Court Opinion

ID: 8270245
Source: CourtListenerOpinion
Date Created: 2022-10-16 19:30:56.216831+00
Date Added: 2024-06-11T16:43:29.280483
License: Public Domain

Van Dyke, J.
(dissenting). This is a motion in arrest of judgment, and the only matter we have to loot at is the plaintiffs’ declaration, to see whether it contains enough on its face, everything thereon being admitted to be true, to justify a recovery. We have nothing whatever to do with the trial below, nor with the way in which the defendants transacted their business, nor with the verdict of the jury, nor with the evidence before them, nor with the motion to set that verdict aside. All these things are foreign to our present inquiry. With the declaration above, and the law of the land applicable to it, we have now to do. If this declaration does not disclose enough upon its face to warrant a recovery, then this judgment should be arrested, if it does, then this motion should be refused.
The question is not whether a declaration might have been framed that would have been sufficient under the law and facts, but whether it has been so framed.
It was suggested,on the argument, that the defects,if any, should have been taken advantage of by demurrer. It is true that the defendants might have done so, but they were under no obligation to do so. They have the same right precisely to take this course that they had to take the other.
Considerable reference has been made to the act of 1846. This may be well enough as a matter of history, but it cannot afford us any legal aid in the present inquiry. That act was wholly repealed by the act of 1849, and is as though *544it had never existed. All the proceedings of this company have been under the latter act. RTo practice prevails under the former act, nor were any adjudications made upon it which can enlighten us as to the construction of the present one. This action, therefore, must be wholly sustained by the act of 1849 or not at all.
This suit partakes of all the essential features of an action brought to recover a penalty, and should be governed by the rules applicable tó such suits. It is not insisted that the defendants, or either of them, ever directly or indirectly promised to pay this claim, nor is it pretended that it is their individual debt. The suit is brought against them for having made and recorded, as is alleged, a false certificate concerning the capital paid in; but as this was done long after this indebtedness accrued, it cannot be contendéd that the debt was in any measure contracted on the faith of that certificate, or that, in becoming the creditors of this company, the plaintiffs, to any extent, gave credit to these individual defendants in consequence of such certificates, nor can it be said that these plaintiffs have in any manner' been either deceived, misled, or wronged thereby. If, then, these defendants are liable at all in this suit, it is because they have incurred a penalty or forfeiture which the plaintiffs are striving to enforce without any other meritorious considerations between them. The law therefore, as to them, must be construed strictly, and before they are permitted to recover it should be very clear that the penalty has been incurred, and that they are in a condition to enforce it. By the first section of the act under which these proceedings take place, persons associating themselves together for corporation purposes are required to make and file in the office of the clerk of the county a certificate, setting forth, among other things, the total amount of the capital stock of such company, the amount with which they will commence business, and the number of shares into which the same L divided..,
*545By the 19th section it is provided, that the president and directors, with the secretary and treasurer of each company, within thirty days after the payment of the last instalment of the capital stock so fixed and limited hy the company, shall make a certificate stating the amount of the capital so fixed and limited and paid in in cash, which certificate shall be signed and sworn to by the president, secretary, and treasurer, and a majority of the directors, and within the said thirty days he recorded and published.
By the 20th section it is provided, that if the company shall increase its capital stock, as is provided for, the said officers, within thirty days after the payment of the last instalment of such additional stock, shall make and swear t# another certificate of the amount so added and paid in in cash, and cause the same to be recorded and published as in the other case.
And the 21st section declares, that if any of the said officers shall neglect or refuse to perform the duties required of them in tho two preceding sections, or the certificates ° made hy them shall be untrue, they shall be jointly and severally liable for all the debts of the company contracted after the expiration of the said thirty days and before such certificate shall he recorded as aforesaid.
Mow this declaration states that tho said associates did file the certificate contemplated in tho first section, and that it was in all things in compliance with the requirements of the act, and that it set forth, among other things, that the amount of their capital stock was $300,000, divided into 3000 shares of $100 each, and that they would commence business with a capital of $288,000, divided into 2880 shares of $100 each. It further states, that afterward, on the 17th day of February, 1854, the said company became indebted to the said plaintiffs in the sum of $2812.73, which amount, not being paid, was prosecuted to judgment. The declaration further stales, that on the *5469tli day of January, 1855, these defendants, being the secretary, president, and treasurer, and a majority of the directors of said company, did within thirty days, after the payment of the last instalment of the capital stock so fixed upon as the amount with which they would commence business, make a certificate, sign and swear to the same, and within the said thirty days, record the same in a book, &c., and cause the same to be published as by the act is required, by which certificate the defendants did certify and make known that the amount of capital stock, with which by the original certificate of incorporation it was declared that the said company would commence business, was $288,000, divided into 2880 shares of $100 each, and that the whole of such amount had been paid into the treasury of the said company in cash, the last payment whereof had been made on the 29th of December, 1854. The declaration then avers that the said sum of $288,000, so fixed and stated in the said certificate, was not paid into the treasury of the company in cash, and that the said certificate and the notice given of the same were false and untrue in the said material representations thereof, by means whereof the said defendants, as officers and directors of the said company, became liable to pay to the plaintiffs the said debt due to them from the said company
These are the material facts contained in the declaration; and the first question which presents itself is, do. these, facts show that the defendants have become liable to pay this debt of the company in consequence of anything contained in the 21st section of the act, which has direct reference to the certificate alleged to be false ? Beyond all question the defendants have not become liable by virtue of any provision of the 21st section, for that section only makes them liable, in any event, for debts contracted after the making of such certificate, whereas the declaration shows that the debt in question was con tractedlong before such certificate was made. The Su-' *547prenie Court so declares it, and I do not understand the counsel to dispute it.
