At the same time, it is held in Indiana that a statute imposing liability upon directors for all debts contracted after any violation of the statute, causing insolvency, including the failure to have the capital stock all paid in within eighteen months, is a penal statute, at least so far as the statute of limitations is concerned, because the creditor is not required to show that he has sustained any damage by the acts or omissions of the directors but instead the directors are personally liable for all the debts contracted after their violation of the statute, where the corporation is thereby rendered insolvent.96 So, in New York, where such statutes are generally held to be penal, it has recently been held that a statute is remedial where it is designed to afford a remedy to creditors and stockholders for "losses" actually sustained by the official acts of directors and officers "by which the funds of the corporation have been depleted." 97 Likewise, a statute which makes corporate officers signing false reports personally liable "to any person who has become a creditor or stockholder of the corporation upon the faith of any such * * report, to the amount of the debt contracted upon the faith thereof if not paid when due, or the damage sustained by any purchaser of or subscriber to its stock upon the faith thereof," is held, even in New York, to be not penal. The court said that the amended statute differed from the former statutes on the same subject, in that the earlier ones made the officers who filed a false report liable for all the debts of the company whether or not incurred on the faith of the report and irrespective of the amount of the debts while the amended statute does not lowed in Brown v. Clow, 158 Ind. 403, 62 N. E. 1006, and St. John v. Stafford, 26 Ind. App. 695, 59 N. E. 1075 as to statute requiring annual reports. 96 Brown v. Clow, 158 Ind. 403, 411, 62 N. E. 1006, where the court said: "The liability so fixed upon them is a penalty or punishment for the violation of the duties with which they are expressly charged." A statute imposing liability on directors for all debts contracted" after the violation of a statute requiring the capital stock to be paid in within eighteen months after incorporation, is a penal statute since it creates a cause of action not before existing and "the creditor is not required to show that he has been imposed upon by fraud, or that he has sustained any damage by the acts or omissions of the directors;"' while, on the other hand, statutes authorizing a recovery for fraud and deceit, which the creditor must allege and prove, and limiting the recovery to the amount of damages sustained are not penal but are remedial. Brown v. Clow, 158 Ind. 403, 62 N. E. 1006. 97 Cæsar v. Barnard, 156 N. Y. App. Div. 724, 141 N. Y. Supp. 659, rev'g on other grounds 79 N. Y. Misc. 224, 139 N. Y. Supp. 974. impose a liability for all the debts of the corporation but simply a liability to any person who has become a creditor or stockholder upon the faith of such a report. "This liability," said the court, "is greater than that which existed at common law, where, in an action for deceit scienter was essential to the maintenance of the action. But this fact does not necessarily render the statute penal," and it is then stated that a statute imposing liability for all actual losses or damages occasioned thereby, but nothing more, does not impose a penalty.98 Likewise, in New York, the liability for illegal dividends was fixed by statute as the loss sustained by reason of such dividend, and it was held that the statute was to be treated not as a penalty but as a provision for indemnity against loss.99 In New York there is now a penalty of fifty dollars a day for failure to file an annual report, after demand, but formerly the defaulting directors were made liable for all existing debts, which was unanimously held to be a penalty. So in California it is held that a constitutional provision that directors shall be liable to creditors and stockholders for all moneys misappropriated by officers does not create a penal liability, in the technical sense, since the recovery allowed is merely to compensate for a loss.1 On the other hand, in construing the statute making directors liable for debts created in excess of the debt limit to the full amount of the excess, "is of a highly penal character the moment it is construed as making the directors liable for the full amount of the