Court Opinion

ID: 9864984
Source: CourtListenerOpinion
Date Created: 2023-09-25 16:18:58.973249+00
Date Added: 2024-06-11T12:36:34.306088
License: Public Domain

Mr. Justice Bouck,
dissenting.
The majority opinion cites a single authority, In Re Haas Co. (Taylor v. Ziegenhagen) (1904), 131 Fed. 232, 65 C. C. A. 218. That case arose in the Northern district of Illinois and was decided by the Circuit Court of Appeals of the Seventh Circuit without mentioning any authority whatever. It thus omitted citing the leading case, decided in 1880 by the United States Supreme Court, with which it is in sharp and unexplainable conflict; Graham v. Railroad Co., 102 U. S. 148, 26 L. Ed. 106. That decision by the federal judicial authority of last resort has remained unquestioned and has been frequently approved. It is unequivocally followed in Sweet v. Lang (1926), 14 F. (2d) 762, decided by the Circuit Court of Appeals of the old Eighth Circuit where Circuit Judge Lewis, now presiding judge in the Tenth Circuit, says:
‘ ‘ The receiver stands in a representative capacity— for the corporation, its stockholders and creditors. He may sue and recover for the corporation whenever it could have done so; but, if there be no such right in it, he, of course, cannot assert in its behalf a right which *320does not exist. Its officers, directors, and stockholders approved, authorized, and ratified by long course of dealing all of the transactions of which the receiver now complains. We know of no rule or principle that would permit it now to repudiate those transactions and require restitution of the payments. In Graham v. La Crosse & M. R. Co., 102 U. S. 148, 26 L. Ed. 106, the court, after observing the well-settled rule that an individual, being solvent and without intent to defraud creditors, may dispose of his property as he pleases, for an inadequate consideration, or even by voluntary conveyance, held that a corporation has the same rights. On page 160 the court said:
“ ‘It is contended, however, by the appellant that a corporation debtor does not stand on the same footing as an individual debtor; that, whilst the latter has supreme dominion over his own property, a corporation is a mere trustee, holding its property for the benefit of its stockholders and creditors; and that, if it fail to pursue its rights against third persons, whether arising out of fraud or otherwise, it is a breach of trust, and creditors may come into equity to compel an enforcement of the corporate duty. This, as we understand, is the substance of the position taken. We do not concur in this view. It is at war with the notions which we derive from the English law with regard to the nature of corporate bodies. A corporation is a distinct entity. Its affairs are necessarily managed by officers and agents, it is true; but, in law, it is as distinct a being as an individual is, and is entitled to hold property (if not contrary to its charter) as absolutely as an individual can hold it. Its estate is the same, its interest is the same, its possession is the same.’ ”
This principle, thus applied by the United States Supreme Court to corporations, as it had been uniformly applied to individuals, remains unquestioned.
Numerous decisions of our own Supreme Court have been in full harmony with the principle.
*321The majority opinion is without support in this jurisdiction, and the judgment below should be affirmed.
However, the concurring opinion of Justice Young, in which Justices Butler and Burke concur, injects an entirely new factor into the case without request or citation or argument from either side, namely, section 9 in Article 15 of the Colorado Constitution and a corresponding statute found in C. L. ’21, section 2261. As these provisions were mentioned neither in the district court nor by the briefs filed in this court, and they are not pleaded, it seems to me that this issue is not properly before us for decision. Even when properly raised, such an issue would seem to call for full discussion and elucidation by counsel on both sides before a conclusion is reached. The issue would of course involve many debatable questions. For example: Is the constitutional provision self-executing? Is any penalty imposed by the statute ? If, as here, these provisions do not include any provision for some penalty, are they not purely directory? Who is entitled to invoke these provisions when, as here, they are not made the subject of affirmative pleading? Who is entitled to invoke these provisions even though they are affirmatively pleaded? And — most important of all — does the word “void” in those provisions mean absolutely void or simply voidable ?
