Colcord v. Granzow
| Decision Date | 27 March 1928 |
| Docket Number | Case Number: 17807 |
| Parties | COLCORD et al. v. GRANZOW et al. |
| Court | Oklahoma Supreme Court |
1928 OK 211
278 P. 654
137 Okla. 194
COLCORD et al.
v.
GRANZOW et al.
Case Number: 17807
Supreme Court of Oklahoma
Decided: March 27, 1928
¶0 A corporate charter which contains a provision authorizing the organization to engage in a business authorized by law is not rendered void by including therein other powers not authorized by law, but such unauthorized powers will be treated as surplusage and void. And the fact that the charter provides that the income to a large extent from the business, for which the law authorizes the corporation to be created, is to be donated to an undertaking for which a corporation cannot be formed does not affect the legal corporate existence of the corporation.
Where a corporation, chartered as a town-site company under section 5301, C. O. S. 1921, and operated as such, purchased various tracts of farm land in the near vicinity of Oklahoma City, some of which were already platted as city additions, and executed its notes for the purchase price, such contracts are not ultra vires in the sense that they are beyond the power of the corporation to make and perform, and the plea of ultra vires is not available as a defense to a suit on the purchase price notes.
Where directors of a corporation create debts beyond the subscribed capital stock of the corporation in violation of section 5336, C. O. S. 1921, even though the debt created is in excess of the authorized capital stock, creditors are not estopped to maintain an action against the directors for the amount of the debts so created in the manner and under the condition prescribed by said section.
Evidence examined, and held sufficient to support the finding of the trial court that the indebtedness in question was created by the directors of the corporation during the administration of the defendant directors who were present at the meetings, and did not cause their dissent therefrom to be entered at large on the minutes of the directors.
When a board of directors of a corporation creates a debt in excess of the subscribed capital stock and authorizes the managing officers to execute notes therefor without authorizing a provision for attorney's fees, such a provision incorporated in the note cannot be enforced against the directors, under section 5336, C. O. S. 1921.
Lack of written notice to directors of a corporation o a special meeting as required by the by-laws does not affect the validity of acts or contracts of the corporation at such meeting so far as third persons dealing with the corporation are concerned. Third persons have a right to assume that such meetings are regular, and the directors may waive such irregularities.
In a suit by creditors against the directors of a dissolved corporation, by reason of said directors having created the debts in excess of the subscribed capital stock of the corporation, as provided by section 5336, C. O. S. 1921, no statute of limitation is available as a defense in favor of the directors, even though the time necessary to bar the claims against the corporation had fully run prior to dissolution of the corporation.
The liability of directors of a dissolved corporation for debts created in excess of the subscribed capital stock of the corporation, as provided by section 5336, C. O. S. 1921, is in the nature of a trust fund for the benefit of all creditors of the corporation who are entitled to participate therein ratably, and creditors claims thereunder may properly be prosecuted by a joinder of all creditors as parties in a single suit.
The right of action provided creditors by section 5336, C. O. S. 1921, against directors of a corporation for creating debts beyond the subscribed capital stock of the corporation in case of dissolution of the corporation, may be maintained by an assignee of an original creditor.
The statutory liability of directors in a suit by creditors for debts created in excess of the subscribed capital stock is limited to the amount of the debt created.
Everest, Vaught & Brewer, W. F. Harn, and Keaton, Wells & Johnston, all of Oklahoma City, for plaintiffs in error.
Hayson & Lukenbill, of Oklahoma City, for defendants in error H. E. Beemblossom and Estelle Beemblossom Baker.
Twyford & Smith, of Oklahoma City, for defendants in error Granzow, Woodward, Hoback, Campbell, Peterson, Callerman, Smith, and Woodward.
Rittenhouse, Lee, Webster & Rittenhouse, of Oklahoma City, for defendant in error Ashton.
JEFFREY, C.
