Leibson v. Henry

• Decision Date: 08 September 1947
• Docket Number: No. 39950.,39950.
• Citation: 204 S.W.2d 310
• Parties: J.H. LEIBSON, S.E. LEIBSON and HELEN HOFFMAN, Appellants, v. CARL J. HENRY, E.J. KEITEL and HARRY P. DRISLER, as Members of UNEMPLOYMENT COMPENSATION COMMISSION OF MISSOURI, and MICHAEL J. CARROLL, Director of the Division of Employment Security.
• Court: Missouri Supreme Court

204 S.W.2d 310

J.H. LEIBSON, S.E. LEIBSON and HELEN HOFFMAN, Appellants, v. CARL J. HENRY, E.J. KEITEL and HARRY P. DRISLER, as Members of UNEMPLOYMENT COMPENSATION COMMISSION OF MISSOURI, and MICHAEL J. CARROLL, Director of the Division of Employment Security.

No. 39950.

Supreme Court of Missouri.

Court en Banc, September 8, 1947.

Appeal from Cole Circuit Court. — Hon. Sam, C. Blair, Judge.

AFFIRMED.

J.M. and Jos. D. Feigenbaum for appellants.

(1) The court erred in affirming the order and finding of respondent Commission, and failing to vacate the assessment as against appellants individually, rather than against them as trustees only of any assets received by them from the corporation of which they were directors; as directors of a corporation who carry on the business of the corporation after its charter is forfeited for failure to file affidavits or reports, are not liable personally for the corporation's obligations after the charter forfeiture, but are liable only as trustees, to the extent of funds of the corporation received by them. R.S. 1939, sec. 5094; Fidelity Adjustment Co. v. Cook, 339 Mo. 45, 95 S.W. (2d) 1162; Woodward Hardware Co. v. Fisher, 269 Mo. 271, 190 S.W. 576. (2) The court erred as mentioned in the prior point, as the forfeiture of a corporation charter for failure to file anti-trust affidavit or to register annually ends the corporation as a de jure corporation, but it continues as a de facto corporation, whose existence can be questioned only in a direct proceeding by the state for that purpose, until which time its directors cannot be personally liable for its obligations. Broadwell v. Merritt, 1 S.W. 855; Laird v. Pan-American Lbr. Co., 237 S.W. 1047; 18 C.J.S., p. 501, sec. 105. (3) The court erred as mentioned in Point (1), the uncontradicted facts being that appellants carried on the business exclusively in the name of the corporation without even knowing of the corporation charter forfeiture, as parties cannot be held liable individually, as co-partners, in the absence of their actually being a partnership, unless they have held themselves out to be partners. Diamond Creek Consolidated Coal & Silver Mining Co. v. Swope, 204 Mo. 48, 102 S.W. 561.

John L. Porter and Charles F. Moseley for respondents; Michael J. Carroll of counsel.

(1) The statutory trustees, under the provisions of Section 5094, R.S. 1939, are without power or authority to transact any business of the corporation except to wind up its affairs and distribute its assets; and they became personally liable for obligations incurred if they continue the business as such. Sec. 5094, R.S. 1939; Turner v. Browne, 351 Mo. 541, 173 S.W. (2d) 868; Illinois Power & Light Corp. v. Hurley, 49 F. (2d) 681, 52 Sup. Ct. 19, 284 U.S. 637, 76 L. Ed. 541; Trower v. Stonebraker-Zea Live Stock Co., 17 Fed. Sup. 687; Ewald Iron Co. v. Commonwealth, 140 Ky. 692, 131 S.W. 774; Jones v. Young, 174 S.E. 885; Poritsky v. Wachtel, 27 N.Y. Supp. (2d) 316; Fidelity Adjustment Co. v. Cook, 339 Mo. 45, 95 S.W. (2d) 1162; Woodward Hardware Co. v. Fisher, 269 Mo. 271, 190 S.W. 576. (2) The corporation, upon forfeiture of its charter, did not become a de facto corporation and was subject to collateral attack. Bradley v. Reppell, 133 Mo. 545, 32 S.W. 645, 54 Am. St. 685; Bruun v. Katz Drug Co., Inc., 351 Mo. 731, 173 S.W. (2d) 906; Estel v. Midgard Inv. Co., 46 S.W. (2d) 193; Ford v. Kansas City & I, Short Line Railroad Co., 52 Mo. App. 439; Broadwell v. Merritt, 1 S.W. 855; Laird v. Pan-American Lumber Co., 237 S.W. 1047; 1 Thompson, Corporations, (3rd Ed.), secs. 263, 270, pp. 322, 336; 8 Thompson, Corporations (3rd Ed.), sec. 6559, p. 749; 8 Fletcher, Cyclopedia of Corporations, secs. 3851, 3852, pp. 174-175; 13 Am. Jur., sec. 1343, p. 1192; 14 C.J., sec. 231, p. 223; 18 C.J.S., sec. 195, p. 501; Sec. 5091, R.S. 1939 (3) The Commission did not make its final assessment against appellants as partners, nor under the provisions of Mo. R.S.A. 5100. Sec. 5100, R.S. 1939.

