| Show HOGGAN CASE AGAINST PRICE RIVER irrigation BACK TO DISTRICT COURT from silt salt lake tribune the supreme court of utah yester day sent suyeme back aek t to a the d district I 1 strict court the ease case of janee james W ile agan against the price river irrera irrigation t on com company thoa thom austin george 0 e A smith albert A fally bert smith and ad joha Y org S smith appellants and the pingree national hank the utah banking company ira D wines 11 II A enright law right thomas we web 4 charles Cli arlea T ul C george 8 auerbach Auerba eh charles 9 13 11 burton 0 n A B rockhill till and william koylan roylan e the last croup group of defend ants representing interests against whom the suit uit had axen ax en dismissed in the di district brict courts was suing for nearly deficiency elency judg ment and interest and obtained judg ment the appellants in the present proceedings th the order of the he supreme court is that the lower court permit hoggan if he desires to amend his complaint and permit further evidence to be in produced trod as to the solvency of the arri ration gation lands company ill 1903 1908 and 1909 TI tho c lower lowe r court is ordered to find that the fo following I 1 lowing directors took water chares or stock belonging to the irrigated land lands company for money due them then at a time when they had no right to b preferred creditors john Y smith sharee shares thomas austin hares shares albert smith 1800 As to george A smith the judgment of the lower court is in rever reversed As to john 1 smith aith thomas austin tal M bert smith it ta rev reverse arse I 1 with diree iff eions to proceed d further urther in the aso as a indicated andl to in tile decision of tilt su preme court if hoggan desires to amend his complaint in all other re amed poets the j of the lower court is affirmed and costs aro are taxed against the price river juver irrigation cont coroi any lany makes charges the substance of corn COM plaint is that in 1006 1906 ho lie sold the main moth reservoir system with buildings and personal personal property perty to the utah ir it tto Vo riga and power ower company for 20 on wl alieh I 1 a partial partia company payment of vua was ina malf le that on july 22 1 v 1907 the Irrig irrigated atI innis I 1 an la company was as in and took over the property of the utah irrigation and power company ani assumed its debts in eluding claim that in jan uary 1110 the Irrig irrigate atel I 1 lands corn com pany signed promissory prom lesory notes in hog ilog gans favor secured by shares of stock in the price river irrigation compano aid ta tie e Abril abriham lain irrig tion coal company any these notes were not paid when due obtained judg ment sold the coll collateral attral for and mentin that in one case the deficiency judg ment meat amounted to 90 and in the tho other the judgment was for 88 2 82 executions were returned wholly unsatisfied Ilog grin further alleges that janu ary 4 1910 john Y smith van D spaulding thomas austin george A smith thomas webb charles tyng william D livingston david morgan albert smith and frank nelsen con the board of directors and managing of officers of ahm irrigated lands company cora pany and owned owned and eon con tried substantially its entire out standing stock at the same time complains john Y smith george A smith thomas aus tin william D livingston albert smith fra prank k finelsen ani ant david mor gan gin con constituted u ted the directors and man aging officer officers and agents of the price river irrigation compa company and owned substantially nil all of its capital stock motive impugned between august 1 1009 and janu ar ary 13 1911 ull u the defendants to this suit hoggan cL charges arges intended to de fr fraud an d him of his claim against the ir ri righted gate lands company and with in tent to delay and defraud its creditors and wrongfully to appropriate to them selves all the assets of the irrigated lands company com piny made in its name various 61 pretended contracts with the price elver river irrigation company and the oti er defendants whereby the irrigated lands company conveyed with ut any adequate consideration oil U the property rights and franchises of the irrigated laul company to the price river tir company and nd to the other defendants flo gian charges that by reason of these those transfers the irrigated lands company was rendered bankrupt he ile says atiat tl at tho the property trans terre I 1 was worth at least and was mere than stalle an la to pay the debts owing to fit him at he ile asserts that the stock in tho the price river irrigation company so transferred had in october compana 1908 been een rl placed od in trust with william D liv lingaton ton for the purpose of paying debts of the irrigated land cowl company of blikh his claim WK wai one this adf h 5 trust he saya at the timo time of the trans fr per had not ter terminate 1 contends that the transfer of the price river irrigation company stock waa was a violation of trust and that the defendants are li liable a ble to ae ac count for the property so sold ho argues thit the individual directors of the irrigated land lands company are personally