¶1 This is a suit by certain creditors of a dissolved corporation against certain directors of the corporation by reason of the fact that said directors created the indebtedness sued upon in excess of the subscribed capital stock of the corporation as provided by section 5336, C. O. S. 1921. H. W. Granzow, C. F. Woodward, J. H. Hoback, G. W. Campbell, Victor Peterson, C. W. Callerman, and Alfred Smith joined as plaintiffs in the petition, and named as defendants C. F. Colcord, J. J. Culbertson, K. W. Dawson, W. F. Harn, D. F. Sparrow, S. L. Brock, O. G. Lee, and Orin Ashton, directors of the State Capitol Building Company, a corporation, dissolved, and also H. E. Beemblossom and Estelle Beemblossom Baker, who also were creditors of said dissolved corporation, but refused to join as plaintiffs in the suit. M. M. Ashton, who also was a creditor, intervened as a party plaintiff. A separate cause of action was pleaded for each of the plaintiffs, and the prayer of said petition asked for judgment on each of said causes of action for the amount therein pleaded in favor, and for the benefit of such respective plaintiff. The petition discloses that some of the parties had reduced their claims to judgment prior to the dissolution of the corporation, but others had not. The original indebtedness of each of the plaintiffs was represented by promissory notes and evidenced a balance duo on the purchase price of certain lands conveyed to the corporation. The same is true of the defendants H. E. Beemblossom and Estelle Beemblossom Baker, who filed cross-petitions asking judgment against said directors, and will hereinafter, also, be designated as plaintiffs. All plaintiffs asked for interest at 8 per cent. from date of the various notes as provided thereby until June 20, 1922, the date of dissolution of the corporation.
¶2 If the statute of limitations is applicable in this character of case, all claims of plaintiffs, including both the judgments and notes, were barred by the statute prior to the dissolution of the corporation. The corporation was dissolved June 20, 1922.
¶3 This suit was commenced on the 18th day of September, 1922. The cause was tried to the court on the 19th day of October, 1925. At the conclusion of all the evidence, all parties joined in a request for findings of fact and conclusions of law. Defendants submitted in writing, findings of fact and conclusions of law on all questions, and requested their adoption, which were denied by the court, and other findings and conclusions of law were made and entered by the court, and judgment was rendered thereon in favor of plaintiffs and against the defendants C. F. Colcord, K. W. Dawson, W. F. Harn, and Orin Ashton on each cause of action for the full amount therein prayed for. The defendants Colcord, Dawson, and Harn have appealed. Numerous assignments of error are made, but are argued under certain propositions of law, which seem to cover all serious questions raised in this court.
¶4 The first proposition urged by defendants is as follows:
"To have a legal corporate existence, a private corporation must be organized for some authorized purpose."
¶5 Under this proposition, it is contended that the State Capitol Building Company never had a corporate existence, and that a corporate existence was a prerequisite to the statutory liability of the directors. The purpose for which the company was organized, as shown by its articles of incorporation, is as follows:
"To promote the building of a state capitol at the intersection of Twenty-Second street, extended, and Lincoln boulevard, in Oklahoma City, Oklahoma county, state of Oklahoma, as contemplated in the act of the Legislature of the state of Oklahoma, providing for the location of such capitol at Oklahoma City; to acquire by purchase, gift, donations, or devise, and to hold for the purposes hereinafter mentioned, real estate in or as additions to Oklahoma City, and to lay out and plat the same into streets, alleys, lots, and blocks, and to sell and dispose of the lots and blocks so surveyed, laid out, and platted, for the purpose of providing a fund for the construction of said building; to act as trustee for the donors of such fund, and for the state of Oklahoma; and to do generally such other and further business, and have such other and further powers as are necessary or desirable, to effectuate and carry out the above purposes."
¶6 Section 5301, C. O. S. 1921, provides that private corporations may be formed for a number of purposes, one of which is:
"For the purpose of locating, laying out, improving town sites, and buying and selling real estate therefor, including the sale and conveyance of the same in lots, subdivisions or otherwise."
¶7 Defendants say that if the State Capitol Building Company ever had a legal corporate existence, it was a public or quasi public corporation, and created by virtue of Senate Concurrent Resolution No. 8, Session Laws 1910-1911. With this we cannot agree. This resolution incorporated a proposal from the defendants and a number of other persons wherein it was proposed that the State Capitol Building Company would be organized, under the laws of the state of Oklahoma, with a capital stock of $1,000 divided into 100 shares of the par value of $10; that said corporation would acquire, plat, subdivide, and sell real estate within the near proximity of the capitol site, proposed to be established at the...
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