I take it that this court — in accordance with a well-recognized rule of procedure which has become a part of our substantive law — will decline to decide a purely private controversy on a theory not presented by counsel to the lower court, which naturally and rightfully proceeded to and did try the case according to the theory on which counsel for both parties obviously intended the case to be tried.
WTaat I have said inevitably requires, I think, the conclusion that the judgment of the district court should be affirmed for the reasons stated.
Suppose, however, that the constitutional and statutory issue raised by the concurring judges could be deemed *322properly introduced into the case. Nevertheless the judgment should be affirmed.
Section 9 in Article 15 of our state Constitution says: “No corporation shall issue stocks or bonds, except for labor done, service, performed, or money or property actually received, and all fictitious increase of stock or indebtedness shall be void. * * *”
The word “void” may mean either “void” or “voidable,” and, where we are concerned with questions of purely private right, as in the present case, “voidable” is preferred. 2 Sutherland on Statutory Construction (2d Ed. by Lewis) 775 [section 400].
Since the majority opinion’s only citation is a federal case I cite here in support of the text just mentioned the following later federal cases: Johansen Bros. Shoe Co. v. Alles, 197 Fed. 274, 277-8, 116 C. C. A. 636, 639-640; Westerlund v. Black Bear Mining Co. (Colorado, old Eighth Circuit, per Circuit Judge Walter H. Sanborn), 203 Fed. 599, 611, 121 C. C. A. 627, 639. In the latter case- Judge Sanborn said:
“Courts take judicial cognizance of the fact that legislatures use the word ‘void’ in statutes in the sense of utterly void so as to be incapable of ratification, and in the sense of voidable by those alone whose rights are infringed without express discrimination, so that resort must be had to settled rules for the interpretation of statutes in each case to determine, in which sense the legislature intended to use it. One of these rules is that an act declared to be void by statute which is malum in se or against public policy is utterly void and incapable of ratification, but an act or contract so declared void, which is neither wrong in itself nor against public policy, but which has been declared void for the protection or benefit of a certain party, or class of parties, is voidable only and is capable of ratification by the acts or silence of the beneficiary or beneficiaries.”
Where possession has been obtained by the mortgagee under a voidable mortgage before a creditor takes steps *323against it, the attack comes too late. Johansen Bros. Shoe Co. v. Alles, supra. That is the situation disclosed in the present record.
The principles of interpretation which apply to legislative acts apply equally to constitutional provisions. 12 C. J. 699, section 42; State v. Stewart, 57 Mont. 397, 402, 188 Pac. 904, 906; Perry County Tel. Tel. Co. v. Public Service Com’n, 265 Pa. 274, 278, 108 Atl. 659, 660; Zancanelli v. Central Coal & Coke Co., 25 Wyo. 511, 550, 173 Pac. 981, 991.
The record shows that the case at bar is exactly equivalent to what it would have been if the Melnicks, defendants in error, who as sole stockholders, directors, and officers were to all intents and purposes the corporation in question, had sold to the Grossman group all the property of their business concern subject to a subsisting chattel mortgage which belonged to them as part of the purchase price. The Melnicks received in exchange for $3,000 worth of property only $1,000 in cash with security on the property sold for the $2,000 balance. Let it be remembered: The amended complaint does not allege that the plaintiff trustee in bankruptcy represents a single creditor who was such when the chattel mortgage was placed upon the property; in other words, so far as appears, the debts due the present creditors were all incurred after the execution of the subsisting mortgage and subject to it. No fraud is alleged, nor is it alleged that the mortgage was made when the corporation was insolvent, or that the mortgage caused the corporation’s insolvency. Not only so, but it is affirmatively shown in the ninth paragraph of the amended complaint that one of the chattel mortgages under which the mortgagees took possession was in every sense a proper corporate mortgage, executed for a valid consideration passing to the corporation.
In the circumstances, and in view of the facts herein, and in the light of all the authorities I think the district *324court judgment should be affirmed. Since the majority-are for reversal, I respectfully dissent.