State Savings Ass'n v. Kellogg

Wagner, Judge, delivered the opinion of the court. This was an action against the defendants, as stockholders [588] of tbe Southwestern Freight & Ootton Press Co. The petition alleges the organization of the company as a corporation under the laws of this State, its existence as such corporation in 1869, its becoming indebted to plaintiff in the same year, and its dissolution in June 1869. The averment is that in June 1869, the said corporation became wholly insolvent and bankrupt, and presented its petition to the United States District Court and was in that month declared a bankrupt, and was totally without funds or means, whereby it became dissolved being unable by reason of a total want of funds and means to exercise its corporate powers. The answer of the defendants denies that they or either of them are in any manner liable to the plaintiffs, but there is no denial of the insolvency of the incorporation. At the trial plaintiff proved the indebtedness of the corporation as stated in the petition. The case was then submitted on the pleadings and proofs, and at the request of the defendants the court declared the law to be, that the plaintiffs could not recover. This action was brought under the statute (1 W. S., p. 293, § 22) which declares, if any company formed under this act dissolve leaving debts unpaid, suits may be brought against any person or persons who were stockholders at the time of such dissolution, without joining the company in such suit. The first question is, whether the insolvency of the company amounted to a dissolution so as to give the plaintiffs the right to pursue this remedy. In the case of Moore vs. Whitcomb, (48 Mo., 543,) it was held that a corporation might be dissolved by a surrender of its franchises, and if it suffered acts to be done which had the effect of destroying the end or object for which it was created, it was equivalent to a surrender of its rights and in effect a dissolution. In the above cited case we mainly followed the leading case of Slee vs. Bloom, (19 John. 456) where the question is most thoroughly examined in the Court of Errors, in the State of New York. In that case it appears that pursuant to a statute the defendants associated together for establishing a cotton [589] manufactory, and became a corporation according to tbe provisions of the statute. For the space of one month there was no meeting of the trustees, nor any business or act done by the corporation; then all the property of the corporation real and personal was sold by the sheriff under an execution. Shortly thereafter the plaintiff, a creditor of the corporation, filed his bill against the defendants to charge them under the provisions of the act, as individually responsible for the debts of the corporation to the extent of their respective shares of stock, alleging that the corporation was to be considered as dissolved after the selling of all its property by the sheriff. The court held that the corporation within the meaning and intent of 'the act, as regarded creditors, was dissolved, after ceasing to act as a corporation for such a length of time, and after a sale of all its property, and that the defendants were individually responsible for the debts of the corporation according to the act. In the course of his able opinion Chief Justice Spencer said, “In point of good sense, this corporation was dissolved within the meanihg and intent of the act, as regards creditors when it ceased to own any property, real or personal, and when it ceased for such a space of time, from doing any one act manifesting an intention to resume their corporate functions. The end, being and design of the corporation were completely determined, and if even it had the capacity to re-organize and re-invigorate itself, the case has happened when, as relates to its creditors, it is dissolved.” The learned judge continued that, with respect to the period of dissolution, it happened when all the property of the company, was sold and that after that time no corporate act was done. So in Penniman vs. Briggs, (Hopk. Ch., 300 ; S. C., 8 Cow., 387) where a manufacturing corporation, established under the same general law as that just alluded to, for twenty years, became insolvent within the time, and incompetent to act by the loss of all its funds, and under the provisions that “for all debts which shall be due and owing by the company at the time of its dissolution, the persons then composing the company should be [590] individually responsible to tbe extent of their respective shares of stock in the company and no further,” it was decided that the corporation was to be deemed dissolved for the purpose of the remedy by the creditors against the stockholders individually. It may be admitted that the old and well established principle of law remains good as a general rule, that a corporation is not to be deemed dissolved by reason of any mis-user or non-user of its franchises, until the default has been judicially ascertained and declared. But it must be observed, that the plaintiff has no control over the process or remedy to dissolve this corporation, either for non-user or for any other cause. It is necessary that the State through its law officer should institute such proceedings. Then if we are to consider this corporation in existence, the plaintiff as a creditor before it can have any remedy, must wait till the charter expires by limitation of time, or until the law officer of the State shall see fit to institute proceedings to vacate it; which may never happen. In the meantime the creditor is wholly remediless. A doctrine so unreasonable, ought not to find any sanction or support. Now the averment in the petition was that when the company presented its petition to the United States District Court,, it was dissolved, being wholly unable, by reason of a total want of funds and means, to exercise its corporate powers. The answer admitted the total want of funds and means, the absolute destitution of assets, but denied the legal inference that the corporation was thereby dissolved within the meaning or sense in which that word is used in the statute. When the corporation was utterly penniless, for what end or object did it continue. What good did it do the creditor to be told that there was the naked shadow but that the substance was all gone. The corporation for all essential purposes was as effectually dissolved as if a solemn judgment of court had been pronounced to that effect. I have no hesitation in coming to the opinion that there was such a dissolution as would afford creditors a remedy against the individual shareholders. [591] But it is further contended that this action is not sustainable because no suit was first brought against the company. The statute (1 W. S., p. 336, § 13) provides, that “no stock holder shall be personally liable for the payment of any debt contracted by any company formed under this chapter which is not to be paid within one year from the time the debt is contracted, nor unless a suit for the collection of such debt shall be brought against such company within one year after the debt shall become due, &c.” The law does not require useless things, and what xoossible good could have been accomplished by bringing suit against 'die company. It would only have been accumulating costs for the plaintiff to pay in addition to its failure to obtain any natisfaction. Before the debt was sixty days old, the company was decreed a bankrupt. It had no assets whatever, it would have been an idle ceremony — a useless form — to have proved up the claim in the Bankrupt Court, for the estate was totally without funds or means of any kind. The Statute' plainly refers to ordinary actions where there is a subsisting corporation. But here, before the limitation had expired the corporation was dissolved. The mere bringing of a suit under such a state of facts, would have been idle, vain and fruitless. Says Kent, Ch. J., in Trustees of Huntington, vs. Nicoll, (3 Johns., 566-598.) “It is one of the maxims of the common law, and which is a dictate of common sense, that the law will not attempt to do an act which would be vain, or to enforce an act which would be frivolous.” The acts in this case surely take it out of the dry letter of the law, and furnish a remedy within its spirit and meaning. A literal compliance would have been wholly futile, and the reason for not proceeding I think is good, legal and sufficient. I am of the opinion that the judgment should be reversed, and the cause remanded. The other judges concur, except Judge Sherwood, who is absent.