Sterling Loan & Inv. Co. v. Litel

• Decision Date: 04 February 1924
• Docket Number: 10820.
• Citation: 75 Colo. 34,223 P. 753
• Parties: STERLING LOAN & INVESTMENT CO. et al. v. LITEL.
• Court: Colorado Supreme Court

223 P. 753

75 Colo. 34

STERLING LOAN & INVESTMENT CO. et al. v. LITEL.

No. 10820.

Supreme Court of Colorado

February 4, 1924

Department 3.

Error to District Court, Logan County; Louis C. Stephenson, Judge.

Action by A. L. Litel, for and on behalf of himself and any other stockholder of the Sterling Loan & Investment Company similarly situated, against the Sterling Loan Investment Company and others. Judgment for plaintiff, and defendants bring error and apply for supersedeas.

Supersedeas denied, and judgment affirmed.

T. E Munson, of Sterling, for plaintiffs in error.

Coen &amp Sauter, of Sterling, for defendant in error.

SHEAFOR J.

A rather extended statement of the facts seems to be necessary for a full understanding of the conditions out of which this litigation arose.

It appears that during the month of March, 1920, W. E. Whittier L. A. Whittier, and A. L. Litel organized a corporation known as the Sterling Loan & Investment Company, which will be hereinafter referred to as the Sterling Company. At the time of the organization of the company the three men named were the only stockholders. The capital stock of the corporation was divided into 2,000 shares, having a par value of $100 each. Of these shares, L. A. Whittier had 667, W. E. Whittier 666, and A. L. Litel 667. Since its incorporation it has been a going concern, with no change in its stockholders, until the 2d day of January, 1923, when L. A. Whittier claims to have sold 5 shares for which certificates were issued to E S. George, and 2 shares for which certificates were issued to D. R. Paschal. During this time W. E. Whittier and L. A Whittier each held 15 shares of stock in the Farmers' National Bank of Sterling, and Litel held 10 shares of stock in said bank, the shares standing in the individual names of the parties. W. E. Whittier was one of the board of directors of the bank. On or about December 1, 1920, the bank failed, a reorganization was effected, and a new bank organized, known as the Sterling National Bank, which latter institution acquired a large portion of the assets of the old bank, and assumed certain of the liabilities of the old bank. Litel took no stock in the Sterling National Bank, but the Whittiers took 40 shares of its stock, which were taken in the name of W. E. Whittier, and for which the Whittiers were to pay the sum of $4,800. Whittier claims that the 40 shares of the stock in the new bank were taken for the Sterling Company, and not for themselves, as individuals, and that he paid for the same out of money belonging to the Sterling Company, and on deposit in the bank; but it appears that this stock was never placed upon the books of the Sterling Company as an asset of the company until the 5th day of February, 1923, Litel, as secretary of the company, having charged the amount to the Whittier brothers individually. At the time of the failure of the Farmers' National Bank, the Sterling Company had on deposit with the bank about $4,800. Litel claims he consented that the deposit of $4,800 of the Sterling Company might be borrowed by the Whittiers and used in the purchase of the 40 shares of stock, and that, in pursuance of his consent, the Whittiers did borrow the $4,800, and purchased the stock, which was taken in the name of W. E. Whittier, this having been done with the consent of the comptroller of the currency. There is evidence that the charges made therefor against the two Whittiers were so entered on the books, at the request of W. E. Whittier. Not long after the organization of the Sterling National Bank it also failed. It appears that, on account of the failure of the two banks, and the individual connection of W. E. Whittier therewith, he incurred certain liabilities, consisting in the assessment of $7,000, by reason of his being a director in the Farmers' National Bank, and a liability in the sum of $4,800, representing the loss on the purchase of the 40 shares of stock in the Sterling National Bank. After these failures, and prior to the 1st of January, 1923, the Whittiers desired to charge the liabilities mentioned against the Sterling Company; but Litel refused to allow this to be done, and refused to recognize any liability of the Sterling Company therefor. The court found that on the 1st day of January, 1923, the Whittier brothers were indebted to the Sterling Company, W. E. Whittier in the sum of $1,018.17, L. A. Whittier in the sum of $1,374.37, and that the copartnership previously existing, known as Whittier Bros., composed of W. E. Whittier and L. A. Whittier, were indebted to the Sterling Company in the sum of $7,678.95. At this time it appears that the Sterling Company, according to its books, was owing Litel $1,946.06. On the 5th day of February, 1923, a meeting of the stockholders of the Sterling Company was held, at which a board of three directors of the company was chosen, and W. E. Whittier, L. A. Whittier, and E. S. George were elected. Following that, officers were elected, of which W. E. Whittier was elected president, L. A. Whittier vice president and treasurer, and E. S. George secretary. At this meeting, after the election of the board of directors, they proceeded to the allowance of certain bills against the company, one for $4,800, representing the 40 shares of stock of the Sterling National Bank, taken by the Whittiers, another in the sum of $7,000, representing an assessment against W. E. Whittier as a director of the Farmers' National Bank, and one for $766.35 salary claimed to be due to E. S. George, which had been charged before that time to Whittier Bros. On the 6th day of February, 1923, the board of directors of the Sterling Company held a special meeting. At this meeting the board of directors voted a salary of $10,000 per year to W. E. Whittier...