The next inquiry then is, is there any other section or provision of the act which renders the defendants liable in consequence of this false certificate, admitting it to be false. The plaintiffs insist that the 30th section makes the defendants liable for this and all other debts of the company contracted while they were either officers or stockholders of the company, in consequence of the falsity of the certificate and notice required by the 19tli section.
This proposition, in my opinion, involves considerations of a very grave and serious nature, for, in looking at the previous sections of the act, we find that they make provision for five different certificates and nine different notices ; and if the position of the plaintiffs be correct, then if in making any one of these certificates, or giving any one of these notices, any one of them is in fact false in any material representation, the officers who signed it become responsible for all the debts of the company contracted while they were-either officers or stockholders, no matter whether those debts are §3000 or §300,000, no matter whether these certificates or notices are important to the creditors or not, and no matter whether the errors are matters of blunder or design. Stockholders, who have simply been such from the beginning for a dozen years or more, and afterwards accept office in the company, and sign one certificate or notice which turns out to be untrue, are made personally liable for all the previous debts of the company and for all subsequent ones, also, contracted while they remain mere stockholders, although they had long before ceased to be officers.
Can it be possible that we are forced to give the act such a construction ? And yet this is the inevitable result to which we are forced if we decide that the plaintiffs in this writ can recove" u ' lee the 30th section for the reason set forth in the declararon, for the 30th section makes no *548distinction between such certificates or notices as are wilfully and corruptly false and sucb as are simply false, for tío one here pretends that these defendants have wilfully done anything wrong, and no distinction is made between one kind of certificate or'notice and another, but it says any certificate or any notice made in pursuance of the said act. , ■
Certainly we ought to be well satisfied, before we make a decision so sweeping and terrible in its possible effects, that the law sternly demands it at our hands ; and although this law, which upon a critical examination of its sections seems in many respects very remarkable, if not absurd, may in certain of its aspects be entitled to a liberal construction, yet viewing this suit as highly penal in its character, and bound to a strict construction, let us see what are the obstacles to the plaintiffs’ recovery under the 30th section.
First. It is insisted, by the defendants, that the certificate alleged to be false has a special and distinct penalty or official liability of its own attached to it, and bearing directly upon it, in the 21st section, and that tlve penalty incurred, or the misconduct complained of, must be reached through the provisions of that section, or' not-at all. It is undoubtedly true, when a single section of an act prescribes a duty or prohibits an act, and adds a special penalty for a violation, and several other sections prescribe other duties or prohibit othbr acts equally important without any special penalties annexed, and the act afterwards has a section embodying a general penalty, which seems to apply to all the sections alike, and is equally severe upon each, accompanied by no explanatory language, it cannot be considered that the one section has a double penalty annexed to its violation, and each of the others has but a single one; on the contrary, it must be understood that each offence has its own punishment, and that those offences which have no special penalty attached will all be punished alike under the general sec*549tion, while the offence which has a special penalty attached will be punished according to that special penalty alone ; and as the offences having the general penalty attached could only be reached or punished by the violation of some one or more of such sections, so the offence provided against in the section containing the special penalty cannot be reached or punished, except in the manner provided in the section containing that special penalty. If it were otherwise, then the person violating the section having the special penalty might be punished twice over, and in two different ways for the same offence. This could not be tolerated, except where the language expressly required or authorized it. And in the present ease, if this debt had accrued after the expiration of the thirty days and before recording the certificate, if the plaintiffs are right in their position, they might have had three suits pending at the same time for this same debt, one against the company, one on the 21st section, and one on the 30th section. The legislature, by the 31st section, evidently meant to give a creditor a privilege of putting all his remedies at law in operation at the same time until he recovers his claim; and yet, to show that the legislature never contemplated the possibility of such a state of things, they have limited the actions to two, one against the company, and the other against the officers, on the appropriate penalty, not on both; and although the act gives a remedy against the individual mernbei’s in chancery, yet it prohibits the use of both, and gives the chancery remedy instead of the other proceedings, if the creditor prefers it; but in giving this election, the legislature has used plain language, and has not left it to a possible inference; or, if the construction of the plaintiffs be correct, we might see another anomaly in legal proceedings, one creditor prosecuting the defendants under the 21st section, and another prosecuting them, at the same time, under the 30th section for the same offence, not for the same claim, but for the same offence, and that, *550too, when both claims accrue on the same days and under precisely the same circumstances! Could the legislature have intended this ?
