Case ID: ohio-st_49/html/0285-01.html
Source: Caselaw Access Project
Author: {"author": "Spear, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Rider v. Fritchey, Adm’r.
    
      Corporations — Liability of stockholders — Pleadings—Section 3, article 13, of the constitution, consti*ued — Meaning of the word “ dues," defined.
    
    1. An averment in a petition to enforce against stockholders, liability for a judgment rendered December 24, 1882, against an insolvent street railroad company, upon a cause of action accruing April 7,1872,.which charges thatthe “company is a corporation duly incorporated under the laws 'of the state of Ohio, * * * and was such corporation prior to the indebtedness hereinafter described,” is a sufficient averment that the corporation was organized under a law which provided for a liability on the part of stockholders, at least to the extent required by the constitution.
    2. Section 3, of article 13, of the constitution which provides that “dues from corporations shall be secured by such individual liability of the stockholders, and other means, as may be prescribed by law; but, in all cases, each stockholder shall be liable, over and above the stock by him or her owned, and any amount unpaid thereon, to a further sum, at least equal in amount to such stock,” is a remedial provision intended to afford a remedy to those who have just claim's upon insolvent corporations, and will, therefore, receive a beneficial construction for the purpose of extending the benefit to all who may fairly come within the meaning of its terms. Giving to the word “dues” such construction, it will include, not-only a claim for a debt arising upon contract, but a demand -for unliquidated damages arising from a tort.
    (Decided March 22, 1892.)
    Error to the Circuit Court of Franklin county.
    The action in the common pleas court was brought by defendant in error, a judgment creditor of The Fairwood Street Railroad Company, a corporation, to enforce on behalf of himself and all other creditors of the company, the statutory liability of stockholders.
    It was alleged in the petition that the “railroad company, is a corporation duly incorporated under the laws of Ohio, * * * and was such cornoration orior to the indebtedness hereinaiter described.” The petition further alleged the recovery, December 26, 1882, of a judgment by the plaintiff against the company, for $1263.64; the insolvency of the company at the time and since, and that the companjr had no property subject to execution. Also, that the judgment was in full force and unsatisfied save a payment thereon of $211.40, June 19, 1883. It was further averred that plaintiff’s cause of action upon which the judgment was rendered, was a claim for damages for negligently causing the death of plaintiff’s intestate, April 1,1872. The names of those claimed to be stockholders were set out with the amount of stock claimed to be held by each. In this list was the name of Fannie Peck, who, it was alleged, was the owner of fifty-five shares. The usual prayer followed. '
    By an amended petition filed October 25,1886, the plaintiff in error was made a party, and as to him it was therein alleged that he was the assignor of the shares of stock standing in the name of Fannie Peck, (who was at the beginning of the suit, and still is, insolvent), the assignment having been made between the years 1878 and 1880. Answer was interposed by plaintiff in error setting up the statute of limitations of six years, to which a reply was filed denying the same.
    Such further proceedings were had, that at the April term, 1887, final judgment was rendered, in which the court found the names of the creditors and amounts due each, the names of the stockholders liable, the amount of stock held by each, and the amount each solvent stockholder should be assessed in order to pay the debts, costs, etc. This amount assessed was a little less than 50-per cent, of the full statutory liability of each solvent stockholder. The plaintiff in error was one of those so assessed, the judgment against him being for $1269.00.
    Error was prosecuted to the circuit court where the sole ground urged was that the petition did not set forth a cause of action and the judgment was erroneous because the individual liability of stockholders is incident only to such demands against the corporation as arise out of its contracts, not extending to such as sound in tort. The judgment of the common pleas was affirmed by the circuit court.
    
