Kehlor v. Chesley Finance Co.

HOUSER, J.

The salient facts upon which the judgment herein and the ensuing appeal depend are that, some four years after the defendant corporation was organized, and during all of which time it had been regularly conducting its business at a profit, it caused an assessment to be levied upon the outstanding paid-up capital stock of the corporation, for the asserted purpose of “conducting business”. In response to such assessment, plaintiff and his assignors paid the same “under protest” and thereupon brought an action to recover from the corporation the amount of money thus paid, together with legal interest thereon. From a judgment in favor of plaintiff, the defendant appeals to this court.

The first point suggested by appellant as a sufficient reason for a reversal of the judgment is, that the evidence adduced on the trial of the action was insufficient to sustain the finding of fact made by the trial court, that at the time when the assessment in question was levied “the defendant corporation was conducting business at a profit and had assets of its own in form and amount sufficient and ample to continue conducting its business at a profit, and that at the time of the levy of the assessment in controversy . . . there existed no necessity for additional funds to pay expenses, conduct business, or pay debts of the defendant corporation”.

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The second point presented by appellant likewise is addressed to the question of the insufficiency of the evidence, and concerns a related finding of fact made by the trial court, to the effect “that the said assessment was not levied for the purpose of paying expenses, conducting business, or paying debts”.

Although not entirely without conflict from other evidence, or all-inclusive in its scope, nor even not without what might appear to be qualifying or modifying conditions—supporting such findings of fact, among other statements which appear in the testimony given by respective witnesses, may be found the following:

The assessment was levied on July 27, 1928, at a time when the corporation had a “liquid working capital” of $23,000; from the inception of the organization of the corporation which occurred in 1924, and “up until the early part of June, 1928, . . . dividends had been earned on the preferred stock of the appellant corporation. . . . During the month of June, 1928, it earned a profit of $1,172.12, and during the month of July, 1928, it earned a net profit of $770.20.” Furthermore, the appellant corporation lent to the Metropolitan Finance Corporation a total of $35,000 between June 7, 1928, and July 31, 1928; of which amount $10,000 was lent on June 7, 1928; $10,000 was lent on July 12, 1928; $5,000 on July 26, 1928; and $10,000 on July 31, 1928. It was also shown that the loans thus made by appellant to the Metropolitan Finance Corporation “were all funds that were not working”; in other words, such loans were all funds of the appellant which it did not require in the operation of its business. Furthermore, it was disclosed that the president of the appellant corporation owned the controlling interest in the Metropolitan Finance Corporation, in which latter corporation he was also a director; that the number of directors of the appellant corporation consisted of five persons, of whom the said president was one, his wife was a second member thereof, and another person, who was identified as the vice-president of the Metropolitan Finance Corporation, was a third member of the board of directors of the appellant corporation. A financial statement and balance sheet of the _ appellant corporation as of June 30, 1928, showed a net surplus of $12,856.15; a similar statement and balance sheet as of date July 31, 1928, showed