Court Opinion

ID: 7109839
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:25:09.97121+00
Date Added: 2024-06-11T16:13:12.849442
License: Public Domain

Sherwin, J.
There can no longer be any question in this state as to the individual liability of stockholders in an ordinary corporation, where there has been a failure to organize, or to give publicity of their exemption from corporate debts substantially as required by the statute. This is *676purely a statutory liability, which attaches upon the failure to do that which the statute says must be done to create the exemption of private property from corporate debts. Where the statute governing its creation has been substantially complied with, no individual liability exists. Where it shall be judicially determined that there has been a failure in this respect, the individual liability exists, and can be enforced. The sole question presented for our determination in this case is whether the publication of the notice of incorporation in the Danbury Review, a newspaper published weekly in a small town more than 60 miles by rail from the place of business of the corporation, was such a publication as to meet the requirements of the statute, when considered in the light of the facts that the corporation’s place of business was in a large commercial city, having a number of daily papers with a large circulation, and, in addition thereto, numerous other papers of more or less general circulation. The statute provides that “a notice must be published * * * in some newspaper as convenient as practicable to the principal place of business” of the corporation. We have held in numerous cases that the requirement of the statute is to give as wide notice as possible, to those who may deal with the corporation, of its nature and character, and of the restrictions, if any, under which it intends to act in its corporate capacity. Corporations for pecuniary benefit have- been organized in all parts of the state, in large cities, in small towns, and in rural communities, and one of the advantages recognized by incorporators who are about to engage in business is that by proper proceedings no liability is assumed beyond the amount of stock subscribed for. But corporations may be legally organized in whose articles there is no limitation which exempts the individual property of its stockholders, hence the requirement that the notice make disclosure on this question; for, if the creditor has no notice or knowledge that such exemption is to be claimed,he has the right to assume that it will not be claimed, and may then extend credit *677on the faith of the individual responsibility of the stockholder's, as well as upon the responsibility of the corporation itself; and, while he might be knowingly dealing with a corporation, he is not bound to know that he is limited to corporate property to secure his debt, unless the requisite notice has been given. In the enactment of this statute the legislature undoubtedly had in view the fact that corporations might organize under the law in any place in the state, and it must always be applied in the light of the facts and circumstances surrounding each case. The word convenient has many definitions, but as used in this statute it seems to us that but one thought in relation thereto could have been in the minds of the makers of the law. The requirement that the notice be published in some newspaper as “convenient as practicable to the principal place of business” of the corporation means that it shall be published in the nearest or “most handy” paper suitable therefor. Any other construction of the language used, in view of the general context, would be strained and unnatural. The law will not make fine distinctions in such matters, and, indeed, the statute itself provides, and we have held in accordance therewith, that a substantial compliance with its terms is all that is necessary. "We must hold, however, that the publication of the notice under consideration was not in substantial compliance with the law, otherwise m> limits can be prescribed within which such a notice may not be legally published. We have repeatedly held that an entire failure to publish the facts which shall exempt the individual property of the stockholder, whether in the form of a notice or in the form of the articles of incorporation, renders his property liable. Eisfeld v. Kenworth, 50 Iowa, 389; Marshall v. Harris, 55 Iowa, 182; Clegg v. Grange Co., 61 Iowa, 122; Heuer v. Carmichael, 82 Iowa, 288. The publication of the notice before us, not being in substantial compliance with the statute as to place, must be held to be no notice at all, and consequently no protection to the defend*678ants. In Seaton v. Grimm, 110 Iowa 145, the notice was in fact pubjished at the proper place, but not within the required time, and it was held that the plaintiffs, being stockholders and incorporators, could not take advantage of their own failure. Our holding here is not in conflict, with that case. The judgment of the district court is affirmeb.