Rogers v. Stag Mining Co.

• Decision Date: 12 December 1914
• Docket Number: No. 1385.,1385.
• Citation: 171 S.W. 676
• Parties: ROGERS v. STAG MINING CO. et al.
• Court: Missouri Court of Appeals

171 S.W. 676

ROGERS v. STAG MINING CO. et al.

No. 1385.

Springfield Court of Appeals. Missouri.

December 12, 1914.

Rehearing Denied December 31, 1914.

1. CORPORATIONS (§ 216) — LIABILITY OF STOCKHOLDERS — LAW GOVERNING.

While the liability of stockholders for unpaid obligations of the corporation is contractual, the laws of the state authorizing the corporation to be formed enter into and become a part of the contract, and the liability imposed must be determined by the laws of such state.

2. CORPORATIONS (§ 239) — LIABILITY OF STOCKHOLDERS — STATUTORY AND CONSTITUTIONAL PROVISIONS — "DUES" — "CONTRACTED" — "ACCRUED."

Under Const. art. 12, § 9, providing that dues from private corporations shall be secured by such means as may be prescribed by law, but that no stockholder shall be individually liable in any amount above the amount of stock owned by him, Rev. St. 1909, § 3004, providing that if an execution shall be issued against a corporation and there cannot be found any property whereon to levy it may be issued against any of the stockholders to the extent of the unpaid balance of the stock owned by them, and section 3006, providing that if any corporation dissolves leaving debts unpaid a suit may be maintained against the stockholders without joining the corporation, stockholders are liable on judgments against the corporation for torts as well as judgments on contract; especially in view of the use of the word "dues" which, prior to the adoption of the Constitution, had been construed to include tort damages as well as contract debts, and the omission of the words "contracted" or "accrued," which, when applied to debts, at least in penal statutes, limits them to those arising on contract.

3. CORPORATIONS (§ 232) — LIABILITY OF STOCKHOLDERS — PAYMENT FOR STOCK IN PROPERTY.

Rev. St. 1909, § 3339, as amended by Acts 1911, p. 148, requiring the articles of agreement of corporations to state, among other facts, that the authorized capital stock has been paid in money or property of the full value thereof, and providing that, if any part of the capital stock is paid in property, an itemized description of the property setting out the cash value of the items shall be given, and that no stock shall be issued unless actually paid for at its par value in cash or in property of a cash value equal to the par value, does not preclude a judgment creditor of the corporation, seeking to enforce the liability of stockholders, from showing that property received in payment of stock was not of the value stated in the articles of agreement; especially in view of Const. art. 12, § 8, and Rev. St. 1909, § 2981, prohibiting the issuance of stock or bonds except for money, labor, or property actually received.

4. CORPORATIONS (§ 232) — LIABILITY OF STOCKHOLDERS — PAYMENT FOR STOCK IN PROPERTY.

Rev. St. 1909, §§ 2975, 3340, requiring a copy of articles of incorporation to be filed with the Secretary of State and recorded in the county where the corporation is located, does not give such notice to all the world of the facts stated in the articles of incorporation as to prevent one seeking to enforce a judgment for wrongful death against the stockholders from showing that property received in payment for stock was not of the value stated in the articles of incorporation, within the rule that a person dealing with a corporation, knowing that it has accepted certain property in full payment of stock, is estopped to claim that the stock is not fully paid up.

Appeal from Circuit Court, Jasper County; Joseph D. Perkins, Judge.

Suit by Ada Rogers against the Stag Mining Company and others. From a judgment for defendants on demurrer, plaintiff appeals. Reversed and remanded, with directions.

Frank H. Lee, Ray Bond, and R. H. Davis, all of Joplin, for appellant. Walden & Andrews, of Joplin, and H. W. Currey and Geo. V. Farris, both of Webb City, for respondents.

STURGIS, J.

This is a suit to enforce against defendants Yoder and Larkin, as original stockholders in the defendant Stag Mining Company, a corporation, the collection of an unsatisfied judgment against that corporation. A demurrer to the petition was sustained.

