Anderson v. Burgess

• Decision Date: 19 February 1924
• Parties: ANDERSON ET AL. v. BURGESS ET AL.
• Court: Oregon Supreme Court

223 P. 244

110 Or. 265

ANDERSON ET AL. v. BURGESS ET AL.

Supreme Court of Oregon

February 19, 1924

Department 1.

Appeal from Circuit Court, Lane County; G. F. Skipworth, Judge.

Suit by Glen G. Anderson and another against J. O. Burgess and another. Complaint dismissed, and plaintiffs appeal. Reversed and remanded.

This is a suit growing out of the division of the assets of a corporation, looking to its dissolution, among its stockholders. The corporation was a private corporation, and the parties to the agreement, which was in writing, are all of the stockholders. Very little attention had been paid by the stockholders to the management of the corporate affairs. The plaintiff Glen G. Anderson, although president of the corporation, was not sure whether or not there was a vice president, and could not tell when any formal meeting had been held. The existence of the corporation was not questioned by any of the parties, and no evidence was adduced to establish its valid organization. By the terms of the agreement, which is made a part of the complaint, the plaintiff Glen G. Anderson, having become dissatisfied proposed to the defendant J. O. Burgess that a division of the property be made. He proffered to Burgess the right to designate the division and he would give or take. Burgess declined to do that, but suggested that Anderson could make the division and Burgess would give or take. Accordingly Anderson did propose a division, and Burgess chose the part of the property he desired, and Anderson agreed to take the remainder.

The contract was drawn apparently in the absence of both parties thereto, and was signed by the parties respectively at different times. By the terms of the agreement the defendants Burgess assumed certain debts of the corporation and agreed to pay them. The total amount of the indebtedness was $228.25. Burgess also agreed to pay the Andersons the sum of $400. Burgess got the money that was in the bank belonging to the corporation. The debts not having been paid, the plaintiffs instituted this suit to compel Burgess to pay, so as to relieve the property received by them from the corporation of the burden of the corporate debts. Disputes arose about the contract, and the plaintiffs further seek a reformation and specific performance of the contract. The creditors are not made parties to the suit, and have not made objection to the division of the assets of the corporation. The answer admits the execution of the contract, and sets up as a separate defense and counterclaim the understanding with defendants as to the matters not clearly covered by the contract and certain matters omitted therefrom, and also seeks a reformation of the contract and judgment against the plaintiffs.

It appears from the evidence accompanying the transcript that the plaintiffs had sold some of the property received by them from the corporation, and that the defendants Burgess had withdrawn from the bank the money belonging to the corporation and that these creditors had not been paid. At the close of plaintiffs' testimony the court, believing that the contract was void as against public policy, and that the parties, plaintiffs and defendants, were attempting to dissolve a corporation without following the statute, without hearing the evidence on the part of the defendants, dismissed the complaint. The plaintiffs only appeal.

H. E Slattery, of Eugene, for appellants.

J. S Medley, of Eugene, for respondents.

COSHOW J. (after stating the facts as above).

It is stated in respondents' brief that the court concluded that the complaint did not state sufficient facts, and that the contract made between the parties was void, because against public policy. Respondents have set out in their brief purported findings of fact and conclusions. From these it appears that the circuit court considered the contract an attempt to dissolve the corporation without following the method prescribed by the statutes of the state and a sale of all the property of the corporation contrary to the statutes. The statutes having provided the method for dissolving corporations, that method is exclusive. But the plaintiffs are not proceeding upon the theory that the corporation is dissolved. On the contrary, the plaintiffs recognize the corporation to be existing.

There was no attempt to sell and transfer the business as a whole. On the contrary, there was a division of the property among the stockholders, looking to a dissolution. This division was made subject to the payment of all the debts. This is permissible. 1 Cook on Corp. (7th Ed.) 15, § 3; 2 Cook on Corp. (7th Ed.) 1618, § 548; 14 C.J. 870, note 37 et seq. The stockholders are the equitable owners of the property of the corporation. After the debts against the corporation have been paid, the remaining property should be divided among the stockholders in proportion to their stock. The transaction, in the instant case, amounted to a dividend of specific property. 14 C.J. 811, 863, 864, notes 9 and 10; Id. p. 865, note 30; Grants Pass Hardware Co. v. Calvert, 71 Or. 103, 118, 142 P. 569; 2 Cook on Corp. (7th Ed.) 1564, § 535; 6 Fletcher, Cyc. Corp. 6118, § 3678; In re Wilson's Estate, 85 Or. 604, 167 P. 580. "So long as corporate creditors are paid, no one is injured by the stockholders distributing, among themselves the assets." 2 Cook on Corp. (7th Ed.) 1618, § 549; 6 Fletcher, Cyc. Corp. 6118, § 3678.

The creditors are not complaining here. This suit was instituted for the purpose of compelling the defendants to pay creditors of the corporation, whom it is alleged defendants agreed to pay. There is evidence supporting these allegations. The defendants and plaintiffs constituted all of the stockholders of the corporation and were its directors. They all participated in the division of the assets. Having participated in that transaction, they are not allowed to complain of the informality with which it was conducted. Woodbridge v. Pratt & Whitney Co., 69 Conn. 304 330, 37 A. 688; Benbow v. Cook, 115 N.C. 324, 20 S.E. 453, 44 Am. St. Rep. 454, 460; Handley v. Stutz, 139 U.S. 417, 11 S.Ct. 530, 35 L.Ed. 227; 1 Cook on Corp. (7th Ed.) 15, note 13. "A corporation may sell all its...