Case Name: SERVICE LUMBER CO. v. SUMPTER VALLEY RY. CO.
Court: Oregon Supreme Court
Jurisdiction: Oregon
Decision Date: 1915-06-15
Citations: 81 Or. 32
Docket Number: 
Parties: SERVICE LUMBER CO. v. SUMPTER VALLEY RY. CO.
Judges: Mb. Justice Bean dissents.
Reporter: Oregon Reports
Volume: 81
Pages: 32–51

Head Matter:
Argued May 6,
dismissed June 15, 1915.
Petition for rehearing allowed October 22, 1915.
Motion to dismiss overruled, and judgment rendered November 3, 1911,
reversed and remanded June 20, 1916.
SERVICE LUMBER CO. v. SUMPTER VALLEY RY. CO.
(149 Pac. 531; 152 Pac. 262; 158 Pac. 175.)
Corporations—Dissolution—Existence for Purpose of Bringing Suit-Statute.
1. Under Section 6699, L. O. L., providing that after-dissolution all corporations shall continue to exist as bodies corporate for five years if necessary to prosecute or defend suits, or settle their affairs, an action by a corporation which had taken the statutory steps for a voluntary dissolution, tried after the expiration of the five-year period, was abated.
Appeal and Error—Former Decision—Matters Concluded.
2. A judgment on defendant’s appeal from a judgment for plaintiff corporation rendered within five years allowed to a corporation after its dissolution for the purpose of bringing suits, etc., appealed on the ground of error in refusing an instruction that if plaintiff had been dissolved before commencing the action it eould not maintain it, and reversing and remanding for a new trial after the lapse of such five-year period, was not conclusive on defendant’s second appeal on the ground that the action was abated because the five-year period had expired at the time of the second trial.
Abatement and Revival—Dissolution—Actions.
3. Where corporation’s cause of action accrued one year prior to voluntary dissolution of the corporation, but action was not brought for two years after sueh dissolution, and the cause was pending in a lower eourt after reversal of judgment on appeal, at the end of the five-year period allowed by Section 6699, L. 0. L./to dissolved corporations for defending or prosecuting actions, the right to continue the prosecution in the name of the corporation ceased, and the corporation was absolutely defunct beyond the five-year limit, so that the action should abate.
Abatement and Revival—Prosecution—Commencement—“Prosecute.”
4. To “prosecute” an action is not merely to commenee it, but includes following it to an ultimate conclusion, so that under Section 6699, Ih O. L., commencement of an aetion by a dissolved corporation before tbe expiration of tbe'five-year limit does not extend tbe limit until final determination of the cause.
[As to when an action may be said to be pending, see note in Ann. Cas. 1912A, 843.]
Corporations—Dissolution—Prosecution of Actions—Judgment After Expiration of Time Limit.
5. Where a judgment of reversal is rendered by Supreme Court in an action by a dissolved corporation, after the expiration of the five years allowed by Section 6699, L. O. L., for the prosecution of such actions, the judgment is void, and on a second appeal the hearing is upon the original appeal as if no judgment had been rendered.
Appeal and Error—Parties—Death—Substitution—Time.
6. Where motion .is made to substitute parties plaintiff, the original plaintiff corporation being defunct, it is not necessary that such motion be made"'within one year, as required by Section 38, L. O. L., if the appeal has been taken before the disability arises.
Corporations—Dissolution—Title to Corporate Property.
7. The stockholders of a defunct corporation, in the absence of creditors, are vested with title to the corporate property as tenants in common.
Corporations—Parties—Stockholders of Defunct Corporation.
8. Under Section 27, L. 0. L., requiring that every action be prosecuted in the name of the real party in interest, except as provided in Section 29, the stockholders of a defunct corporation having no creditors are proper parties plaintiff in an action to enforce a corporate claim.
Corporations—Dissolution—Action—Parties—Substitution.
9. Stockholders of a defunct corporation may be substituted as parties plaintiff in an action where an appeal has been taken before dissolution of the corporation without the necessity of making motion for such substitution within one year after the dissolution of the corporation as required by Section 38, L. G. L.
From Baker: Dalton Biggs, Judge.
In Banc. Statement by Mr. Justice Benson.
This action by tbe Service & Wright Lumber Company, a corporation, against tbe Sumpter Valley Railway Company, a corporation, was begun on September 11, 1909, and after trial a judgment was duly made and entered in favor of plaintiff on November 3,1911. Thereafter an appeal was taken to this court, being perfected on April 29, 1912. On September 30, 1913, this court handed down a decision reversing the judgment: Service Lumber Co. v. Sumpter Valley Ry. Co., 67 Or. 63 (135 Pac. 539). One of the issues raised by the answer and reply in the .first trial was the contention of defendant that the plaintiff, having accomplished a voluntary dissolution on May 6,1907, had no power to institute this action. The cause coming on for retrial upon the remand from this court defendant, by leave of the trial court, filed an amended answer, one of which amendments pleaded in effect that the five years allowed to plaintiff by Section 6699, L. O. L., in which to wind up its corporate affairs had expired and that therefore the action had abated.
Plaintiff’s demurrer to this defense was sustained. The cause then proceeded to trial upon the issues as joined before the first trial. A judgment was duly entered on January 9, 1914, in favor of plaintiff, and defendant appeals.