excess debts which they may have authorized, regardless of loss or damage which may have been occasioned by their acts." 2 In Mississippi, in 1916, the Supreme Court said that "the trend of modern authority. and that of well-reasoned cases, is toward the conclusion that a statute of the character here in review [imposing liability on directors for paying illegal dividends] is not penal in the proper meaning of such term. In the sense that the liability here declared 'is new and unknown to the common law,' and that the party complaining must 98 Hutchinson v. Young, 80 N. Y. App. Div. 246, 80 N. Y. Supp. 259: 99 Dykman v. Keeney, 10 N. Y. App. Div. 610, 42 N. Y. Supp. 488, aff'd without opinion in 160 N. Y. 677, 54 N. E. 1090. This holding was referred to on a subsequent appeal in the same case (16 N. Y. App. Div. 131, 45 N. Y. Supp. 137) and the Court of Appeals affirmed without opinion. 1 Winchester v. Howard, 136 Cal. 432, 89 Am. St. Rep. 153, 69 Pac. 77, 64 Pac. 692. 2 Moss v. Smith, 171 Cal. 777, 155 Pac. 90. therefore bring himself clearly within the terms of the statute, this might possibly be termed a penal statute. So far as the interests of the bank in this case are concerned, the statute is remedial; its object is to authorize a recovery of the money actually disbursed in violation of the statute. It is compensation that the creditors seek; and, when once compensated, no matter from what source, the liability imposed is discharged. The public, as such, has no direct interest in the result." 3 In Wisconsin, a late case also supports this distinction where a statute "does not give creditors of a corporation damages in excess of that occasioned by the wrong, but only equal to it," and holds that in such a case the statute imposes "a contractual relation upon the officers, and not a penalty in the strict sense of the term. A statute which does not enlarge the liability imposed under the rules of the common law is to be construed as not penal.5 In any event, liability under a statute authorizing depositors to sue directors of a bank for their loss due to receiving deposits when insolvent, is one "created by statute" rather than "for penalty or forfeiture"; and it was said in Kansas that "the general rule is that a statutory obligation to pay damages which the common law does not give is 'a liability created by statute,' where the damages awarded are limited to compensation-are limited to an amount which merely makes the injured person whole. The general rule, also, is that a statutory obligation to pay an amount beyond compensation to submit to more than the simple redress of the wrong done; to pay not merely in respect of the deserts of the injured person but as punishment for the wrong done is a penalty."6 § 2604.- Importance of determining whether statute is penal or remedial. Generally the only time the decision as to the nature of the statute becomes important is either in connection with its construction, or in determining what statute of limitations is applicable, or as affecting the survival or abatement of the cause of action, 3 Metzger v. Joseph, 111 Miss. 385, 71 So. 645. 4 Weston v. Dahl, 162 Wis. 32, 155 N. W. 949. 5 See Winchester v. Howard, 136 Cal. 432, 441, 89 Am. St. Rep. 153, 69 Pac. 77, 64 Pac. 77, 692, as explained in Moss v. Smith, 171 Cal. 777, 785, 155 Pac. 90. 6 Frame v. Ashley, 59 Kan. 477, 53 Pac. 474. 7 See 2605, infra. 8 See §§ 2700-2701, infra. or as relating to the effect of a repeal of the statute,10 or as bearing on the right to sue in another state or country.11 § 2605. Construction of statutes. When the statute imposes a liability in the nature of a penalty, it is penal in such a sense as to be subject to the general rule that penal statutes are to be strictly construed; and an officer cannot be held liable unless the case comes clearly and strictly within the terms of the statute.12 Furthermore, notwithstanding it has been held that a statute deemed to be remedial and not penal is to be liberally construed,18 the general and approved tendency of the courts is to construe the statute strictly and in favor of the corporate officers without regard to whether the statute is to be deemed strictly a penal one or otherwise. Thus, in Illinois, it was held that while the liability imposed by a certain statute was not penal but contractual, yet the liability was like that of a surety and therefore stricti juris, and the court said: "This being the case, the statute should receive a construction in consonance with the nature of the obligation imposed. The words employed should be interpreted according to their plain and obvious meaning, and should not be extended by construction so as to embrace cases not clearly within the terms of the statute." 