Where the case was tried twice below and twice went to the
highest court of the state and the federal question was decided
adversely to plaintiff in error on the first appeal, he is not
concluded thereby because he failed to then take a writ of error if
it appears that the first judgment of the higher court did not
finally dispose of the case, but required further proceedings in
the court below.
Not until the judgment of the court of last resort is final will
a writ of error lie to this Court under § 237 Judicial Code.
The contention that, under the local practice on a second writ
of error to the supreme court of the state, a federal question that
was passed on at the first hearing is not open cannot be sustained
in this Court if, as a matter of fact, the state court did pass on
the question on the second hearing and decide it adversely to
plaintiff in error.
Page 237 U. S. 414
Any course of procedure having for its object the taking of
property to satisfy an alleged legal obligation without according
any hearing to a respectful protest invoking the supreme law of the
land cannot be regarded as due process of law.
Section 2677, General Statutes of Florida of 1906, as amended in
1909, as construed by the highest court of the state, is repugnant
to the due process provision of the Fourteenth Amendment insofar as
it allows, after execution has been returned "no property" against
a corporation, an execution to issue against a stockholder for the
same debt to be enforced against his property to the extent of his
unpaid subscription as the same appears on the books of the
corporation without notice to such stockholder or other preliminary
step.
While a judgment against a corporation without fraud or
collusion in a court having jurisdiction may be made conclusive
upon the stockholder, as to existence and amount of the debt, the
property of a third party may not be taken to satisfy that debt,
upon the ground that he is a stockholder and indebted to the
corporation, without granting him an opportunity to be heard.
One protesting against his property's being taken without due
process of law cannot be denied such process on the ground that due
process would lead to the same result, as he had no defense on the
merits.
Extra-official or casual notice, or a hearing granted as matter
of favor or discretion, does not take the place of the notice with
right and opportunity to be heard which the due process provision
of the federal Constitution requires.
In this case, the execution was not a mere attachment
establishing a lien without going further until after opportunity
to be heard.
Where defendant comes into court for the sole purpose of
objecting on jurisdictional grounds to the execution of final
process against his property, his petition cannot, under the due
process provision of the Fourteenth Amendment, be converted into a
tender of an issue of fact respecting his status as a stockholder
so as to conclude him on a matter not within the pleadings and
which was not litigated.
63 Fla. 64 reversed.
The facts, which involve the constitutionality of § 2677,
General Statutes of Florida of 1906, as amended by the Act of 1909,
c. 5892, relating to the liability of stockholders for judgment
debts of the corporation to the extent of their subscriptions
remaining unpaid, are stated in the opinion.
Page 237 U. S. 416
MR. JUSTICE PITNEY delivered the opinion of the Court.
The Armour Fertilizer Works, having recovered in the circuit
court for Manatee County, Florida, a judgment for about $3,000
against the Parrish Vegetable & Fruit Company, a corporation,
sued out a writ of execution against the goods and lands of that
company, and placed it in the hands of the sheriff, who returned
that he was unable to find any property of the judgment debtor
whereon to levy. Thereupon, pursuant to § 2677 Gen.Stat.Fla. 1906,
as amended by Act of 1909, c. 5892, the Fertilizer Works sued out
an execution against the goods and lands of the plaintiff in error,
Henry L. Coe, as a stockholder of the Vegetable Company. This writ
set forth the recovery of the judgment by the Fertilizer Works
against the company, mentioning the date, the amount, and the court
in which it was recovered, the issuing of execution against that
company and the return thereon, and commanded that there be made of
the property of Coe, as one of the stockholders of the Company, "an
amount equal to the amount remaining unpaid upon the subscription
of the said Henry L. Coe to the stock of said corporation." A
formal levy was made upon a parcel of land, the property of Coe,
but there was no interference with his possession, nor had any step
been taken towards selling the land, when Coe filed in the circuit
court a petition to quash the execution as issued
Page 237 U. S. 417
illegally, alleging that it had been issued without notice to
him, and amounted to the taking of his property without due process
of law, and that the statute permitting it was void under the
Constitution of Florida, and was also repugnant to the "due
process" and "equal protection" clauses of the Fourteenth
Amendment. The circuit court entered judgment in the following
words:
"The execution is quashed, but not on the ground of
unconstitutionality of the statute. The statute is constitutional,
but the execution cannot issue until some preliminary steps are
taken."
