Clough v. Otis

• Citation: 25 Colo. 520,55 P. 809
• Parties: CLOUGH et al. v. OTIS.
• Decision Date: 19 December 1898
• Court: Supreme Court of Colorado

55 P. 809

25 Colo. 520

CLOUGH et al. v. OTIS.

Supreme Court of Colorado

December 19, 1898

Appeal from district court, El Paso county.

Action by William A. Otis, substituted for the Rocky Mountain Oil Company, against Richard Clough and others, to enforce a penalty against the latter as directors of a corporation. There was a judgment for plaintiff, and defendants appeal. Affirmed.

C. W. Franklin, for appellants.

Colburn & Dudley, and J. C. Helm, for appellee.

CAMPBELL C.J.

In the original complaint the appellants were joined as defendants with the Manitou Lime & Mining Company, a corporation. The object of the action was to enforce a penalty imposed upon them, as directors of that company, because of the failure of the company, through its proper officers, to file its annual report and its certificate of paid-up stock, in accordance with the provisions of sections 487, 491, 1 Mills' Ann St. (sections 248, 252, Gen. St.), which are as follows:

'Sec 487. The president and a majority of the directors or trustees, after the payment of the last installment of the capital stock so fixed and limited by the company, shall make a certificate stating the amount of the capital so fixed and paid in, which certificate shall be signed and sworn to by the president and a majority of the directors or trustees, and they shall record the same in the office of the secretary of state, and a copy in the office of the recorder of deeds of the county wherein the business of said company is carried on.'

'Sec. 491. Every such corporation shall annually, within sixty days from the first day of January, make a report, which shall state the amount of its capital and the proportion actually paid in, and the amount of existing debts; which report shall be signed by the president, and shall be verified by the oath of the president or secretary of said company, under its corporate seal, and filed in the office of recorder of deeds of the county where the business of the company shall be carried on. And if any such corporation shall fail so to do, unless the capital stock of such corporation has been fully paid in and a certificate made and filed as provided in section twelve (12) of this act, all the directors or trustees of the company shall be jointly and severally liable for all the debts of the company that shall be contracted during the year next preceding the time when such report should be this section have been made and filed, and until such report shall be made.'

To the complaint a demurrer was interposed on various grounds, one of which was that there was an improper joinder of parties defendant. The demurrer was overruled, but thereafter the plaintiff dismissed the action as to the corporation defendant, continuing it as against the individual defendants, as directors, and then filed an amended complaint against them only, upon which the action was tried. Upon agreement of parties, the trial was to the court without a jury; and judgment was rendered against defendants in the sum of $3,800, to reverse which this appeal is prosecuted.

In the original complaint it was alleged that the Manitou Lime & Mining Company contracted an indebtedness in favor of the plaintiff corporation between the date of organization of the defendant company and the 1st day of July, 1893, on which date said defendant company executed and delivered to the plaintiff, as evidencing such indebtedness, its three several promissory notes, in the sum of $1,000 each. It was further alleged that the individual defendants were directors of the corporation during the entire period of this default, and that, by reason of such failure of the company to file its annual report and certificate of paid-up stock required by the foregoing sections, such directors became liable for the full amount of the debts of the defendant company contracted in favor of the plaintiff during the year next preceding such failure. In the amended complaint, as has been said, the action was dismissed as to the corporation, and the plaintiff proceeded against the directors individually. Aside from this, the only substantial difference between the original and the amended complaint was that the latter set out with greater particularity the nature of the indebtedness, and the times when it was contracted by the original defendant company, and in the further fact that there was not, as in the original, a separation of the cause of action into three separate statements. The defendants filed a joint answer, denying upon information and belief the indebtedness, denying the authority of the treasurer who executed the promissory notes in the name of the original defendant company, and setting up the plea of the bar of the statute of limitations.

The material facts, as we consider them, are substantially as follows: In 1890 the Manitou Lime & Manufacturing Company (which hereafter, for brevity, will be called the 'Manufacturing Company') was organized to manufacture and sell lime in El Paso county. A part, if not all, of the goods sold and delivered by the plaintiff company was ordered and received by it. Some time during the year 1893 its directors and stockholders, owing to the supposition (as we gather it from the record) that there was valuable mineral on their property, determined to enlarge the scope of the business by adding to it the industry of mining. To that end a certificate of incorporation of a new company, called the Manitou Lime & Mining Company (hereafter designated as the 'Mining Company') was prepared, and duly filed in the appropriate public offices on the 10th day of April, 1893. The Manufacturing Company, by appropriate action in furtherance of this design, voted to sell and transfer to the new company all of the property of the former, and to receive therefor the entire issue of the capital stock of the new, to be distributed to the stockholders of the old in proportion to the interest which they owned therein. The transfer was made on or after May 13, 1893. Prior to the beginning of this action no certificate of paid-up stock and no annual report of either company were filed within the time required by law, or at all. This action was begun April 20, 1894.

The principal propositions upon which appellants rely to reverse the judgment are: Firt. That no sufficient proof was made of the indebtedness. Second. That the amended complaint on which the cause was tried set up a wholly new and different cause of action from that contained in the original. Third. That the act of the stockholders of the Manufacturing Company with reference to the Mining Company was, in legal effect, merely an amendment of the former articles of incorporation; that the two corporations are identical; and that when the indebtedness in question, all of which was incurred at various times between March 1 and July 1, 1893, was contracted by the Manufacturing Company, during all of such period of time the directors were in default, in that they failed to comply with both of the sections of the statute quoted; and inasmuch as the suit was brought more than one year after such alleged default occurred, which was not later than March 2, 1893, the bar of the statute of limitations applies.

1. It is said by counsel for appellants that proof of the indebtedness was not made, because the only evidence thereof was the production of the books of the plaintiff company, and that under our statute they were not sufficiently identified or made admissible. With respect to this contention it may be said that, without considering any of the evidence relating to these books, the admissions and conduct of the authorized agents of both the Manufacturing Company and the Mining Company...