Court Opinion

ID: 6905368
Source: CourtListenerOpinion
Date Created: 2022-07-23 21:59:27.510893+00
Date Added: 2024-06-11T16:06:19.542445
License: Public Domain

Petition for rehearing allowed October 22, 1915.
Petition for Rehearing.
(152 Pac. 262.)
Mr. Justice McBride
delivered the opinion of the court.
In a petition for rehearing remarkable for its ability and plausibility, plaintiff questions the soundness of the original opinion dismissing this case. A brief résumé of the circumstances leading up to such dis*38missal is not inappropriate: On May 3,1907, the plaintiff corporation passed a resolution to dissolve, which was accepted hy the Secretary of State on the seventh day of the same month, and a certificate issued upon that day dissolving the corporation. Plaintiff’s cause of action accrued May 27,1906, nearly a year previous to the resolution dissolving the corporation, and this action was commenced in September, 1909, over three years after the right to bring it had accrued and over two years after the corporation had voluntarily dissolved. The plaintiff recovered a judgment, from which defendant appealed to this court, where the same was reversed for material error and a new trial ordered; the opinion being handed down September 30, 1913: 67 Or. 63 (135 Pac. 539). Before the new trial was had defendant filed a plea in abatement setting up the fact that more than five years had elapsed since the dissolution of the corporation, and that by the terms of Section 6699, L. O. L., the plaintiff corporation had ceased to exist for any purpose, and was therefore incapable of further prosecuting this action. This plea being overruled, the trial proceeded, and, the plaintiff having again recovered a judgment, an appeal was taken to this court, where defendant’s plea was held good and an order of dismissal made: 149 Pac. 531. The petition for rehearing presents the following propositions: (1) That Section 6699 should be construed to allow this action, commenced within the five-year period, to be prosecuted to an end even after the termination of the five-year period; (2) that, should the court refuse so to construe Section 6699, the court should permit the action which abated at the end of the five-year period to be revived and further prosecuted, with the substitution in place of plaintiff of stockholders in plaintiff corporation, or a receiver of the plaintiff corporation to be appointed by the court; *39(3) that, should the court refuse such substitution, it should hold that the first nisi prius judgment is still in force.
3. As to the first proposition a careful review of the authorities only strengthens our conviction that it is impossible for the court to adopt the view taken by the learned counsel for plaintiff without deliberately disregarding the terms of the statute. Upon the certificate of dissolution being issued, the corporation is as dead as though it had never existed, except for the purpose of prosecuting or defending actions and suits against it, settling its business, disposing of its property, and dividing its capital stock, and for these purposes a further grace of five years is allowed, and there its functions cease absolutely. Seeking diligently to find authority that would give plaintiff the right to have its case heard fully upon the merits on this appeal, we have found none under a statute like ours, and counsel have cited us to none. The case of Willamet Falls C. & L. Co. v. Kittridge, 29 Fed. Cas. 85, No. 17,105, is not in point, because in that case the five years allowed to a corporation in which to wind up its business had not expired when the plea in abatement was filed, and there is, therefore, no conflict between that decision and the opinion of Judge Gilbert in Dundee Mortgage & Trust Investment Co. v. Hughes (C. C.), 77 Fed. 855. The construction placed upon the statute by counsel would be subversive of the very purpose as well as the language of the law, in that, where the statute says that a dissolved corporation shall have five years within which to prosecute or defend actions, counsel’s construction would extend the period indefinitely if the action or suit were commenced a single day before the five-year limitation expired. The authorities, as shown by Justice Benson, *40are practically unanimous in favor of the view taken in the original opinion; nor is this rule necessarily harsh or unjust. In the case at bar the corporation voluntarily dissolved after its cause of action had accrued, thereby avoiding for five years the burden of paying to the state the annual license fee and making the annual statements required by Section 6707, L. O. L., and thereafter delayed for more than two years the institution of the present action. This does not present the same equitable features which would appear had the dissolution been involuntary, or where the action had been begun promptly after the right to institute it accrued. The plaintiff having availed itself of the benefits of a dissolution, cannot complain if it is required to submit to the hardships imposed by statute under such circumstances. It also had another remedy. It could at any time within the five-year period allowed for winding up its business have assigned its cause of action to its stockholders or to some other person, and the action could then have been carried on in the name of such assignee for the benefit of its stockholders. Not having done this, its right of action is completely lost. So far as the present appeal is concerned, it is a dead corporation. Should this court affirm the judgment on the merits, plaintiff could no more order an execution or dispose of the judgment than a man in his grave could transact the same business. The consequences of the voluntary extinction of a corporation at common law are succinctly stated in Fox v. Horah, 36 N. C. 358 (36 Am. Dec. 48), in the following language:
“The real estate remaining unsold reverts to the grantor and his heirs, ‘because [in the language of Lord Coke] in the case of a body politic or incorporate the fee is vested in their political or incorporate capacity, created by the policy of man, and therefore the *41law doth annex a condition in law to every snch gift and grant that, if snch body politic or incorporate be dissolved, the donor or grantor shall re-enter, for that the cause of the gift or grant faileth’: Co. Litt. 136. Goods and chattels, by the common law, were deemed of too transitory and fluctuating a nature to be susceptible of reversionary interests after an estate for life, and, on the death of a corporation, they do not revert to the grantor or donor, but, being bona vacantia, or goods wanting an owner, they vest in the sovereign, as well to preserve the peace of the public as in trust to be employed for the safety and ornament of the commonwealth. Choses in action are under the operation of a different rule. They were rights of the corporation to demand money in the hands of persons by whom it was withheld. They derived their existence from contracts or quasi contracts by which the relation of debtor and creditor was created. When the creditor corporation died, and there was no successor, no representative, the relation of debtor and creditor ceased, and the debt became necessarily extinct. None but the creditor had a right to demand the money, and when his right is gone, the money becomes to all purposes the money of the possessor.”
