Christian v. Gates Rubber Co. Sales Division, Inc.

• Decision Date: 08 September 1969
• Docket Number: No. 1,No. 1068A177,1068A177,1
• Citation: 145 Ind.App. 229,250 N.E.2d 486
• Parties: Elsie F. CHRISTIAN, Appellant, v. The GATES RUBBER COMPANY SALES DIVISION, INC., Christian Tire Company, Inc., and Roy Lowry, Appellees
• Court: Indiana Appellate Court

Page 486

250 N.E.2d 486

145 Ind.App. 229

Elsie F. CHRISTIAN, Appellant, v. The GATES RUBBER COMPANY SALES DIVISION, INC., Christian Tire Company, Inc., and Roy Lowry, Appellees.

No. 1068A177.

Appellate Court of Indiana, Division No. 1.

Sept. 8, 1969.

Rehearing Denied Oct. 8, 1969.

Raymond W. Gray, Jr., Indianapolis, for appellant, Barnes, Hickam, Pantzer & Boyd, Indianapolis, of counsel.

McDonald & McDonald, Princeton, for appellees.

LOWDERMILK, Presiding Justice.

This was an action commenced by plaintiff-appellee, The Gates Rubber Company Sales Division, Inc., against Christian Tire Company, Inc. and Roy Lowry and Elsie F. Christian individually for the recovery of $32,012.22 for merchandise sold by appellee Gates, pursuant to warehousing agreements executed by Christian Tire Company, Inc. and Roy Lowry as Treasurer of said corporation on February 20, 1957, and March 31, 1959, respectively. The complaint also asks the court to set aside the chattel mortgage on the merchandise of Christian Tire Company, Inc. which was executed in favor of the appellant, Elsie F. Christian, on the grounds of fraud and an alleged conspiracy to defeat the rights of appellee, Gates, as a general creditor of Christian Tire Company, Inc.

Trial was had by jury, which returned a verdict in favor of Roy Lowry and against Christian Tire Company, Inc. in the amount of $16,500 and Elsie F. Christian in the amount of $15,500. Elsie F. Christian then filed her motion for a new trial, which motion was overuled, and this appeal followed.

The appellant assigns as error the overruling of the motion for new trial and argues that:

(1) The court erred in giving, over the objections of the appellant, appellee's tendered Instructions No. 6 and 9;

(2) Error was committed as to the forms of the verdict submitted;

(3) The verdict is contrary to law, and

(4) Error was committed in assessing damages.

The basic controversy in this case and issues presented were:

1. Whether and to what extent appellee Christian Tire was indebted to appellee Gates as of August 10, 1961; and if such an indebtedness did exist.

2. Whether a chattel mortgage given to appellant, on November 23, 1960, on the property of the appellee Christian Tire had been executed in fraud of the rights of appellee Gates as a creditor of appellee Christian Tire and should, therefore, be set aside.

3. Whether appellant and appellee Lowry, as directors of appellee Christian Tire, had on November 23, 1960, made a distribution of the assets of that corporation to shareholders or a loan thereof to an officer or director, so as to render them personally liable for the alleged corporate indebtedness sued upon--to the extent of such distribution and/or loan, if any.

Appellee Gates filed its motion to dismiss, or in the alternative, to affirm the judgment of the trial court on the ground that the summary of the evidence as set out in appellant's brief does not comply with Rule 2--17(e) of the Rules of the Supreme Court, 1967 Revision.

The pertinent part of Rule 2--17(e), supra, is as follows:

'It shall be unnecessary to set out the entire record or the bill of exceptions with the evidence in the brief in a separate section thereof. In lieu thereof, the appellant shall set forth a summary of the evidence and the record which he believes to be pertinent to the issues involved in the initial portion of the argument section of the brief, with specific reference to the line and page in the transcript where such evidence may be found or the pleadings or other paper may be found.' (Our emphasis.)

Appellant's brief has, in our opinion, been prepared in compliance with Rule 2--17(e), and we, therefore, now deny appellee's motion to dismiss.

Although we are of the opinion that appellant's brief complies with said Rule 2--17(e), it was necessary for appellee to make additions and supplementations in appellee's brief, pointing out with specific citations in the transcript and line any corrections or additions.

We shall next discuss appellant's assignment of errors.

