Harpster v. Big Four Coal Co. , 36 Ohio App. 10 ( 1930 )

The plaintiff in error, Luella H. Harpster, was plaintiff in each of two actions brought in the court of common pleas to recover a penalty. One of these was against the Big Four Coal Company, a corporation, under Section 8623-127, General Code, which provides, among other things, that every corporation that fails, within three days after request, to mail a statement of profit and loss, and balance sheet, required to be prepared, to any shareholder making request, shall be subject to a penalty of $100 and the further penalty of $10 for each day, beginning three days after written request, that such default shall continue, to be paid to any and all shareholders making such request. The other action was brought against Earl C. Vail, treasurer of the Big Four Coal Company, under the provisions of Section 8623-128, General Code, which provides, in substance, that, if the treasurer shall neglect, fail, or refuse to mail a copy of the statement of profit and loss and balance sheet, after written request by any shareholder, he shall be subject to a penalty of $100 and a further penalty of $10 for every day beginning five days after such request, that such default shall continue, to be paid to any and all shareholders making such request.

Section 8623-64, General Code, requires every corporation to lay before the shareholders at the annual meeting, or at any other meeting at which directors are to be elected, a statement of profit and loss and balance sheet, specifying how the same shall be made up, and it also provides that the corporation shall, upon written request of any shareholder made after notice of such meeting, forthwith mail to such requesting shareholder a copy of such statement of profit and loss and balance sheet. There was a demurrer filed to the petition in each case, and the court sustained these demurrers. After sustaining the demurrer, the court in each case permitted the plaintiff to amend the petition by interlineation by stating that the defendant is a corporation for profit and not a bank. The amendments were not in fact made, but the court below treated them as having been made in each case, and, in the arguments in this court, counsel on both sides treated these pleadings as if amended. We will therefore so treat them. After being given leave to amend as stated, plaintiff not desiring to plead further, the court rendered judgment for each defendant for costs. These proceedings in error are brought to reverse such judgments.

In our opinion the petition in the Vail case is demurrable for the reason that the only request for the statement of profit and loss and balance sheet was made by the plaintiff from the Big Four Coal Company. There is no allegation in the petition to show that the defendant Vail ever had any knowledge that a request had been made of the corporation. He could hardly be personally liable for a penalty until he was aware that a share-holder desired a statement and balance sheet, and a request made upon the corporation would not be a request upon one of its officers, at least without knowledge by such officer that such request had been made. The petition in the Vail case, as amended, was therefore fatally defective.

In the Big Four Coal Company case there is no claim made that the amended petition does not state facts sufficient to constitute a cause of action, if Section 8623-127, General Code, is constitutional. The contention made by defendant in error, however, is that this section is unconstitutional, for the reason that it is so excessive as to penalties that it denies equal protection of the laws and deprives the defendant in error of its property without due process of law. Many cases have been cited but they are not very helpful, as none of them involves the exact question presented here. It is not contended that penalties may not be imposed to compel the performance of duties on the part of a corporation, providing such imposition does not deprive the corporation of its constitutional rights. If the penalties are reasonable and not excessive, the claim as to unconstitutionality must fail. Counsel for defendants in error, in their brief, use the following language:

"It is the possibility of excessive penalties, and not their actuality, that denies equal protection. It is enough if the penalties threaten great financial loss. Thus a corporation, doubtful of the intended scope of the statute, which failed to mail statements to one thousand shareholders, would immediately be subject to a penalty of $100,000.00 plus $10,000.00 for each day thereafter, all of which, at the end of the statutory period of one year allowed by Section 11225, General Code, for bringing action on a penalty, would amount to $3,750,000.00. A holder of one share would likewise recover about $3,750.00."

One answer to this contention is that the penalty can easily be avoided by mailing the statement. The penalty must be large enough to compel the performance of the duty, and we can easily imagine a case where a penalty of only a dollar a day would run into figures greater than those used in the illustration. Many of the great corporations have more than 100,000 shareholders, and, if such corporation should fail to mail statements on request to 20,000 shareholders, the aggregate penalty at the end of the year at $1 a day would amount to $7,300,000. It is thus apparent that, no matter how small the penalty, the total amount recoverable will be large if a large number of requests for statements are not complied with. The corporation laws of this state require publicity so far as shareholders are concerned, and the General Assembly may make the penalty sufficient to secure that publicity. In our judgment it does not exceed such amount as is well calculated to require the performance of the duty imposed, and require it with reasonable promptness. The statute is not in contravention of the constitutional provisions referred to, and the amended petition in the Big Four Coal Company case therefore stated a good cause of action.

For the reasons given, the judgment in the Vail case will be affirmed, and the judgment in the Big Four Coal Company case will be reversed, with directions to overrule the demurrer and for further proceedings according to law.

Judgments accordingly.

LLOYD and RICHARDS, JJ., concur.