200 P. 921 | Or. | 1921
The controversy arose out of the following written contract:
“Agreement Between John J. Serry, M. Syverson and J. W. Moore.
'“The parties agree to organize the Gates Mill Co., a corporation, with a capitalization of $10,000. Each agrees to subscribe and' pay for $2,000 in stock. Syverson and Moore are to pay cash and Serry is to convey to the corporation the entire present plant and equipment, lease, timber contracts, rights of way, goodwill and all other assets, except lumber now manufactured and accounts receivable of business known as Gates Lumber Company the same to be conveyed free of all liens and all debts paid except only the balance unpaid on the contract between Serry and Schroeder Bros. & Co., which balance shall not exceed $3,000.
“As additional consideration for said conveyance Syverson and Moore each agree to pay Serry in cash the sum of $133.33 or $266.66 for both said Syverson & Moore. Serry agrees to satisfy said Syverson & Moore and hereby guarantees that the liens and all outstanding debts, claims and demands whatsoever against or owing by said Gates Lumber Co. and or himself, the said Serry, do not exceed the sum of $3,000 and as collateral security for said guaranty agrees to deposit with and hereby assigns to said Syverson and Moore 2,000 shares' of stock in said*517 Gates Mill Co. Serry acknowledges receipt of $90 on account of the above additional consideration.
“Gates, Oregon, July 5, 1918.
“M. Syverson. (Seal)
“By H. Syverson.
“John J. Serry. (Seal)
“J. W. Moore. (Seal)”
This written contract was preceded by an oral agreement, or at least by a supposed oral agreement, and certain occurrences which must be first explained before this controversy can be fully understood.
Schroeder Bros. & Co. owned a sawmill near Gates in this state and contracted to sell it to Serry for $3,500. Serry paid $500 on the purchase price, took possession of the property pursuant to the terms of the contract of sale, and agreed to pay the balance at a specified future time. O. C. Dike owned the land upon which the sawmill was located; but Serry held a lease covering the land. Serry did not own any standing timber; but he had a contract which enabled him to cut timber standing on lands owned by E. K. Cramer. Serry and a partner operated the mill for a period of time not definitely shown. Serry acquired the interest of his partner and continued to operate .the mill alone until June 23, 1918, when negotiations, which had been begun only a few days previously, culminated in an oral agreement, or at least a supposed oral agreement, between the plaintiffs and the defendant. Serry and his partner and also Serry as sole operator of the mill did business under the assumed name of Gates Lumber Company.
M. Syverson is the wife of H. Syverson; the latter acted throughout the negotiations as the agent of the former who it may be added was apparently the moneyed one of the two. H. Syverson and his wife
The plaintiffs caused articles of incorporation to be signed and filed with the proper officers on June 28th for the incorporation of the Grates Mill Co. with
On July 5, 1918, H. Syverson, Moore and W. B. Shively, an attorney who was representing the plaintiffs, met with Serry at his home near Grates for the purpose of preparing the necessary legal papers. At once it developed that the parties either had not thoroughly understood each other when they parted upon June 23d, or else there was an unwillingness on one side or the other to abide by what had been orally agreed upon. The plaintiffs claim that each of them was to subscribe for 2,000 shares of stock and that the defendant was to subscribe for the same number of shares. Serry testified that the plaintiffs were to pay $5,000, or $2,500 each, into the treasury for the stock received by them; but the plaintiffs say that each of them agreed to pay $2,000 and no more. We understand, not from Serry’s pleading but from his testimony, that Serry admits that it was finally agreed that he was to receive 2,000 shares of stock; but we also understood that he claims that he was to receive something more than 2,000 shares of stock for his interest in the sawmill property. There is evidence to the effect that on July 5th Serry insisted that he was entitled to $3,000 for his interest and that each of the plaintiffs should pay $2,500 into the treasury of the corporation. The plaintiffs claimed that the parol agreement made on June 23d provided for the issuance of 2,000 shares of stock to each of the three parties to the suit; that the defendant was to transfer his interest in the sawmill property in payment.for his stock; and that each of the plaintiffs was to pay $2,000 into the treasury of the corporation for his or her stock. There is also evidence in
"When H. Syverson, Moore and Shively returned from supper, all the interested parties got together and proceeded to take the necessary steps to completó the organization of the corporation. M. Syverson, through her agent H. Syverson, subscribed for 1,999 shares of stock. H. Syverson subscribed for one share; Serry and Moore each subscribed for 2,000 shares. Serry and the other subscribers signed a written waiver consenting that the first meeting of stockholders be held at 9:45 p. m. on July 5th. At this first meeting of the stockholders, by-laws were adopted and the two Syversons and Moore were unanimously elected directors.
In addition to taking part in the organization of the corporation, at some time after supper Serry
“The entire present plant, equipment, tools, lease, timber contracts, rights of way, goodwill and all other assets except only the lumber now manufactured and accounts receivable of Gates Lumber Co., a business now owned entirely by me, free and clear of all liens, claims, demands and debts whatsoever, excepting only the unpaid balance not exceeding $3,000 of the contract between myself and Schroeder Bros. & Co., dated July 20, 1917.”
According to the affidavit made on July 5th, Serry owed the aggregate sum of $2,168.82 to twenty-three creditors in addition to the balance of $3,000 remaining unpaid on the contract with Schroeder Bros. & Co.
