Stevens v. Boyes Hot Springs Co.

TYLER, P. J.

Action to recover a balance alleged to be due upon a promissory note payable to plaintiffs and executed by defendant Boyes Plot Springs Company, a corporation. The note was dated July 6, 1922, and was in the sum of $6,800 and it provided for five payments in yearly installments of $1360 each, together with interest. In the complaint it is alleged that the note was duly and regularly executed by defendant corporation and, as consideration for it, plaintiffs transferred and delivered to the corporation 10,000 shares of its capital stock, and at the same time also delivered and surrendered to it a certain promissory note which the plaintiff William G. Stevens held

[481]

against one R. G. Lichtenberg amounting in principal and accrued interest to the sum of $1753, the total consideration for the stock and note being the sum of $8,500. Thereafter a payment was made by the company in the sum of $1700 upon the account and a promissory note was executed by it for the balance in the sum of $6,800 as above recited. Thereafter on the sixteenth day of August, 1923, defendant company paid to plaintiffs the first installment provided for in the note, to wit, $1516, being principal and interest to date. It is then alleged that defendant Sonoma Properties Company, a corporation, assumed the liabilities and received the assets of defendant Boyes Hot Springs Company. Nonpayment by either defendant of the balance of the note, amounting to the sum of $5,440 is recited. Defendant Boyes Hot Springs Company by its answer denied the validity and legality of the note, on the ground that the sole and only consideration for the same was the surrender and transfer to defendant Boyes Hot Springs Company of 10,000 shares of the capital stock of said corporation by the plaintiffs; that the purpose and result of such transaction was to diminish, withdraw and deplete the capital stock and assets of such corporation in contravention and violation of sections 309 ‘ and 359 of the Civil Code of this state. By way of cross-complaint it prayed for a rescission and cancellation of the note and the return to it of the sum of $1516, being the amount of the first installment and interest paid by it as above referred to. Defendant Sonoma Properties Company also filed an answer making certain denials. After trial the court made its findings relating to the due execution of the note and the payment made thereon. It further found that the only consideration for the instrument was the 10,000 shares of stock transferred, and that the payment of the first installment of $1516 effected a division, withdrawal and diminution of the capital stock of the corporation, contrary to the provisions of the Civil Code above referred to; that the transaction was therefore void and of no effect. In accordance with these findings, the court thereupon made its conclusions of law to the effect that defendant and cross-complainant Boyes Hot Springs Company was entitled to the return to-it by plaintiffs and cross-defendants of the sum of $1516 paid to them; that there was nothing due to the plaintiffs and cross-