These rules have been, however, materially modified by statutes of the various states, and in some instances by judicial decisions without the aid of statutes, so that it may be taken to be the general rule that upon the extinction of a corporation by voluntary dissolution its real and personal property and assets become the property of the stockholders, but the corporation, as such, does not remain alive for any purpose beyond the limit of five years.
4. Section 6699, L. O. 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 *42purpose 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.”
Counsel for plaintiff contend that the word “prosecute” means to commence, and in this connection cites Hickox v. Elliott (C. C.), 22 Fed. 13, in which Judge Deady, construing the statute which requires that “every action shall be prosecuted in the name of the real party in interest,” observes:
“In my judgment, the term ‘prosecuted’ is used in this section in the sense of ‘commenced,’ and does not prevent a party from assigning his interest in the subject matter of an action after it has been duly commenced, or require that the assignee shall make himself a party thereto, or dismiss the same and commence ■ another action in his own name. And so the provision appears to have been construed in Garrigue v. Loescher, 3 Bosw. (N. Y.) 578, cited in Wait’s Annotated Code, 115.”
Judge Deady was evidently misled by an erroneous statement as to the effect of the decision in Garrigue v. Loescher, which holds only that an assignee of a chose in action may sue in his own name, and, further, that having sued in his own name, he cannot sustain his title by evidence of an assignment made after he has commenced his action.
In Hickox v. Elliott (C. C.), 22 Fed. 13, the court was dealing with a living plaintiff and a living assignee of that plaintiff, and there can be little doubt that, if the case had presented the aspect of a plaintiff, who had assigned his claim and thereafter died, the court would have abated the suit, or upon a proper showing have directed a substitution. Here we have a case carried on in the name of a plaintiff who is absolutely extinct for any purpose whatever, with no substitu*43tion asked until the present petition for rehearing was filed. While the word “prosecute” may comprehend the commencement of an action, it includes more. To prosecute an action means not only to file a complaint and serve a summons, but it necessarily includes the carrying on of the action to some conclusion. The following cases, in addition to those cited in the original opinion, bear out the conclusion herein reached: Marryott v. Young, 33 N. J. Law, 336; Cohens v. Virginia, 19 U. S. (6 Wheat.) 264 (5 L. Ed. 257); Inhabitants of Knowlton Township v. Read, 11 N. J. Law, 320; State v. McDonald, 2 N. J. Law, 355, 360; Territory v. Nelson, 2 Wyo. 346; Inhabitants of Great Barrington v. Gibbons, 199 Mass. 527 (85 N. E. 737). And see generally Words and Phrases, title “Prosecute,” every case there cited having been carefully examined by this court.
Reason also supports this construction of our statute, which was evidently designed to remedy the harshness of the common-law rule abating every action and destroying all rights of recovery on behalf of a corporation the moment it became dissolved. Instead of this, the statute allows five years as a reasonable time within which all actions may be brought to a conclusion and the proceeds from them or the judgments themselves be disposed of to the advantage of stockholders and creditors. That the plaintiff, with a large claim against defendant, should have voluntarily dissolved, leaving it unliquidated, or, having dissolved, allowed two of the five years limitation to expire before commencing its action, is certainly due to no harsh feature of the law. It is clear that, had this action been commenced when the cause accrued, or even when the dissolution took place, plaintiff would have had ample time to have concluded it before the expiration of the five years allowed for that purpose. Consequently, *44while we deplore the necessity for so doing, we cannot extend the time allotted by statute to meet the peculiar exigencies of this case any more than we could allow an action upon a promissory note to be commenced seven years after the cause of action accrued, instead of the six years prescribed by statute, because it appeared that the payor of the note actually owed the money, nor can this court at this time allow a substitu- • . tion so as to preserve plaintiff’s present judgment.
5. There was no plaintiff when the first appeal was heard, and it was the duty of one party or the other to have called that fact to the attention of the court and asked for substitution, which would have given the defendant a good judgment of reversal, and, perhaps, incidentally have kept the cause alive for a new trial. This was not done, and our judgment of reversal was an absolute nullity. The case stands here upon the appeal from the first judgment of the Circuit Court just the same as if no judgment of this court reversing the case had been rendered: Young’s Estate, 59 Or. 348, 363 (116 Pac. 95, 1060, Ann. Cas. 1913B, 1310). The logical result of the reasoning of defendant’s counsel, however, cuts both ways. If the present proceeding is void because there was no plaintiff in existence when the case was tried and the judgment rendered, it follows that there was no valid appeal from the second judgment for the same reason. That being so, the appeal should be dismissed, but it also follows that, as there was ho plaintiff when the former appeal was heard, and no substitution asked or granted, the judgment of reversal was void and an absolute nullity, and in such a case the judgment should be set aside; it being always in the power of the court to purge its records of a void judgment.
6. The attorney for plaintiff has appeared for the stockholders and asked that they be substituted as par*45ties upon the original appeal and the causé reinstated. It is claimed by defendant that no substitution can be had in this case, because no motion therefor was made within one year, as required by Section 38, L. O. L.; but in Long v. Thompson, 34 Or. 359 (55 Pac. 978), it was held that this section did not apply to a case where the death or disability occurred after an appeal had been taken to this court.
The petition for substitution should be allowed, and our former opinion reversing the first judgment set aside. The matter will then stand for hearing upon the original appeal.
An order will be entered accordingly.
Rehearing Allowed.