The Fertilizer Works removed the cause by writ of error to the
Supreme Court of Florida, and that court reversed the judgment (63
Fla. 64), holding that the statute required no preliminary step to
be taken before an execution might be issued against a stockholder,
and that there was no general law or rule requiring previous notice
to him. The court further said:
"A stockholder of a corporation becomes such charged with
knowledge that, under the statute, upon the return of
nulla
bona upon an execution issued against the corporation, an
execution may be issued against him for the unpaid subscription to
the stock he holds. . . . The statute above quoted [sec. 2678,
Gen.Stat. 1906, set forth below] affords the means by which the
officer holding the execution may obtain definite information as to
the stockholders and the unpaid subscriptions on the stock. If the
person against whom the execution is issued is not in fact a holder
of stock upon which there is unpaid subscription, or if the amount
of the execution is in excess of the unpaid subscription, the
stockholder may have appropriate relief under the statute providing
for the testing of the legality of executions.
See
Sections 1624 and 1625, Gen.Stat. of 1906."
The case went back to the circuit court with a mandate
"that such further proceedings be had in said cause as,
according to right, justice, the judgment of said supreme
Page 237 U. S. 418
court, and the laws of the State of Florida, ought to be
had."
It was again brought on for hearing before the circuit court,
when, without further pleadings or evidence on either side,
judgment was rendered denying the motion to quash. Upon Coe's writ
of error, the supreme court affirmed this judgment, for reasons
expressed as follows:
"Coe does not claim that he was [not] in fact a stockholder, nor
that there remains no balance due upon his stock, nor seek to
interpose any of the defenses pointed out as open to him upon the
former hearing, but stands boldly on his attack upon the
constitutionality of the act, and by a proceeding unknown to our
practice. There does not appear to have been any forcible seizure
of any property of the said Coe, other than the formal levy upon
realty, which does not interfere with the owner's possession. The
statute presents many difficulties that may arise as to others not
similarly situated, and may as such be beyond the power of the
legislature, but the party now before this Court has not brought
himself within the class who may justly complain, and the judgment
as to him, upon the authority of our former holding, is therefore
affirmed."
The present writ of error was then sued out.
Defendant in error moves to dismiss upon the ground that,
according to the local practice, the opinion delivered by the
supreme court upon the first writ of error decided the question
involved and became the law of the case, so that plaintiff in
error, having failed to take a writ of error upon that judgment,
was thereafter concluded by it. But, as appears from what has been
stated, the first decision did not conclude the litigation; it
called for further proceedings in the circuit court, and not until
the judgment rendered by that court on the going down of the
mandate had been affirmed upon the second writ of error did there
exist a final judgment in the court of last resort of the state
such as might be brought under
Page 237 U. S. 419
the review of this Court by virtue of § 237, Judicial Code, Act
of March 3, 1911, 36 Stat. 1156, c. 231. Besides, the contention
that, by the local practice, the federal question was not open for
discussion or consideration upon the second writ of error is
conclusively disposed of by the fact that the supreme court did, on
that occasion, again consider it, with the result that the state
law and the authority exercised under it were upheld as valid and
not repugnant to the Constitution of the United States, and the
immunity especially set up and claimed by plaintiff in error under
that Constitution was overruled.
North Carolina R. Co. v.
Zachary, 232 U. S. 248,
232 U. S. 257,
and cases cited. The statement in the second opinion that the
attack of plaintiff in error upon the constitutionality of the act
was "by a proceeding unknown to our practice" does not, we take it,
mean that the court did not necessarily pass upon the
constitutional question. We are not sure we clearly comprehend the
meaning of the expression quoted, in view of the effect attributed
to §§ 1624 and 1625 in this case and in earlier decisions cited
below. It would seem plain that any course of procedure having for
its object the taking of property to satisfy an alleged legal
obligation, and which yet accorded no hearing to a respectful
protest invoking on reasonable grounds a prohibition found in the
supreme law of the land, could itself hardly be termed "due process
of law." The constitutional guaranty is not to be thus evaded, and
we cannot believe there was any purpose to evade it in this case.
Upon the whole, the right of review in this Court is clear, and the
motion to dismiss the writ of error must be denied.
The Florida statutes upon which the controversy turns are set
forth in the margin.