Action Dismissed.
For appellant there was a brief over the names of Mr. John L. Band and Messrs. Snow & McCamant,, with oral arguments by Mr. Band and Mr. Zera Snow.
For respondent there was a brief with oral arguments by Mr. Bobert Service and Mr. Samuel White.
As to effect on pending actions of statutory period permitting litigation of corporations after dissolution, see note in 32 L. R. A. (N. S.) 452.
For authorities passing upon the question as to whether corporation or stockholder is real party in interest by whom action must be brought, see note in 64 L. R. A. 609, Reporter.

Opinion:
Me. Justice Benson
delivered the opinion of the court.
In the appellant's abstract of record we find some 17 assignments of error, but we shall consider one question only, and that is as to whether or not at the time of the trial the plaintiff's right of action.' had abated. We conclude that it had, and it remains only to give our reasons for such conclusion. The plaintiff corporation on May 6, 1907, took such steps as are prescribed by statute for a voluntary dissolution. This was done, doubtless, in order to avoid the burdens of annual reports and the payment of annual license fees. Section 6699, L. 0. L., is as follows:
"All corporations that expire by limitation specified in their articles of incorporation, or are dissolved by virtue of the provisions of Section 6701, or are annulled by forfeiture or other cause by the judgment of a court, continue to exist as bodies corporate for a period of five years thereafter, if necessary for the purpose of prosecuting or defending actions, suits or proceedings by or against them, settling their business, disposing of their property, and dividing their capital stock, but not for the purpose of continuing their corporate business."
As to the effect of this statute in a case like the one at bar it is said in the case of Dundee Mortgage & Trust Investment Co. v. Hughes (C. C.), 77 Fed. 856:
"In some of the states where the corporate existence is so extended by statute, express authority is given to prosecute to a final judgment all actions begun by the corporation within the limited period: Franklin Bank v. Cooper, 36 Me. 179; Greenbrier Lumber Co. v. Ward, 30 W. Va. 43 (3 S. E. 227). Under such a law was decided the case of Bewick v. Alpena Harbor Imp. Co., 39 Mich. 700, which is cited by counsel for the plaintiff. In that case the court held that the corporation might prosecute to a close any action commenced within the three-year period of limitation fixed by the statute, but in so holding gave effect to another provision of the law upon the same subject, which provided that no such suit, once commenced, should become abated at any time until brought to a close. There is no such or similar provision in the Oregon law. The statute of this state gives a bare extension of life for a fixed period after the dissolution of the corporation. Without the statute, as we have seen, by the common law, all corporations were defunct from the moment of their dissolution. The statute extends their existence for a further period for a stated purpose. At the expiration of that period it is the logic of the common-law rule that the corporation is as absolutely defunct as it would have been in the first instance had not its life been prolonged by the intervention of the statute. The Supreme Court of Massachusetts has held that a judgment recovered against a corporation after the expiration of a similar period of limitation is absolutely void: Thornton v. Marginal Freight Ry. Co., 123 Mass. 32."
The doctrine here expressed appears to be in accord with the great weight of authority: 10 Cyc. 1314; 5 Thompson on Corporations, § 6550, 6555; MacRae v. Kansas City Piano Co., 69 Kan. 457 (77 Pac. 94); Buck Stove etc. Co. v. Vickers, 80 Kan. 29 (101 Pac. 668); May v. North Carolina St. Bank, 2 Rob. (Va.) 60 (40 Am. Dec. 726); 1C.J.134; 7 R. C. L., § 750, 751. This doctrine, it is true, may work hardship in the individual case, but it must not be forgotten that in the case at bar the dissolution of the corporation was voluntary, and no doubt the stockholders weighed the resulting advantages as against the consequent disabilities, so they cannot now complain.
It is contended with great earnestness and ability by counsel for plaintiff that the same question was before this court in the former appeal herein (67 Or. 63 (135 Pac. 539), and that the fact that the cause was remanded for a new trial after the lapse of the five-year period is conclusive upon the question. However, .we cannot agree with counsel in this. The judgment first appealed from was rendered within the five-year period, and the only assignment of error relating thereto that was then presented was in the following, words:
"The court erred in refusing to give the instruction requested by the defendant to the effect that as the plaintiff had been disincorporated prior to the commencement of the action, there was no evidence justifying the plaintiff in maintaining the action and that plaintiff could not recover."
On petition for rehearing the opinion and judgment on former appeal (67 Or. 63 (135 Pac. 539), set aside, substitution of parties allowed, and cause is ordered to stand for rehearing on original appeal.
Rehearing Allowed.
Mr. Samuel White, Mr. Charles W. Fulton and Mr. Robert Service, for the petition.
Mr. John L. Rand and Messrs. Snow & McCamant, contra.
In Banc.
This assignment simply calls attention'to the fact that the action was commenced after the dissolution, and that was the only matter germane to the present discussion which was then submitted or considered. At the time the first judgment was rendered the lapse of the five-year period was not an issue, and could not be, for no such lapse had then occurred. It follows that the action must be dismissed.
Action Dismissed.
Mb. Justice Bean dissents.