Washington Securities Co. v. Goodstein

Mr. Chiee Justice Allen delivered the opinion of the court. This is an action against a director of a corporation to recover for a debt of the corporation. Judgment for defendant, and plaintiff brings error. The action was brought under section 2312, C. L. 1921, which makes a director, and other officers, of a corporation liable for all debts of such corporation that shall be contracted during the year next preceding the time when the annual report should have been made. The complaint alleges the failure to file the annual report which should have been filed within sixty days after January 1, 1923. It is then sought to recover installments of rent due at different times in the year 1923. *345 These were due under a lease, signed by plaintiff and defendant’s corporation in the year 1921. The contention of plaintiff in error is, in effect, that the debt was contracted in the year 1923 because it did not exist until such time, while defendant in error contends that the debt was contracted in 1921, at the time the lease was made, and consequently more than one year preceding the default in the filing of the annual report. The authorities sustain plaintiff in the contention that there was no absolute debt until 1923, with reference to the installments of rent sued for. 14A, C. J. 213; Stieffel v. Tolhurst, 67 App. Div. 521, 73 N. Y. S. 1034. The statute, however, imposes the liability not for debts existing but for debts “contracted” within the year. The question is: When was this debt, springing into existence in 1923, contracted? Obviously it was contracted at the time the agreement respecting it was made, and the only agreement that was made was the lease, and that was executed in 1921. That disposes of the case, and defendant is not liable because the debt, though existing in 1923, was contracted in 1921, which was more than one year preceding the time of the default in the filing of the annual report. The conclusion above announced is consistent with the rule that liability exists where a debt is contracted at the time the directors are in default, regardless of the time of the maturity of the debt, as stated in 14A, C. J. 211, and in Thatcher v. Salomon, 16 Colo. App. 150, 64 Pac. 368. In the case of promissory notes the debt is contracted, not when the notes become due but when they are executed. Sherman v. J. S. Brown Merc. Co., 78 Colo. 335, 241 Pac. 724. The debt arises, of course, at the time it may be collected (Shields v. Loveland, 74 Colo. 27, 218 Pac. 913), but it is not necessarily contracted only at such time. The word “contract” as a verb means to undertake something by contract. In the instant case *346 the contract was made in 1921, though the debt did not mature until 1923. When the debt did mature, it was because of the contract of 1921. There was no error in sustaining the demurrer to the complaint and in entering judgment for defendant. The judgment is affirmed. Mr. Justice Whiteord and Mr. Justice Denison concur.