It said, however, in avoidance of the rule contended for and the authority cited that it only applies where there is an incompatibility between the special section and the general one. By this I understand it to be admitted, that if there be an incompatibility between the two sections, the special one must prevail, and the general one be excluded. Eow what constitutes an incompatibility between two sections ? I cannot imagine a greater one than that the punishment attached to one section is wholly different from that of the other.
Suppose the first section of an act declares, in proper terms, that no person should commit the crime of larceny, and if he should, and should be thereof convicted, he should be punished by a fine of $100; the second section declares that no person shall commit the crime of robbery, the third section declares that burglary is unlawful, the fourth makes it a crime to commit forgery, and the fifth declares the same thing about arson, neither of the sections or offences having any penalty or punishment attached t© them except the first; but the next section declares, that if any person shall be guilty of any of the offences mentioned in the previous sections of the act, and shall be thereof convicted, he shall be punished by a fine of $1000. Eow can it be gravely contended that if a person should become guilty of larceny, the prosecution under the first section might be waived, and the one under the general provision of the last section substituted ? Or could it be contended that a prosecution under the last section, for the offence mentioned in the first, could be lawfully had under any circumstances ? And why not ? Simply because the provisions of the last section are incompatible with those of the first; the first, therefore, forms an exception to the general provision for punishment in the last section, and must be governed by its own provision. But in *551what way are the two sections incompatible with each other ? It cannot be because the different crimes mentioned are not all felonies, nor because they cannot all be prosecuted in the same way and in the same tribunal, nor is it because the language in the last section does not in its terms apply to all the sections alike, but it is simply because the punishment in the two sections is wholly different. We could not pass by the provisions of the first section, where the penalty is $100 for its violation, and betake ourselves to the provision of the last section, where the punishment is $1,000. And herein precisely is the incompatibility between the two provisions in the act before us. The punishment in the two cases is wholly different, and this makes them incompatible. The 21st section makes the defendants liable for a certain class of debts only. The 30th section makes them liable for all the debts of the company contracted while the defendants were stockholders, which may make the punishment ten times as heavy as it would be under the 21st section; consequently the plaintiffs cannot abandon the 21st section, which expressly fixes the penalty for a violation of the 19th section, and betake themselves to the 30th section, and thereby seek to make the penalty for the violation of the 19th section ten times as heavy as the one expressly provided for it in the 21st section. The two things are wholly incompatible, and this being the ease, it is not the right of a plaintiff to make his election between the two. The special penalty is alone applicable to the case; and if this does not turn out to be sufficiently severe it is the fault of the law, but it is a fault which the plaintiffs cannot remedy by bringing their action under a section which cannot be made to apply to the case.
In the act under consideration, with five certificates and nine notices provided for, we have three special penalties or liabilities created which relate to these certificates and notices, one applicable to the certificate in question, and the one to be used when the capital stock is *552increased. One applies to the certificate to be made when the capital stock is reduced,-the other relates to the notice to be given annually of the affairs of the company, leaving several other notices and certificates prescribed and acts prohibited to which the 30th section only can have . application. I think, therefore,, that these different provisions bring the case before us within the principles before laid down, and which force us to the conclusion that the duties prescribed in the 19th section have their own peculiar penalty for their violation provided in the 21st section, and when that penalty has been incurred, its own special punishment must follow, and that only.
