company shall annually within twenty days from the first day of January, make a report which shall be published in some newspaper 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 the capital and the portion 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 such company and filed in the office of the county where the business of the company shall be carried on; and if any such company shall fail so to do all the trustees of the 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.” A New York corporation organized under this law failed to give the annual notice of its indebtedness, as provided by said section 12, and during such default became indebted to a bank. The bank then sued the trustees of the corporation for the amount of the debt. The court of appeals of New York, in Bank v. Bliss, 35 N. Y. 412, discussing said section 12 and another section, said: “The liability of the trustees under said section 12, it must be observed, is not limited to the injury or damage sustained by the creditors in consequence of the violation; but, upon failure to file a report, the trustees are subjected to the payment of the whole amount of the debts of the company then existing, and for all that shall be contracted. These provisions appear to be severally punitive, inflicted, on grounds of public policy, for the protection of creditors, and the prevention of frauds upon the public in respect to the financial condition of such corporation. It is clear that the liability of the trustees is not imposed as an indemnity, because it has no relation to the actual loss or injury sustained by the party in whose favor the action is given. The action depends wholly upon the statute. There...