Brown v. Clow

• Decision Date: 19 February 1902
• Docket Number: 19,317
• Citation: 62 N.E. 1006,158 Ind. 403
• Parties: Brown et al. v. Clow et al
• Court: Indiana Supreme Court

62 N.E. 1006

158 Ind. 403

Brown et al. v. Clow et al

No. 19,317

Supreme Court of Indiana

February 19, 1902

Rehearing Denied April 25, 1902.

From Clinton Circuit Court; J. V. Kent, Judge.

Action by James B. Clow and others against John S. Brown and others directors of a corporation to enforce a personal liability against defendants as such directors under the provisions of the statute. From a judgment for plaintiffs, defendants appeal.

Judgment affirmed against all of the defendants except E. B Martindale, and reversed as to him.

B. Crane, A. B. Anderson, H. Taylor and C. Martindale, for appellants.

P. S. Kennedy and S. C. Kennedy, for appellees.

OPINION

Dowling, J.

This was an action to charge the directors of a company, organized under the general law for the incorporation of manufacturing companies, with a statutory liability on account of alleged violations of the said act. The case is here for the third time. Clow v. Brown, 134 Ind. 287, 33 N.E. 1126; Clow v. Brown, 150 Ind. 185, 48 N.E. 1034. See, also, Bruner v. Brown, 139 Ind. 600, 38 N.E. 318.

The complaint is in five paragraphs, designated as amended first, third, fourth, fifth, and sixth paragraphs. Issues were formed, and the cause was submitted to the court for trial. At the request of the parties a special finding was made, with conclusions of law thereon. The defendants separately excepted to each conclusion, and afterwards moved for judgment in their favor on the finding. This motion was overruled, as was also a motion for a new trial. Judgment was thereupon rendered for the plaintiffs below, and the defendants appealed. The rulings complained of are the decisions upon the demurrers to the answers of the defendants; upon the conclusions of law; the motion for judgment for the defendants on the findings; and on the motion for a new trial.

The first paragraph of the complaint, as amended, so far as it is necessary to consider the same, alleges a violation of §§ 5060, 5076 Burns 1901, 1 R. S. 1852, § 8, p. 359, Acts 1863, p. 48, § 2, which require that the capital stock, as fixed by the company, shall be paid into the treasury within eighteen months from the incorporation of the same, and declares the directors jointly and severally liable in an action founded on the said statute for all debts contracted after any violation of the provisions of the said act whereby such company was rendered insolvent. It states that the capital stock was fixed at $ 200,000, but that, with the exception of $ 3,000, it was never subscribed for or paid in; that the company executed a mortgage on its contemplated plant and franchises to secure its bonds to the amount of $ 150,000; that it made a contract with the firm of Comegys & Lewis to build its works in consideration of the delivery and issue to them of all of said bonds and $ 197,000 of said capital stock; that the said bonds were not, in fact, delivered to said firm, but were pledged by the company, and that the money realized upon them was paid to said contractors, and the said stock was delivered to said firm as a gratuity. The amendment of this paragraph did not, as we think, change the original cause of action, but the additional averments were but an amplification of the grounds of complaint set forth in the original paragraph.

The third paragraph of the complaint is similar to the first, and avers that no money whatever was collected by said corporation and put into the treasury thereof, and that the company never had any money capital or resources.

The fourth paragraph of the complaint is founded upon §§ 5071, 5072, 5073 Burns 1901, 1 R. S. 1852, p. 360, § 13, Acts 1869, p. 89, §§ 1, 2. It avers that the appellants were directors at the time the annual reports required by the statute should have been published, that the appellants failed to publish such reports, and that the appellees were thereby misled, deceived, and damaged.

The fifth and sixth paragraphs of the complaint did not differ materially from the first and third, and sought to charge the appellants with the debt due to the appellees as the consequence of their violation of the provisions of the statute, whereby the corporation was rendered insolvent.

