Moore v. Lent

Paterson, J. This action is based upon the following provision of the code: “ The directors of corporations must not .... create debts beyond the subscribed cap[503]ital stock.....For a violation of the provisions of this section, the directors under whose administration the same may have happened (except those who may have caused their dissent therefrom to be entered at large upon the minutes of the directors at the time, or were not present when the same did happen) are in their individual and private capacity jointly and severally liable to the corporation, and to the creditors thereof in the event of its dissolution, to the full amount of the .... debt contracted.”

The defendants were members of the board of directors of the South Mountain Consolidated Mining Company, a corporation organized under the laws of this state, and having a subscribed capital stock of ten million dollars, divided into one hundred thousand shares, all of which were issued as full-paid stock in part payment of the mines and other property of the corporation. The officers of the corporation borrowed large sums of money from the plaintiffs, who were partners in a banking business at Silver City, Idaho. All of the moneys borrowed by the corporation were repaid to plaintiffs, except the sum of $46,953.50. In February, 1876, and while this amount remained unpaid, the corporation became insolvent. A petition in bankruptcy was filed in the United States district court at San Francisco, the usual assignment was made, and the plaintiffs duly proved and filed their claim, but never received any dividends, the receipts from sales having been consumed in the payment of dividends to preferred creditors. During the months of July and August, 1875, when the indebtedness to plaintiffs was created, the corporation was in debt about two hundred thousand dollars. The defendants were present at all meetings of the directors when the indebtedness was incurred, and none of them caused any dissent to be spread upon the minutes. The court found that “ the debt alleged in the complaint was not, nor was any debt, created by said corporation beyond its subscribed capital stock.” The court held [504]that the defendants were not liable to the plaintiff in any amount, and judgment having been entered in their favor, plaintiff moved for a new trial, which was denied. The appeal is from the order and from the judgment.