Continental Supply Co. v. Abell

ON MOTION for REHEARING. (Opinion filed July 25, 1933.) On motion for rehearing the contention is made by defendants[7, 8] that the opinion of the court in this case, if permitted to stand, should be given application to future transactions only and should not control this case. This contention is grounded on the doctrine of stare decisis. They rely upon the rule stated in 15 C.J. 916, as follows: "It is a well-established rule that, where a principle of law has become settled by a series of decisions, it is binding on the courts and should be followed. This rule, which is usually known and referred to as the rule of stare decisis, is founded largely upon considerations of expediency, it being indispensable to the due administration of justice, especially by a court of last resort, that a question once deliberately examined and decided should be considered as settled and closed to future argument." And on page 945, as follows: "Where the statute which has been construed by the courts is subsequently re-enacted, this amounts to a legislative adoption of the construction placed upon the statute, and such construction cannot thereafter be changed."

Briefly summarized, defendants' claim is that under the rule announced in Continental Oil Co. v. Montana Concrete Co.,63 Mont. 223, 207 P. 116, First Nat. Bank v. Cosier, 66 Mont. 352,213 P. 442, 443, and First Nat. Bank v. Barto,72 Mont. 437, 223 P. 963, they were entitled to prevail in this action; that by now overruling those decisions and announcing a different rule, it should be held to apply only to future cases under the principles announced in Montana Horse Products Co. v.Great Northern R. Co., 91 Mont. 194, 7 P.2d 919, affirmed in Great Northern Ry. Co. v. Sunburst Oil Ref. Co.,287 U.S. 358, 53 Sup. Ct. 145, 77 L. Ed. 360.

The contention is resisted by plaintiff on the ground that the prior cases did not consider the effect of sections 93, 6012 and 6013, Revised Codes 1921, and hence that, since these sections are the controlling point here, the former cases cannot be treated as stare decisis. Plaintiff's position cannot be sustained. The point decided by the prior cases was that where there was an amendment of the statute fixing the liability and a general repealing clause without any reservation of the right to maintain an action which had previously accrued under the Act which was thus repealed, it must be considered as if the liability never existed. The fact that these sections of the statute, which had a material bearing upon the point considered, were not called to the attention of the court, does not affect the question we are considering. In the case of Doney v.Northern P. R. Co., 60 Mont. 209, 199 P. 432, certain statutes were not given proper consideration, and this gave rise to the different conclusion in the Montana Horse Products Case. Under the prior decisions the precise point whether the repealing clause of an amendatory statute without any saving clause extinguished the liability was decided differently from the case here presented. Thus in First Nat. Bank v.Barto, supra, the liability arose on March 6, 1917. The statute then in force required the report to be filed by January 20 of each year. The defendants contended that for failure to file the report on or before January 20, 1919, the directors were then liable, and that the cause of action was barred by the statute of limitations. But the court held that Chapter 189, Laws of 1919, amending the prior statute and repealing all Acts and parts of Acts in conflict with it, without a saving clause, deprived the creditors of the right to enforce the directors' liability under the prior statute.

That case was on a parallel with this, in principle. There the amending statute did not take effect until March 10, 1919. Until that time Chapter 140, Laws of 1909, controlled, requiring the statement to be filed on or before January 20, 1919. For default there was liability for all debts then existing. Thus, on January 20, 1919, defendants in that action were in default under an existing statute and were liable for the debt sued upon. But the court held that the statute which took effect nearly two months later took away the right to enforce the liability "except as to proceedings past and closed." The court held that after March 10, 1919, plaintiff could not have asserted any rights arising under the prior statutes of 1909.

