Freeman v. Glenn County Telephone Co.

THE COURT

This is an appeal by the defendants from a judgment against the individual defendants in favor of the Glenn County Telephone Company in an action begun by the plaintiff as a stockholder of said corporation, to recover of the individual defendants as directors thereof, for the benefit of the corporation, a certain sum of money alleged to have been distributed to the stockholders by the said directors, constituting the entire capital stock of said corporation, contrary to the provisions of section 309 of the Civil Code. On May 21, 1917, the court below sustained a demurrer to the amended answer of the defendants and, the said defendants failing to amend, their default was duly entered by the clerk. Thereafter, on August 13, 1917, the cause came on for disposition by the court and, notwithstanding the default, the defendants appeared by their attorneys. No additional pleadings were filed, however, and the court proceeded to make findings upon the facts stated in the complaint. It appeared from certain exhibits filed with the said answer, constituting transcripts of the records of the defendant corporation, that the sums given in the complaint were inaccurate in small amounts. The findings constituted a mere reaffirmation of the allegations of the complaint giving the corrected figures instead of those stated in the complaint. The findings were not filed until October 19, 1917. In pursuance thereof, on October 19, 1917, judgment was entered, directing the said individual defendants to pay into the treassury of the said defendant corporation the sum of $40,833.60 in money, and certain bonds for ten thousand dollars, or, in case the bonds could not be returned, to pay into the treasury

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the said sum of ten thousand dollars, and that the plaintiff recover from the individual defendants his costs.

The legislature of 1917 enacted an amendment to section 309, which took effect on July 27, 1917. This was during the time the court below had the matter under advisement. By this amendment it was provided that “the liability of a director of a corporation heretofore incurred shall not exist in any case where, all of the debts and liabilities of the corporation to creditors having been paid, the capital stock divided, withdrawn, or paid out constituted all of the capital stock of the corporation and the same was paid out, withdrawn, or divided with the consent of all of the stockholders to or among themselves.” (Stats. 1917, p. 657.)