Gardner v. Rumsey

I am unable to agree with the opinion of the majority in so far as it holds that the Arkansas statute upon which this action is based is a penal statute in the international sense that a cause of action based thereon cannot be enforced in the courts of this state. In my judgment the maxim, to wit, "The courts of no country execute the penal laws of another," has no application to the statute in the case at bar. The difficulty is often encountered in recognizing the distinction between what are penal statutes within the international sense, and those that may be penal in their nature, in the sense that they are strictly construed and have the primary purpose of affording a private remedy to a person injured by the wrongful act of another. The distinction has been stated as follows:

"A statute is penal, within the rules of private international law, when it awards a penalty to the state or a public officer in its behalf, or to member of the public suing in the interest of the whole community to redress a public wrong."

In my judgment this principle of law has no application to statutes the primary purpose of which is to afford a private remedy to a person injured by a wrongful act of another, and especially when the recovery is simply compensatory for the damages sustained, and there is a natural connection between the damage sustained and the tort of the wrongdoer.

The leading case on the subject is Huntington v. Attrill,146 U.S. 657, 13 Sup. Ct. 224, 36 L.Ed. 1123, where it is said:

"It will be necessary, in the first place, to consider the true scope and meaning of the fundamental maxim of international law, stated by Chief Justice Marshall in the fewest possible words: 'The courts of no country execute the penal laws of another.' The Antelope, 10 Wheat. 66, 123 (6 L. Ed. 268). In interpreting this maxim, there is danger of being misled by the different shades of meaning allowed to the word 'penal' in our language. In the municipal law of England and America, the words 'penal' and 'penalty' have been used in various senses. Strictly and primarily, they denote punishment, whether corporal or pecuniary, imposed and enforced by the state, for a crime or offense against its laws. * * * But they are also commonly used as including any extraordinary liability to which the law subjects a wrongdoer in favor of the person wronged, not limited to the damages suffered. * * * The question of whether a statute of one state, which in some aspects may be called penal, is a penal law in the international sense, so that it cannot be enforced in the courts of another state, depends upon the question whether its purpose is to punish an offense against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act. * * * The provision of the statute of Now York, now in question, making the officers of a corporation, who sign and record a false certificate of the amount of its capital stock, liable for all of its debts, is in no sense a criminal or quasi criminal law. * * * As the statute imposes a burdensome liability on the officers for their wrongful act, it may well be considered penal, in the sense that it should be strictly construed. But as it gives a civil remedy, at the private suit of the creditor only, and measured by the amount of his debt, it is as to him clearly remedial. To maintain such a suit is not to administer a punishment imposed upon an offender against the state, but simply to enforce a private right secured under its laws to an individual. We can see no just ground, on principle, for holding such a statute to be a penal law, in the sense that it cannot be enforced in a foreign state or country."

The identical question was before the Supreme Court of Kansas in the case of Great Western Mach. Co. v. Smith, 124 P. 414. The court stated as follows:

"The rule that a penal statute will not be enforced outside the territorial jurisdiction of the Legislature enacting it applies only to such statutes as are entirely penal, their sole purpose being to inflict punishment for the violation of a law, for the public benefit, and not to those which are in part compensatory; the violator being required to make good to an individual a possible loss having some connection with his default."

In the body of the opinion, the court used the following language:

"Obviously the statute under consideration was enacted with an especial view to the protection of creditors. No other penalty was provided for the failure of a corporation to file an annual statement. While in a particular instance, a creditor might not have suffered actual loss from such failure, the absence of the statement might easily be the occasion of his granting credit or forbearing to sue. The statute makes the officer, who fails to give the creditor information to which he is entitled, a surety for the corporation. The creditor receives no more than the amount of his debt from one whose misconduct has a natural connection with his being the holder of a claim which he finds difficulty in enforcing against the principal."

The Supreme Court of Minnesota, in the case of Gulledge Brothers Lumber Co. v. Wenatchee Land Co., 142 N.W. 305, 46 L. R. A. (N. S.) 697, stated as follows:

"The question whether a statute of one state, which in some aspects may be called penal is a 'penal law' in the international sense, so that it cannot be enforced in the courts of another state, depends upon the question whether its purpose is to punish an offense against the public justice of the state, or to afford a private remedy to a person injured by the wrongful act."

