Gibbs v. Davis , 27 Fla. 531 ( 1891 )

Taylor, J. :

Herbert IL Gibbs, on the 23rd of April, 1886, instituted his suit at law in the Circuit Court-of Volusia county, in the ¡Seventh Circuit, against If. S. Sanford and William I). Ilavis, as stockholder.-! in “The Florida Journal Company,’' a corporation, to recover the sum of 8700 alleged to be due upon a written contract entered into by and in the name of the said corporation, on the 19th of March, 1.885.

The declaration, filed May 2d, 1887, alleges that the-defendants, Sanford and Davis, are stockholders in said company; Sanford to the amount of $2,500; and Davis to the amount of ¡DTK); thatsahl company was duly organized and incorporated in accordance with the general act of incorporation of -Florida, as contained in Chapter 34 of McClellan’s Digest; that said company first incorporated under the name of the “Putnam County Journal Association,"’ but after-wards changed its name to “The. Florida Journal Company;’1 that under and within the terms of the written contract, attached as a part of said declaration, made by said company in its corporate name, there is due and owing to the plaintiff $700 that has. never been paid; that the said corporation was dissolved on or about the 3rd day of August, 1887, leaving the said indebtedness to the plaintiff still due and unpaid ; that the defendants, Sanford and Davis, were stockholders as aforesaid, and to the respective amounts aforesaid at the time of its dissolution, and became then and are now liable to the plaintiff for said indebtedness due to him from said company to the amount of stock t hen owned by them respectively in said corporation.

The summons issued in the cause having been returned non eat ¡unaiiitx as to the defendant, II. H. Sanford, the plaintiff, or his attorneys, on June 7th, 1886, idled with the clerk Ihe request-in the words following: '“You will note of record the non-service of the summons ad T('spowd<'H(iu-Jii- on 11. S. Sanford, defendant herein.”

The defendant, Davis, interposed eight pleas, but for the purposes of this decision we deem it unnecessary to notice any of them particularly, except the seventh, which is as follows : “And for a seventh plea, defendant says, that as a stockholder in the Putnam County Journal Association, under the laws of Florida defendant is not liable to or indebted to plaintiff in any amount, no judgment or execution having been obtained by plaintiff against- said company and levied upon its property, or returned showing that said company had no property out of which said j udgment could be made.” To this seventh plea, as well as to the 1st, 2d, 3d, 4th and fith, the plaintiff demurred. Upon this demurrer the court- below rendered the following judgment: “The demurrer to the defendant’s poleas Mving been argued by counsel for plaintiff and defendant, and the court being advised, it is ordered that the demurrer to first and second pleas be sustained,, and the demurrer to the remaining pleas is overruled, the court holding that the plaintiffs amended declaration is bad in law because there had been no judgment and execution against the corporation before?, action brought against the defendant stockholders ; and it- is adjudged that the plaintiff take nothing by his suit, and the defendant go without a day.” From this judgment the plaintiff appeals to this court.

The issue presented involves a construction o£ section 27, Chapter 1639, Laws of Florida, approved August 8th, 1868, (section 20, p. 232, McClellan’s Digest-,) and of section 9, Chapter 3165, Laws, approved March 11 th, 1879, (section 40, p. 236, McClellan’s Digest). It may be well to observe that section 9 of Chapter 3165, acts of 1879, was originally included as section 22 in Chapter 1639, acts of 1868, and was repealed by Chapter 2016, act of February 12th, 1874, but was re-enacted in 1879 as section 9 of. Chapter 3165.

