Watrous v. Hilliard

• Decision Date: 03 December 1906
• Citation: 88 P. 185,38 Colo. 255
• Parties: WATROUS v. HILLIARD et al.
• Court: Colorado Supreme Court

88 P. 185

38 Colo. 255

WATROUS v. HILLIARD et al.

Supreme Court of Colorado

December 3, 1906

Appeal from District Court, Arapahoe County; P. L. Palmer, Judge.

Action by L. M. Kimball against the Revenue Mining, Milling & Tunnel Company. Petition of J. J. Watrous against B. C. Hilliard receiver, and others for an order of distribution. From the judgment, petitioner appeals, and Richards brings cross-error. Reversed and remanded.

Ezra Keeler, for appellant.

F. D Taggart, for appellee.

BAILEY J.

Late in the afternoon of the 20th day of September, 1899, appellee John H. Richards demanded of the Revenue Mining, Milling &amp Tunnel Company a settlement on account of his claim for damages for personal injuries alleged to have been theretofore received by him. Upon the following day one L. M Kimball, a director of the corporation, filed in the district court of Arapahoe county his complaint, alleging that the corporation was indebted to him in the sum of $12,000, that the corporation was insolvent, and praying the appointment of a receiver. In the filing of this complaint E. W. Waybright acted as attorney for defendant. The corporation, by E. H. Wilson, its attorney, upon the same day confessed the truth of the complaint and the motion of Waybright, attorney for plaintiff, for the appointment of a receiver, and upon the same day the court appointed James L. Wilson, father of E. H. W ilson, as receiver. Subsequently, the claim of E. H. Wilson against the corporation was filed and allowed, for the sum of $5,300. E. H. Wilson was the attorney for the corporation, and, after the obtaining of the judgment, seems to have appeared as counsel for the plaintiff Kimball, the corporation, and the receiver, as well as B. R. Cowan, who was the president of the corporation and who filed a claim which was allowed, amounting to $13,280.28. The property of the corporation, aside from certain mining machinery and appliances used in mining, consisted of unpatented mining claims. The receiver represented to the court that it was necessary to perform labor upon these claims to avoid their being relocated by some other parties. Permission was granted to perform the labor and B. R. Cowan furnished the money for that purpose, amounting to $6,000. His claim against the estate for this amount was allowed as a preferred claim. During the period when these matters were progressing, Richards instituted suit against the company and obtained judgment against it on the 27th day of March, 1901, for $10,000. He caused execution to be issued, which was returned unsatisfied. He likewise caused a transcript of the judgment to be filed in the office of the clerk and recorder; for the purpose of making it a lien against the real estate of the corporation. On the 4th of September, 1901, the receiver, Wilson, filed a petition to sell all the property of the corporation for the purpose of paying the debts. On the 22d of October, the court made its order authorizing the sale of the property. On the 2d of November, 1901, Richards filed his amended petition. There is nothing in the several abstracts to show when the original petition was filed. In this amended petition Richards alleges that at the time he received his injuries, to wit, in June, 1898, the company was not indebted to any person; that at 5 o'clock on the 20th of September, 1899, petitioner demanded of defendant a settlement in full for his damages; that within 24 hours thereafter the plaintiff in the action was to have a receiver appointed, and who was a resident of the city of Boston, prepared his complaint and caused the same to be filed; that the corporation, Kimball, and James L. Wilson, by their respective attorneys, conspired fraudulently to place the property of the corporation in the hands of a receiver with the purpose and intent of depriving petitioner of every remedy against defendant and its stockholders for the collection of his judgment. He further alleges that defendant was not insolvent at the time of the commencement of the receivership suit but that the proceedings were instituted for the sole purpose of preventing Richards, when he obtained his judgment, from collecting the same; that the proceeding instituted by Kimball for the appointment of a receiver was made at the instigation of the corporation, acting through its stockholders and directors; that the claims of Kimball, Cowan and Wilson against the corporation were for money paid by them upon stock subscriptions or for assessments voluntarily paid by them and other stockholders for the prosecution of the work of defendant; and praying that his judgment be allowed as a claim against the estate. The receiver objected to the allowance of the claim of Richards and the court made an order that all of the claimants appear on the 23d day of December and show cause, if any, why the claim of Richards should not be allowed, and allowed as a preferred claim. J. L. Wilson, receiver, B. R. Cowan, E. H. Wilson, and L. M. Kimball filed answers to the petition of Richards. In none of these answers are the allegations made by Richards concerning the conspiracy and fraudulent conduct of the parties denied. They allege, however, that Richards' claim is unjust, and his judgment was unjustly obtained through fraud, and that E. H. Wilson was defendant's attorney and had sole charge of defendant's interest.

