Williams v. Yocum

• Decision Date: 31 January 1928
• Docket Number: 1391
• Citation: 263 P. 607,37 Wyo. 432
• Parties: WILLIAMS, ET AL. v. YOCUM, ET AL. [*]
• Court: Wyoming Supreme Court

263 P. 607

37 Wyo. 432

WILLIAMS, ET AL. v. YOCUM, ET AL. ^[*]

No. 1391

Supreme Court of Wyoming

January 31, 1928

APPEAL from District Court, Converse County; HARRY P. ILSLEY, Judge.

Action by Elizabeth P. Williams, as executrix of the estate of John T. Williams, deceased, and others, against John Yocum and others. From a decree for defendants, plaintiffs appeal.

Affirmed.

Frank A. Kemp, Jr., and M. A. Kline, for appellants.

The action is for an accounting of corporate assets transferred to an individual and thereafter transferred to a new corporation in exchange for its shares of stock, plaintiffs claiming that they were not permitted to participate in a pro rata share of the value of the old corporation. The legal principles applicable to the controversy as presented by a review of the pleadings, evidence, lack of evidence and ruling thereon, we believe to be as follows. Where interested parties fail to testify, the presumption is that their testimony, if given, would have been injurious to their cause, 22 C. J. 121; Campbell v. Creighton (Colo.) 167 P. 975; Johnston v. McKenna (N. J.) 74 A. 287; Stirling v. Wagner, 4 Wyo. 5; The Santissima Trinidad, 5 L.Ed. 468; 39 Cyc. 294; Fletcher Corp. 5621. Defendants could not buy the trust property for themselves, or for a new corporation organized by them, Perry Trusts § 602; Credle v. Baugham, 136 A. S. R. 806; Co. v Cotton Mill etc., 232 F. 421; Michoud v. Girod, 11 L.Ed. 1076; U.S. v. Carter, 217 U.S. 286; Robertson v. Chapman, 152 U.S. 673; Tyler v Herring (Miss.) 19 A. S. R. 289; Webb v. Branner (Kan.) 52 P. 429; Langer v. Co. (N. D.) 186 N.W. 104; Godley v. Co. (N. Y.) 105 N.E. 818. Defendants should be required to account for the value of the good will of the business as a going concern, Moore v Rawson (Mass.) 70 N.E. 64; Iman v. Inkster (Neb.) 134 N.W. 265; Rowell v. Rowell, 99 N.W. 473; Claycraft v. Assn. (Ky.) 77 S.W. 923; Mason v. Co., 33 L.Ed. 526, and for the full value of the assets of the old corporation, Lindemann v. Rusk (Wis.) 104 N.W. 119; Windmuller v. Co. (N. J.) 90 A. 249; Smith v. Stone (Wyo.) 128 P. 617.

Hagens & Murane, for respondents.

The old company was regularly dissolved, § 5439 C. S.; the transaction was by agreement and there was no misrepresentations or fraud in disposing of the assets, in forming the new corporation. A judgment based upon conflicting evidence will not be disturbed on appeal, Stahley Co. v. Beckstead, 27 Wyo. 173; Standard Oil Co. v. Sullivan (Wyo.) 237 P. 253. Evidence of fraud must be clear and satisfactory, Kahn v. Traders Co., 4 Wyo. 419; Patterson v. Co., 7 Wyo. 401. The duties of trustees, upon dissolution, are fixed by statute, § 5441 C. S. The court properly sustained objections to the declarations made after the transaction, Jones Evidence §§ 238-248; 11 Enc. Evidence, 412. Trustees cease to be such when purpose of trust is accomplished, 2 Perry (6th ed.) 1496-1502. The order dissolving the temporary injunction was a final order and appealable, Anderson v. Englehart, 18 Wyo. 196; Weaver v. Richardson (Wyo.) 132 P. 1148; 23 Cyc. 1224. The order was an adjudication, 15 R. C. L. § 429. The directors of the old corporation did not act as trustees until after the dissolution of the company. Cases cited by plaintiffs in error are not applicable on the facts. The old company was dissolved by action of more than two-thirds of its shareholders and was within the statute, Ch. 349 C. S. The sale of one corporation to a new corporation, whose offices are the same, will not vitiate the sale if it be in good faith, Marks v. Merrill Co., 203 F. 16; Ryan v. Williams, 100 F. 172; Watkins v. Bank (Kans.) 32 P. 914; Bowditch v. Co., 82 A. 1014; Green v. Bennett, 110 S.W. 108; Smith v. Stone, 21 Wyo. 62. Plaintiffs' case is barred by limitations, §§ 5566-5569 C. S.; 17 R. C. L. § 105; Smith v. Martin (Calif.) 67 P. 779; Stevens v. Reed, 60 N. Y. C. 726; Reed v. Brun, 157 F. 190 (8th Cir.); Boren v. Boren (Tex.) 85 S.W. 49; Griffith v. Co. (Wash.) 79 P. 314. The rule that limitations shall run from discovery of fraud, does not operate in favor of the party who might, with ordinary diligence, have made a prior discovery of the fraud, Wilson v. LeMoyne, 204 F. 726; Duphorne v. Moore (Kan.) 107 P. 791; Coad v. Dorsey (Neb.) 148 N.W. 155; Garbutt Co. v. Walker, 64 S.E. 698; Simmons v. Co. (Ia.) 154 N.W. 166. Trustees of a dissolved corporation become such by virtue of the law, in other words, constructive trustees, and the statute of limitations begins to run as soon as alleged wrongful acts are committed, Stianson v. Stianson (S. D.) 167 N.W. 237; Lammer v. Stoddard (N. Y.) 9 N.E. 328; Broder v. Conklin (Calif.) 53 P. 699.

