Lucero v. Colorado Life Insurance

Opinion by Mr. Justice Denison. The plaintiffs brought suit in the District Court of Las Animas county against the Colorado Life Insurance Company and Plested, receiver thereof, stating two causes of action and praying the court to ascertain the exact sum due the receiver on a certain note of $12,000, and that upon the payment of such sum the receiver cancel and surrender the note and the mortgage securing the same. The first cause was based upon alleged fraud in procuring the note, and the charge was that misrepresentation had been made as to the affairs of the defendant company, stock in which constituted the consideration for one-half the note. The second cause of action was upon neglect or wrongful conduct of the corporation itself, and the receiver, in failing- to collect certain notes due the corporation. The. case was 'tried to the court. Upon the evidence of the first cause of action the court found there was no fraud. As to the second cause of action, the court held the facts alleged to be immaterial, excluded testimony concerning the same, and entered a decree for the defendants. The testimony for the plaintiffs showed that in April 1912, agents of the corporation persuaded the plaintiffs to subscribe for 2,000 shares of stock in the company at $3 per share and to borrow of the company $6,000 and in consideration thereof to give their note for $12,000 dated April 25th, 1912, payable ten years after date, secured by mortgage of even date, on a large amount of ranch land in Costilla county. The company never did any insurance business. The money, proceeds of the stock which was sold, was wasted, if not worse, and the company shortly became insolvent. No part was paid of the $100,000 required by statute to be paid to the commissioners of Insurance. The plaintiffs [324] had notice of the condition of affairs at least as early as April, 1913. On the 28th of September, 1913, the receiver was appointed. The plaintiffs took no action but paid interest to the receiver until September 30th, 1915, when they brought this suit. They seek, in effect, to rescind their purchase of stock. If they were to rescind it, it was their duty to act promptly, especially in view of the fact that the company during their delay had become insolvent and its estate was in process of administration by á receiver. Brown v. Gordon-Tiger Co., 44 Colo. 311, 322, 97 Pac. 1042; Central Life Association v. Mulford, 45 Colo. 240, 244, 100 Pac. 423. Their delay was too great to permit rescission. The court’s holding concerning the second cause of action we think is correct. However, we think that portion of the note the consideration for which was stock in the proposed company never became and could not become the property of the company until $100,000 had been deposited with the commissioner of insurance as required by §3117 R. S. 1908. In Greiger v. Salzer, 165 Pac. 240, this court held that the commissioners appointed under that statute were charged with the express duty as trustees to collect the subscription price of stock, preserve it, pay $100,000 of it to the commissioner of insurance and turn the rest over to the company when the company began business; but that if they failed to pay the $100,000 over to the commissioners of insurance, the proposed company could never become a company to do business, and in such case the commissioners must pay back to the subscribers all the money they had received from them. If follows from this, and indeed the opinion in Greiger v. Salzer expressly says, that the subscription price of stock is the property of the commissioners and not of the company; and it further follows that the receiver has no interest in that part of this note the consideration of which was stock, — and, since it is the price of stock in a proposed company which has never come into existence, — it must be returned to the [325] purchasers. We cannot, however, direct that that order be made because the commissioners are not parties hereto, but we think that the plaintiffs should be protected by injunction against the transfer of this note to any innocent purchaser. In this case that is all the relief that can be given them. When the note matures if the commissioners attempt to collect their half of it, the defense justified by the case of Greiger v. Salzer can be set up with other defenses, if any. If it becomes necessary to clear plaintiffs’ title, some proceeding can be begun against the commissioners. We do not overlook the fact that the note is made directly to the company, but, under Greiger v. Salzer, the company must be regarded as no more than the agent of the commissioners. The judgment is reversed, with directions to issue the injunction, above suggested, forthwith, and to proceed in accordance with this opinion. Garrigues, C. J. and Scott, J. concur.