Evening capital news. (Boise, Idaho) 1901-1927, 1912-12-15
LIABILITIES OF
DIRECTORS IS AN
ISSUE IN ACTION
Indebtedness of $4,000 Is
Involved in Kootenai
County Case Judge Dunn
Is Reversed.

ration and Indebtedness of $4,000 or
that of Fred g. Stoltz versus J. 7
Scott ct al, appealed from the dis
trict court for kootenai county, the
supreme court of this state through
an opinion handed down late yester-
day reversed the opinion entered by
Judge H. n Dunn, which sustained
the demurrer t. the complaint aud
dismissed tn ease. The supreme
court sets this Judgment aside per
hitting the defendants to answer,
The action represented in this case
was 10 recover alleged Illegal diri-
bends paid to the directors of the con-
Germ involved The opinion is writ
ten by Justice sullivan and concurred
in hy Chicf Justice stewart. 1t APP
pears from the complaint that Stolta
MAS the duly appointed and qualified
receiver of the VIM Barr CLANCY So,
It'd. q corporations ana brought ac-
ton against Scott, Barr, Vim, CLANCY
and Barton; Barr and Vim did not
appear but the other defendants APP
peared and filed demurrers. The ac-
ton was brought to recover several
sums Of money aggregating $685.,
with interest.
Setting forth the additional facts in
the case Justice sullivan says;
Receiver Brought Suit
1T is alleged that said corporation
is indebted to numerous individuals
and corporations in the sum Of s40,-
600: that the corporation is insolvent
and unable to meet It's indebtedness
that said corporation ceased TO do
business on OF about July -, 1910, and
at said time converted all of Its bust
ness and property into cash and paid
the proceeds thereof pro rata among
its creditors that said corporation has
not elected any officers since said
time and has not operated under Its
franchise as a corporation since that
date. and that said corporation has
abandoned the business for which 1t
Was incorporation and to all intents
ana purposes is entirely broken up
and dissolved and that there Is no
property or assets Of said corpora
tion out of which the creditors can
be paid.
In February 1912, said receiver
made application to the proper court
and was granted the right to bring
!. this suit against the above-named
defendants for the recovery Of dtyi-
dcnds alleged to have been illegally
Of said corporation Then follow al
legations &c The annual meeting Of the
stockholders of said company and Of
the directors and that on Jan. IA, l9oS,
said directors at a meeting OF the
board Of directors of said company
declared and ordered paid a dividend
Of 10 per cent on the capital stock Of
said company thai tire dividend so
declared amounted TO the sum Of $3.50,
that no part Of said dividend was paid
from the surplus profits arising from
the business of said company and at
tho time said dividend was declared
and paid there We're no surplus prof
It's Of said corporation and that all Of
said dividend was paid out of the cap
ilal stock of the corporation; that said
dividend was paid under the admins
tratinn Of said defendants as diree-
tors Of said company, and that none OF
said directors caused their dissent
from theS declaration or payment Of
said dividend to be entered at Largo
upon the minutes Of said directors.
Would Collect from Directors.
"All of the directors We're present at
the meeting at which the dividend
was declared, approved and ordered
paid: that all Of said directors cen-
serted thereto and voted therefor:
that ~ reason Of the payment OF said
dividend out of the capital stock, life
said corporation and it's creditors
sustained a loss amounting to sSS95.
that the creditors Of said corporation
first discovered and learned that said
dividend was nor paid out Of the sur
plus profits of said company IN or
about March 80, 1911. and that neither
..l,I4,. i tznf4
ton has taken any action To recover
said s3sa5 from said directors. or any
part thereof that this action u
brought for the purpose Of collecting
from the directors of said corporation
tho money illegally paid out as dtvi-
dcnds for the benefit and ON behalf
Of the creditors Of the corporation
Then follows Il prayer for Judgment
for said amount
Syllabus of Court
The syllabus OF the court is as fol-
lows:
Under the provisions of sector
e73e. revised codes, the directors o.
a corporation are prohibited frou
making dividends except from the sur.
MUS profits arising from the business
Of the corporation, and the directors
are also prohibited from dividing
withdrawing or paying to the stock
holders or any Of them, any part @
the capital stock, and are prohibited
from reducing or increasing the capt.
tal stock except as in the statute pro,
vided.
q For a violation OF the provision.
of said section Of the statute, certain
directors are in their individual al,
private capacity made jointly and seY
orally liable to the corporation AM
10 its creditors, in event of dissoln
tion. to the full amount of the capita
stock so divided, withdrawn, paid on
or reduced.
3. Section 51s5, revised codes, pro
ytdes that corporation may be dis
solved by the district court upon II
voluntary application for that purpose