Roe v. Durham

71 So. 109, 195 Ala. 584, 1916 Ala. LEXIS 336

• Court: Supreme Court of Alabama
• Decided: February 10, 1916
• Status: Published

Opinion

SOMERVILLE, J.

(1) When a corporation has been dissolved by a decree of the chancery court on petition of its majority stockholders, under the provisions of section 3511 of the Code, it is not then within the influence of section 3516 of the Code, providing that: “Corporations whose charters expire by limitation and which are dissolved by forfeiture or by any other cause, except by judicial decree, exist as bodies, corporate for the term of five years after such dissolutions, for the purpose of prosecuting or defending suits, settling their business, disposing of their property, and dividing their capital stock.”

But a dissolution by the agreement and recorded declaration of all the stockholders, under section 3510 of the Code, unquestionably leaves the corporation within the terms of section 3516. See Nelson v. Hubbard, 96 Ala. 238, 246, 11 South. 428, 17 L. R. A. 375.

The respondent corporation is therefore still subject to a suit upon any liability which accrued prior to its dissolution in December, 1914. And it can make no difference whether the liability sued on grows out of a contract or a tort. It may be that the power given to the directors, by section 3516, to pay the corporate “debts,” would not authorize them to pay claims in tort —a point which we do not decide. But, if that proposition be conceded, it would be a compelling reason why a suit should He against the corporation to convert the claim into a judgment debt, so that it could be paid by the directors.

It results that the corporation is not misjoined as a party respondent to the bill, and that, if the corporation is shown to be liable for the amount of the complainant’s judgment against W. T. McGowin, by reason of the failure or refusal of its officers to comply with the requirements of section 4105 of the Code, then there is equity in the bill.

(2) The substance of section 4105 is that'when an execution or attachment is levied on the stock of the defendant in any corporation, the officer shall go to the corporation’s office and there shall demand of any corporate officer or agent there present a statement in writing, under oath, “of the amount of the defendant’s stock, the number of his shares, or extent of his interest in such corporation or company, and shall leave with the officer, agent or clerk a copy of the writ.” The penalty for neglect or refusal by the corporation to furnish such a statement within 10 days is that it shall be liable to the plaintiff for the full amount of his judgment or decree.

The bill does not show that W. T. McGowin ever at any time owned any stock or interest in the Roe Drug Company, and the demurrers challenge the liability of the corporation under this statute, and the equity of the bill itself, in the absence of any allegation that W. T. McGowin was the owner of stock or other interest in the corporation at the time of the officer’s demand for information thereof. -

We have given due consideration to the language and the purpose of the statute in question, and we are led to the conclusion that it applies, ex vi terminorum only to the execution or attachment debtor who has at the time an interest in the capital or joint stock of the corporation as shown by its records. Even if the language of the statute were doubtful in this regard, it could never be intended that corporations should be penalized by the imposition of the judgment liabilities of defendants to whom they are strangers, and with whom they have no affiliations and no interests in common. Such a construction of the statute might, indeed, subject it to the gravest constitutional objections.

But, very plainly, the purpose behind this extraordinary penalty is to prevent corporations and stock companies from' protecting their stockholders against the process of creditors by concealing the character and extent of their holdings. It presupposes that such judgment debtors are in fact stockholders, or have an interest known to the corporation; and the demand for information is expressly predicated upon the officer’s levy on the defendant’s stock or interest — a manifest impossibility if he has no stock nor interest.

The inquiry authorized is, not whether such judgment debtor owns any stock, and, if so, how much; but, assuming that he owns stock — 'Upon which the officer must have effected a levy— how much does he own? If he is not a stockholder, and has no interest in the corporation, there is of course no levy; and that relationship does not exist between the corporation and the plaintiff and defendant in execution, upon which alone the statute grounds the right and the duty therein stated.

In its present state the bill is in this respect subject to the demurrers, both general and special. It results that, the decree appealed from must be reversed, and a decree will be here rendered sustaining the demurrers to the bill of complaint, which will stand dismissed, unless amended within 30 days.

Reversed and rendered.

Anderson, C. J., and Mayfield and Thomas, JJ., concur.