State Sav. Ass'n of St. Louis v. Kellogg

• Decision Date: 31 March 1873
• Citation: 52 Mo. 583
• Parties: STATE SAVINGS ASSOCIATION OF ST. LOUIS, Plaintiff in Error, v. SANFORD B. KELLOGG, et al., Defendants in Error.
• Court: Missouri Supreme Court

52 Mo. 583

STATE SAVINGS ASSOCIATION OF ST. LOUIS, Plaintiff in Error,

v.SANFORD B. KELLOGG, et al., Defendants in Error.

Supreme Court of Missouri.

March Term, 1873.

Error to St. Louis Circuit Court.

T. T. Gantt, for Plaintiff in Error.

I. The Southwestern Freight and Cotton Press Company was “ dissolved” in June, 1869. It is admitted by the pleadings, that it was in that month decreed a bankrupt. It is further admitted by the pleadings, that it was then wholly without funds or means.

When it is provided in the act creating a corporation “that the individuals composing it shall be liable at the time of the dissolution of the company for the debts then due, any inability of the company by reason of a total want of funds to exercise its corporate powers, will be deemed a dissolution.” (Ang. & Ames on Corp., § 613, (9th edition.) Penniman vs. Briggs, Hopk. Ch., 300; S. C., 8 Cow., 387; Bank of Poughkeepsie vs. Ibbotson, 24 Wend., 473.)

In the case of Slee vs. Bloom, 19 Johns., 456, the High Court of Errors reversed the decision of Kent, Chancellor That eminent jurist had decreed that the corporation was not dissolved by insolvency. But Ch. Just. Spencer, delivering the opinion of the Court of Errors, held “that the corporation is dissolved when it has done, or suffered to be done, acts equivalent to a direct surrender.” (p. 473.)

Pursuing the inquiry as to when the dissolution occurred, he remarked (p. 477) “we may safely say it happened on this February, 1818, when all the property of the company was sold.”

The case of the Southwestern Freight and Cotton Press Company is stronger than this, for in June, 1869, it was adjudicated a bankrupt, on its own petition, and had no assets at all.

II. The conditions then obtained on which it is provided in § 20, Ch. 62, that “suits may be brought against any person or persons who were stockholders at the time of such dissolution,” without suing the company itself.

If this be the only provision of the statutes which we need consult, it is difficult to see how the liability of the defendants can be denied. And even if § 13 of Ch. 69 must also be satisfied the same conclusion is, it is submitted, inevitable. But the General Assembly had no right to impose the conditions which it prescribes. The pointed and emphatic mandate of the Constitution, (Cons, of Mo. Art., 9 Subd., 6,) is that “in all cases each stockholder shall be individually liable, over and above the stock by him or her owned, and any amount unpaid thereon, in a further sum at least equal in amount to such stock.”

Looking to the provision of § 13 of Ch. 69, we see that it declares, substantially, that stockholders shall not be liable in all cases for the debts of corporations, but that in respect of debts of a certain character they shall not be liable at all.

Here is the legislative imposition of conditions, the legislative annexing of qualifications, of a very important nature, to the constitutional mandate. The conditions are arbitrary and onerous, and may be entirely impracticable. In the case at bar, the specific performance of the second of the conditions is, and was in 1869, impracticable. Its performance, cypres, would have been vain and futile.

III. But (supposing us bound by this provision, for the sake of the argument,) we are not barred by having omitted to sue the company within a year after the debt matured. Before the debt was sixty days old, the company was decreed a bankrupt. Not only was this the case, but it was then totally, absolutely, without any assets. Of course our statute, speaking as of the 1st August, 1866, at latest (p. 882, Rev. St., 65,) had reference to no provisions of the act of 2d March, 1867, which being passed by the Congress of the United States, in direct and express pursuance of the authority of the Federal Constitution, is “the supreme law of the land.” Equally, of course, our Legislature in 1866, by the language employed, intended ordinary actions at law. It could not have intended to require a creditor to be guilty of a contempt of court, by suing in a State Court a decreed bankrupt.

The plaintiff was not bound to prove up its demand against the assets of the bankrupt corporation in the hands of the assignee. There were no assets at all. “ Lex neminem cogit ad vana, seu impossibilia.” But if “the law compels no man to do an idle, or an impossible thing,” it surely cannot be argued either that it required the plaintiff to prove up his demand against an estate confessedly not able to pay costs, or to incur the penalties of a contempt by suing a decreed bankrupt in the courts of Missouri.

If indeed, there had been any assets in the hands of the assignee of the corporation, it was our duty to have exhausted them. But there being none, it will be strange doctrine if we were nevertheless obliged to go through the idle form of asking for a share of it. Surely this would be compelling a man to do a vain thing, contrary to the maxim “ lex neminem cogit ad vana seu inutilia ” (Broom's legal maxims, 248; Trustees of Huntington vs. Nicoll, 3 Johns., 566,598.)

Glover & Shepley, for Defendants in Error.

I. The decisions have been uniform that insolvency within the meaning of the bankrupt law is only the present inability to pay the debts of the corporation or individual, as they mature.

II. The right given by the statute of this State against the individual stockholders, is only after all the means have been exhausted, as against the corporation, and all its assets applied so far as they will go.

Section 11 of the act (Genl. Stat. 1865 p. 328,) provided that only after a judgment has been obtained against the corporation and execution issued thereon, and no property was found sufficient to satisfy the execution, can the stockholder be called upon to respond. It proceeds upon the theory, that the assets must be exhausted before the individual liability commences.

III. The dissolution of the corporation spoken of in Section 20, which gives the right to sue the stockholder upon the “dissolution” of the corporation, is an absolute dissolution-- a ceasing to exist where there are neither officers to be served with process, nor assets to respond, and therefore, judgment cannot be had against the corporation, because there is no one to respond.

That this is the meaning of that section, is obvious from the preceding section, the 19th, which treats about the “dissolution” of the corporation. It provides that when a corporation dissolves--has ceased to exist--certain officers shall be trustees for the purpose of distributing its assets among its creditors, and may sue and be sued as such trustees. This can only be the case when the corporation has expired by limitation, or when it has surrendered its franchise. The “dissolution” spoken of in the 20th Section, is the “dissolution” spoken of in the 19th section, and so long as it can be sued as a corporation, and does not act by its former officers as its trustees, there has been no dissolution within the meaning of the act.

The 37th section of the bankrupt law provides that corporations shall not be discharged from their debts, but they exist as before.

Suppose the assignee pays 95 per cent. of the debts, what is to prevent the corporation from continuing till the term limited in its charter expires, by an issue of new stock or a voluntary assessment subscribed by its stockholders.

The present bankrupt law was mainly fashioned from the insolvent law of Massachusetts, and that law contained a similar provision in relation to discharge of a corporation. The same question now arising was presented in the case of Coburn vs. Boston Papier Mache Company, 10 Gray, 243; and Chief Justice Shaw, then decides that under such a provision the law does not operate as a dissolution.

The provision in the bankrupt law that there can be no discharge, admits the right to sue, however fruitless it might be.

IV. As this is a manufacturing Co., organized under G. S. Ch. 69; W. S. Ch., 37, Art, VII. there can be no recovery under the provisions of the 13th section against individual stockholders, unless suit had been commenced against the Company within one year after the debt became due, and...