The Cosier Case was also the same in principle as this. There the indebtedness was created on April 20, 1918. The law up to March 10, 1919, required a statement to be filed on or before January 20, 1919. The statement was not filed. In that case the court, after referring to the Continental Oil Co. Case with approval, said: "Applying these established rules to the case under consideration it is apparent that the Act of March 10, 1919, deprived plaintiff of any right it might have had to proceed against the defendants to enforce their liability as directors under the previously existing statute, and that the Lohmiller Mortgage Loan Company was not in default under the 1919 Act when this action was begun on July 29, 1919, since it had until March 1, 1920, in which to file a report, and therefore there was no existing liability on the part of the defendants." Thus the court viewed the sufficiency of the complaint from the standpoint of the law as it existed when the action was commenced.

This action was not commenced until long after the effective date of Chapter 5, Laws of 1927. Under the prior decisions of this court defendants could not have been held liable, for the cause of action accrued under prior laws repealed by Chapter 5, Laws of 1927. It is of no importance that for the interim between March 1, 1927, and July 1, 1927, defendants were in default under the law then in force. That was the situation in the prior cases.

Under the prior decisions of this court, on July 1, 1927, the remedy for enforcing a liability incurred under the prior statute was taken away "except as to proceedings past and closed." Here the debt for which defendants are sought to be held was incurred between May 9 and September 17, 1927. Defendants at the time this debt was contracted had the right to rely upon the prior decisions of this court. They were warranted in assuming that if they were not proceeded against and judgment obtained against them prior to July 1, 1927, the remedy against them would be taken away by Chapter 5, Laws of 1927, which was passed in February, 1927, but which was not to become effective until July 1 of that year; and as to such part of the debt as was incurred after July 1, under prior decisions they could not be held liable because they were not then in default under any law.

Plaintiff is not injured by holding that the principles of law announced in the main opinion in this case shall be applicable only from and after its promulgation. It cannot complain that it is not given an advantage not existing under the law at the time the debt was incurred. At the time it extended credit to the Abell Oil Company, it knew, or will be held to have had knowledge, that under the prior decisions of this court, July 1, 1927, marked the end of its unenforced remedies against the directors.

The rule that a judicial interpretation of a statute becomes a part of the statute itself, so far as contract and property rights are concerned, and that changes in judicial interpretation should not be given retroactive effect, has received judicial sanction by many courts. (Douglass v. Pike County,101 U.S. 677, 25 L. Ed. 968; 7 R.C.L. 1010; Bagby v. Martin,118 Okla. 244, 247 P. 404; Hoven v. McCarthy Bros., 163 Minn. 339,204 N.W. 29; and see 37 Harvard Law Review, at p. 424.) And it has been held to apply as well to questions of procedure affecting property rights (Norton v. Crescent City Ice Mfg.Co., (La.App.) 146 So. 753; State v. Haid, 327 Mo. 567,38 S.W.2d 44; Kelley v. Rhoads, 7 Wyo. 237, 51 P. 593, 75 Am. St. Rep. 904, 39 L.R.A. 594), to a criminal case (State v.Bell, 136 N.C. 674, 49 S.E. 163), and to a penalty (People v.Tompkins, 186 N.Y. 413, 79 N.E. 326, 12 L.R.A. (n.s.) 1081). "A change in the judicial view of the law by a subsequent decision could not amount to more than a change in the law by legislation," and, of course, could act prospectively only. (Inre Knowles' Estate, 295 Pa. 571, 145 A. 797, 63 A.L.R. 1086;Klocke v. Klocke, 276 Mo. 572, 208 S.W. 825; and see 7 R.C.L. 1010, note 20, and cases there cited.)

It is unnecessary that it be shown that reliance was actually[9] placed by defendants upon the former decisions. Reliance thereon will be presumed. (Bank of Philadelphia v. Posey,130 Miss. 825, 95 So. 134.)

Under the doctrine announced in Montana Horse Products Co. v. Great Northern R. Co., supra, the last paragraph of the opinion by Mr. Justice Matthews should be changed so that the judgment appealed from will stand affirmed. It is so ordered.

The motion for rehearing having served its purpose is denied.