      
      J. M. •Swartz, J. V. Lee, and O. W. Aldrich, for plaintiff in error.
    I. Are the stockholders in all corporations of Ohio, bound for its debts, or liabilities?
    This must be answered in the affirmative, in order to uphold the judgment, because the petition does not state the date of the organization of the defendant corporation, further than to say, that it was a corporation prior to the date of the death of the defendant in error’s intestate, which was April 17, 1872.
    If there is such a liability, upon the stockholders of all Ohio corporations, it must be either a statutory or constitutional liability, or a common law.liability. That there is no such common law liability, 'see, Carr v. Iglekart, 3 Ohio St., 458.
    Is there such a liability imposed by the constitution, or statutes, upon all Ohio corporations, regardless of the date ot organization?
    There was no such obligation imposed by the constitution of 1802, and no general statute imposing such a liability upon stockholders generally, until after the adoption of the constitution of 1851.
    While section 8, of art. 13, of the present constitution in providing for the liability of stockholders of corporations, does not in terms, distinguish between existing ones, and those to be created thereafter, yet as it did not show by affirmative language that it wás intended to apply to existing corporations, it will not be deemed to be retroactive. This question has been decided in accordance with this view in the case of Citizens Bank of Steubenville v. Wright, 6 Ohio St., 319.
    That the constitution was not to be construed as retroactive where the language would admit of another construction, see also, State v. Roosa, 11 Ohio St., 17; Ohio v. Union Township, 8 Ohio St., 400; Cormrirs of K?iox Co. v. Nichols, 14 Ohio St., 260.
    That stockholders in corporations organized before the constitution of 1851 was adopted, are not subject to the individual liability imposed by that instrument, was decided, in Palestine, etc., Co. v. Wooden, 13 Ohio St., 395.
    If any act passed since that time should attempt to impose a liability upon the stockholders of corporations organized under the old constitution, greater than that imposed by the law under which it was organized, such a law would be unconstitutional. Ireland y. Palestine, etc., Co., 19 Ohio St., 360.
    From those decisions we claim that the proposition of law upon which the petition is necessarily based is, not that the stockholders of all corporations, incorporated under the laws of Ohio, are liable for the debts, or liabilities of the corporation; but that the true proposition, logically expressed, is, "The stockholders of some such corporations are liable.” The “some” are those organized since the adoption of the present constitution, and any shown to have been organized before that time, under laws, whether general or special, in which the liability was imposed.
    We think it is a principle of pleading, too plain to be disputed, that where a statutory liability is imposed upon a particular class of persons, in any action to enforce such liability, the pleading must show that the persons against whom the remedy is sought, were embraced within the class against which the liability is declared, or it fails to show a cause of action.
    II. Upon the point as to the liability of any of the stockholders of a corporation for damages for a tort, we think the weight of authorities is, to the effect that such liability is limited to the creditors of the corporation, and that no person is deemed to be a creditor by reason of a claim for damages for a tort of the corporation. Bohn v. Brown, 33 Mich; Cabe v. Me Cune, 26 Mo., 371; Doolittles. March, 11 Neb., 248; Heacock v. Sherman, 14 Wend., 59; Archer v. Ross, 3 Brewster (Pa.) 264; Child v. Boston and Fair Haven Iron Works, 137 Mass., 516; Cook’s Stock and Stockholders, 220; Morawetz Cor., 608, 613; Act of 1861, S. and S., 136; Mamón v. Jacob, 6 S. W. Rep., 251; Wright v. McCormack, 17 Ohio St., 86 ; Brown v. Hitchcock, 36 Ohio St., 667; Hawthorn v. Calif, 2 Wall., 10.
    
      It is shown by the record that plaintiff in error assigned and transferred his stock sometime between the years 1878 and 1880, and that the judgment against the company was recovered in 1882. We contend that, whatever view may be taken of the stockholders’ liability, the plaintiff below did not become a creditor of the corporation until the recovery of the judgment. Evans'v. Lewis^80 Ohio St., 14; Crouch v. Gredles, 6 Hill, 250; Kellogg v. Schayler, 2 Denio, 73; Zimmer v. Schlespatif, 115 Mass., 52.
    
