Singhaus v. Piper
| Decision Date | 03 May 1919 |
| Docket Number | No. 20445.,20445. |
| Citation | 172 N.W. 523,103 Neb. 493 |
| Parties | SINGHAUS v. PIPER ET AL. |
| Court | Nebraska Supreme Court |
The liability of a stockholder in a corporation for failure of the corporation to publish notice of indebtedness required by section 577, Rev. St. 1913, is in the nature of a penalty for neglect of duty. One stockholder, who is equally in fault in that regard with all other stockholders, cannot maintain such action, as creditor of the corporation, against the other stockholders.
In such case, there is no default under the statute until one year after the organization of the corporation.
Whether such notice is sufficient without the signatures of a majority of the directors, quære.
A corporation may exchange property in purchase of its outstanding shares, but the transaction must be in entire good faith, and in no manner injure the rights of its creditors or its stockholders.
The relation between stockholders under such circumstances may be regarded as confidential; and, if they are creditors of the corporation, their right to object to such a transfer is analogous to the right of creditors to object to transfers of property by their debtors.
If the transfer is made with the view of securing stockholders against loss on account of existing indebtedness of the corporation, the transfer might be held invalid as against such creditors; but, if at the time of the transfer the remaining corporate property is of such value as to afford ample security for the debts of the corporation, and the business of the corporation continues for several years, the fact that in the meantime the business has become unprofitable and new debts incurred so that the corporation has become insolvent, is not conclusive that the transfer complained of was made with the intention of defrauding existing or subsequent creditors.
In such case, a creditor and stockholder at the time with knowledge of the transfer and of the business and assets of the corporation cannot complain of the transfer because after three or four years the business of the corporation has become unprofitable, and new debts have been incurred exceeding the value of the assets.
Appeal from District Court, Burt County; Day, Judge.
Action by John A. Singhaus, administrator de bonis non of the estate of Swan M. Nelson, deceased, against John F. Piper and others, and Riley S. Hart and others, as stockholders of the Nebraska Improvement Company. Judgment for defendants John F. Piper and others, and for plaintiff, against defendants Riley S. Hart and others, and they appeal, and plaintiff takes a cross-appeal. Judgment in favor of defendants John F. Piper and others affirmed, and judgment against Riley S. Hart and others reversed, and cause remanded for further proceedings.Herbert Rhoades, of Tekamah, John J. Sullivan, of Omaha, and James A. Clark, of Tekamah, for appellants and cross-appellees.
Montgomery, Hall & Young, of Omaha, and J. A. Singhaus, of Tekamah, for appellee and cross-appellant.
The plaintiff, as administrator of the estate of Swan M. Nelson, deceased, obtained a judgment against the Nebraska Improvement Company, a corporation, and execution thereon being returned unsatisfied, brought this action in the district court for Burt county to recover the amount of the judgment from the stockholders of the corporation because of the alleged failure to publish the annual notice of indebtedness required by statute, and to recover from certain of the stockholders real estate taken by them in exchange for shares of stock in the corporation. The trial court found against the plaintiff on the first cause of action, and in favor of the plaintiff against certain of the defendants upon the second cause of action. These defendants, who had exchanged their shares of stock for property of the corporation, appealed, and the plaintiff has filed a cross-appeal from that part of the judgment which released the defendants from liability because of the alleged failure to publish the statutory notice.
[1] The plaintiff was himself a stockholder in the corporation, and the first question presented upon his cross-appeal is whether that fact would prevent his recovery against the other stockholders because of the failure to publish notice. The statute makes all of the stockholders responsible for the failure to publish the statutory notice. They may compel the directors, by mandamus, to comply with the statute in that respect, and so protect themselves from liability. Smith v. Steele, 8 Neb. 115. If they fail to see that the notice is published they become liable for debts of the corporation as specified in the statute. This amounts to a forfeiture for failure to perform a duty, as stated by Chief Justice Maxwell in Porter v. Sherman County Banking Co., 36 Neb. 271, 54 N. W. 424:
If one stockholder who has incurred this penalty could recover of other stockholders similarly situated, it would seem that his recovery ought at least to be reduced by the amount of his own liability, or his judgment should be against himself as well as against the other stockholders. In that case, the easiest way for him to liquidate it would be to cancel the judgment which he had obtained. This leads to such extravagant conclusions that it seems impossible that the Legislature could have intended such a result. The point was...
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