liable to him nal an I 1 other creditor creditors lor the value of property dis dilated la im violation of trust hoggan sustained after a trial the caso case was ne as to all defendants excell excel irrigated lands company price river irrigation company thomas thom an austin george A smith albert smith and john Y smith wao wl 0 with tho the exception of the tile irrigated lands company are the ap pel 11 rants lants all issues were found in 1 favor vor of hoggan among other thing tie district dix triet court concluded I 1 that I 1 the attempted transfer to the th e price river irrigation company of the property of the tile Iri irrigated gated company lands ads corn com any was fraudulent and void and he taking liking ol 01 said property was a wrongful appropriation and conversion of eail said property ai as against the plain tiff iff herein ani ant that as alast said plaintiff eald said property iro perty is fie property of the tile Ii irrigated gated lands company and subject ta to plaintiff plaintiffs judgments that a special master hould be appointed to take over nd sell 11 so much of the real and personal property to wrongfully appropriated a P by the price river arrs irrigation 9 pta 1 company a as clar may claim be required to pay p plaintiffs tl f V that la in the ecat cat the proceed proceeds of aid said bale sale are insufficient to P pay ry 1 the he claim claims in full the plaintiff ie entitled tat to personal jud judgment ament for or euch suel h deft clency efte y as may ina y against the brict I 1 river re irrigation c 0 m pany john 1 smith thomas A austin u st 1 n and george A baileh that all tte tie pirty arty of 0 the tile arri gated lands company waa as transi transferred erred to the price icher irrigation arril aaion company who fused to pay plaintiff the acourt amount t due him is buted of eav says the supreme court 0 f th tae state in fact when the tart last re of the ir it righted lauds lands loelan com panya Is a assets was transferred to the arf price river I 1 ver irn ration gation ca company piny it wa was stipulated b berwein elwe ri the two cor corpora pors eions that the price river irrigation company did not assume or agno to Is I 1 a any of the obligations or edness of the irrigated lanis corn com fl a u y 1 it t is s also I 1 40 con conceded coded that the price rl e ri river v er irrigation company never had any prop arty save that received from the arri irrigated atad lauds lands company the management of one corporation mav organize another and transfer its property pro ery to the new corporation but if it t does oes c so even with the con bout sont of all the stockholders stock hollers lers the new nw cop corporation oration is liable for the debts of th ether to the tile extent of the tile value of the property recel vou claim substantiated it ie is chalin d 1 by appellants alls the supreme wurt that the company was organize org anise I 1 for the pur purpose se of die din buting tn water among farmers ers 10 1 whom the price kraeer hares shares wore were to be sold nothing in fit the ree ord that effectually contradicts thil this cfall instant of bailing a scheme to defrain d as claimed by plaintiff it seems that it was under the circum stances stance at that time a sensible and businesslike plan and perhaps as practical as an that eol could have been evi ed these transactions stripped the tile irrigated lands company of all its property but the evidence as we read it does not warrant the eion sion that there was fraul frau I 1 or bad faith by the directors or that there was an sit intent that such conveyance conveys 1 be of alvau a tage to these dl di rectors or that they did or could make inelda any profit thereby except incidentally to as a stockholders with the axce exception n of john Y smith the atio individual were not dirce tors of the arri irritated bated lands company during 1908 and for that reason if fur for no other they fallout I 1 not bo be held accountable ace 0 for any illegal or ultra vires acts sets of the tile irrigated landa corn com I 1 any dui duding ing that year 11 after A ft er reviewing further r financial transactions of the irrigated I 1 lads company the supreme court in ift part it is s evident that at that time the director directors and stockholders of both companies nice had high hopes that te ve shares of stock and also land could be sold and that sufficient would be realized to pay the fifteen notes for each heretofore mentioned and to complete the reservoir system it if these expectations had been realized the project probably would lave been completed and nd creditors would have been pat pit I 1 but the stock was not pal ably ablo fhe rho 10 received from front tie 11 e in notes lial list in 1 the mean me an time been spent the evidence does not show any waste of this money or that tits t it wa was not expended for proper I 1 purposes all the money was in the development of the tile price river system neither fraud bad faith nor culpable negligence was shown on the part of the directors alo wl ere are deafen cants ants here george A smith albert smith mith and thomaa thomas austin were not directors until the money cd ed from the sale