Mountain Waterworks Const. Co. v. Holme

• Decision Date: 06 February 1911
• Citation: 49 Colo. 412,113 P. 501
• Parties: MOUNTAIN WATERWORKS CONST. CO. v. HOLME. DENVER UNION WATER CO. et al. v. SAME.
• Court: Colorado Supreme Court

113 P. 501

49 Colo. 412

MOUNTAIN WATERWORKS CONST. CO. v. HOLME.

DENVER UNION WATER CO. et al. v. SAME.

Supreme Court of Colorado

February 6, 1911

Appeal from District Court, City and County of Denver; Frank T Johnson, Judge.

Actions by Elizabeth F. Holme, executrix of the will of Richard Holme, against the Mountain Waterworks Construction Company and others. From a judgment for plaintiff, defendant the Waterworks Construction Company appeals, and from judgment dismissing the action against the Denver Union Water Company and another, without costs, they appeal. Affirmed.

Gerald Hughes, for appellants.

Dines &amp Holme, for appellee.

MUSSER J.

On March 29, 1889, the Citizens' Water Company, hereinafter called Citizens' Company, was incorporated. Its capital stock was fixed at $3,000,000, divided into 30,000 shares of the par value of $100 each. Seven directors for the first year were named in the certificate of incorporation, and the objects of the company were to construct and operate waterworks for supplying the city of Denver, its inhabitants and others, with water.

On April 29, 1889, the Mountain Waterworks Construction Company hereinafter called Construction Company, was incorporated by five of the directors of the Citizens' Company. Its capital stock was fixed at $500,000, divided into 5,000 shares of the par value of $100 each. Later the capital stock was increased. The incorporators were named as the directors for the first year, and its objects were to build and construct reservoirs and waterworks and to lay water mains, pipes, and conduits for collecting and distributing water. On April 29th the board of directors of the Construction Company met and organized. At that meeting a resolution or motion was passed which was as follows: 'That this company will pay all assessments upon the sum of $15,000 of the capital stock of this company subscribed for by Charles P. Allen, and also all assessments upon $15,000 of the capital stock of this company subscribed for by Richard Holme; and that in consideration thereof the said Allen and the said Holme shall each pay interest on all such assessments against them, respectively, from the time each assessment is made at the rate of 8 per cent. per year; and, in consideration of such advancements by this company of said assessments, the said Charles P. Allen and Richard Holme are to assign, transfer, and set over to the Citizens' Water Company the sole and exclusive right to use the patent issued to Charles P. Allen for the manufacture, sale, and use of certain wooden conduits, iron bands, and clips, as is more particularly described in the said patent and the specifications thereof, in the counties of Arapahoe, Jefferson, Douglas, Park, Chaffee, and Lake, in the state of Colorado and also in any other place in the state of Colorado where the Citizens' Water Company may desire to use the same in connection with its own system for supplying the city of Denver, the inhabitants thereof, the additions thereto, and the suburbs thereof, with water.'

The attorney of the company was directed to see that the proper assignment and transfer of the patent was made. On May 2d Allen conveyed a half interest in the patent mentioned in the resolution of April 29th to Richard Holme, covering the state of Colorado, and on May 3d Holme and Allen transferred the patent to the Citizens' Company, as provided in the resolution. These transfers were duly recorded in the record of transfers of patents in the United States patent office. This patent was of considerable value to the company, and was kept, used, and enjoyed by it at all times after the transfer to it, as well as by its successor, the Denver Union Water Company. On April 30, 1889, various persons subscribed for the capital stock of the Construction Company in the aggregate amount of 5,000 shares, being all of the capital stock, and among them was the subscription of Richard Holme for 200 shares. The subscriptions to the capital stock of the Construction Company were paid from time to time by the subscribers, as assessed or called for by the directors. At each of these calls, Holme paid the assessment on 50 shares until these 50 shares were fully paid for by him in cash, when a certificate was issued to him therefor. On the first page of the journal of the Construction Company, under date of May, 1889, the various subscribers to the capital stock were charged with their subscriptions, and among them appears Richard Holme, charged with 200 shares of the par value of $20,000. In the ledger of the company, under date of May 1, 1889, Mr. Holme is charged with capital stock to the amount of $20,000, and is credited by various items of cash paid at different times to and including August 15, 1890, aggregating $5,000 and showing a balance of $15,000. This balance of $15,000 was under date of January 1, 1891, carried down and charged in the ledger to Mr. Holme. Mr. Holme executed his promissory note for the sum of $15,000, dated January 1, 1891, and payable one day after date, with interest at the rate of 8 per cent. per annum until paid. The Citizens' Company and the Construction Company appear to have occupied the same office, and some of the officers of one were officers of the other, and this note remained in the valult in the office, was listed among the assets of the Construction Company, and was produced at the trial by the cashier of the Denver Union Water Company, who found it in a safe marked 'Citizens' Water Company,' among other papers of the Construction Company.