The Court of Appeals of New York, in the case of Loucks v. Standard Oil Co., of N.Y., 120 N.E. 198, stated as follows:

"A statute is penal, within the rules of private international law, when it awards a penalty to the state or a public officer in its behalf, or to a member of the public suing in the interest of the whole community to redress a public wrong."

The Supreme Court of Vermont, in a very recent, case, Wellman v. Mead, 107 A. 396, stated as follows:

"The question of whether a statute of one state which in some aspects may be penal is a penal law in the international sense, so that it cannot be enforced in the courts of another state, depends on whether its purpose is to punish an offense against the public justice of the state, or whether it affords a private remedy to a person injured by the wrongful act."

The Supreme Court of Vermont, in the case of Parr v. Briggs Estate, 47 A. 793, stated as follows:

"Deceased was a director of a corporation for the negotiating of loans and the sale of promissory notes and other securities organized in another state under a statute providing that directors of a corporation creating debts in excess of its subscribed capital stock are liable in their individual and private capacity to the creditors of the corporation to the full amount of the debt contracted, in the event of the dissolution of the corporation. Debts and liabilities were contracted in excess of the capital stock subscribed, and the corporation dissolved. Plaintiff purchased notes from the corporation in his state, which the corporation guaranteed, but they were never paid. Held, that he could maintain an action thereon against the estate of deceased outside the state where the corporation was created, since, the statute creating the liability being contractual, and not penal, an action thereon could be brought in any state."

The Supreme Court of Arkansas, in the case of Nebraska Nat. Bank v. Walsh, 59 S.W. 952, stated as follows:

"Sand. H. Dig., secs. 1337, 1347, requiring the president and secretary of all corporations to make annual statements of the condition of the corporations, and making them personally liable for corporate debts where they neglect or refuse to make such statements, are not penal, but remedial, and are not within the statute requiring actions on penal statutes, where any part of the penalty goes to the state or county, to be brought within two years."

This case has been followed by the Supreme Court of Arkansas in the following cases: Hughes v. Kelly Bros., 129 S.W. 784; Taylor v. Dexter, 189 S.W. 1060; McDonald v. Mueler, 183 S.W. 751; and by the federal court in a case involving the Arkansas statute (Proctor Gamble Co. v. Warren, 180 Fed. 543).

The Supreme Court of the state of Colorado, in the case of Credit Men's Adjustment Co. v. Vickery, 161 P. 297, stated as follows:

"In some respects the statute is penal, while in others it is remedial in character; penal in its nature as to the directors for the purpose of determining their liability and to be strictly construed. When the liability is clearly shown, it is remedial in character as to creditors and to be liberally construed in its enforcement."

The Supreme Court of Mississippi, in the case of Louisville N. R. Co. v. McCaskell, 53 So. 348, stated as follows:

"The rule that the criminal and penal laws of one state will not be enforced by the courts of another state, because such laws have no extraterritorial effect, applies only where the purpose is to punish an offense against the public justice, and does not apply where the purpose is to afford a private remedy to one injured by wrongful act; and hence punitive damages may be awarded by the courts of one state for a wrong done in another state."

The Supreme Court of New Hampshire, in the case of Hill v. Boston M. R. Co., 89 A. 482, stated the rule in the fifth, sixth, and seventh paragraphs of the syllabus as follows:

"5. Where the controlling purpose of a statute is to impose a punishment for violating its provisions it will not be enforced a foreign jurisdiction.

"6. It is for the courts of the forum to determine whether a statute is penal in its nature so as to prevent its enforcement in a foreign jurisdiction, or whether it merely provides for the enforcement of private statutory rights of a transitory nature.

"7. A statute may be deemed penal in one aspect and remedial in another, within the rule against enforcing foreign penal statutes, and the fact that the public is incidentally protected by the enforcement of a statute is not conclusive in determining whether it is penal or remedial within such rule."