RINER, Justice. BLUME, C. J., concurs.

OPINION

RINER, Justice.

This was a suit for an accounting brought by the plaintiffs and appellants, hereinafter mentioned as the plaintiffs, against the defendant, and respondents, hereinafter designated as the defendants, in the District Court of Converse County. A trial to the court resulted in a decree for the defendants, and by direct appeal the cause has been brought to this court for review. Both the pleadings and the record in the case are somewhat voluminous.

The petition's allegations are substantially that the Douglas Mercantile Company, incorporated in 1902 under Wyoming law, possessed a capital stock of $ 50,000, divided into two thousand shares of $ 25 each, par value; that it was profitably engaged until about February 4, 1920, in a general merchandise and grocery business at Douglas, Wyoming; that the plaintiffs held 319 shares of stock in this company, and that defendants were also stockholders in and constituted the directorate thereof, the defendants Jenne and Yocum being respectively its president and treasurer until its dissolution; that on February 4, 1920, more than two-thirds of the stockholders of the company, after legal notice, adopted a resolution dissolving the company and granting its directors in effect the powers to settle up company affairs, as are detailed in sec. 5441, W. C. S. 1920; that notices of dissolution were given and published as required by law; that there came into the hands of the defendants, as trustees for the stockholders, company assets consisting of real estate and storage warehouse valued at $ 8,000, book accounts and accounts receivable valued at $ 45,000, bills receivable valued at $ 900, merchandise and stock in trade valued at $ 49,652.65, furniture etc. valued at $ 8,000, cash on hand and in bank $ 22,000, or a total value of $ 133,552.65. It is also alleged that the good will of the company was, at dissolution, worth more than $ 10,000; that on February 12, 1920, defendants sold and conveyed to W. J. Butler, one of their own number, all of the said assets except a note for $ 900, which sale was without consideration and not in good faith, it being understood that said Butler would incorporate a new company of similar name, transfer these assets to it and give all stockholders, other than the plaintiffs, proportionate interests in such new company; that this arrangement was carried out; that after the stockholders' meeting aforesaid, the defendants falsely and fraudulently represented to the plaintiffs that W. J. Butler would purchase said assets for $ 80,000; that these assets were worth not more than that sum and that the money thus received would be proportionately divided among all the stockholders of the old company; that these representations resulted in inducing plaintiffs to accept $ 40 per share for their proportionate part of the assets of the dissolved company; that plaintiffs relied upon these representations and did not learn of their falsity until long afterwards; that said Butler himself never paid for the assets purchased by him, but that the transfer was a mere paper transfer through Butler to the new company, and payment was actually made to plaintiffs for their stock from the cash assets of the dissolved company at the rate of $ 40 per share; that the amounts so paid plaintiffs were much less than they should have received; that plaintiffs did not and had no opportunity to learn that there had been no bona fide sale of the company assets as required by law, until about February 15, 1922; that as statutory trustees, defendants should account to plaintiffs for more than $ 27.50 per share additional to the $ 40 per share already received.

W. J Butler, though named in the petition as defendant, was never served with process, he being, at the time the petition was filed and ever since, a non-resident of the state. The other defendants filed an answer, setting up four separate defenses. The first of these, consisting of admissions and denials, in effect admits the sale of the assets of the Douglas Mercantile Company (herein designated as the old company) on February 12, 1920, to W. J. Butler, and the subsequent transfer thereof by Butler to a new corporation of similar name (herein designated as the new company) with a capital of $ 75,000, but denies that defendants took stock in the new company pursuant to a prior agreement, and declares the sale was made fairly, for the best price obtainable and in good faith. It also alleges that plaintiffs were paid amounts in cash for their proportionate proceeds of the sale which represented full and just compensation for their shares of stock and a proper proportionate share of the actual sale of the assets of the old company. The second defense recites at length the various legal steps taken to accomplish the dissolution of the old company and reiterates the existence of good faith in the matter of the sale to Butler and due distribution of the proceeds thereafter to all of the stockholders in the old company, it being asserted that plaintiffs received the payments for...