Under date of January 31, 1891, on page 46 of the journal of the Construction Company, is an entry of construction to sundries of $30,000, consisting of Charles P. Allen, for use of patent pipe, $15,000; Richard Holme, for use of patent pipe, $15,000, with a notation, 'as per contract and resolution of the board, April 29, 1889.' And in the ledger, under the same date, Richard Holme was credited by construction, $15,000, from page 46 of the journal, and construction was debited to Allen and Holme, from page 46 of the journal, $30,000. The account of Allen does not appear in the record, though the evidence shows that he was credited with $15,000 by construction. On page 52 of the journal, under date of May 21st, bills receivable was charged with $30,000, to construction, for the note of Richard Holme for $15,000, with a notation that the note was for stock; also for a note of Allen for $15,000, and on the same date bills receivable was debited with Allen and Holme, $15,000 each, from page 52 of the journal, and construction was credited by the two items of bills receivable, each for $15,000, from the same page. These entries show that Holme had purchased 200 shares of the capital stock for $20,000; that he paid $5,000 in cash; that his account for capital stock was dlosed; and that the company held his note for $15,000. On November 8, 1890, Holme was appointed to act as secretary pro tem. until further order of the board, and on February 26, 1891, he was elected secretary of the company, which position he appears to have occupied until about January, 1900, though in the fall of 1897 he withdrew from active charge, the books were taken from his direct supervision to the office of the president, and his position was nominal. He signed such documents as were brought to him. No certificates of shares were issued to any of the stockholders of the Construction Company until April 1, 1891.

On page 1 of the stock journal of the company, under the caption 'stock issued,' is an entry showing the issuance to Holme of 200 shares, under date of April 1, 1891, and on the opposite side, under the caption, 'certificate canceled,' appear words and figures indicating the cancellation of certificate No. 5 to Holme for 200 shares, under date of October 7, 1891. On page 2 of the stock journal, under the caption 'stock issued,' appears an entry of the issuance of 150 shares to Holme on October 7, 1891, and just below this entry appears another, showing the dissuance to Holme, on the same day, of 50 shares. No cancellation of the 150 shares appears. These entires in the stock journal were made among other entries relating to other stockholders.

In the account of Richard Holme, in the stock ledger of the company an entry shows the issuance to him, on April 1, 1891, of certificate No. 5 for 200 shares, from page 1 of the stock journal. Certificate No. 5 was never detached from its stub in the certificate book. It was signed by Holme, as secretary, with the corporate seal attached. It was not signed by the president. There was indorsed on it a written assignment, signed by Holme and dated October 7, 1891, wherein 50 shares were assigned to Richard Holme and 150 shares to Richard Holme, and written across its face in the handwriting of Holme were the words 'canceled October 7, 1891.' The account of Richard Holme in the stock ledger showed the cancellation of certificate No. 5 on October 7, 1891, and the issuance, on the same day, to Richard Holme, of certificate No. 32 for 150 shares and certificate No. 33 for 50 shares. Certificate No. 33 for 50 shares was detached from the stub, and was surrendered and canceled on July 12, 1904, and certificate No. 122 for 50 shares was issued to Elizabeth F. Holme in lieu thereof. Certificate No. 32 for 150 shares was written up to Mr. Holme, signed by the secretary, not signed by the president, had the corporate seal attached, and in that condition remained in the certificate book, attached to its stub. All the entries aforesaid in the various books of the company remained unchanged from the time they were made. In the account of Holme in the stock ledger appear, in red ink, under the main caption 'certificate canceled,' the figures '32' under the...