
    Eversman v. The Ray Shipman Co. et al.
    
      Corporations — Articles cancelled for nonpayment of franchise tax — Section 5509, General Code — Contracts, mechanics’ liens and mortgages executed after cancellation but before reinstatement, valid — Section 5511, General Code — Priority over claims of general creditors existing before articles cancelled.
    
    A corporation organized under Ohio laws, and resident of this state on February 15, 1924, had been in default for a period of more than 90 days for annual report and payment of franchise tax, and on that date the secretary of state, by virtue of Section 5509, General Code, can-celled its articles of incorporation by entry upon the margin of the record thereof in his office, and immediately notified the corporation of the action taken by him. On that date the corporation was indebted to certain persons upon contracts executed prior thereto, and after that date, and within a period of two years thereafter, and before reinstatement of said corporation under Section 5511, General Code, said corporation entered into contracts for labor and materials which entered into buildings upon real estate of said corporation and executed mortgages in favor of persons lending money to said corporation: Held, that the transactions of the corporation after February 15, 1924, were not void and that mechanics’ liens obtained for labor and material thereafter furnished, and mortgages upon real estate executed by said corporation thereafter are valid liens, and entitled to payment prior to the claims of general creditors existing before February 15, 1924.
    (No. 19554
    Decided June 15, 1926.)
    Error to tlie Court of Appeals of Butler county.
    This cause originated in the court of common pleas of Butler county. The petition of Eversman was filed in August, 1924, for the appointment of a receiver and for the dissolution and distribution of assets of the Ray Shipman Company, an Ohio. corporation, organized for the purpose of buying, selling, and improving real estate. The issues which were tried in the court of common pleas were made up by the cross-petition of the Walker Contracting Company, asserting a mechanic’s lien, and of other defendants asserting mechanics’ liens and mortgages, and by the answer of Eversman to the cross-petitions. The pleadings show that on February 15, 1924, the corporation was in default for the reports and payment of franchise fees and taxes required to be made and paid by Sections 5495 to 5507, inclusive, General Code, and that on said February 15, 1924, by virtue of the authority conferred by Section 5509, General Code, the secretary of state cancelled the articles of incorporation by appropriate entry upon the margin of the record thereof in his office, and thereupon notified that corporation of the action taken by him. The pleadings further disclose that Eversman had a claim against the corporation which was contracted prior to February 15, 1924, and that all of the claims of lienholders were contracted after that date. The mechanic’s lien claimants furnished labor and materials under contracts dated subsequent to February 15, 1924, and all of such labor and material entered into buildings and improvements upon real estate owned by said corporation, and the defendants who assert mortgages loaned money which was used for the purpose of making said improvements, and those mortgages were also executed and delivered after February 15, 1924. All claims of lienholders were contracted within the period of two years after the cancellation of the articles of incorporation by the secretary of state. No proceedings have ever been filed in quo warranto by virtue of Section 5513, General Code. The pleadings make an issue of the effect of the action of the secretary of state in cancelling, the articles of incorporation and of the question whether the contention of Eversman is a collateral attack upon the right of the Ray Shipman Company to exercise corporate powers. The court of common pleas decreed priority in favor of the lien-holders, and, upon error prosecuted to the court of appeals, that judgment was affirmed. The cause has been admitted to this court upon motion to certify the record.
    
      Messrs. Roettinger £ Street, and Messrs. Andrews, Andrews £ Rogers, for plaintiff in error.
    
      Mr. J. Arthur Meyer, Messrs. Fitton £ Beeler, Messrs. Williams £ Sohngen, Mr. M. 0. Burns, Mr. Walton S. Bowers, Mr. C. F. Antenen, Mr. W. C. Shepherd, Messrs. Koehler £ Korner, Mr. John E. Neilan, Messrs. Shotts £ Millikin, and Messrs. Cobb, Howard £ Bailey, for defendants in error.
    
      Messrs. Booth, Keating, Pomerene £ Boulger, amici curiae.
    
   Marshall, C. J.

