Globe Publishing Company v. State Bank of Nebraska at Crete

• Decision Date: 06 June 1894
• Docket Number: 5538
• Citation: 59 N.W. 683,41 Neb. 175
• Parties: GLOBE PUBLISHING COMPANY ET AL. v. STATE BANK OF NEBRASKA AT CRETE ET AL
• Court: Nebraska Supreme Court

59 N.W. 683

41 Neb. 175

GLOBE PUBLISHING COMPANY ET AL. v. STATE BANK OF NEBRASKA AT CRETE ET AL

No. 5538

Supreme Court of Nebraska

June 6, 1894

ERROR from the district court of Saline county. Tried below before HASTINGS, J.

Judgment of the district court affirmed as to the Globe Publishing Company and reversed as to all stockholders, and action dismissed.

Robert Ryan, for plaintiffs in error, contending that the provisions of the statute upon which the action is founded are penal and that the repeal of the statute abates the action, cited Complied Statutes, 1889, sec. 136, ch. 16; Session Laws 1891, ch. 13; Bennet v. Hargus, 1 Neb. 419; Butler v. Palmer, 1 Hill [N. Y.], 325; People v Livingston, 6 Wend. [N. Y.], 526; Dash v. Van Kleeck, 7 Johns. [N. Y.], 477; Macnawhoc Plantation v. Thompson, 36 Me. 365; Johnson v. Hahn, 4 Neb. 146; Key v. Goodwin, 4 M. & P. [Eng.], 341; Willliams v. County Commissioners, 35 Me. 348; Underwood v. McDuffee, 15 Mich. 367; Sturtess v. Ellison, 4 M. & S. [Eng.], 586; Yeaton v. United States, 5 Cranch [U.S.], 281; Rachel v. United States, 6 Cranch [U.S.], 329; United States v. Passmore, 4 Dal. [U.S.], 372; Commonwealth v. Kimball, 21 Pick. [Mass.], 375; Stoever v. Immell, 1 Watts [Pa.], 558; Wiles v. Suydam, 64 N.Y. 173; Flash v. Conn, 109 [U.S.], 371; Chase v. Curtis, 113 U.S. 458; Steam Engine Co. v. Hubbard, 101 U.S. 188; Halsey v. McLean, 12 Allen [Mass.], 438; Derrickson v. Smith, 3 Dutch. [N. J.], 166; Sturges v. Burton, 8 O. St., 215; First Nat. Bank of Plymouth, Pennsylvania, v. Price, 33 Md. 487; Irvine v. McKeon, 23 Cal. 472; Bird v. Hayden, 1 Robt. [N. Y.], 383; Moies v. Sprague, 9 R. I., 541; Veeder v. Baker, 83 N.Y. 156; Gadsden v. Woodward, 103 N.Y. 242; Cady v. Smith, 12 Neb. 630; Hanson v. Donkersley, 37 Mich. 184.

The amount of the claim justly due from the Globe Publishing Company should have been ascertained by a judgment and the corporate property exhausted before proceedings were instituted against the stockholders. (Constitution, sec. 4, art. 11; State v. Boyd, 31 Neb. 734; Weil v. Lankins, 3 Neb. 384; Wineland v. Cochran, 9 Neb. 480; Crowell v. Horacek, 12 Neb. 622; Brooks v. Stone, 19 HOW Pr. [N. Y.], 395; Baines v. Babcock, 27 P. [Cal.], 674; Baines v. Story, 27 P. [Cal.], 676; Potter v. Dear, 27 P. [Cal.], 676; Cambridge Water-Works v. Somerville Dying & Bleaching Co., 4 Allen [Mass.], 243; Holyoke Bank v. Goodman Paper Mfg. Co., 9 Cush. [Mass.], 576.)

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

Chas. Offutt and Charles S. Lobingier, contra:

Section 136 of chapter 16, Compiled Statutes of 1889, was not remedial. (Sutherland, Statutory Construction [ed. 1891], sec. 207.)

