Mann's Mercantile Co. v. Smith

Cook, J., delivered the opinion of the court. The Smith Mercantile Company, a trading corporation, under the laws of this state, was doing business at its domicile in Indianola. The manager of the company bought a bill of merchandise from the traveling salesman of appellant. When this purchase was made, appellee, A. B. Smith, was present and assented to the purchase. Mr. Smith was, at this time, one of the directors of the Smith Mercantile Company. The merchandise so purchased was delivered to the Smith Mercantile Company. Subsequently the Smith Mercantile Company was declared a bankrupt, and its estate was administered [27] through the bankrupt court. Appellant received dividends in the settlement of the estate, but, after crediting all of said dividends to its aforesaid claim, a balance of two hundred eighty-four dollars and three cents remained unpaid. This suit was instituted against appel-lee, A. B. Smith, for this balance, on the ground that he, as director of the mercantile company, contracted this debt, which was in excess of the “capital stock paid in,” of said corporation; that he, having contracted such debt, is individually liable “for the excess over the amount of capital stock,” by virtue of the provisions of section 924, Code of 1906, reading as follows: “The amount of debts which any trading corporation or company may contract or owe shall not exceed the amount of its capital stock paid in; and, in case the debts exceed that amount, the directors who contracted such debts shall be individually liable for the excess over the amount of capital stock, and may be sued therefor by any creditor, whether the debt be due at the time of suit brought or not, if such creditor was without notice or knowledge of the excess at the time his debt was made.” Whether statutes of this character are penal statutes, in the sense that they must be strictly construed by the ■courts, has been the subject of some diversity of opinion, but it would seem that the great weight of authority regards such statutes as penal in their nature. The liability imposed by the statute is of purely statutory origin, and we must look to the statute itself to ascertain whether or not the facts of each particular case bring the defendant within the terms of the law. Mr. Smith was a director of the mercantile company, and was present when the debt was contracted, and inferentially, at least, assented to the contract of purchase. For present purposes it is conceded that the company was then insolvent, and the debt then made was in excess of the capital stock of the debtor company. The first clause of section 924 of the Code, the section under consideration, limits the indebtedness trading [28] corporations may lawfully contract, and, to enforce this-policy of the law, the second clause of the section gives to any creditor of the corporation the right to sue all directors of the corporation individually “who contracted such debts.” It must be admitted that Mr. Smith could not make a contract binding on the corporation merely because he happened to be a director. It seems clear also that debts-prohibited by the statute must be valid claims against the corporation, enforceable in the courts, and capable of being made a charge on the assets of the company. The manager of the company had authority to buy and sell,, but there is nothing in the record to suggest that individual directors possessed the same power. Again, directors act together, and usually express-their acts in the minutes of the board; but, whether so-expressed or not, it must be shown that the director sought to be charged with liability assented to, or contracted, the debt officially as a director, acting concurrently with a majority of the board. Tradesman Pub. Co. v. Knoxville Car Company, 95 Tenn. 634, 32 S. W. 1097, 31 L. R. A. 593, 49 Am. St. Rep. 943. This case is-the only case brought to our notice deciding the exact point involved in this case, and the rule therein announced meets with the approval of the text-writers. So-far as we have been able to ascertain, the soundness of the decision has not been questioned. See Shackelford v. R. R. Co., 37 Miss. 202. It may be, and is, suggested that, this rule will make it extremely difficult to fix liability upon directors of trading corporations. It is not the function of the courts to supplement legislation, or to give a construction to statutes not warranted by the-terms thereof. Appeal to the lawmakers, and not to the courts, is the only remedy, if the statutes have not gone’ far enough to remedy existing evils. Chapter 104, Acts of 1910, fixing the terms of court in. Sunflower county, provides that the first twelve days of [29] each term shall he for civil business, and the last twelve days for criminal business. Judgment in this case was rendered during the first twelve days of the term, but the motion for a new trial was not disposed of until after the expiration of what is termed by the briefs civil term. The order overruling the motion was, however, entered on the minutes of the last twelve days. It is contended that the court could not transact any civil business after the first twelve days. The division of the time was for convenience, and in nowise limits the power of the court to try a case properly within its jurisdiction. The judge cannot ignore the division of time, when to do so would deprive a party to a law suit of any substantial right. Affirmed. ON SUGGESTION OE ERROR. It is suggested that, to maintain the original opinion In this cause, it will be necessary to overrule two former decisions of this court, viz., Avery & Sons v. McClure, 94 Miss. 172, 47 So. 901, 22 L. R. A. (N. S.) 256, 19 Ann. Cas. 134, and Kimbrough v. Davies, 61 So. 697. When the original opinion was written, it was not conceived that the cases cited were applicable to the present case, and upon a re-examination of same no reason appears why this conception should be revised. The present case is based on section 924, Code 1906, making directors of corporations individually liable for debts of the corporation contracted by them in excess of the paid-in capital stock of the corporation. Avery é Sons v. McClure, supra, was an action in the chancery court of Lowndes county, based upon a decree of the circuit court of the United States awarding Avery & Sons a judgment for damages against a corporation for the infringement of a patent right owned by Avery & Sons. This bill sought to hold the stockholders and directors of the corporation liable for the amount of this decree, “the contention being that the stockholders were [30] liable under section 909 of tbe Code of 1906 for tbe amount, of any balance that may remain unpaid for tbe stock subscribed for by them; further, that under section 923 of the Code the directors and stockholders were liable for the amount of the capital stock withdrawn and dividends declared while the company was insolvent; further, that the directors were liable under section 924 of the Code for debts contracted in excess of the capital stock.” It will be seen that the last-named cause of action is based on section 924 of the Code, and that the cause of action in the present case is based on the same section. In Avery & Sons v. McClure, the court held that the directors were not liable, for the reason that damages awarded for the infringement of a patent did not fall within the meaning of our statutes making stockholders and directors liable under certain circumstances for the debts of corporations. This was the “single question” presented to the court, and nothing more was decided. It was held that the cause of action sued on was not a debt in the sense of the statutes. The question here pre-sentéd and decided was not then before the court. In Kimbrough v. Davies, 61 So. 697, this court merely held that a stockholder of a corporation cannot withdraw the capital stock of the company until all of the debts then owing by the corporation have been paid. This was. the question before the court, and this is all the court passed on. The “single question” presented by the record of the present case is: Did the director contract the debt? This question was answered in the negative, and in doing so it was not necessary to overrule, criticise, or explain Avery v. McClure or Kimbrough v. Davies, because it seemed obvious that these cases do not in anywise conflict with the conclusion reached in the present case. Suggestion of error overruled.