The learned counsel for the defendant contends: 1st. That’no suit can be maintained by a creditor of a corporation against an individual stockholder thereof without first exhausting his remedy against the corporation itself. 2d. That under this statute stockholders are not liable at all in this State for the debts of the corporation. 3d. That section 27 of Chapter 1639, Laws of 1868, (section 20, p. 232, McClellan’s Digest-,) that reads as follows (its proviso omitted): “If any company formed under this chapter is dissolved, leaving debts unpaid, suits may be brought, against any person or persons who were, stockholders at the time of such dissolution, without joining the company in such suit, to an amount equal only to the amount in par value of the stock held by such person or persons, the collection to be made from the property of each stockholder respectively ; and if any number of stockholders (defendants in the case) shall not have property enough to satisfy his or thoir portion of the execution, then the amount of deficiency shall be divided equally among all the remaining stockholders, and collection made accordingly, deducting from the amount a sum in proportion to the amount of stock owned by the plaintiff at the time the company was dissolved,” is superseded by section 9 of Chapter 3165, acts of 1879, (section 40, p. 236, McClellan's Digest,) that reads as follows : “If any execution shall have been issued against the property or effects of any corporation, and if these cannot be found whereon to levy, then such execution may be issued against any of the stockholders to an extent equal, in amount to the amount of stock by him owned, together with any amount unpaid thereon : Provided, That no execution shall issue against any stockholder except upon the order of the court in which the action, suit or other proceedings, shall have been brought or instituted, made upon motion in open court, after good and sufficient notice in writing to the person upon whom execution is desired, and upon such motion the court may order execution to issue accordingly. 4th. That a suit at law will not lie in this State under our statutes by a single creditor of a corporation i'or himself alone against a single stockholder of such corporation, but that the remedy, if any, is by bill in equity, on behalf of himself and all other creditors of the company, against all of its stockholders. 5th. That the liare assertion in the declaration “that the corporation was dissolved,’’ is not sufficient to enable the plaintiff to sue under the provisions of section 27, Chapter 36‘JU, but that the declaration should have stated in detail the facts relied upon as constituting such dissolution in contemplation of law.

After careful consideration of the two sections of our statute above referred to in the light of the decisions of other State's having provisions of law similar to „our own, particularly the conclusions of the courts of the ¡átate of Missouri, whose statute on this subject is almost a duplicate of the Florida statute, we do not agree with these contentions of the counsel for the defence.

That a stockholder in a corporation organized under this law of Florida is liable for the debts of such corporation to an extent equal to the amount in par value of the stock held by such person, there can be no doubt. Though there is no language in the statute in haec verba declaring the liability of the stockholder for the debts of the company, yet to hold otherwise would leave the legislative enactment contained in section 27, Chapter 103!), in the awkward attitude of permitting suits to be brought, and judgments and executions to be recovered against persons who were not, liable for the debts sued for ; and would further seriously indict the sanity of the law-making power, in its enactment of section 0, of ('lmi)ter 8105, for permitting executions to issue summarily against a stockholder, without any previous formal suit against him, for the enforcement of a, judgment recovered against the corporation, where none of its property or effects can be found wherewith to satisfy same, without any liability on his part for such, judgment or the debt it represents.

By the act of subscription for stock-tlie stockholder 'assumes these provisions of the law creating- his liability for the debts of the company as part of the contract. of subscription. Before resort can be had to the stockholder to enforce this liability, under these pro■visions of the statute, one of two conditions precedent must, appear:

1st. By the provisions of section 27, Chapter 1039, (section 20, p. 232, McClellan's Digest,) there must app-nir a dissolution of the company, leaving debts unpaid.

2d. By the provisions of section 9, Chapter 3105, (section 40, p. 236, McClellan's Digest,) where there has been judgment recovered against the company, it must be shown that no property or effects of the company can be found whereon to levy the execution sufficient to satisfy the same, before resort can be had to the stockholder.

In the latter case, no formal suit is necessary against the stockholder to establish bis liability, but execution issues against him on mo! ion to tlie court renderingtlie judgm/uit. after notice, directly from the judgment against the company to the amount of stock by him owned. From these two distinct and separate provisions of our statute, the one, upon the dissolution of the company, allowing the stockholder to be sued for the company's debts without joini/ty the company in the suit; and the other permitting. execution to issue against the stockholder to enforce a judgment against tiie company in which the stockholder was not individually named as a party, we are led to the conclusion that it is th»1 intention of the statute to treat tlie stockholders of corporations, as they really are, as part and parcel of tlie corporation itself, and to make them primarily and severally liable to the extent of their stock for the. debts of the company.