of so called trust stock stork bad been expelled and they certain ly could not be held liable on the tile theory on which the tile district court held them accountable principle outlined it Is well nettled in thia this jur fadle ton tion that the directors are from preferring debts duo to them selves when a corporation Is anol vent when the notes referred to be came due all of tho the individual deafen cants were given stock for the mon nion e ey tr paid out by them for the tile corporia tion on that was in the fall of 1909 defendant george A smith ree receive elvel shares of stock in fit consideration of gid paid by him for the company but at fiat at time george A smith was not a director of tho the irrigated lands company and hence had a right to ne tie capt a pr preference eferen whether the corn com pany was inso insolvent I 1 en t nt at that time or not thomas austin who aleo also pall a note on which ho he had becat gu guarantor a cantor was a director direct nr at the time and if the irrigated lands landis company was insolvent be lie should account for the stock that was received by him when he was both director and credi tor but it is said that he lie was only a guarantor assuming that air mr austin was a guarantor only it would not change the principle involve involved the record shows allows that john V smith was at all times a director drector of both corporations and that he be received COO shares of stock in payment of hie his claim against the tile irrigate lan Is coal corn any the court foud that al bert smith rLee etc elved ived shares of stock albert smith did not pay a guarantor but purchased three notes of each on september 21 1909 paying IP stok la Is accepted albert smith smiths e testimony was that he had never been able to collect on the notee notes because as ie le opposed supposed the irrigated lands did not have lave the money to I 1 ay him I 1 finally he was forced to take 1800 hares shares of the water stock or nothing lie ile did not conci consoler con siler ler the stock of murli much value lie sold some of it within sixty days ai 11 a hare share aa ail a il I 1 he bad had c shares in his own name at the time of the trial when mr aft smith comments the supreme court bought the three notes he was not riot a director ant an 1 if the corporation wai was willing t to 0 take the unusually liberal discount of we fall to perceive la in the transaction anything that would sub eject him to the charge of fraud or ot dis din hou eaty Ilo however wever in 1000 1900 when he presented the purchased autee for ray ment 14 I 1 wa was a director and if the company was tax then ina avent lv ent he was not justified Jolli fied in accepting the 1800 and them for the 1 at 0 of f dwyte bt due him ami ali thus 1 ot other b er er tro ditora to of a f fund t d to which they h y were primarily ac may ny be possible po seible ti that it mr air mith bad had no s of the inso insolvency of 01 th the it I 1 r land lands company it it W in solvent but it will not do 10 to eay any that be he did not know the financial to rondi 11 dl tion of a cor corporation ration of which he lie was a director it was hie ill s duty to know and he is presumed to h have 4 v k known 1 lo 10 the financial status of the c corporation 0 r por a alon n insolvency quenon Que the qu cation hero here arista whether th the O 0 Irrig irrigate atel 1 land lands company wax as in PO or in imminent danger of in solvency in 1909 john Y smith a director of both corporations from tu th dates of hi incorporation and continuing a a a dir thereafter ti that tho the irrigated lands company was in solvent when it conveyed the mam moth reservoir to the price biver river irrl ration gation company ind that it wa was in solvent from october 24 1908 1909 according to his testimony ter the Irrl gaid id landi lands company waa was an adventure in IA high finance and was little more taza a wild speculation with arete that w were e re at all time timm dubious in its an aft to the amended complaint the tile I 1 irice rice river irrigation company al at leges that ou oil january sa 1910 01 the tile irrigated lands company oni pany was indebted indebted to various creditors in the tile sum 0 ja and aa therefore Ue tLe bankrupt on the other aud v vi fin lind in plaintiffs amended coni plaint the tile statement that the tile property ir esfer red led to the price rover irrigation om pont patty was worth and still ie Is worth 11 the supreme court refuses to direct findings on this thin question ani aul almo oa 01 on the question of the value of price rinar stock or water shares in 1909 though it sugg ests that 1603 16 CO the tile price at which the dinc dirLe tors tori took this tills stock boull be a just basis of liability if the lie irrigated land lands company was Inso insolvent hent ill 1009 tor I or that reason tre the supreme court sends tin tho case came back to to the district dl triet court with directions to inquire it if Ilog gail aarem to ameni his complaint into the matter of the tile solvency of the irrigated lan lils in company in 1008 1908 and and the tile resultant fi friability ability of thy directors of the COM company pally at that time |