H. Syverson and his wife and Moore paid to the corporation a total of $4,000 in cash for the stock subscribed for by them. A certificate for 2,000 shares of stock was issued in the name of Serry, but was delivered to the plaintiffs to be held as security for the guaranty contained in the contract of July 5th.
Serry had a contract with "Weaver Clark under the terms of which the latter had done the work of delivering logs at the mill. According to the affidavit made on July 5th, Serry owed Clark $490. However, on July 8th, three days after making the affidavit, Serry confessed judgment in favor of Clark in the sum of $1,402.50. A writ of execution was immediately issued. The sheriff levied upon the mill prop
In their complaint the plaintiffs recite the contract of July 5th, narrate the circumstances connected with the Clark judgment, and then, based upon the contract and the purchase of the Clark judgment, pray for a decree against Serry for $1,000 and for a sale of the shares of stock held by the plaintiffs as security.
The answer gives the defendant’s version of the oral agreement, and then proceeds with averments of fraudulent representations. According to the answer it was agreed that the plaintiffs and H. Syverson would organize a corporation to he known as the Gates Mill Co.; that stock should he issued—
“to the amount of $6,500, $2,133 of said stock to be issued to defendant for a portion of his interest in the mill and the remainder of said stock to be issued to plaintiffs and the said H. Syverson; and said plaintiffs and the said H. Syverson were to pay the*523 said defendant the sum of $333 as the difference between the value of his equity in said mill and the amount of stock to be issued to him.”
It will be recalled that, besides the balance of $3,000 unpaid on the purchase price of the mill, the defendant owed different creditors debts, aggregating $2,168.82, which he had incurred in the operation of the mill. In the answer the defendant avers that the plaintiffs and H. Syverson agreed immediately to advance the necessary moneys for the payment of this indebtedness, and that it was further agreed by all parties that the plaintiffs and H. Syverson should repay themselves by selling the manufactured lumber then on the yard at the mill and by collecting moneys due on lumber already sold, and after they had repaid themselves the balance should be paid to the defendant. The answer continues by alleging that—
“at said time it was further understood and agreed that the stock to be issued to defendant in said corporation should be retained by plaintiffs and the said H. Syverson as additional security to protect them in the repayment of the moneys advanced by them to pay up said indebtedness referred to herein.”
The answer gives an account of the alleged fraud relied upon by the defendant. It is averred that the plaintiffs, H. Syverson and their attorney—
“came to this defendant, and falsely and fraudulently represented to this defendant that they desired to have defendant make an assignment of the stock of said corporation to them, and that the agreement mentioned in paragraph two of the amended complaint herein (the contract of July 5th) was such an agreement and that it had for its sole purpose the assignment of said stock, and further represented that the same was entirely in accord with the oral agreement theretofore entered into between the parties, and then and there pretended to read said agree*524 ment to this defendant, hut in doing so, misread the same, or did not read it to this defendant as it now reads.”
The defendant alleges that he did not know that the name of H. Syverson had been omitted from the contract; that he did not know that the—
“agreement contained a provision making any guarantee that the claims against the Gates Lumber Company and himself did not exceed the sum of $3,000, nor did said defendant know that said contract contained a provision providing for the organization of said corporation at the capitalization of $10,000, said parties having represented to defendant that said corporation had already been organized at a capitalization as provided for by the agreement set forth.”
It is further argued by the defendant that even though it be held that the contract shall not be canceled, no recovery can be had because: (1) The plaintiffs did not show any damage to themselves personally, but the right of recovery, if any exists, is in the corporation; (2) the plaintiffs did not make the payments which they agreed to make; (3) the plaintiffs did not comply with the Bulk Sales Act; and (4) the
The plaintiffs did not pay to the defendant the full sum of $266.66 as required by the contract. On June 23d Serry was paid $100. Serry expended $10 of this amount for the benefit of the corporation and the remaining sum of $90 was credited to the plaintiffs ■ when the contract was drawn on July 5th. The defendant has never made formal demand for the unpaid balance of $176.66; the plaintiffs have not refused to pay further than to say that the money has been garnished. In the affidavit made by Serry he stated that he owed E. K. Cramer $288.42; but subsequently Serry confessed judgment in favor of Cramer for $714.50. Cramer was paid and the judgment assigned to W. B. Shively, the attorney for the plaintiffs. After the assignment of the judgment an execution was issued and the plaintiffs garnished. We infer, however, that the money which was paid to Cramer was furnished by the plaintiffs; that in reality the plaintiffs own the Cramer judgment; and that the assignment of the judgment was made to Shively merely “to avoid confusion.” The garnishment proceeding, in the circumstances presented here, did not
“that it is not proposed to purchase the manufactured lumber on any accounts receivable which are to be retained by Mr. Serry, and out of which he expects to pay his indebtedness.”
The defendant says that the notice issued on July 6th was interpreted by the creditors to mean that the corporation proposed to buy all the assets of Serry, and that for that reason the creditors became greatly excited and “brought suits referred to in plaintiffs’ amended complaint.” It is,our conclusion from the evidence that if the two notices had been mailed together on July 6th the result would have been the same so far as the Clark judgment is concerned. The Cramer judgment was entered after the second letter was mailed to the creditors.
The decree is affirmed. Affirmed.