Pyper v. Salt Lake Amusement Ass'n , 20 Utah 9 ( 1899 )

Bartch, C. J.,

after stating the facts, delivered the opinion of the court.

Under the facts above set forth the appellant contends, among other things, that both the plaintiff and her assignor are estopped from now insisting on any demand, against the corporation, for compensation for the services in question. This contention appears to us to be well founded. Those services were performed, by the assignor, as an officer of the company, without any stipulation for compensation. As was said and admitted by counsel for the respondent in their brief, “he was an officer of the company and was evidently supposed to do whatever was necessary to be done. He continued his various duties as long as he was an officer, and when his official term ceased his employment ceased also.”

It seems the other officers likewise performed duties, but it is not shown that any one of - them ever claimed or received compensation therefor. Nor does it appear that the assignor was to be an exception. But whether, under all the evidence, he would have been entitled to compensation, notwithstanding there was no stipulation therefor, had not, through his own conduct, the rights of third parties intervened and rendered the payment of his claim inequitable, is not necessary to decide. It is shown by the evidence that the services, whatever they were, were performed without any agreement, as to whether or not the officer or assignor should be compensated therefor; that he was present at the meeting when the affairs of the corporation, which was insolvent, were discussed, and signed the resolution which provided for the payment of the entire indebtedness by the issuing and sale of new capital stock, upon the calling in of the old; that when he, with others, was notified that all the debts of the corporation had been paid by the sale of the new stock, he joined with, such others in directing "the distribution and disposal of the remainder of the stock, without the slightest intimation that the corporation was indebted to him. He thus either negligently or willfully suppressed his claim against the corporation, and, after having lulled innocent persons into security that the stock which they were purchasing would be free from incumbrance, participated in the distribution of the very stock, which it would have been the duty of the board of directors to sell in payment of his claim, if it had been found valid. Having thus suppressed the true state of affairs of the corporation, it is clear that if he himself were suing upon his claim he could not be permitted to profit at the expense of innocent third parties who purchased stock at full value. He certainly could not be allowed to retain the stock, and also to recover upon his claim. How.then can it be successfully contended that his assignee can sue and recover upon the claim, and he retain the stock which ought to have been sold in payment thereof? The as-signee stands in no better plight than the assignor. What will estop him will estop her. It is idle to say that the purchaser of the stock, which was sold to pay off the indebtedness of the corporation, would not be injured by a recovery in this case. Their stock would be depreciated to the full extent of the recovery, and this would work an injury of which the assignor’s inexcusable wrong or negligent conduct would be the efficient cause. Of this there can be no reasonable doubt. By his conduct the assignor represented to the purchasers that he had no claim against the corporation, and that their stock would be clear-of incum-brance. These representations were material and calculated to induce persons to purchase the stock, and if loss results because of them, it is more just and equitable to cast the burden of the loss upon him in whose acts and conduct it originated, than upon the purchasers of the stock who relied.on the inducements held out to them that the entire indebtedness of the corporation would be paid by the sale of stock. The taking of the stock by, and conduct of, the assignor, under the circumstances, were calculated, even if not willfully designed, to mislead, .and are good grounds of "estoppel. Under the circumstances it was the duty of the corporation to protect the stockholders from the injury which would result from the assignor’s own wrong, by refusing to pay the claim out of the corporate assets.

The assignor was not only standing by and participating in matters affecting the liabilities of the insolvent company, but, if his claim was well founded, actually suppressed the true state of affairs at a time when it was his duty to make a disclosure,’ and he and his assignee are therefore effectually estopped from asserting the claim against the corporation. Herman on Estoppel and Res Judicata, Secs. 952-954.

Having reached the conclusion that the respondent is estopped, because of the acts and conduct of her assignor, from asserting the claim in question against the corporation, it becomes unnecessary to consider the other points .presented.

The judgment must be reversed, with costs, and remanded with directions to the court below to dismiss the action.

.It is so ordered.