Harper v. the Union Mfg. Co.

• Decision Date: 26 September 1881
• Citation: 1881 WL 10607,100 Ill. 225
• Parties: HENRY G. HARPERv.THE UNION MANUFACTURING COMPANY et al.
• Court: Illinois Supreme Court

100 Ill. 225

1881 WL 10607 (Ill.)

HENRY G. HARPER

v.THE UNION MANUFACTURING COMPANY et al.

Supreme Court of Illinois.

Filed at Ottawa Sept. 26, 1881.

OPINION TEXT STARTS HERE

APPEAL from the Appellate Court for the Second District; heard in that court on appeal from the Circuit Court of Whiteside county.

Mr. F. SACKETT, for the appellant:

When a new liability is imposed, or a new cause of action is given by statute, and no remedy is provided by the statute, the right to resort to the appropriate common law form of action is implied. 1 Term Rep. 512; Corwith v. Culver, 69 Ill. 502; Culver v. The Third National Bank of Chicago, 64 Id. 528.

In the case of Richardson v. Akin, 87 Ill. 138, the Supreme Court held, that since the act of 1872, concerning corporations for pecuniary profit, took effect, a court of law has no jurisdiction of a suit by a creditor of such corporation against a stockholder, unless his debt accrued before the act of 1872 took effect,--the remedy, if any, being in equity.

This decision is but an application of another uniform rule of law, that where a statute imposes a liability or creates a new cause of action, and a remedy for its enforcement is expressly given by the statute, that remedy is exclusive, and no other can be adopted. Almy v. Harris, 5 Johnson, 175; Broom's Legal Maxims, marg. pp. 145-149; Confrey v. Stark, 73 Ill. 187.

One objection is, that our only right to proceed against the stockholders, to enforce their liabilities, is conferred by the 25th section of the act of 1872; and that the provision of that section, which declares that “each stockholder may be required to pay his pro rata share of such debts or liabilities, to the extent of the unpaid portion of his stock, after exhausting the assets of such corporation,” by implication repeals all laws making stockholders liable, otherwise than for the unpaid portion of their capital stock,--that the mention of one class of stockholders by implication excludes all others.

Messrs. BENNETT & GREEN, for the appellees Smith, Williams, Wood, Hubbard, Korn, Chase, Long, Parks, Goodell, Jenne and Buell:

It is well recognized law that members of a corporation are not liable at common law, individually, for the debts of the corporation, and if liable at all, are so by statute. (Thompson's Liability of Stockholders, sec. 4, and cases cited.) And that when the liability of the stockholder is claimed to arise out of the failure of an officer to perform some act, as, the filing of a certificate that stock has been paid in, it is penal in its nature, and should be strictly construed. (Thompson's Liability of Stockholders, secs. 50, 54; Garrison v. Howe, 17 N. Y. 456; Gray v. Coffin, 9 Cush. 199.) And whenever a statute was designed to relieve stockholders from a more onerous liability imposed by a previous statute, it is entitled to be construed remedially in their favor. Thompson's Liability of Stockholders, sec. 55, and cases cited; Holyoke Bank v. Goodman Paper Co. 9 Cush. 582.

This right of individual liability of stockholders is in the nature of a penalty, and not a vested right, until after a debt is contracted. Cooley on Const. Lim. 359; Thompson's Liability of Stockholders, secs. 71, 72; Richardson v. Akin, 87 Ill. 138.

A repeal of an individual liability law is valid as to after contracted debts, and stockholders afterward joining the corporation. Thompson's Liability of Stockholders, sec. 72; Ochiltree v. Railroad Co. 21 Wall. 249; Gray v. Coffin, 9 Cush. 192.

Although the general law of 1857, under which the Union Manufacturing Company was organized, contained no special clause allowing the legislature to repeal or modify it as to corporations organized under it, yet the legislature has such power when its exercise affects no vested rights. Gay v. Keys, 30 Ill. 413; Richardson v. Akin, 87 Id. 138; Bailey v. Hallister, 26 N. Y. 112.

An inspection of section 16 of the act of 1872, providing for the liability of the officers and directors above referred to, shows that by the language of the section it is not limited to corporations organized under the laws of 1872.

Section 25 of the same act, under which this suit is brought, and in accordance with the provisions of which appellant must recover, if he recover at all, fixes the limit to which the liability of the stockholder may be enforced by such mode, “to the extent of the unpaid portion of his stock, after exhausting the assets of the corporation.” The mode of procedure and the limit of enforcement by such mode are connected in the same clause; and keeping in view the strict construction to be given such statutes, can any one fairly claim that by such mode any liability of a stockholder, beyond the limit thus named, can be enforced?

Messrs. DINSMOOR, STAGER & DINSMOOR, for the appellees Royer and Mickle:

The bill should have been filed in behalf of all the creditors. Mann v. Pentz, 3 N. Y. 415; Crease v. Babcock, 10 Metc. 531; Adler v. Milwaukee Patent Brick Mfg. Co. 13 Wis. 70. Nance, the assignee, should have been made a party. Hopkins v. Roseclare Lead Co. 72 Ill. 373.

From the bill and answers it appeared whether or not these persons were necessary parties. If complainant had desired to make them parties, he should have done so before the hearing. If he had asked leave on the hearing, it would undoubtedly have been granted on terms, but as he never asked leave it was the duty of the court to dismiss the bill. Atkins v. Billings, 73 Ill. 597; Searles v. Jacksonville, P. and M. Railroad Co. 2 Wood, 621.

Messrs. MANAHAN & WARD, for the appellee R. B. Witmer:

The statutory provisions govern and limit the liability of the stockholder. Baker et al. v. Backus, Admr. 32 Ill. 99.

The legislature has the power, before rights of creditors have attached, to change or abolish the statutory liability. Coffin v. Rich, 45 Me. 507.

The acts of April 18, 1872, and March 26, 1872, govern this case.

By section 25 of the act of 1872 the remedy is solely in equity, and jointly against all of the stockholders with the corporation, and perhaps all of the creditors must join. The appellant has brought his suit and sought his remedy under section 25 of the act of 1872, but declines to be bound by its limitations.

Mr. JUSTICE DICKEY delivered the opinion of the Court:

This is a suit in chancery, brought by Harper against the Union Manufacturing Company and Taylor Williams, and others, constituting all the stockholders of that company, to coerce the payment to the complainant of a judgment of over $2000, recovered in the circuit court of Whiteside county in September, 1877,...