We can discover no inconsistency or conflict in tIkprovisions of these two sections of the statute. They were both, as before stated, originally incorporated in the act of August 8th, 18(58, and seem to have been designed to give to the creditors of corporations, whose creation is rendered so simple and easy by the statute, a plain and ample remedy for the recovery of their claims, no matter what may be the status of the organization as such. In the one case where there has been no dissolution, but the company still, maintains its status asa corporation so that its proper officials can be found to respond in the company’s name to suits for its debts, then its creditors must sue the company in its corporate- capacity and name before assailing the shareholders, but in such case, if no property of the company can be found whereon to levy the execution, then the credit or has the additional and summary remedy of resorting wiilphis execution to the property of the shareholder».

■ In the other ease where there has been a dissolution of the organization, when the organization itself has disbanded and disappeared and cannot be found, then the creditor under this statute is permitted to resort by suit direcily against the stockholder without joining the defunct company.

It is contended for the defendant in this case that before resort can be had upon him as a shareholder for a. debt of the company, that the dissolution of the corporation must first be decía '<'(1 and established either by legisle.five enactment or by the judgment or decree of some court. The decided weight of authorities is against this view of the question, and the proposition may now be said to be settled, that where .the statute makes the dissolution of the corporation a condition precedent to the enforcement of the shareholder’s liability, the dissolution, in the sense in which the term is here used, takes place when the corporation comes into a condition of having debts aud no assets, and has ceased to act and exercise its corporate functions, or has suffered acts to be done which end the object for which it was cheated. Cook on Stock and Stockholders, sec. 219; Chesapeake & Ohio Canal Co. v. Baltimore & Ohio R. R. Co.; 4 Gill & Johnson, (Md.) 121. In this case the court says: £iA private corporation aggregate may be dissolved, by the death of all of its members, or by the loss of an integral part, whereby it is rendered unable to do any corporate act, or to restore itself by a new election; or a corporation may be dissolved by a surrender to the government of its franchise, or by an act of the legislature repealing the act of incorporation, with the assent of the corporation; or it may be dissolved by a forfeiture of its charter, through abuses or neglect of its franchises, as for condition broken, there being a tacit condition in every such grant, that the corporation shall act up to the end of its institution. * * * Where there is no corporate body in existence; as where'it has been dtx.solred by the loss of an integral part-, or by surrender, etc., it would be not only useless but absurd, to go into a court of law, to obtain a judgment of dissolution.” Lex nemimn cog It ad vana neu imiMlia perar/emla. To the same effect are Slee vs. Bloom, 19 Johnson, 474; Briggs vs. Penniman, 8 Cowen, 390; Cary vs. The Cincinnati & Chicago R. R. Co., 5 Iowa, 364; Perry et al. vs. Turner et al., 55 Mo., 421; Cen. Ag. & Mech. Asso. v. Ala. Gold Life Ins. Co., 70 Ala., 120.

It is contended further that the, bare allegation in the declaration “that this company has been dissolved’’ is not sufficient, but that the- facts relied on as constituting the dissolution should have been stated in detail. We think the a negation of the. declaration in this respect is sufficient. It states the leading fact, that there has been a dissolution, and this is all that is necessary. The detail of circumstances that go to establish a state of dissolution are matters of evidence that need not be pleaded. Overmeyer et al. vs. Cannon, 82 Ind., 458; Bank of Poughkeepsie vs. Ibbotson, 24 Wendell, 479.

It is further contended, and the court below based its ruling upon the plaintiff's demurrer to the defendant’s plea upon this view, that under these statutes no suit can be maintained by a- creditor of a corporation against an individual stockholder thereof without first exhausting his remedy against the corporation .itself. We do not consent to this proposition. The clear intention of the Legislature in its enactment of section 27, Chapter 1639, (section 20, p. 232, McClellan’s Digest,) giving to the words thereof their plain ordinary meaning, was to give to the creditors of corporations organized under that act, the right, whenever such corporation arrived at a state of dissolution, to proceed by suit directly against the stockholder or stockholders of the company for the recovery of their claims, to the amount m par value of the stock held at the time of such dissolution by such person or persons, and this without joining the company by its corporate name as a part,y in the suit. There is nothing in the statute that, requires an exhaustion in such cases of the creditor's remedies against the corporation as a condition precedent to their right to proceed by suit to enforce the statutory liability of the stockholder. The only condition precedent required by the statute to be shown in the dissolution of the corporation; when tills is shown the liability of the shareholder directly to the creditor to the amount of his stock becomes absolute. in this view we are sustained by the authorities cited above.