While the identical question was not involved, yet in defining what was strictly a penal statute, this court, quoting from Words and Phrases, page 5269, in the case of Smith v. Colson, 31 Okla. 703, 123 P. 149, stated:

" 'Penal Laws' are those imposing punishment for an offense against the state, and which, by the American and English Constitutions, the executive of the state has the power to pardon."

This portion of the opinion was cited with approval in the case of St. Louis S. F. R. Co. v. Steele, 37 Okla. 536,133 P. 209.

The rule announced in 21 R. C. L., page 225, is as follows:

"The test whether a law is penal, in the strict and primary" sense, is whether the wrong sought to be redressed is a wrong to the public, or a wrong to the individual. And a distinction has been made between statutes which are entirely penal, their sole purpose being to punish a violation of the law for the public benefit, and those which are in part compensatory, the violator being required to make good to an individual a possible loss having some connection with his default. It is universally held that statutes of the former character can be executed only by the sovereignty enacting them. But by the weight of later authority, and by the better reason, actions may be maintained anywhere to enforce the liability to an individual, created by statutes of the latter kind."

The only recent case that I have been able to find holding to the contrary is the case of Commercial National Bank v. Kirk (Pa.) 71 A. 1005; the Supreme Court of Pennsylvania, basing its opinion on the fact that the Montana Supreme Court had construed the statute to be penal, and stating it would accept that construction of the statute, and the action, being founded upon a penal statute, could not be enforced in the state of Pennsylvania. With due respect to said court, it is very evident that the court failed to recognize the distinction pointed out by the Supreme Court of the United States in the case of Huntington v. Attrill, supra, where the court used the following language:

"As the statute imposes a burdensome liability on the officer for their wrongful act, it may well be considered penal, in the sense that it should be strictly construed."

An examination of the decisions of Montana discloses that court had only construed the statute to be penal in the sense that the statute should be strictly construed, but the Pennsylvania court accepted the construction placed upon the statute by the Montana courts for all purposes. In my opinion, the majority opinion of this court fails to recognize this distinction. An examination of the cases cited in the majority opinion discloses that the question involved in most of these cases was whether the statute was penal, in the sense that it should be strictly construed.

In the case of Merchants' Bank of New Haven v. Bliss,35 N.Y. 412, relied upon, the only question involved was the statute of limitations, and the syllabus in the case is as follows:

"The limitation of three years runs against an action for the penalty imposed upon the trustees of a manufacturing company for neglecting to file and publish an annual report; it is a suit for the benefit of party aggrieved."

In the case of Irvine v. McKeon, 23 Cal. 472, the question involved was simply whether the statute should be strictly construed, and no other question was considered by the court.

In the case of Bovee v. Boyle, 136 P. 467, by the Court of Appeals of Colorado, the question involved was whether the statute should be strictly construed. In the later case of Credit Men's Adjustment Co. v. Vickers, supra, the Supreme Court of Colorado cited with approval the case of Huntington v. Attrill, supra, and used the language quoted heretofore.

The case of Blaine v. Curtis (Vt.) 7 A. 708, is also cited. That case was founded upon a usury statute which permitted a recovery of three times the amount of interest paid, and while there is a distinction between that kind and character of statutes and one that permits only the recovery of the actual damage sustained, the Supreme Court of Vermont, in the late case of Wellman v. Mead, supra, after citing the case of Blaine v. Curtis, supra, and other cases, used the following language:

"The evident tendency of modern decisions is toward a broader comity in the enforcement of rights created by the Legislatures of sister states"

— and the court followed the Huntington v. Attrill Case.

The case of Carnahan v. Western Union Tel. Co., 89 Ind. 526, 46 Am. Rep. 175, while it announced the general rule that a state will not enforce the penal laws of another state, yet this case was distinguished by the Supreme Court of Indiana in the case of Burns v. Grand Rapids I. R. Co., 15 N.E. 230, and the rule modified to a certain extent.

In regard to the Oklahoma cases cited to support the contention of the majority: In Rogers v. Bonnett, 2 Okla. 553,37 P. 1078, the portion of the opinion in so far as it deals with this question was simply dictum, and the syllabus in the case does not even mention the proposition discussed in the body of the opinion. This case can easily be distinguished, for the reason it was discussing the question of whether the statute was penal in the sense that joint tort-feasors would be liable for contribution.