* That we may
not
Page 237 U. S. 420
misapprehend the construction placed upon them by the state
court of last resort, or the ground of its opinion that they
afforded due process of law to plaintiff in error,
Page 237 U. S. 421
it will be well to briefly review their history. Sections 2677
and 2678 trace their origin to §§ 22 and 23 of an Act of 1868
(Laws, p. 123, c. 1639), which followed the model of § 36 of the
companies clause consolidation act 1845 (8 & 9 Vict. Cap. 16),
except that they permitted execution against the stockholder to an
extent "equal in amount to the amount of stock by him owned,
together with any amount unpaid thereon." There was a proviso, as
in the English act, that no such execution should issue except upon
an order of the court, "made upon motion in open court after good
and sufficient notice in writing to the person upon whom execution
is desired." These sections were repealed in 1874 (Laws, p. 95, c.
2016), and reenacted in 1879, with insignificant verbal
modifications (Laws, p. 118, c. 3165, §§ 9 and 10). By an Act of
1887 (Laws, p. 96, c. 3729), the liability of stockholders to the
creditors of the corporation was limited to "so much as may remain
unpaid upon his or her subscription." In the Revision of 1892, this
limitation of the liability was engrafted upon the Act of 1868, as
reenacted in 1879, and at the same time the provision for notice to
the stockholder prior to the issuing of the execution was omitted.
The result appeared as §§ 2152 and 2153 of that Revision, found as
§§ 2677 and 2678 in the General Statutes of 1906. The amendment of
1909 was apparently passed for the purpose of bringing the
phraseology of the section into conformity with the judicial
construction, as declared in
Knight & Wall Co. v. Tampa
S.L.B. Co., 55 Fla. 728, 743, 744.
Meanwhile, and from an early period, the laws of Florida
Page 237 U. S. 422
have contained provisions for testing the legality of any writ
of execution upon application of the defendant, made after its
issue. Sections 1624 and 1625, Florida Gen.Stats. 1906, referred to
in the opinion of the supreme court above quoted, originated in
Acts of 1834 (Laws, p. 13, c. 742), and of 1844 (Laws, p. 54, § 6),
concerning which the court has repeatedly held that they provide
separate, consistent, and independent remedies, the one by
proceeding before the sheriff, the other before the court or a
judge in vacation, and that the courts of law have full power to
revoke, correct, restrain, or quash their own process in the course
of their ordinary jurisdiction, so that no recourse to a court of
equity is necessary.
Mitchell v. Duncan, 7 Fla. 13, 19;
Robinson v. Yon, 8 Fla. 350, 354;
Mathews v.
Hillyer, 17 Fla. 498, 500;
Barnett v. Hickson, 52
Fla. 457, 460.
We understand, therefore, that in the present case, the court
held that, under § 2677, as amended in 1909, on a return of "no
property" upon an execution against a corporation, an execution may
be issued against any stockholder without notice to him or other
preliminary step; that the writ is to be enforced against his
property to the extent of his unpaid subscription to the stock that
he holds in the company, and this amount the officer ascertains
from the custodian of the records of the corporation, in accordance
with § 2678; that, if the person against whom the execution is
issued is not in fact a holder of stock upon which there is an
unpaid subscription, or if the amount of the execution exceeds the
unpaid subscription, he may have relief under §§ 1624 or 1625, and
that, in the absence of such objection on his part, the execution
is enforced, although there may have been only a formal levy,
without even such notice to the owner of the property as might be
implied from a forcible seizure or an interference with his
possession.
Thus, construed, and as applied in this case, we think
Page 237 U. S. 423
§ 2677 is repugnant to the "due process of law" provision of the
Fourteenth Amendment, which requires at least a hearing, or an
opportunity to be heard, in order to warrant the taking of one's
property to satisfy his alleged debt or obligation, and in our
opinion the other sections do not adequately supply the defect.
It may be conceded that a judgment recovered against a
corporation, without fraud or collusion, in a court having
jurisdiction over the subject matter and the party, may,
consistently with the Fourteenth Amendment, be treated as
concluding the stockholder respecting the existence and amount of
the indebtedness so adjudged.
Sanger v. Upton,
91 U. S. 56,
91 U. S. 59;
Hawkins v. Glenn, 131 U. S. 319,
131 U. S. 329;
Glenn v. Liggett, 135 U. S. 533,
135 U. S. 544;
Great Western Telegraph Co. v. Purdy, 162 U.
