Willis v. St. Paul Sanitation Co.

• Decision Date: 18 January 1892
• Parties: WILLIS v ST. PAUL SANITATION CO. ET AL.
• Court: Minnesota Supreme Court

48 Minn. 140

50 N.W. 1110

WILLISvST. PAUL SANITATION CO. ET AL.

Supreme Court of Minnesota.

Jan. 18, 1892.

(Syllabus by the Court.)

1. Article 10, § 3, of the constitution, providing that “each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him,” is self-executing, and creates an individual liability on the part of the stockholder for corporate debts to an amount equal to the amount of stock held or owned by him.

2. The subject of chapter 30, Laws 1889, amending the insolvent law of 1881, is sufficiently expressed in its title.

3. The provision in section 1 of this amendatory act, “that the release of any debtor under this act shall not operate to discharge any other party liable as surety, guarantor, or otherwise for the same debt,” includes stockholders who are liable for the debts of the corporation.

4. This provision is not unconstitutional, as applied to cases where the liability of the stockholder was incurred before, but the proceedings under the insolvent act were had and the corporation discharged subsequent to, its passage.

Appeal from district court, Ramsey couty; BRILL, Judge.

Action by Elizabeth L. Willis against the St. Paul Sanitation Company and others to enforce, as against its stockholders, a sum due from said company. Judgment for plaintiff. Defendant E. L. Mabon appeals. Affirmed.

James H. Foote, for appellant.

J. C. & W. H. Michael, for respondent.

MITCHELL, J.

1. This was an action brought by a creditor of an insolvent corporation to recover from certain of its stockholders on their individual liability for the corporate debts, under what is commonly called “the double liability clause” of the constitution, which provides that “each stockholder in any corporation (excepting those organized for the purpose of carrying on any kind of manufacturing or mechanical business) shall be liable to the amount of stock held or owned by him.” Article 10, § 3. The principal question in the case is whether this provision of the constitution is self-executing, or whether it requires legislation to carry it into effect. The same question is also involved in the cases of McKusick v. Seymour, and Meagher, 50 N. W. Rep. 1114, (submitted at a later day of the present term,) and has been exhaustively argued in both cases. Some points were made by counsel in one case that were not urged in the other; but as the question is common to both cases, and as there was an understanding among counsel that all arguments presented in either should be considered in both, we shall endeavor to fully determine the question in the present opinion. In addition to this main question, counsel for the appellants in the Meagher Case, supra, urged that this constitutional provision is not intendedto impose any “double liability” upon stockholders, but simply means that they shall be bound to pay for their stock once its “face amount,” any device or agreement to the contrary notwithstanding, and that, having once paid for their stock in full, they are not further liable. Except for the eminence of the counsel who have advanced this view, we would not deem it entitled to serious consideration. While no fixed form of words has been adopted to express the idea, yet provisions couched in more or less similar language have been frequently incorporated into constitutions and statutes, and have been uniformly understood and construed as providing for an individual liability of stockholders for corporate debts in addition to this risk of losing the amount of their stock. This is the meaning which has been invariably attached to this provision of our constitution. It is the one attributed to it by this court in numerous cases, although never in the form of a direct and authoritative decision; and we do not believe that the construction now sought to be placed upon it ever occurred to, or was ever advanced by, any one, until suggested by counsel in the present case. Any such construction would render the provision meaningless and useless, for all that would be accomplished by it was already fully covered by the law. If a person had subscribed for stock, and had not paid for it the amount agreed, of course he was liable to the corporation, and, through it, to its creditors; and if the stock had been issued to him as paid-up stock, when not in fact paid for, under such circumstances as to operate as a fraud upon creditors, he was, upon well-settled principles, liable to them as for unpaid stock subscriptions. The construction contended for would give the public no security beyond what they already had under the existing law. Its absurdity is rendered apparent when considered in connection with the amendment of November 5, 1872, inclosed in parentheses; for then the whole section would mean that, while the stockholders in all other corporations should be liable to pay once for their stock at its face amount, yet stockholders in manufacturing corporations need not be required to do so. The obvious intention of the provision was to add to the ordinary liability of a corporation for its debts the individual liability of the stockholders to a limited amount, and that the measure of that liability should be a sum equal to the amount of stock owned or held by them. This stock is not the subject of the liability, but the measure of it; in other words, the stockholders are liable, not for the stock, but, in addition thereto, for a sum measured by the amount of the stock.

