Lagrone v. Brown , 166 La. 445 ( 1928 )

The opinion in this case, together with the one in Smalley v. Bernstein, completely emasculates Act 267 of 1914, known as the Corporation Act, not only with respect to the rights of the creditors of a corporation against the directors, but also as to the rights of the corporation itself against its directors.

In the Bernstein Case, while the opinion concedes that a right of action is vested in the creditors, it, nevertheless, holds that when the estate of the corporation is in the hands of a trustee in bankruptcy the latter cannot sue for the benefit of the creditors, nor can he sue for the corporation, because the act does not make the liability of the directors an asset of the corporation.

In order that I may make no mistake in construing the Bernstein opinion, I will quote therefrom the following:

"Whatever may have been the law prior to the adoption of this section [17], here the liability is expressly stated to be to the creditors. The liability is not said to be to the corporation also, nor is there anything in sections 18 and 19, or elsewhere in the act, justifying the conclusion that the cause of action is granted to any other than the creditors."

It never occurred to me before the opinions in the Bernstein Case and the present case that it required any statute to make an agent responsible to his principal for acts of dishonesty in the administration of the principal's affairs; in other words, I have never understood that, if an agent embezzled his principal's money which had been intrusted to him, the principal must show some special statute authorizing him to sue his agent before he can do so.

The directors of a corporation are but the agents of the corporation, and they are responsible to the corporation for their wrongful and mal-administration.

But this is not true now, since the corporation act limits the right of action to the creditors, and, when the corporation is placed in bankruptcy, the trustee cannot sue.

The opinion in the present case is made to rest primarily on the Bernstein Case, and, while it is said in the present case also that a right of action is vested in the creditors, the receiver cannot sue in behalf of the insolvent estate or for the benefit of the creditors, and this because the statute does not expressly declare that a receiver may sue for the benefit of the creditors.

So we find that neither the trustee in bankruptcy nor the receiver of the insolvent corporation can sue the directors for the causes set forth in the statute (and which are embraced in this suit and are about as grave and injurious to the corporation and its creditors as could be made), and this simply because the statute does not include in its terms an express authority to the corporation to sue.

It need hardly be said that, so long as the corporation is solvent, the creditors cannot sue the directors for acts of maladministration, nor can the creditors sue while the corporation is in the hands of the receiver, so long as such receiver has not expressed an unwillingness to sue.

I repeat, therefore, the statement made in the beginning that the two decisions under consideration have completely emasculated the corporation statute, and, if permitted to stand, neither the creditors nor the corporation can sue the directors, it matters not how much damage the wrongful and mal-administration of the affairs of the corporation by the directors may cause the corporation and its directors.

But, aside from what has been said in the very case now under consideration (Lagrone v. Brown, 161 La. 784, 109 So. 490), this court, with all the justices concurring, except the Chief Justice, who concurred only in the decree, held that section 17 of Act 267 of 1914 was broad enough to cover the acts charged against the directors in this case, and to make them liable in solido to the corporation and its stockholders and creditors.

There is no ambiguity in this language. There can be no mistake as to what the court decided.

But now in the same case, after that judgment has long since become final, and the property of the plaintiff, this court, following what had been said in the Bernstein Case, declares that the plaintiff, as receiver, has no cause of action and cannot sue on behalf of the corporation.

I have been led to believe that a final decision in a certain cause became the law of the case for all time to come, and that no court could thereafter reverse it to the prejudice of the party in whose favor it was rendered. But that appears now not to be true. The law of this case is the decision in the Bernstein Case, the parties to which have no interest whatever in the instant case.

I concede the power of the court to reverse itself and to overrule prior jurisprudence, either expressly or by ignoring altogether the prior jurisprudence, but what I do complain of, and what I do question is, not only the propriety, but the power, of the court to reverse a prior judgment rendered in the same case, between the same parties, and upon the same subject-matter, simply because such prior judgment happened not to conform to the ruling in another and subsequent case.

In the former judgment, we said that the statute gave the plaintiff the right to sue for the causes stated in the petition. That judgment became final and the property of the plaintiff.

But now, in the same case and between the same parties, the court sets that judgment aside and declares that the plaintiff has no cause of action under the statute. Thus the doctrine of the law of the case has been destroyed completely.

However, the evil has been committed and cannot now be remedied, but I desire to record my dissent so that the record may be kept straight so far as I am concerned.