And lastly, it is contended that a suit at law will not lie in this State under this statute by a. single creditor ■of a corporation for himself alone, against a single stockholder thereof, but that the remedy, if any, is by bill in equity on behalf of himself and all other creditors of the company against all of its stockholders.

Though it appears from the record in this case that If. 8. 8anford was originally joined with William I). Davis as a defendant in this suit, yet no services upon him has ever been perfected, and the suit lias practically been discontinued as to him by noting the fact of non-service according to the provisions of the stat-rite, (section 19, p. 814, McClellan’s Digest,) and the case as presented by the record is, to all intents and purposes that oí! a single creditor (Herbert H. Gibbs) of a corporation for himself aloné suing for a debt alleged to be due by such corporation.

While the Supreme Court of Missouri in Perry et al., vs. Turner et al., supra, has held that if the suit is brought against more than one stockholder it must necessarily be by proceedings in equity, yet we are not called upon in this case to consider the question as to whether the suit should be at law or in equity where there is more than one shareholder sought to be recovered against, we do not, therefore, pass upoji that phase of the question. The case presented to us is that of a- single creditor suing at law for his own claim alone to enforce the liability of a single shareholder. As before stated this statutory liability of the shareliolder is r.r contractu., and we see nothing in the statue to prevent its enforcement in a case like this by an action at law.

Although no allusion has been made in any of the briefs or arguments of counsel for the appellant or appellee, in this case to the provisions of Chapter 8729, Laws of Florida, approved May 81st, 1887, which seems to change the liability of stockholders in corporations, and to limit such liability to the amount that remains unpaid upon their subscriptions, and that repeals all former laws conflicting therewith; yet we deem it proper to refer to said act only for the purpose of saying that the conclusions we have reached in this case are based entirely upon the interpretations we have put upon the provisions of said sections 2(0 and 40, pp. 232 and 236, McClellan’s Digest. And that, so far as the same are disclosed by the record here, tire rights and liabilities of the parties in this case are to be determined upon the provisions of law in force prior to the enactment of the said Chapter 8729, approved May 31st, 1887, the latter law having been passed subsequently to the transactions involved in this suit.

There remains but one other question presented by the record that we deem it necessary to pass upon, and that is the ruling of the court below upon the plaintiff's demurrer; to the second plea of the defendant, which plea is as foliows : “For a second plea said defendant says that he is not now, and never was, a resident of the county of Volusia, nor has any cause of action against him, as alleged in plaintiff’s declaration, accrued in said county of Yolnsia, and the above named court lias no jurisdiction in the premises, and defendant prays judgment if said suit shall not abate against him for want of jurisdiction.” To this plea the plaintiff demurred, and upon the argument the court sustained the demurrer. Upon the authority of Russ, Administrator, vs. Mitchell, 11 Fla., 80, we think the ruling of the court belowr upon the demurrer to this plea, was proper. The issue attempted to be presented by this plea of the defendant, under the construction given by this court in the case last above cited, to the provision of the statute contained in section 6, p. 813, McClellan’s Digest, is not properly one as to the jurisdiction of the court as at common law, but is a question of privilege, the privilege under the statute to be sued in some other county of this State than the one in which the action is brought. To avail himself properly of this privilege, so as to divest the court of its jurisdiction over him that it had acquired by the personal service upon him of its process, it was necessary for the defendant by his plea to disclose some other county in this State in which he resided, and in which, under the statute, he had the privilege to be sued, than the one in which the suit was brought. Failing to do this, we think the court below was correct in sustaining the demurrer to said plea.

It follows from the views here expressed that the judgment of the court below overruling the plaintiff’s demurrer to the defendant’s pleas, and dismissing the defendant without day, must be reversed; and it is ordered with directions for such further proceedings in said cause as shall be consonant with the views and opinions herein expressed.