The next case is Mohr v. Sands, 44 Okla. 330, 133 P. 238. The court simply announced the broad principle which is stated as follows:

"It is well settled that the courts of one state will not enforce the penalty prescribed by the laws of another state."

To support this contention, the court cited the case of The Antelope, 6 L.Ed. 268, but did not mention the fact that the Supreme Court of the United States, in the later case of Huntington v. Attrill, supra, stated this maxim was too broad, and would no doubt be misleading in determining what was strictly penal statutes in the international sense construed. The court also cited the case of Wisconsin v. Pelican Ins. Co., 32 L.Ed. 239. This case was an action on behalf of the state to collect a penalty for the use and benefit of the state, and comes squarely within the class of cases announced in the case of Huntington v. Attrill, as being a penal statute. The case of Mohr v. Sands, supra, can easily be distinguished from the case at bar for the reason the statute involved in that case was imposing liability of three times the amount of actual damages sustained. It is unnecessary to determine whether the courts of this state would refuse to enforce such a statute, but if so, it should be on the theory that the law is against the public policy of the state, and not upon the theory that it is a penal statute. The statute under consideration does not permit the recovery of damages in excess of the creditor's debt or the damages that he has actually sustained. Whether this court would permit a statute to be enforced which imposes a liability of three times the amount of the creditor's claim or three times the damages actually sustained, is not before us for consideration, and it is unnecessary for us to determine that question.

In the case of Holt v. Aetna Bldg. Loan Ags'n,78 Okla. 307, 190 P. 872, this court was dealing with the question whether the statute should be strictly construed, and the court stated as follows:

"Such statutes must be strictly construed. Before one can recover the penalty therein imposed, he must state specifically every fact to bring him strictly within all their terms."

This case is not in conflict with the principle of law announced by the Supreme Court of the United States in the Huntington v. Attrill Case, but is in accord with the principle announced as being a statute penal in the sense that it should be strictly construed.

In the case of Breting v. Lindauer, 37 Mich. 217, the question involved was whether that statute was penal in the sense that the repeal of the statute in Michigan released the directors who intentionally neglected to file a report required by statute. The statute in Michigan, in addition to imposing a liability upon the director, made the intentional neglect to file the report a misdemeanor and subjected him to a fine.

The case of Wright v. Bartlett, 43 N.H. 548, is cited as supporting this contention. The Supreme Court of New Hampshire, however, in the later case of Hill v. Boston M. R.,89 A. 482, quotes with approval and follows the Huntington v. Attrill Case, supra. The case of Barnes v. Whitaker, 22 Ill. 606, is also cited. The question involved in that case was the collection of a penalty for usury; a certain per cent. of the penalty was to go to the common school fund of the state of Iowa. That fact would take it out of the class of statutes the purpose of which was to afford a private remedy to a person injured by a wrongful act. The statute in that case was to punish an offense against the laws of the state of Iowa, and the redress was not compensation to a private individual, but a portion of the compensation belonged to the state of Iowa. This case comes squarely within the rule announced in the case of State of Wisconsin v. Pelican Ins. Co., 32 L.Ed. 239.

The suit in the instant case is founded upon the statute of Arkansas which provides that if the directors fail to file a certificate they become liable to the creditors for the amount of the creditors' debt. This, in my judgment, is simply a remedial statute, and provides a remedy in favor of the creditor against the individual for his wrongful act and limits his recovery to the amount of his debt. As was said in the Kansas Case, supra, in substance:

"The statute makes the officer who makes a false certificate which the law imposes upon him to file, a surety for the corporation. The creditor receives no more than the amount of his debt, from one whose misconduct has a natural connection with his being the holder of a claim which he is unable to enforce against the principal."

It is my opinion that the decisions relied upon by the majority are not applicable to the facts in this case, nor do the authorities support the law as announced by the majority opinion, and they are clearly against the weight of authority of modern decisions.

For the reasons stated, I dissent. I am authorized to announce JOHNSON and NICHOLSON, JJ., concurring.