      Charles E. Burr and T.- M. Livesay, for defendant in error.
    We take it that the expression “the law of the state of Ohio” will be understood by the court, as the expression is understood in common usage, to mean the general laws of the state of which courts take judicial notice, and not a private enactment which in the “ordinary language” mentioned in the code is not a law at all. Brown v. State, 11 Ohio, 276.
    If this be so the court will take judicial notice of the fact that The Fairwood Street Railroad Company was not incorporated by any act under which the stockholders were not liable for the dues of the company..
    When this case was before the circuit court no objection was made to the petition in the respect now under consideration; but, on the contrary, it was conceded that The Fair-wood Street Railroad Company was incorporated under the act of 1861, (S. & S. 136), Cir. Ct. Rep., vol. 3, 89.
    When the amendment to the petition was filed, making Rider a defendant, he did not demur; but answered, and went to trial upon the evidence.' After the trial, he filed no motion for a new trial; took no bill of exceptions, nor did he otherwise bring the defect complained of to the attention of the court. The alleged defect in the petition was one which could readily have been cured by amendment if attention had been called to it. Under these circumstances, it would seem that the plaintiff has effectually waived the objection. Davis v. Hines, 6 Ohio St., 473; Ohio Life Ins. <5f Trust Co. v. Goodin, 10 Ohio .St., 557.
    
      It is claimed by counsel on the other side that the stockholders of this street railroad company were not liable for obligations growing out of torts
    In Ohio the constitutional provision for the protection of those having demands against corporations, and the statutes passed in pursuance thereof, are purely remedial in their nature, and ought, by the ordinary rules, to receive a liberal interpretation. Thompson on Eiability of Stockholders, sec. 52 et seq.\ Saterlee v. Stevens, 11 Ohio, 420; Tracy v. Card, 2 Ohio St., 431; Stale v. Harrison, 31 Ohio St., 250,264; Sedgwick on Construction of Statutes, 2nd ed. 308; Dwarris on Statutes, 231.
    The constitution uses the word “dues.” No word of broader import could have been chosen. The codifiers of 1880 paraphrased the word into “debts and liabilities.” Revised Statutes, 3258. The legislature is powerless to authorize the organization of a corporation in which the liability of the stockholders shall be less than that prescribed by the constitution. State ex rel. v. Sherman, 22 Ohio St., 411.
    The question, therefore, is reduced to this, viz: What does the word “dues” used in the constitution mean?
    Counsel on the other side has not been able to cite any case where the word “dues” has been held not to include an obligation arising out of tort. The word as a noun substantive is not one ordinarily used in such statutes, and this may be one reason why it has not received more frequent judicial construction. However this may be, this court is free to give the word such construction as is most conformable to justice, good-sense and the intent of the constitution. Carver v. Braintree Man. Co., 2 Story, 432; Milldam Foundry v. Hovey, 21 Pick., 417, 455; Smith v. Omans, 17-Wis., 395; Whiter. Hzmt, 6 N. J. E., 418; Cable v. McCzme, 26 Mo., 371; Morawetz on Corp., sec. 880, et seq.
    
   Spear, C. J.

A preliminary question arises upon an objection made by defendant in error that because the plaintiff in error has brought into this court as defendant, only the pa-intiff below, the court cannot have jurisdiction for want of necessary parties. If a reversal of the judgment would deprive defendant in error of any right as to parties below not present here, there would be force in this objection. But if the petition does not make a case against any of the alleged stockholders, it cannot prejudice the defendant in error that the other parties below are not parties in this court.

The petition is attacked here on two grounds. 1. That it is insufficient for want of an averment that the street railroad company was incorporated since the adoption of the constitution of 1851. 2. That there can be no liability in the present case against stockholders because stockholders are not liable for obligations of the corporation growing out of torts.

In support of the first proposition the argument is that in order to maintain the petition’ it must be held that stockholders in all corporations incorporated under the laws of Ohio are liable for the debts or liabilities of the corporation, which cannot be, for the reason that as to many, if not all. corporations organized prior to the adoption of the present constitution, no statutory liability whatever was imposed on stockholders. Hence an allegation such as is contained in the petition in this case that the “company is a corporation duly incorporated under the laws of the state of Ohio,” is not an allegation of organization under a law which imposes liability upon stockholders.

