Houston v. Utah Lake Land, Water & Power Co.

• Decision Date: 20 December 1919
• Docket Number: 3382
• Citation: 187 P. 174,55 Utah 393
• Parties: HOUSTON et al. v. UTAH LAKE LAND, WATER & POWER CO. et al. (STARR et al., Interveners)
• Court: Utah Supreme Court

187 P. 174

55 Utah 393

HOUSTON et al. v. UTAH LAKE LAND, WATER & POWER CO. et al. (STARR et al., Interveners)

No. 3382

Supreme Court of Utah

December 20, 1919

Appeal from District Court, Fourth District, Utah County; A. B Morgan, Judge.

Action by Otho S. Houston and another against the Utah Lake Land Water & Power Company and others, in which A. F. Starr and others intervene. Otho S. Houston dying after action was brought, his widow, Elizabeth Houston, as executrix of his last will and testament, intervened.

Judgment for defendants, and plaintiffs and the interveners appeal.

AFFIRMED.

James Ingebretsen, of Salt Lake City, M. J. Moore, of Los Angeles Cal., and M. R. Straw, of Provo, for plaintiffs appellants.

Booth & Booth, of Provo, for intervening appellants.

Wedgwood, Irvine & Thurman and Walton & Walton, all of Salt Lake City, for respondents.

WEBER, J. CORFMAN, C. J., and FRICK, GIDEON, and THURMAN, JJ., concur.

OPINION

WEBER, J.

Plaintiffs and interveners, designated appellants here, have appealed from a judgment in favor of defendants. Appellants sought to foreclose certain mortgages upon the property of the Utah Lake Land, Water & Power Company, one of the defendants. The Utah Lake Land, Water & Power Company, hereinafter termed respondent, was incorporated in 1907 under the laws of Utah. It failed to pay the Utah state corporation license tax for the year 1914, and, pursuant to law, its right to do business was annulled and its charter was forfeited in 1915. Thereafter, in March, 1916, after its charter had been forfeited, the defunct corporation obtained control of the capital stock of the Les Angeles Mortgage Company, a California corporation, exchanging for the shares of stock notes executed by respondent, which also executed mortgages on its property to secure the notes. The following abridgment of the pleadings and proceedings in the case to the time of trial is taken from appellants' brief:

"As appears from the original and first amended complaint, this suit was brought to enforce payment of and to foreclose two of the notes and mortgages, but in connection therewith the plaintiff's sought for and obtained the appointment of a receiver upon several grounds, among others, forfeiture of the company's charter under the state license tax, waste and mismanagement, and insolvency. The corporation appeared, and both by demurrer and answer challenged the validity of the notes and mortgages upon the grounds that they were not authorized corporate acts, and that they were executed at a time when the company's right to do business and its charter had been annulled. The first answer asserts that the obligations are void and not binding upon the corporation, both because the officer who acted was without authority in the premises, and because the corporation was in fact, under the license tax statute, nonexistent.

"The answer contains also a counterclaim under which the defendant charges the vendors of the stock with deceit with respect to the sale thereof, alleging that the stock as bought should have been worth about $ 75,000, but was actually worth much less, so that the defendant sustained damages in the sum of about $ 42,000.

"Upon the original and first amended complaint, and after an order overruling the demurrer and upon the answer of the defendants and a hearing had, the court appointed a receiver. After the appointment of the receiver and prior to the hearing on the merits the plaintiff Houston died, and his widow, as executrix, was substituted. Upon and in connection with this substitution she filed a complaint in intervention, setting up her note and mortgage, and praying for the enforcement thereof in the usual form. Two other owners of stock in the Los Angeles Mortgage Company, Messrs. Gore and Starr, sold their stock to the defendant at the same time and under the same circumstances in the same transaction as the plaintiffs, and they also, as interveners, set up and sought the enforcement of their notes and mortgages.

"At the hearing the plaintiff Loy filed another amended complaint. This preserves the essential features of both the original and first amended complaint, but sets up the Loy note and mortgage and asks for its enforcement with greater certainty and clearness than in either of the original pleadings.

"The defendants filed separate answers to the Houston intervention and the Loy amended complaint. In legal effect, however, they are substantially the same. The defendants filed separate answers to the Gore and Starr interventions. These are not the same in fact or in legal effect as the answers filed to the Houston and Loy complaint, but in view of the proof actually received and the objections and rulings at the trial practically the same issues were raised in the Gore and Starr interventions as upon the other pleadings.

"The intervener Houston and plaintiff Loy filed replies. The defenses raised by the answers are in substance that, since the charter of the defendant corporation had been forfeited, it had ceased to exist, and could not act by an officer nor transact any business; that in any event the officer who assumed to act for the defendant corporation was not authorized and the transaction was not conducted or the papers executed in accordance with law; and, furthermore, that the purchase of stock in a foreign corporation was not authorized under the purpose clause of the corporation, and the note and mortgage executed as the purchase price of this stock was therefore ultra vires and void. These were the material defenses, although stated at length and in connection with some collateral and incidental matters. These defenses are reiterated in objections to the introduction of evidence.

"The replies in substance proceed upon the theory and allege that, if the charter was forfeited, or if the officer who acted was not duly authorized, or if the act was beyond the purpose clause, nevertheless the right to plead these defenses had been waived because of the failure of the corporation to rescind and because of its acts exercising ownership over and enjoying the benefits from the property received from the transaction, and also because the corporation had affirmed the contract, in place of rescinding it, by founding a claim for damages thereon both in its first answer in this suit and in an independent suit brought in Los Angeles; also that the transaction had been ratified by a long course of conduct inconsistent with disaffirmance such as the foregoing, and also because, the contract having been fully executed, and it being impossible to restore the plaintiff and interveners to their original position, and because of the full enjoyment by the corporation of the fruits of the transaction, the corporation would be estopped to plead any of the defenses asserted; also that the transaction was for the purpose of winding up the company, and thus authorized under the statute extending the life of forfeited charter corporations.

"At the trial all appellants offered in evidence the several notes and mortgages, first establishing as a preliminary the presidential signature of the corporation, the authenticity of the seal affixed, calling attention to the recitals in the mortgage that the corporation was an existing concern, and that the president was authorized, offering the resolutions of the board and stockholders empowering the president to conduct practically all business on behalf of the company, including the sale and other disposition of all of its assets, the borrowing of money, the execution of notes and mortgages, and the entire minute book showing that up to the last meeting held by the board these resolutions were at practically each meeting affirmed and readopted. This proof, together with other evidence offered, was, upon objection made, excluded, whereupon all parties rested, and the court entered judgment dismissing all the complaints."

Numerous errors based upon exclusion of testimony are assigned, but the only question that need be considered, and which is decisive, is whether a corporation whose charter has been forfeited for the nonpayment of the state corporation license tax in this state may thereafter engage in new business and embark upon new enterprises. The statute (Comp. Laws Utah 1917, section 870 [chapter 10, page 14, Sess. Laws 1913] provides:

"Any...