Kiefhaber Lumber Co. v. Newport Lumber Co.
Before: Allen
Synopsis
Corporations—Action for Debt of One Corporation—Parties— Joinder of Corporation Owning All Stock—Judgment.—In an action to recover a debt of - one corporation, another corporation, owning the whole of its capital stock when the debt was contracted within the statute of limitations, was properly joined as a defendant to render against it as a stockholder the judgment recovered in the action.
Id.—Nature of Liability of Stockholder—Basis.—The liability of a stockholder is founded upon the contract made by the corporation for and on behalf of its stockholders, their personal liability attaching to and attending that of the corporation.
Id.—Stockholders Parties to Action Against Corporation—Appropriate Judgments.—If a debt be established as that of a corporation, in an action to enforce the same against it, those who were stockholders when the debt was contracted may be made parties defendant thereto, and appropriate judgments entered therein.
Id.—Causes of Action Against Debtor Corporation—Assigned Claim—Breach of Warranty upon Sale to Plaintiff—Fictitious Entries in Book—Judgment.—Where a first cause of action against the debtor corporation was upon an assigned claim against it, and other causes of action were based upon its breach of an express warranty upon a sale of its property and assets, including a book of accounts warranted to be due, in which false entries were made in the sum of $1,047.75, owing to discounts to be made to its sellers on settlement, - judgment was properly entered upon the assigned claim, and each cause of action, with interest, against the debtor corporation, and the corporation owning its stock when the causes of action arose.
Id.—Effect of Breach of Warranty to Plaintiff—Knowledge of True Condition of Accounts not Imputable—Knowledge of Promoter—Adverse Interest—Forgetfulness.—Where the warranty was not implied, but solely expressed, the previous knowledge of its promoter, who was also at the time of promotion adversely interested in the selling corporation, is not imputable to it, and where it was not present to his mind when the corporation plaintiff was organized, and he joined with it as its director when the sale to plaintiff was consummated and the warranty was made upon the purchase of its accounts and assets.
Id.—Statement of Ownership of Property Sold—Averment of Ownership.—The statement in the bill of sale that the property sold was that owned by the seller is not only descriptive of the property, but is in addition an averment of actual ownership.
Id.—Effect of Discount Agreements and Guaranty.—The discount agreements had the effect to establish the claim on the part of those entitled thereto against the property sold to an amount equal to that found by court as fictitious entries, and by the express terms of the guaranty plaintiff was protected from the result of such claims when so established.
ALLEN, P. J.
The first cause of action is based upon an assigned claim due plaintiff from the Newport Lumber Company (a corporation), the debt being contracted within three years before the commencement of the action and at a time when its codefendant, the Consolidated Lumber Company, was the owner of all of the capital stock of the Newport Lumber Company. The other causes of action were based upon the terms of an express warranty growing out of a sale to plaintiff of the assets of the Newport Lumber Company situated at Redlands.
The record discloses that one Kief haber was the managing agent at Redlands of the Newport Lumber Company (hereinafter referred to as the Newport Company), which corporation was a subsidiary of its codefendant, the latter owning all of the capital stock of the former; that Kiefhaber, having in contemplation the organization of an independent corporation which should acquire the Newport Company’s business
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at Redlands, entered into preliminary negotiations relative to such purchase. This resulted in the execution of an instrument signed by the vice-president of the Newport Company, by the terms of which the Newport Company proposed to sell its property and lumber yards at Redlands, owned by it, including a large amount of uncollected accounts, for the aggregate price of $38,800; the receipt of $350 from Kiefhaber was acknowledged, and the balance was to be paid in cash and notes of the Kiefhaber Lumber Company; a bill of sale to be made when the cash payments were made. It was also stated in such proposition that possession of the assets so sold had been delivered. Kiefhaber accepted these terms, and accordingly executed his note for $350, and proceeded, in connection with other parties, to organize plaintiff corporation, upon which organization plaintiff caused to be paid the cash amount stipulated in such written proposal, including the amount covered by Kiefhaber’s note of $350, and a bill of sale was duly executed by the Newport Company to plaintiff. In this bill of sale the Newport Company stipulated that it was selling the property owned by it at Red-lands and covenanted and agreed to warrant and defend the sale of said property, goods and chattels against all persons claiming or to claim the same. Among the items entering into the gross purchase price was one of accounts due the Newport Company, amounting to $16,750.20. This sum was shown by the books and a balance sheet present before the parties at the time of the contract to be due the Newport Company from various customers on account of goods theretofore sold and delivered. These books of account so shown were in fact inaccurate in this, that while the goods had in fact been sold and charged upon the books, the same had been sold under an agreement that upon payment thereof a deduction by way of discount should be made by the seller. This discount agreement was previously known by Kiefhaber, but was overlooked, and he did not have in mind the same when the sale was proposed or made.
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