After the filing of this amended petition, the property of the corporation was sold to B. R. Cowan for the sum of $39,000 $3,000 of which was paid in cash and $36,000 withheld until the sale should be approved. Cowan procured assignments of all of the claims against the estate except the Richards judgment, and these claims appear to have been presented by, and allowed in favor of members of, the board of directors of the corporation and their attorney, E. H. Wilson. Upon the filing of the several answers to Richards' petition, the court heard the matter and allowed the claim. Cowan then refused to make his bid for the property good, for the reason that at the time he made the bid the Richards claim was not allowed, and that all of the claims and expenses of administration which had then been allowed would not exceed $39,000, the amount of his bid; that the Richards claim being allowed and being entitled to a pro rata share of the purchase money would necessitate paying something like $8,000 in cash which Cowan had not contemplated. The property was then ordered resold and at the second sale was purchased by J. J. Watrous who was also a member of the board of directors. He bid the sum of $8,500, paid $100 in cash on the bid and reserved $8,400 until approval of the sale, and had assigned to him the claim of Cowan. Richards then filed a petition requesting that he be allowed to have an execution issued and levied upon this property and the same sold to satisfy his judgment. His petition was disallowed and Richards saved an exception. He subsequently filed a petition in which he again alleges a conspiracy existing between the directors of the company; that the receiver was appointed by the connivance of the corporation and of these creditors, who were directors, and asked that his claim be made superior to the claims of Kimball, the two Wilsons, and Cowan. The court ruled that the claim of Cowan should not be paid until after the claim of Richards, Kimball, and E. H. Wilson were satisfied. Cowan saved an exception. Watrous then filed his petition in which he alleged that the claim of Cowan had been assigned to him and that, inasmuch as $6,000 of the claim was for the purpose of defraying the expense of administration and for the development of the property, and that $3,000 was the cash which had been paid by Cowan at the time of the abortive sale; that these should be preferred claims and be allowed before Richards should receive anything. At this time there was no money in the hands of the receiver or the court belonging to the estate. All that had been paid in had become exhausted by the receiver in paying himself and in other administration expenses. At the hearing upon Watrous' petition it was shown that, at the time of the sale to Cowan, Wilson came upon the courthouse steps and inquired of Mr. Keeler, the attorney, as to the amount of the claims. Keeler said that as near as he could figure it they would amount to $39,000. Wilson then stated that they would bid the $39,000. Keeler replied that he thought they were making a mistake in bidding so much for the property. To this Wilson replied: 'I have just seen them all, I have just come from them, and we have fully concluded to bid it in for the full amount of all the claims and take our chances on the allowance of the claim of Richards against the estate, and fight him to a finish.' The petition of Watrous was denied, and it was ordered that he pay into court he balance of the purchase money for the property sold to him by the receiver, amounting to $8,400, to be distributed in accordance with the previous order. Watrous took exceptions and brought the case here upon appeal, making Richards, Kimball, and E. H. Wilson appellees. Richards filed cross-errors, alleging that the court erred: First, in refusing to grant him an execution against the property; and second, in refusing to make his claim superior to those of Kimball and E. H. Wilson. The foregoing are the material facts in this case as we are able to gather them from the abstracts. On account of the unsatisfactory manner in which the abstracts have been prepared, it is possible that some facts which might appear to be material have been omitted from the above statement. We have before us an abstract of the record, a supplemental abstract of the record, and an abstract of the...