Section 136 did not provide for the recovery of a penalty. (Anderson's Dictionary of Law; Sutherland, Statutory Construction, sec. 208; Howell v. Roberts, 29 Neb. 483; Coy v. Jones, 30 Neb. 798.)

Section 136 is a part of the charter of the Globe Publishing Company. (Abbott v. Omaha Smelting Co., 4 Neb. 416; Smith v. Steele, 8 Neb. 115; 1 Morawetz, Private Corporations [2d ed.], sec. 318; Dartmouth College v. Woodward, 4 Wheat. [U.S.], 518.)

Section 136 is a part of the contract by virtue of which persons were permitted to do business as a corporation; compliance therewith was the condition on which the shareholders escape personal liability. (Doolittle v. Marsh, 11 Neb. 244.)

The repealing act could not affect the rights of creditors which had attached before the repeal. The state and federal constitutions forbid the enactment of any law "impairing the obligation of contracts." (Howell v. Roberts, 29 Neb. 483; Coy v. Jones, 30 Neb. 798; Porter v. Sherman County Banking Co., 36 Neb. 271; State v. Cathers, 25 Neb. 250; 2 Morawetz, Corporations, sec. 872; Cook, Stock & Stockholders [2d ed.], 515; Hawthorne v. Calef, 2 Wall. [U.S.], 10; McDonnell v. Alabama Gold Life Ins. Co., 85 Ala. 401; Corning v. McCullough, 49 Am. Dec. [N. Y.], 308; Hodgson v. Cheever, 8 Mo. App., 321; Lowry v. Inman, 46 N.Y. 119; Central Agricultural & Mechanical Association v. Alabama Gold Life Ins. Co., 70 Ala. 120; Edwards v. Williamson, 70 Ala. 145; Aultman's Appeal, 98 Pa. St., 505.)

The citations relied on by the plaintiffs in error are not in point, because they all construe penal statutes, and counsel does not distinguish between a liability imposed upon officers or trustees; and upon the entire body of the shareholders. This distinction should be made. (Thompson v. Reno Savings Bank, 3 Am. St. Rep. [Nev.], 846, note; Flash v. Conn, 109 U.S. 371; Chase v. Curtis, 113 U.S. 452.)

Since the corporation was insolvent, the action was properly brought against it and the stockholders simultaneously. (Smith v. Steele, 8 Neb. 115; Howell v. Roberts, 29 Neb. 483; Abbott v. Omaha Smelting Co., 4 Neb. 416; White v. Blum, 4 Neb. 555; Cook, Stockholders [2d ed.], 219; Morgan v. Lewis, 17 N.E. [O.], 558; Sleeper v. Goodwin, 67 Wis. 585; Richards v. Beach, 5 N. Y. Sup., 574; Walton v. Coe, 110 N.Y. 109; Shellington v. Howland, 53 N.Y. 371; Kincaid v. Dwinelle, 59 N.Y. 548; Flash v. Conn, 109 U.S. 371; Munger v. Jacobson, 99 Ill. 349; Toucey v. Bowen, 1 Biss. [U.S.], 81; Marion Township Union Draining Co. v. Norris, 37 Ind. 424; Shafer v. Moriarty, 46 Ind. 9.)

RAGAN, C. NORVAL, C. J., concurring. RYAN, C., took no part in the decision.

OPINION

The facts are stated in the opinion.

RAGAN, C.

The State Bank of Nebraska at Crete, Nebraska, 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 judgment, and the Globe Publishing Company and all stockholders, except two, 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, chapter 11 General Statutes, 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 paper 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. (Bennet v. Hargus, 1 Neb. 419; Knox v. Baldwin, 80 N.Y. 610; Victory Webb Printing & Folding Machine Mfg. Co. v. Beecher, 97 N.Y. 651; Gregory v. German Bank of Denver, 3 Colo. 332; Breitung v. Lindauer, 37 Mich. 217; Yeaton v. United States, 5 Cranch [U.S.], 281, 3 L.Ed. 101; Norris v. Crocker, 13 HOW 429, 14 L.Ed. 210.)

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 (ch. 40). 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 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 portion actually paid in and the amount of its 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 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 Merchants' Bank of New Haven 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...