LEEDY, J.

This is an appeal by plaintiffs in a proceeding under Sec. 9432B,¹ to review a decision of the Unemployment Compensation Commission of Missouri re-assessing unemployment contributions against plaintiffs-appellants, which, with interest, aggregated $1246.41. The circuit court affirmed. In Division One an opinion was adopted (one judge dissenting) affirming the circuit court's judgment, and the cause was transferred to the court en banc.

The writer, to whom this case was assigned after the divisional opinion failed of adoption en banc, has changed his view, and reached the conclusion that the case was properly ruled by the divisional opinion. Utilizing portions of that opinion as part of the general framework for this one, it will be amplified by treating of the aspect of the case to which the dissent was directed. The issue is one of law, there being no substantial dispute concerning the facts. The case really turns upon the question of the nature and effect of the statutory forfeiture of a corporation's charter, and is determinable upon a construction of the applicable sections of Art. I. Chap. 33, R.S. '39, and Mo. R.S.A., as the same existed at and following the date of forfeiture, and prior to the effective date of "The General and Business Corporation Act of Missouri." (Laws 1943, p. 410 et seq., and amendments thereto; Laws 1945, p. 696; Laws 1945, p. 711.)

On and prior to January 1, 1940, plaintiffs were the sole shareholders and directors of Shelco Manufacturing Company, Inc., a Missouri corporation (hereinafter referred to as "Shelco"), and an "employer" within the purview of the Unemployment Compensation Law, Art. 2, Chap. 52, secs. 9421-9445.

On January 1, 1940, Shelco having failed to make the annual registration report required by Sec. 5085, and having failed to file the anti-trust affidavit required by Sec. 5086, its charter was on that date, pursuant to Sec. 5091, forfeited, and so declared by the Secreretary of State, and its certificate duly cancelled. However, the plaintiffs did not undertake, as trustees, to liquidate the corporation's affairs as contemplated by Sec. 5094, nor was rescission of the forfeiture as provided by Sec. 5093, ever applied for, but the garment manufacturing business of Shelco was thereafter operated by plaintiffs in manner as theretofore, and in the corporate name until January 10, 1942, at which time continuing business losses resulted in an accumulation of obligations, including Federal taxes, and forced a "close down." The only company asset then remaining was machinery "mortgaged for more than it was worth." All of the unemployment contributions in question accrued during the period of more than two whole years next after the date of forfeiture.

The commission by its order and finding assessed unemployment contributions due and payable since January 1, 1940, against plaintiffs, having drawn the conclusions of law that plaintiffs, by virtue of Sec. 5094, "became trustees of Shelco Manufacturing Company, Inc., on January 1, 1940, and as such trustees were without power or authority to transact any business on behalf of the corporation except to wind up its affairs and distribute its assets. Since these trustees did transact business for a purpose other than winding up the affairs of the corporation and distributing its assets, they have become personally liable and are jointly and severally liable for the obligations incurred by them because of having engaged in business operations and activities beyond the scope of their authority as such trustees. Such liability includes the liability for the payment of contributions on the wages of persons employed by them after January 1, 1940."

Plaintiffs complain that, under Sec. 5094, the assessment should have been made against them as trustees (to the extent of assets received by them from the corporation), and contend that the assessment against them as individuals should be vacated because "directors of a corporation who carry on the business of the corporation after its charter is forfeited for failure to file affidavits or reports, are not liable personally for the corporation's obligations after the charter forfeiture, but are liable only as trustees to the extent of funds of the corporation received by them." The cases relied on are Fidelity Adjustment Co. v. Cook, 339 Mo. 45, 95 S.W. 2d 1162, and Woodward Hardware Co. v. Fisher, 269 Mo. 271, 190 S.W. 2d 576. They further contend that while forfeiture of Shelco's charter ended Shelco's existence as a corporation de jure, yet its continued operation as formerly, and under the corporate name, constituted Shelco a corporation de facto whose corporate existence can be questioned only in a direct proceeding by the State, and meanwhile plaintiffs can be subjected to no personal liability for obligations incurred after the forfeiture.

Neither of the two cases relied on under their first assignmnt is in point because they did not involve the issue presented here. Both were actions based solely upon statutes imposing personal liability for the debts of a corporation upon officers and directors (as partners) who continue to carry on the business after forfeiture of the corporation's charter. Liability was denied in each, but on the ground that the portions of the statutes upon which the actions were based were unconstitutional because of defective titles. As pointed out in the Woodward case, the effect of the portions of the statute held unconstitutional would have been to make the directors personally responsible as partners for obligations incurred before as well as after the forfeiture and cancellation of the charter. Liability apart from that expressly imposed by such statutes was not asserted, and hence not considered. It is this latter question with which we are now confronted.

Annual registration is required under Sec. 5085 "on or before the first day of July." Section 5086 provides that the anti-trust...