14 But when it is said that such statutes are to be strictly construed, this means no more, it has well been said, than that "the real sense of the legislature is to be found in the terms and arrangement of the statute without straining or refinement, and the expressions used are to be taken in their natural and ordinary sense." 15 10 See § 2607, infra. 11 See § 2718, supra. 12 United States. Park Bank V. Remsen, 158 U. S. 337, 39 L. Ed. 1008; Chase v. Curtis, 113 U. S. 452, 28 L. Ed. 1038; Providence Steam-Engine Co. v. Hubbard, 101 U. S. 188, 25 L. Ed. 786. And see the dictum of Mr. Justice Gray in Huntington v. Attrill, 146 U. S. 657, 36 L. Ed. 1123. California. Moss v. Smith, 171 Cal. 777, 155 Pac. 90; Loveland v. Garner, 71 Cal. 541, 12 Pac. 616; Irvine v. McKeon, 23 Cal. 472. Colorado. Bovee v. Boyle, 25 Colo. App. 165, 136 Pac. 467. District of Columbia. Clifford, 5 App. Cas. 312. Jackson v. Illinois. Hoyt v. Haase, 80 Ill. App. 187. New York. President, etc., of Manhattan Co. v. Kaldenberg, 165 N. Y. 1, 7, 58 N. E. 790; Bruce v. Platt, 80 N. Y. 379; Bonnell v. Griswold, 80 N. Y. 128; Garrison v. Howe, 17 N. Y. 458. 13 Cæsar v. Bernard, 156 N. Y. App. Div. 724, 727, 141 N. Y. Supp. 659. 14 Lewis v. Montgomery, 145 Ill. 30, 47, 33 N. E. 880. See also Woolverton v. Taylor, 132 Ill. 197, 22 Am. St. Rep. 521, 23 N. E. 1007, rev'g 30 Ill. App. 70. 15 Deloria v. Atkins, 158 Mich. 232, 241, 122 N. W. 559, 16 Det. L. N. 583. Statutes creating liability should be construed as a whole, although covering different sets of circumstances.16 § 2606. Statutes as retrospective. Statutes imposing liability have been held not retrospective,17 but they have been held applicable to an indebtedness for rent arising after the enactment of the statute under a lease which was executed prior thereto.18 § 2607. Amendment or repeal of statutes creating liability. It is generally held that such statutes are penal in such a sense that they may be repealed at any time, even after an action has been commenced by a creditor, without violating constitutional prohibitions against laws impairing the obligation of contracts or interfering with vested rights; and that a creditor has no vested right under such a statute against an officer until he has recovered a judgment against him.19 In such a case, the legislature may repeal a statute imposing upon directors or other officers a penal liability for corporate debts, not only as against existing creditors, but also as against creditors who have commenced an action, and after the repeal no judgment can be rendered.20 Furthermore, while it is sometimes held that such statutes cannot be repealed so as to affect existing rights, where they are deemed remedial rather than penal,21 yet it seems that even where statutes are considered remedial, the governing rule is the general one that the repeal of a statute which gives a cause of action destroys the right, and any pending action based on such statute is abated by such repeal.22 And of course, inchoate and invested rights can be destroyed by a repeal where a statute expressly declares that "any statute may be repealed at any time." 23 16 Gay v. Kohlsaat, 223 Ill. 260, 79 N. E. 77. 17 Stieffel v. Tolhurst, 67 N. Y. App. Div. 521, 73 N. Y. Supp. 1034. 18 Stieffel v. Tolhurst, 67 N. Y. App. Div. 521, 73 N. Y. Supp. 1034. 19There is no such thing as a vested interest in an unenforced penalty." Gregory v. German Bank of Denver, 3 Colo. 332, 25 Am. Rep. 760, citing Sedgwick, St. & Const. Law, 111; Norris v. Crocker, 13 How. (U. S.) 429, 14 L. Ed. 210; Gaul v. Brown, 53 Me. 496; Nichols v. Squire, 5 Pick. (Mass.) 168; Bay City & E. S. Ry. Co. v. Austin, 21 Mich. 391; Curtis v. Leavitt, 15 N. Y. 152. 20 Union Iron Co. v. Pierce, 4 Biss. 327, Fed. Cas. No. 14,376; Gregory v. German Bank of Denver, 3 Colo. 332, 25 Am. Rep. 760; Breitung v. Lindauer, 37 Mich. 217; Victory Webb Printing & Folding Mach. Mfg. Co. v. Beecher, 97 N. Y. 651; Knox v. Baldwin, 80 N. Y. 610. 21 See Charles E. Brown & Co. v. Ware, 87 Vt. 121, 88 Atl. 507. 22 See 2 Thompson, Corporations, $ 1331, and also Moss v. Smith, 171 Cal. 777, 787, 155 Pac. 90. 23 Moss v. Smith, 171 Cal. 777, 787, 155 Pac. 90. |