S. 329,
162 U. S. 337.
But before a third party's property may be taken to pay that
indebtedness upon the ground that he is a stockholder and indebted
to the corporation for an unpaid subscription, he is entitled, upon
the most fundamental principles, to a day in court and a hearing
upon such questions as whether the judgment is void or voidable for
want of jurisdiction or fraud, whether he is a stockholder and
indebted, and other defenses personal to himself.
See Great
Western Telegraph Co. v. Purdy, ubi supra; Bernheimer v.
Converse, 206 U. S. 516,
206 U. S. 528,
532;
Converse v. Hamilton, 224 U.
S. 243,
224 U. S. 256;
Selig v. Hamilton, 234 U. S. 652,
234 U. S.
660.
The suggestion that because, under §§ 1624 and 1625, a hearing
upon pertinent questions of fact may be had at the instance of the
alleged stockholder after the execution issues, and before
interference with his possession or his property right, therefore
plaintiff in error, having been at liberty in this proceeding to
raise meritorious questions, is not "within the class who may
justly complain" will not withstand critical analysis.
The statute mentions no classes, and the state court
Page 237 U. S. 424
merely distinguished between those who complain and those who do
not. Against one and all, execution may be issued without notice or
hearing, the judgment against the corporation, and the record of
stockholdings and stock subscriptions found upon the books of the
corporation, being treated as conclusive against those named as
stockholders. If a person against whom execution is thus issued as
for an unpaid stock subscription does not happen to receive notice
extra-officially or, receiving it, makes no objection, his property
is taken in satisfaction of the corporation's debt -- manifestly
without due process of law. But, it is said, plaintiff in error is
not within that class; he in fact learned of the execution before
his property was sold or even his possession was disturbed, and he
had an opportunity for a hearing in the present proceeding as to
all questions upon which his liability depended. The fallacy of
this is that it ignores the issue of law raised by the petition of
plaintiff in error, and substitutes an issue of fact for which he
was not summoned and which he has not consented to litigate. To one
who protests against the taking of his property without due process
of law, it is no answer to say that, in his particular case, due
process of law would have led to the same result because he had no
adequate defense upon the merits.
Rees v.
Watertown, 19 Wall. 107,
86 U. S.
123.
Nor can extra-official or casual notice, or a hearing granted as
a matter of favor or discretion, be deemed a substantial substitute
for the due process of law that the Constitution requires. In
Stuart v. Palmer, 74 N.Y. 183, 188, which involved the
validity of a statute providing for assessing the expense of a
local improvement upon the lands benefited, but without notice to
the owner, the court said:
"It is not enough that the owners may by chance have notice, or
that they may as a matter of favor have a hearing. The law must
require notice to them, and give them the right to a hearing and an
opportunity
Page 237 U. S. 425
to be heard."
The soundness of this doctrine has repeatedly been recognized by
this Court. Thus, in
Security Trust Co. v. Lexington,
203 U. S. 323,
203 U. S. 333,
the Court, by Mr. Justice Peckham, said, with respect to an
assessment for back taxes:
"If the statute did not provide for a notice in any form, it is
not material that, as a matter of grace or favor, notice may have
been given of the proposed assessment. It is not what notice,
uncalled for by the statute, the taxpayer may have received in a
particular case that is material, but the question is whether any
notice is provided for by the statute"
(citing the New York case). So, in
Central of Georgia Ry. v.
Wright, 207 U. S. 127,
207 U. S. 138,
the Court said: "This notice must be provided as an essential part
of the statutory provision, and not awarded as a mere matter of
favor or grace." In
Roller v. Holly, 176 U.
S. 398,
176 U. S. 409,
the Court declared: "The right of a citizen to due process of law
must rest upon a basis more substantial than favor or discretion."
And in
Louis. & Nash. R. Co. v. Stock Yards Co.,
212 U. S. 132,
212 U. S. 144,
it was said: "The law itself must save the parties' rights, and not
leave them to the discretion of the courts as such."
The writ of execution cannot, of itself, be treated as
equivalent to a writ of attachment, establishing a lien upon the
stockholder's property, but going no further until he has had an
opportunity to show cause why that property should not be applied
to the payment of the corporation's debt. Not only is such a
purpose wholly unexpressed in the writ, but such is not its normal
function or effect; no "day in court" is named, and there is no
provision for notice or monition by service, publication, mailing,
or otherwise.