Appellee's tendered Instruction No. 6 reads in the words and figures as follows, to-wit:

'You are instructed that at all times mentioned in the plaintiff's complaint, there was a statute in force in the State of Indiana, which was binding upon the defendants Elsie F. Christian and Roy Lowry, which reads in pertinent part as follows:

'The directors of a corporation shall jointly and severally be liable for the debts and contracts of the corporation in the following cases;

'(1) For knowingly and willfully * * * assenting to the withdrawal or distribution to stockholders of the assets of the corporation if the corporation is, or is thereby rendered, insolvent or its capital is thereby impaired, in an amount equal to such * * * withdrawal or distribution.

'(2) For knowingly and willfully making or assenting to a loan to an officer or director, to the extent of the debts contracted between the time of making or assenting to such loan and the time of its repayment, in an amount equal to such loan.

'Unless a director was absent from the meeting at which such * * * withdrawal or distribution was declared or loan made, or unless his dissent therefrom shall be filed in writing with the secretary of the company, he shall be conclusively presumed to have assented thereto.'

'You are further instructed that if you find a preponderance of the evidence that the defendants, Elsie F. Christian and Roy Lowry, were directors of the Christian Tire Company, Inc., on November 23, 1960, and if you further find by a preponderance of the evidence that said directors knowingly and willfully made a distribution of the assets of the corporation thereby rendering it insolvent or made a loan of any assets of the corporation, then in such event, if any, the directors of said corporation may be held liable under this statute.'

Appellant's written objections to appellee's tendered Instruction No. 6 is in the words and figures as follows, to-wit:

'The defendant, Elsie F. Christian, objects to the giving of plaintiff's tendered instruction No. 6 which the Court has indicated it would give to the jury for the reason that the instruction is confusing and misleading as to the defendant, Elsie F. Christian, because it does not specify what parts, if any, of the statute therein contained may be applicable to Elsie F. Christian; and for the further reason that numbered paragraph (2) of said statute is wholly inapplicable to any issue raised by the pleadings in this cause and is wholly inapplicable to the defendant, Elsie F. Christian, for the reason that there is no evidence whatever that any loan was ever made by the corporation to Elsie F. Christian. Likewise, there is no evidence under numbered paragraph (1) of the statute that there was ever any withdrawal or distribution to Elsie F. Christian as a stockholder of Christian Tire Company, Inc. of any of said corporation's assets. To the contrary, all of the evidence shows that any and all payments by way of money, property or encumbrances were made at a time when Elsie F. Christian was not a stockholder in the corporation. This instruction is further misleading and confusing in that although the statute clearly states that numbered paragraph (2) thereof pertains only to loans to officers or directors of the corporation, the instruction insofar as the same reads as follows:

'and if you further find by a preponderance of the evidence that said directors knowingly and willfully made a distribution of the assets of the corporation thereby rendering it insolvent or made a loan of any assets of the corporation, then in such event, if any, the directors of said corporation may be held liable under this statute.'

does not purport to apply only to distributions to stockholders or loans to officers, but loans or distributions generally, thus making said instruction confusing and making the same an incorrect and inconsistent statement of the law.'

Appellee's tendered Instruction No. 9 reads in the words and figures as follows, to-wit:

'You are instructed that at all times mentioned there was in force a statute in the State of Indiana and binding on the defendants which provided as follows:

'No corporation shall make any advancement on account of services to be performed in the future or shall make any loan of money or property to any officer or director of the corporation."

Appellant's written objections to appellee's tendered Instruction No. 9 is in the words and figures as follows, to-wit:

'The denfendant, Elsie F. Christian, objects to the giving of plaintiff's tendered instruction No. 9, which the Court has indicated it will give to the jury for the reason that said instruction is wholly beyond the issues presented by the pleadings in the case and does not apply under any evidence whatever to the defendant Elsie F. Christian and as to the said Elsie F. Christian, said instruction is confusing and misleading in that its application is not restricted to the defendant Roy Lowry. The only evidence in this cause by which any loans to any officers of any corporation might be inferred pertain to payments made by the corporation for the benefit of Roy G. Lowry in payment of his indebtedness; further, this instruction is confusing and misleading in that the Amended Complaint in this cause does not seek to recover any loan of money or property made to an officer or director of Christian Tire Co., Inc.'

After examining the transcript and the briefs of the parties we are of the opinion that the appellant, Elsie F. Christian, unloaded her stock in the corporation to the secretary-treasurer thereof, namely, Roy Lowry, for a substantial consideration, knowing full well at the time of her resignation the corporation was insolvent.

Appellee's Instructions No. 6 and 9, in our opinion, properly instruct the jury as to liability of directors of a corporation for the doing of particular acts, such as loans, transfers or advancements...