This case involves an interpretation of Sections 5509 to 5513, inclusive, General Code, which sections contain the following pertinent provisions:

Section 5509: “If a corporation * * * required by tbe provisions of this act, to file any report or returns or to pay any tax or fee, * * * fails or neglects to make any sucb report or return or to pay any such tax or fee for ninety days after the time prescribed in this act * * * the commission shall certify such fact to the secretary of state. The secretary of state shall thereupon cancel the articles of incorporation of any such corporation * * * by appropriate entry upon the margin of the record thereof # * *. Thereupon all the powers, privileges and franchises conferred upon such corporations, by such articles of incorporation * * * shall cease and determine. ’ ’

Section 5510: “Any person or persons who shall exercise, or attempt to exercise, any powers, privileges or franchises, under the articles of incorporation * * * after the same are cancelled, as provided in section one hundred and twenty [G-. C., Section 5509] of this act, shall be fined,” etc.

Section 5511: “Any corporation whose articles of incorporation * * * have been cancelled * * * upon the filing, within two years after such cancellation, with the secretary of state, of a certificate from the commission that it has complied with all the requirements of this act and paid all taxes, fees or penalties due from it, and upon the payment to the secretary of state of an additional penalty of one hundred dollars, shall be entitled again to exercise its rights, privileges and franchises in this state, and the secretary of state shall cancel the entry made by him * * * and shall issue his certificate entitling such corporation to exercise its rights, privileges and franchises.”

Section 5512: “In addition to all other remedies for the collection of any taxes or fees due, under the provisions of this act, the attorney general, shall, upon the request of the commission, whenever any taxes, fees or penalties due, under this act, * * * shall have remained unpaid for a period of ninety days, * * * apply to the common pleas court * * * for an injunction to restrain such public utility or corporation from the transaction of any business within this state, until the payment of such taxes or fees and penalties thereon. ’

Section 5513: “If any corporation fails or neglects to make and file the reports or returns, required by this act, or to pay the penalties provided in this act for failure to make and file such reports or returns, for a period of ninety days after the time prescribed in this act, the attorney general, on the request of the commission, shall commence an action in quo warranto * * * to forfeit and annul its privileges and franchises.”

All these sections must be construed in pari materia. It is claimed by the plaintiff that Section 5509 is self-executing, and that the action of the secretary of the state ipso facto terminates all power and authority of the corporation; that all of its acts thereafter, until reinstated, are absolutely void and of no effect. If the broad and sweeping language of Section 5509 should be taken' without reference to the other sections, it would' be difficult to answer that contention. When they are all read together, as parts of a single piece of legislation, and when the purpose of that legislation is taken into consideration, and when that enactment is construed in the light of the previous legislation on that subject, the language of Section 5509 must be held to have a different meaning. Section 5510 clearly .contemplates that the officers of such corporation may continue to exercise the forbidden powers, privileges, and franchises, and provides a penalty for such exercise. It may, therefore, be inferred that the Legislature recognized a measure of vitality in the corporation, and that it intended to penalize the continued exercise of powers which would be valid, though interfering with the primary purpose which the Legislature had in mind. Section 5511, in providing for reinstatement within a period of two years, further recognizes some vitality in the corporation, notwithstanding the action of the secretary of state, because within that period the payment of the fees and taxes and the filing of reports gives to the corporation the clear right to reinstatement, and reposes no discretion in the secretary of state to withhold a certificate of reinstatement. In law, as well as in nature, where the spark of life has entirely fled, there is no power short of the miraculous which can restore it. But, having placed in the power of the corporation itself the means and the instrumentality of reinstatement, the conclusion is irresistible that the Legislature did not intend that all powers of the corporation should cease and determine. In Section 5512 the evidence of the existence of life becomes still stronger, and the purpose of the Legislature in the opening sentence of that section becomes manifest. That section states that it is an additional power to those granted in the previous sections, and that it creates an additional remedy “for the collection of any taxes or fees due, under the provisions of this act.” By that section the services of the attorney general come to the aid of the secretary of state, to be employed for the purpose of assisting the secretary of state, and providing additional remedies. All the language of that lengthy section, with some repetition and prolixity, relates to the subject-matter of the collection of taxes and the procuring of reports of corporations. It is impossible to read those four sections concurrently without reaching the conclusion that the secretary of state and the attorney general are clothed •with the ministerial powers of enforcing the filing of returns and the collection of fees and taxes. Later, in the provisions of Section 5513, the Legislature turns to a different subject, and provides for a proceeding in quo warranto in a court of competent jurisdiction “to forfeit and annul its privileges and franchises.” It will be seen that in Section 5509 the secretary of state was given authority to “cancel” the articles of incorporation. In Section 5513 the attorney general is authorized to file quo warranto proceedings “to forfeit and annul its privileges and franchises. ’ ’ While the word “cancel” may be just as effective as the word “forfeit” or the word “annul,” if there is any shade of difference in the meaning, the latter words must be held to be more forceful, and certainly more final. All of these sections were enacted at the same time, and are found as different and successive sections of the act of the Legislature of May 31, 1911 (102 Ohio Laws, p. 224), and as parts of the Tax Commission Act. If the Legislature had intended to clothe the secretary of state with full power to finally cancel, forfeit, and annul corporate franchises, there was no occasion for the further enactment of Section 5513. Throughout Sections 5509 to 5512, inclusive, the language repeatedly refers to the collection of taxes and the filing of reports. In Section 5513 there is no mention of the processes of collecting taxes or filing reports, but in that section the final provision is made for forfeiting and annulling corporate privileges and franchises after the lapse of a certain period of time following the failure to file such reports or to pay such taxes and after the tax commission shall have requested such action on the part of the attorney general. The authority given to the secretary of state in Section 5509 appears for the first time in the Tax Commission Act, although the authority to the attorney general to bring an action in quo warranto was conferred on April 11, 1902. (95 Ohio Laws, p. 126.)