The point is one of some nicety, but We are hot impressed with its sufficiency. It will be noted that no demurrer was interposed by the plaintiff in error to the petition. On the contrary, he answered and went to trial. He filed no motion for new trial, took no bill of exceptions, nor did he ask a special finding of facts. The attention of the trial, court was not called to this alleged defect in the petition, nor does it appear to have been urged in the circuit court. Indeed it is stated in defendant’s brief, and not denied, that, upon the argument in the last named court, it was con-ceeded that the company was incorporated under the act of April 10, 1861, which act imposes liat hity in the identical terms of the constitution. It would appear that the party is rather late in making this objection,'especially as he has apparently suffered no prejudice. However, waiving this, we think it proper to judicially notice that no statute existed prior to the adoption of the present constitution authorizing the incorporation of a street railroad company, and, having in mind the duty enjoined by our code, to construe pleadings liberally in order to assist the parties in obtaining justice, we are of opinion that the allegation that the “company is a corporation duly incorporated under the laws of the state of Ohio,” is a sufficient averment that it was incorporated under a law enacted since the adoption of the present constitution. And as no such statute would have been valid which did not impose the constitutional liability, (State ex rel. v. Shermau, 22 Ohio St. 411), and as it is not to be assumed that the legislature would enact an invalid statute, the further conclusion would follow that the company was incorporated under a law which did subject stockholders to liability for obligations of the corporation.

A more serious question arises with respect to the second point. Can the stockholders of an Ohio corporation be held for obligations of the corporation growing out of torts? It follows from'what has already been stated, that we must assume that this street railroad company was organized under a law which imposed upon stockholders just such liability as the constitutional provision requires. We look, therefore, to the constitution as our guide. The provision, section 3, of article 13, is: “Dues from corporations shall be secured, by such individual liability of the stockholders, and other means, as may be prescribed by law; but, in all cases, each stockholder shall be liable, over and above the stock by him or her owned, and any amount unpaid thereon, to. a further sum, at least equal in amount to such stock.” The question turns upon the import of the word “dues.”

It has been contended that provisions creating individual liability on the part of the stockholders are in derogation of the common law, and are, therefore, to be construed strictly. Authorities in support of this rule are not wanting, and, in so far as such liability is attached by way of penalty for the omission of some act required by the statute, as in some of the states, it is probable that_the weight of authority favors the proposition. But all concede that this is a remedial provision, and to hold that there must be applied to it the same test as if it were a penal law, is to hold that all remedial laws must be so construed, for every remedial law must of necessity be in derogation of the common law. Where the provision is simply remedial, though it does impose an obligation which did not attach at common law, we see no reason to insist Upon what is called a strict construction, but believe that the ordinary rule which requires the court to inquire simply as-to the intent ot the law-makers, reading the provisions as they were intended to be read, will best attain the ends of justice. This leads us to look to the intent of the section quote& Speaking in general terms, it must be manifest that the intent was to provide that those who derive advantage from the authority of the state, given by our incorporation laws, shall, at the same time, assume responsibility .for the acts of the artificial creature which they have called into legal being, affecting the rights of others. Having in mind this general intent, and the provision being remedial, it should, we think, be construed with a view to remove the evil and extend the benefit proposed.

It is conceded that if a cause of action for a tort can be treated as a “debt,” the liability of the stockholders for it would follow. The affirmative of this is asserted, and the following authorities are cited in its support. Carver v. Manufacturing Company, 2 Story, 432; Milldam Foundry v. Hovey, 21 Pick. 417; Grey v. Bennett, 8 Met. 522; Smith v. Omans, 17 Wis. 395, and White v. Hunt, 6 N. J. R. 418. To the contrary of this, counsel for plaintiff in error cite: Bohn v. Brown, 33 Mich. 257; Cable v. McCune, 26 Mo, 371; Doolittle v. Marsh, 11 Neb. 248; Heacock v. Sherman, 14 Wend. 59; Archer v. Rose, 3 Brewster, 264; Child v. Iron Works, 137 Mass. 516; Cook’s Stock and Stockholders, §220; Morawetz, §§ 608, 613; Nanson v. Jacobs, 6 S. W, Rep. 246 (Mo.); Evans v. Lewis, 30 Ohio St. 14; Crouch v. Gridley, 6 Hill, 250; Kellogg v. Schayler, 2 Denio, 73, and Zimmer v. Schleehauf, 115 Mass. 52. A review of these authorities would be important if a holding upon the proposition were necessary to a decision of the case before us. "We think it is not.