The appellant Martindale answered in twenty-nine paragraphs, the first being a denial of the whole complaint. The succeeding twenty-one paragraphs set up the statute of limitations of two and six years. The twenty-third paragraph specifically denied that Martindale was a stockholder or director of the company at the time of the alleged violations of the statute. The twenty-fourth paragraph of the answer, which is directed to the first, third, fifth, and sixth paragraphs of the complaint, is a plea of a former adjudication. The twenty-fifth paragraph of the answer alleges that the appellants Martindale and Brown and one Pierce, since deceased, each subscribed for $ 1,000 of the capital stock of the company, and paid for the same by the transfer to the company of a franchise and contract to supply the city of Crawfordsville, Indiana, with water, said franchise and contract being worth $ 4,000; that the company, on April 13, 1886, made a written contract with the firm of Comegys & Lewis, of New York, to construct said water-works, and operate them for one year, and that as the sole and entire consideration therefor the company issued and delivered to Comegys & Lewis $ 150,000 of its first mortgage bonds and $ 197,000 of its capital stock, which stock had never been subscribed or issued for any other purpose; that the appellant Martindale never received nor converted to his own use any money or property of the company; that no agreement was made by which any of the directors of said company were to receive or did receive, directly or indirectly, any interest in, or portion of, or benefit from, the said bonds and stock so issued to Comegys & Lewis; that the capital stock was paid for in good faith, and into the treasury of the company, within eighteen months after the incorporation of the said company; and that all of the acts of the said company were done in good faith, and that none of the transactions thereof was fraudulent, simulated, fictitious, or pretended. The twenty-sixth paragraph of the answer of the appellant Martindale sets up the statute of limitations of two years to the amended first paragraph of the complaint, and avers that the cause of action in said first paragraph is different from that contained in the original complaint. The twenty-seventh paragraph of appellant Martindale's answer sets up the limitation of six years to said amended first paragraph of the complaint, and alleges that the cause of action therein differs from that contained in the original complaint. The twenty-eighth paragraph of Martindale's answer to the fourth paragraph of the complaint, as amended, is a plea of a former adjudication as to the transfer of Martindale's stock and his resignation as a director before the alleged violations of the statute by the directors of the company. The twenty-ninth paragraph of Martindale's answer goes to the entire complaint, and is also a defense of a former adjudication upon the questions of Martindale's transfer of his stock, and his resignation of his position as a director. The appellant Brown filed a separate answer to the first, third, fifth, and sixth paragraphs of the complaint, alleging a former adjudication of the questions presented by said paragraphs. Brown also filed a separate partial answer to the fourth paragraph of the complaint, setting out in great detail the facts which were supposed to show a former adjudication of the questions of the liability of said Brown for his stock subscription of $ 1,000. Brown and Pierce filed a joint answer to the first paragraph of the complaint, the first paragraph of said answer being a denial. The remaining paragraphs of the joint answer were similar to those filed by Martindale. The death of the defendant Pierce having been suggested, one Taylor, as the administrator of his estate was substituted as a defendant to the action. Taylor, as such administrator, entered a special appearance, and filed pleas in abatement of the first, third, fourth, fifth, and sixth paragraphs of the complaint on the ground that the action was to recover a statutory liability, and that it abated on the death of the defendant Pierce, and could not be revived. Taylor, as such administrator, moved to dismiss the first, third, fifth, and sixth paragraphs of the complaint, as to Pierce. A like motion was subsequently made as to the fourth paragraph of the complaint. Said administrator next filed his answer in denial of the whole complaint, with a further paragraph adopting as his own the affirmative answers filed by his decedent.

Demurrers were sustained to the fourth, eighth, sixteenth twenty-fourth, twenty-fifth, and twenty-eighth paragraphs of Martindale's answer; also to Brown's separate answer to the first, third, fifth, and sixth paragraphs of complaint; also to Brown's and Pierce's joint paragraph number ten of their answer to the fourth paragraph of the amended complaint, and to the twelfth paragraph of their answer to the fourth paragraph of the complaint; also to the twenty-third paragraph of their joint answer to the first, third, fifth, and sixth paragraphs of the complaint; also to the twenty-fifth paragraph of their joint answer to the fourth paragraph of the complaint. A demurrer to Brown's separate partial answer to the fourth paragraph of the complaint was sustained. A demurrer to the pleas in abatement filed by Taylor, administrator of Pierce, was sustained. The motions of Taylor, administrator, to dismiss the first, third, fourth, fifth, and sixth paragraphs of the complaint were overruled. The plaintiffs below...