The material facts admitted by the demurrer are these: That the defendant Stag Mining Company is a Missouri corporation having a capital stock of $48,000; that plaintiff obtained a judgment against it for negligence resulting in the death of her husband; that an execution was issued thereon and returned not satisfied, the defendant corporation being insolvent; that defendants Yoder and Larkin are two of the three original incorporators of said company and have been and are large stockholders therein; that the entire capital stock of said corporation, as stated and set forth in the articles of incorporation, was paid up in property, to wit, a mining plant and lease, therein described and valued at the entire capital stock, but, in fact, not worth over $1,000, as the defendant stockholders well knew.

Two questions are thereby presented for our consideration: First, whether a judgment creditor can avail himself of the remedy provided against stockholders for failure to pay their stock subscriptions when the judgment arises from tort. Second, whether, under our present statute (Acts of 1911, p. 149), the capital stock being paid in property at a fixed valuation and so stated in the articles of incorporation, a judgment creditor can show that the property is not of the value fixed, and thereby that the stock subscription is not fully paid. It is just to remark that we are much assisted in the proper solution of these propositions by the able and exhaustive briefs of counsel for either side wherein the authorities pro and con are ably and exhaustively collected, discussed, and distinguished.

As to the first of these propositions, it will be found that most of the authorities agree that the proper solution depends largely on the intent and wording of the constitutional and statutory provisions of the various states imposing liability on the stockholders for unpaid obligations of the corporation. We may grant that such obligations are contractual and grow out of the stockholders' voluntary subscription of stock. Yet the laws of the state authorizing the corporation to be formed and to exist enter into and become a part of that contract, and the liability imposed must be determined by the laws of such state.

An early and leading case on this subject, and one cited in many of the authorities hereinafter referred to, is Cable v. McCune, 26 Mo. 371, 72 Am. Dec. 214, which arose under the statute of 1845, making stockholders liable for the "debts" of the corporation "then existing" and thereafter "contracted" for failure to publish an annual notice showing "the existing debts of the corporation." The demand sued for grew out of a tort of the corporation. It will be first noted that this statute does not deal with unpaid stock subscription, but imposed a penalty on the stockholders for failure to publish the required notice. The court held this statute to be penal and not remedial, and this, as we shall see, is an important distinction. The court further held that the statute then under consideration, being strictly construed, by its terms imposed a liability for a limited kind of demands only, to wit, those arising from contract and not for tort. In discussing this matter, the court said:

"The question, however, here is: What class of demands is embraced within the words `debts contracted'? Our Legislature did not go the length which others have in fixing the liabilities of the stockholders of these manufacturing corporations. They did not enact, as in many other states it is enacted, that the stockholders should be responsible for every liability established against the corporation, and which its assets turned out insufficient to meet. Such statutes as these, creating a general and determined liability not dependent on circumstances, becoming as it were a part of the very essence of the charter, may reasonably admit of a very different construction from a law which seems to recognize the general principle of individual irresponsibility subject to a very limited exception, and only ventures to hold out such responsibility as a penalty for a failure on the part of its managers to perform certain acts directed in the law and supposed to furnish some advantages to the public."

The court then distinguishes that case from Carver v. Braintree Mfg. Co., 2 Story, 432, Fed. Cas. No. 2,485, holding that the stockholders' liability extends to tort debts, largely because of a different wording of the Massachusetts statute making it a remedial one. The Cable v. McCune Case, supra, was followed in Cable v. Gaty, 34 Mo. 573, 86 Am. Dec. 126, construing in a similar manner a then statute of this state imposing on the directors of a corporation liability, with some limitations, for debts "existing and contracted" in excess of the capital stock of the corporation. The court again remarked:

"It is very clear, from the language and obvious purpose of the section, that the debts, which must exceed in amount the capital stock paid in to subject the directors to liability, must be debts voluntarily created by them or under their authority. * * * The language of the section seems to apply only to one kind of liabilities of the corporation, and to make the directors liable to pay the same debts which constitute debts of the company, in excess of the capital stock paid in, and no other. The claim of the plaintiffs is not a debt voluntarily created by the directors or under their authority, and is excluded by its character from the number of those for which the directors may be personally liable."

Since these decisions we have adopted a new Constitution and new statutes, and it is important to note the new provisions. Section 9, art. 12, of our Constitution, reads:

"Stockholders, Extent of Liability. — Dues from private corporations...