It would seem to be the undoubted duty of the court to ‘.give the word “dues,” as found in the section quoted, such construction as will secure the apparent object of the constitution-makers in its adoption. Constitutions are neces-.sárily couched in terse language, and we look there for the use of words in a broad, comprehensive sense. This term ’“dues” is of extended import. Among other definitions Ratham .gives the singular: owed; capable of being justly demanded; that which may be justly claimed. Worcester: that which any one has a right to demand. Webster: that ought to be paid or done to or for another; justly claimed as a right or property; fulfilling obligation; that which belongs or may be claimed as a right; whatever custom, law, or morality requires to be done; right, just title or claim. Bouvier defines it as what ought to be paid; what may be •demanded. It seems natural to say that where one is injured by the negligence of another, reparation is due. This implies a legal demand for reparation, and in Heacock v. Sherman, supra, Justice NERSON admits that the word '“demand,” found in the New York statute, if it stood alone, would be broad enough to include a cause of action for a tort.

It is difficult to see any reason why the framers of the ■constitution' should intend to afford one who gives credit for goods or money to a corporation a right to demand compensation of the stockholders in case of insolvency, and deny a like right to one who intrusts it with the care of his person, as in the case of a passenger, or to one even a stranger who, without fault on his part, is injured by the negligence of the corporation’s agents. It may well be asked: are the rights of things more sacred than the rights of persons? Is there any rule of public policy which would justify the protection of rights arising ex contractu, which would not equally call for protection of rights arising ex delicto, or any claim for unliquidated damages? Suppose, as is suggested by Mr. Justice Story, in illustrating his propositions in Carver v. Manufacturing Company, supra, a contract by a corporation to manufacture goods of a particular quality or character, or to emplóy workmen, to be wholly broken, so that the right of the injured party would be, not to money, but to unliquidated damages; if these would be without the purview of the statute, it would have a very narrow and inadequate range. Or, suppose a manufacturing corporation to obstruct its neighbor’s mill privilege, or stop his works by back flowage, we see, at once, that an insolvent corporation might do irreparable mischief without any just redress. Or, suppose an insolvent corporation should unlawfully convert 1000 bales of cotton belonging to a third person, the mischief could be redressed only by an action of trover for unliquidated damages,-and'.if the individual operators were not liable, after an unsatisfied judgment, the statute would be little more than a delusion. A narrow construction would exclude recovery in all these -cases; a broad, liberal construction, .such as should be given to a remedial provision, would afford relief, and thus attain the objects which, it would seem, was in the contemplation of 'the lawmakers.

As conclusion, we are of the opinion that the word “dues” should receive a beneficial construction, one which will include within its scope as well a demand for unliquid-ated damages for a tort, as a claim for a debt, arising upon Contract.

The plaintiff in error was the owner of stock in this insolvent corporation while the action was pending against it; Being a claim for which liability attached to the stockholders, as we have found, it rested upon him to an amount equal to his stock. Before the judgment was rendered he assigned his stock to'one who, at the beginning of, the present suit, and at the time of trial, was insolvent. He could not thus shift the responsibility.

The question involved in this case, as to the meaning of term “dues,” was not before the court in either Evans v. Lewis, 30 Ohio St. 14, or Brown v. Hitchcock, 36 Ohio St. 667, and we do not understand our conclusion to be inconsistent with the decision in either of those cases.

In the court of common pleas a counsel fee was taxed for plaintiff below, and the same was included in the judgment as part of the costs. This was manifest error, but inasmuch as defendant in error has, since the argument, ■remitted the amount, no farther notice need be given it.

Other grounds of error are alleged. An inspection of the record fails to satisfy us that either is well taken.

Judgment affirmed.