Guilfoyle v. Brown

Hooh, J.

(dissenting): I must dissent from the decision in this

case. In my opinion the record discloses sufficient facts to justify the holding of the trial court that the statute of limitations had been tolled and that recovery could be had upon Brown’s debt to the company. The action was by the company against Brown’s personal estate. The original debt was $11,600, for 116 shares of stock issued in 1926. No payments of principal or interest had been made, and the court found that there was due on the account $20,135.67. The essential question was whether Brown had occupied such a position with the company and had exercised such a control and domination of the board of directors as to hold him responsible for failure to enforce payment of the debt. If he did exercise such control and domination there is support for the trial court’s view that the statute did not run during the period in question. ( 13 Am. Jur. 971 ; Greenleaf v. Profile Cotton Mills, 235 Ala. 530 , 180 So. 582 ; 3 Fletcher’s Cyclopedia Corporations, 301; Ryan v. Leavenworth, A. & N. W. Ry. Co., 21 Kan. 365 ; Federal Reserve Life Ins. Co. v. Gregory, 132 Kan. 129 , 294 Pac. 859 ; Adam v. Morgan, 142 Kan. 865 , 52 P. 2d 643 .) It also may be said that the situation is analogous to one where a party represents both sides of a claim and it is generally held that the statute does not run.

What did the testimony disclose as to Brown’s domination? From the date the company was organized and during the whole period of *624 years in question he held and exercised a substantial majority stock control of the company. During the entire period he was president of the board of directors. The company secretary testified that every year, sometime before the annual meeting of the stockholders, Brown would hand him a list of those who were to be elected as officers and directors of the company and that such persons were always elected. He testified that it was Brown who fixed the salaries of the officers and employees. The auditor testified that it was Brown who hired him and fixed his salary. The secretary testified that Brown paid nothing for the stock issued to him and directed that he simply enter a charge for it on the books. Although he made no payment and never paid any interest on the debt, he drew his eight percent dividends regularly from March 1, 1926, to April 1, 1932. None of this testimony was disputed. The defendant offered no testimony whatever against this particular cause of action. In the face of the situation thus revealed, can there be any reasonable doubt that it was Brown and not the board of directors who was running the company and that Brown controlled and dominated the board? Was not the trial court right when it concluded that Brown had held such a trust relationship, and exercised such a control as to make him responsible for protecting the interests of the company? Surely no board of directors, except one which was wholly dominated by Brown himself, would have permitted him to take the company’s stock, make no payment for it, pay no interest, but continue to receive his dividends regularly upon the stock. Brown was a debtor to the company on a debt created by his own act, he had full control, which he exercised, and was in position to avoid payment, which he did. To bar recovery on the debt, under such circumstances, is to use the statute to protect a wrongdoer in his own wrongdoing. I do not think the law and the decisions prevent escape from that result in this case.