Counsel have referred to a number of early cases decided by this court which declared that corporate franchises could only be forfeited by the decree of a competent tribunal in a judicial proceeding instituted by the government for that purpose. All the cases cited in support of that principle were decided by this court prior to the enactment of Section 5509, and they can, therefore, throw no light upon the question of the power of the secretary of state, if the Legislature should see fit to attempt to confer such power upon that official.

It is not necessary in the instant case to determine whether the Legislature might confer upon the secretary of state the power to terminate the powers, privileges, and franchises of a corporation. It is sufficient to say that, when all these sections are construed together, the legislative intent is evident, and it becomes clear that it was not intended to confer that power upon the secretary of state further than to facilitate the filing of reports and the collection of fees and taxes. It is quite clear that after February 15, 1924, the attorney general might have brought a suit to enjoin further transactions on the part of the corporation, and might have brought criminal proceedings for the collection of penalties, and it is equally clear that by Section 5513 the final power to forfeit and annul corporate privileges and franchises was made to rest where it has always rested, in a court of competent jurisdiction, to be invoked by a proceeding in quo warranto.

This determination of the matter is in perfect harmony with the declarations of this court in Newburg Petroleum Co. v. Weare, 27 Ohio St., 343, and in American Soap Co. v. Bogue, 114 Ohio St., 149, 150 N. E., 743, and List v. Burley Tobacco Growers’ Co-operative Assn., 114 Ohio St., 361, 151 N. E., 471, both of which have been recently decided by this court, and which declare that corporate acts of foreign corporations within this state prior to registration, within the limitations permitted by the laws of this state, are not void. All of the sections under consideration in this case relate to reports, fees, and taxes of resident and nonresident corporations, placing both on the same basis. This court having repeatedly declared that the acts of foreign corporations not registered in Ohio are not void, by the same token the acts of resident corporations under the ban of cancellation, where there is admittedly some spark of life, must also be held to be not void. We have been referred to the decisions of other states, but we find that the statutes of the states where those decisions have been rendered are sufficiently different from the Ohio statutes to render those authorities noncontrolling.

The judgment of the Court of Appeals affirming the judgment of the court of common pleas will, therefore, be affirmed.

Judgment affirmed.

Jones, Matthias, Day, Allen, Kinkade and Robinson, JJ., concur.  