Windsor v. McVeigh, 93 U. S.
274,
93 U. S. 279
et seq.; Grannis v. Ordean, 234 U.
S. 385,
234 U. S.
393.
This case bears no proper analogy to
York v. Texas,
137 U. S. 15,
137 U. S. 21;
Kauffman v. Wootters, 138 U. S. 285, and
Western Indemnity Co. v. Rupp, 235 U.
S. 261,
235 U. S.
272,
Page 237 U. S. 426
where it was held that a state, without violence to the due
process clause of the Fourteenth Amendment, may so regulate its
practice that a person who voluntarily enters one of its courts to
contest any question in a pending action -- even a person appearing
specially to object that the court has not acquired jurisdiction
over him -- may be deemed to have submitted himself to the
jurisdiction of the court for all purposes of the action, and hence
be bound by its determination of the merits if his objection to the
jurisdiction be overruled. For, in this case, there was no pending
action or issue; plaintiff in error came into court to object, on
jurisdictional grounds, to the execution of final process upon his
property. And the effect of the decision under review was to
convert his petition, which simply raised an issue of law under the
state constitution and the Fourteenth Amendment, into a tender of
an issue of fact respecting his status as a stockholder and the
amount of his unpaid subscription, if any, and then to hold him
concluded upon the latter issue for failure to introduce evidence
bearing upon it. In doing this, the court in effect rendered
judgment against him upon a matter that was not within the
pleadings and was not in fact litigated. To do this without his
consent -- and the record shows no consent -- is contrary to
fundamental principles of justice.
Reynolds v. Stockton,
140 U. S. 254,
140 U. S.
268-269.
Judgment reversed, and the cause remanded for further
proceedings not inconsistent with this opinion.
*
"
GEN. STAT. FLORIDA 1906."
"SEC. 2677. (2152.) MAY ISSUE AGAINST STOCKHOLDERS. -- If any
execution shall issue against the property or effects of any
corporation, and there cannot be found whereon to levy, then such
execution may be issued against any of the stockholders to an
extent equal in amount for so much as may remain unpaid upon the
subscription and no further, and all property whether real or
personal of any stockholder in any corporation aforesaid shall be
exempt from the debts and liabilities of such corporation
contracted in its corporate capacity, except the stock of said
stockholder of or in said corporation to the extent mentioned
aforesaid."
"Amended by Florida Laws 1909, c. 5892, to read as follows:"
"2677. (2152.) MAY ISSUE AGAINST STOCKHOLDERS. -- If any
execution shall issue against the property or effects of any
corporation, and there cannot be found whereon to levy, then such
execution may be issued against any of the stockholders to an
extent equal in amount for so much as may remain unpaid upon their
subscription to capital stock and no further.]"
"2678. (2153.) CUSTODIAN OF RECORDS TO GIVE SHERIFF NECESSARY
INFORMATION. -- The clerk or other officer having charge of the
books, records, and papers of any corporation, on demand of any
officer holding execution against the same, shall furnish such
officer with the name, places of residence and the amount of
liability of every person liable as aforesaid, and if such officer
refuses so to do, he shall, upon complaint thereof, be liable to a
fine not exceeding $500."
"1624. (1195.) UPON AFFIDAVIT OF ILLEGALITY AND BOND. -- If any
execution shall issue illegally, the defendant in execution, his
agent, or attorney may procure a stay of the same by making and
delivering to the officer having the execution an affidavit stating
the illegality and whether any part of the execution be due, and a
bond payable to the plaintiff with two good and sufficient sureties
in double the amount of the execution or the part of which a stay
is sought. Upon receipt of such affidavit and bond, the officer
shall stay any proceeding on the execution and return the bond and
affidavit to the court from which the execution issued, and such
court shall pass upon the question of illegality as soon as
possible. If the execution be adjudged illegal in any part, the
court shall make an order staying it as to such part, but if it be
adjudged legal in whole or in part, the court shall (or if it has a
clerk, shall direct such clerk to) enter up judgment against the
principal and sureties on such bond for the amount of so much of
the execution as shall be adjudged to be legal, and execution shall
forthwith issue thereon."
"1625. (1196.) UPON MOTION. -- The court before which an
execution is returnable may, on a motion and notice to the adverse
party, for good cause, upon such terms as the court may impose,
direct a stay of the same, and the suspension of proceedings
thereon."