2. This brings us to the main question, viz., whether this provision of the constitution is self-executing. That such has been the general understanding of the bench, bar, and business men in this state is conceded. This court has, in a long line of cases, assumed that such was the fact. Dodge v. Roofing Co., 16 Minn. 373, (Gil. 327;)Allen v. Walsh, 25 Minn. 543;State v. Thresher Manuf'g Co., 40 Minn. 213,41 N. W. Rep. 1020;Mohr v. Elevator Co., 40 Minn. 34341 N. W. Rep. 1074;Arthur v. Willius, 44 Minn. 409,46 N. W. Rep. 851;Densmore v. Stone Co., (Minn.) 48 N. W. Rep. 528. And, so far as we are aware, the correctness of this view has never been questioned or doubted in any court, until one of the counsel in this case interposed a brief in Arthur v. Willius, supra, in which he took the position for which he now contends. Of course it is true, as counsel suggests, that this court has never before been called on to decide the question, and that mere assumption on the part of either bench or bar does not make a thing law; but, on the other hand, it is also true that a construction which has for a third of a century been accepted by every one as so obviously correct as never to have been questioned or doubted is much more likely to be right than a newly-discovered one, suggested at this late day by the emergencies of present litigation. The fact that no such view ever before suggested itself to the minds of court or counsel in the numerous cases where the point might have been made, and where it was to the interest of counsel on one side or the other to make it, certainly raises a strong presumption against it. Moreover, as the generally accepted view has doubtless long been the basis of the credit of corporations, it ought not now to be disturbed, unless clearly wrong. But if the question was entirely one of first impression, we have no doubt as to how it should be determined. A constitution is but a higher form of statutory law, and it is entirely competent for the people, if they so desire, to incorporate into it self-executing enactments. These are much more common than formerly, the object being to put it beyond the power of the legislature to render them nugatory by refusing to enact legislation to carry them into effect. Prohibitory provisions in a constitution are usually self-executing to the extent that anything done in violation of them is void. But instances of affirmative self-executing provisions are numerous in almost every modern constitution. For instances of this, see State v. Weston, 4 Neb. 216;Thomas v. Owens, 4 Md. 189;Reynolds v. Taylor, 43 Ala. 420;Miller v. Marx, 55 Ala. 322;People v. Hoge, 55 Cal. 612.

Without stopping to specify, it will be found on examination that our own constitution abounds in provisions that are unquestionably self-executing, and require no legislation to put them into operation. The question in every case is whether the language of a constitutional provision is addressed to the courts or the legislature, -does it indicate that it was intended as a present enactment, complete in itself as definitive legislation, or does it contemplate subsequent legislation to carry it into effect? This is to be determined from a consideration both of the language used and of the intrinsic nature of the provision itself. If the nature and extent of the right conferred and of the liability imposed is fixed by the provision itself, so that they can be determined by the examination and construction of its own terms, and there is no language used indicating that the subject is referred to the legislature for action, then the provision should be construed as self-executing, and its language as addressed to the courts. In almost every case cited by appellants in which a constitutional provision has been held not self-executing, it will be found either that its language indicated an intention that legislation should be had to carry it into effect, or that the nature of the provision itself was such as to render such legislation necessary. To the first class may be referred the provision in the constitution of Missouri (quite different from that in ours) considered in the case of Morley v. Thayer, 3 Fed. Rep. 739, although that case really only decided that the plaintiff could not recover because he had not followed the remedy provided by statute. To the same class belongs the case of Jerman v....