Coombes v. Getz,
Annotate this Case
285 U.S. 434 (1932)
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U.S. Supreme Court
Coombes v. Getz, 285 U.S. 434 (1932)
Coombes v. Getz
Argued March 21, 1932
Decided April 11, 1932
285 U.S. 434
1. Where the contract clause of the Federal Constitution is involved, this Court will determine for itself whether there be a contract the obligation of which is within the protection of that clause, and whether that obligation has been impaired, and, likewise, will determine for itself the meaning and application of state constitutional or statutory provisions said to create the contract or by which it is asserted an impairment has been effected. P. 285 U. S. 441.
2. One section of the California Constitution provided that directors of corporations should be liable to the creditors for all moneys embezzled or misappropriated by corporate officers. Another section reserved power to alter or repeal all existing or future laws concerning corporations. While creditors who contracted with a corporation, with these provisions in force, were suing to enforce their rights against a director for money misappropriated by the corporation's officers, the section making the director liable was repealed.
(1) The right to enforce the liability was part of the creditors' contracts, perfected and fully vested before the repeal, and was protected by the contract clause of the Constitution and by the due process clause of the Fourteenth Amendment. Pp. 285 U. S. 442, 285 U. S. 448.
(2) When the contracts were made, the Supreme Court of California had not decided that the repeal of a law creating such a contractual liability extinguishes the cause of action. P. 285 U. S. 445.
(3) The so-called reserved power of a state over corporations and their shareholders cannot be used to destroy the vested rights of third persons or to impair the obligations of their contracts. P. 285 U. S. 441.
213 Cal. 164, 1 P. 2d 992, 4 P. 2d 157, reversed.
Certiorari 284 U.S. 613, to review a decision dismiss ing an appeal in a suit to enforce a director's liability to creditors of a corporation.