Again, it is insisted, by the defendants, that the contingency or occurrence upon which these defendants can be made personally liable does not appear, from the declaration, to have hapjjened. The charge is, that within thirty days after the payment of the last instalment of the sum of $288,000, the amount of stock on which the company were to commence business, the defendants made a certificate, &c., that the whole of that amount had been paid in in cash, whereas it is charged that such sum had not then been paid in in cash, and that the certificate was false in this particular; but the defendants contend that the statute does not contemplate or prescribe any such certificate to be used at that stage of the proceedings, and that as a consequence whether such certificate was made or not, or whether it was. true or false, is a matter of no importance; that the defendants cannot be made liable on a mere voluntary certificate which the scatute has neither provided for nor authorized, but which, through mistake or over caution, they may have used. This is undoubtedly true, if the facts be as contended for by the defendants. Hence the important inquiry on this part of the case is, what kind of a certificate does the 'law require. It is conceded, by both sides, that the certificate contemplated is the one prescribed in the 19th section of the act, and the question is, what kind of a certificate *553does that section contemplate and require ? Is it a certificate to be made after the whole of the $300,000 has been paid in in cash, or is it one to be made after the whole of the $288,000 lias been paid in in cash ? If the section requires the certificate to apply to the latter sum, then it has been made, pursuant to the statute, and if false it makes the defendants liable to such penalty as is applicable to it. If the section requires the certificate to apply to the former sum of $300,000, then this certificate in controversy has not been made pursuant to the statute, is not a certificate which the law requires or provides for; and whether the defendants madeand recorded it intelligently or ignorantly, whether they did it deceitfully or honestly, is of no importance. It is a mere nullity, and as worthless for any purpose as so much blank paper; no proceeding can be based upon it. Which kind of certificate, then, does the 19th section contemplate and require ? The language of the section is, that the officers, within thirty days after the payment of the last instalment of the capital stock so fixed and limited by the company, shall make a certificate, &c., stating the amount so fixed and paid in, &e. It says the last instalment of the “ capital stockP What is the capital stock of the company ? The declaration tells us that the company, by their original certificate of association, made known that their capital stock was $300,000, No other sum can be considered the capital stock. Surely the sum on which a company determines to commence business cannot be considered the capital stock of the company, when it may not be the fourth of it. The section says, in express terms, the capital stock “ so fixed, ” and “ limited ” by the company. What capital stock was fixed and limited by the company? None that I can ascertain, except the total sum of $300,000. This amount was fixed and limited by their original certificate, not by the officers, but by the stockholders themselves, when they signed the certificate of incorporation, and cannot be altered without a new vote *554of tlie stockholders and a new certificate to be recorded and published. While the other sum of -$288,000, divided into 2880 shares of $100 each, was -neither fixed nor limited, nor intended to be, but was intended to be changed from time to time at the will of the company, without either certificate or record or notice, both in the amount and in the number of Shares, until it should reach the maximum -of $300,000 and 3000 shares so fixed and limited by the company in their articles of association.
The same thing is required when an increase of the capital stock is made, as provided in the section immediately following. The certificate in that ease is not to be made and recorded until within thirty days after the last instalment of the entire additional stock has been paid in in cash. These two sections, the 19th and 20th, are almost if not quite identical in their features and provisions, eaeh makes provision for a certificate to be made and -recorded of the paying in of the last instalment of the capital stock, the one to be made after the last instalment of the original stock has been paid in, and the other after the last instalment of the additional stock has been paid in, and both are classed together, and made subject to the same special penalty or liability in the -section immediately following them.
I can ai-rive at no other conclusion, therefore, than that the certificate mentioned in the 19th section is one that is not to be made until after the whole capital stock fixed and limited in the original certificate has been paid in. The ■certificate before us is not such a certificate, nor can I find any authority in ‘law for such a certificate as this one alleged to be false. Consequently it is merely voluntary, made under a misapprehension -of duty, and is the same as if it had never been made.
It is no answer to this view of the case to say -that, by such construction, the company would never be under any necessity of making the certificate; that all they would have to do would be to omit paying in the last instalment, and the time would never arrive for making the *555certificate ; for while this is all very true, the objection applies with exactly the same force to the other view of the case, for if the certificate is to apply to the amount with which the company determines to commence business, that is $288,000, all they have to do is to omit paying in the last instalment of that amonnt, and the time will never arrive when the making of such certificate will become a necessity. The law does not render necessary the actual paying in, before the company begins business, of the whole amount of capital with which the company determines to commence. Provision is made for calling it in by instalments. There is no limit to the smallness of the amount with -which a company can commence business, except that found in the third clause of the first section, which is $0000. And the company, in the present case, was in operation long before the last instalment of $288,000 was alleged to have been paid in, for the debt' in the case before us was contracted nearly a year before such payment.
If, indeed, this certificate, worthless and mistaken as it is, had in fact deceived or misled the plaintiffs ; if they had or could, to any extent or in any manner, have given credit to the company on the faith of this certificate, and lost their money thereby, I should have felt myself obliged to seek for a more liberal construction of the law. For this is, after all, the whole object and end and aim of these personal liability sections, to give a remedy to those who have been deceived and defrauded and wronged by these false certificates and affidavits of the officers; hut 1 do not see howr, with the most liberal construction, I could have reached a different conclusion.
I think, therefore, that there is no sufficient cause of action disclosed in this declaration, and that judgment in. the case should be arrested.
For affirmance—Judges Haines, Ogden, Risley Swain and Wood.
For reversal—Judges Van Dyke, Combs and Valentine.