Branson v. Oregonian Ry. Co.

• Decision Date: 14 January 1884
• Citation: 11 Or. 161,2 P. 86
• Parties: BRANSON and others v. OREGONIAN RY. CO., (Limited.)
• Court: Oregon Supreme Court

2 P. 86

11 Or. 161

BRANSON and others v. OREGONIAN RY. CO., (Limited.)

Supreme Court of Oregon

January 14, 1884

Appeal from circuit court of Yam Hill.

The plaintiffs in the lower court and respondents herein brought suits against the Oregonian Railway Company, (Limited,) the Oregon Railway Company, (Limited,) William Reid, Ellis G Hughes, James B. Montgomery, and Joseph Gaston, and the Dayton, Sheridan & Grand Ronde Railway Company, and the Willamette Valley Railroad Company, to enforce payment of certain obligations known in the case as freight receipts and sought to charge the property of the Dayton, Sheridan &amp Grand Ronde Railway Company with a trust for the payment of these obligations; also, to charge the liability on the stock. The Dayton, Sheridan & Grand Ronde Railway Company conveyed its property to the Willamette Valley Railroad Company, as consideration for the payment of the debts of the Dayton, Sheridan & Grand Ronde Railway Company. The Willamette Valley Railroad Company conveyed to the Oregon Railway Company (Limited) for the same consideration, and the Oregon Railway Company (Limited) conveyed the property to the Oregonian Railway Company (Limited) without consideration. Joseph Gaston subscribed for $100,000 of the stock in the Dayton, Sheridan & Grand Ronde Railway Company, and $500,000 in the Willamette Valley Railroad Company, and subsequently assigned to E.G. Hughes, as set out in the opinion. The case was heard and determined in the circuit court, and went to the supreme court on appeal, when the Oregonian Railway Company appeared by new counsel and charged bad faith on its attorney and asked his removal; and also that William Reid and Ellis G. Hughes had acted in bad faith as their agents and to such an extent as to make them liable in the case without recourse; and, further, that if their case was properly presented there would be no liability on it; and moved to remand the same to the court below. The defendants Hughes and Reid, and the Oregon Railway Company, (Limited,) made no objection thereto. The supreme court accordingly remanded the cause to amend pleadings and take further proofs upon and touching the question of bad faith on the part of William Reid and E.G. Hughes. There was set up an agreement between William Lowsen and P.M. Cochrane and the Oregon Railway Company, (Limited,) whereby the Oregon Railway Company (Limited) agreed to convey the property and stock, free of debts. The Oregon Railway Company (Limited) claimed the agreement was a new form. The case came before the supreme court again on the appeal of the Oregonian Railway Company (Limited) as against the plaintiffs below and all its co-defendants. The issue was mainly upon the charges made by the Oregonian Railway Company (Limited) as against its co-defendants, William Reid, E.G. Hughes, and the Oregon Railway Company, (Limited.)

J.K. Kelly, for respondents, B.B. Branson and others, plaintiffs below.

C.J. MacDougall and J.M. Bower, for William Reid and Oregon Railway Company, (Limited.)

C.B. Bellinger and Geo. H. Williams, for Hughes.

H.T. Bingham, for Montgomery.

W.H. Effinger and Jonathan Bourne, Jr., also Edmund Robertson, (by special leave,) for the Oregonian Railway Company, (Limited,) appellant.

Joseph Gaston in propria persona.

WATSON C.J.

The decision heretofore rendered in this case leaves but few questions for determination at the present time. Those still open to investigation will now be examined briefly:

1. The power of the circuit court to allow amendments to the pleadings after the remand of the cause was the same as it was before the appeal was taken. The remand was ordered that the lower court might examine this power, and this court had no authority to prescribe the character of the amendments or the terms of their allowance. And we think this view is in full accord with a fair construction of the language employed in the opinion upon the subject of the remand.

2. But conceding the power of the lower court to permit the amendment to the complaint which the appellant objects to, still the respondents (plaintiffs below) can have no relief on the new cause of suit thus introduced. It is doubtful if the allegations show any cause of suit, but if they do the proof wholly failed to establish one. The theory upon which the complaint appears to have been framed, and the proofs introduced in respect of this cause of suit, seems to be that all the debts of a private corporation are equitable liens upon its property, which are not discharged by a purchase in good faith and for an adequate consideration, even if made with notice of unpaid debts.

The position taken by the respondents is thus stated by their learned counsel in his supplemental brief: "No act of the grantor or grantee of this corporation property, no matter what, can set aside this trust imposed by the law short of the actual payment of the debt." According to this doctrine the debt of a private corporation is a specific lien on every portion of its property, and a purchaser with notice cannot get a good title while such debt remains unpaid. It is true, such corporation holds its property in trust for its creditors and stockholders. Field, Corp. § 143; Chicago, etc., R.R. v. Howard, 7 Wall. 392. But this is perfectly consistent with the power to sell any portion or all of its property for an adequate consideration, free from the incumbrances of its debts, the price received for the property taking its place as the trust fund. Powell v. North Missouri R. Co. 42 Mo. 63; Hill v. Fogg, 41 Mo. 563. As the case made by the pleadings and proofs in this instance shows no bad faith nor want of adequate consideration paid for the property purchased by the appellant from the Willamette Valley Railroad Company, we hold that the property in the hands of the purchaser is not subject to any trust for the satisfaction of the unpaid debts of its grantor, although chargeable with notice of them at the time of the purchase.

3. The evidence shows that Joseph Gaston subscribed for 1,000 shares of the capital stock of the Dayton, Sheridan & Grand Ronde Railway of the par value of $100 per share, and also subscribed for 5,000 shares of the capital stock of the Willamette Valley Railroad Company, of the par value of $100 per share; all of which he afterwards assigned to Ellis G Hughes to hold in trust for any person or corporation who or which might become a purchaser of the property and stock of such corporation upon the terms specified in such assignment. Said stock is unpaid stock, and the legal title thereto is still in Hughes. After the assignment, and on or about the fourth day of February, 1880, William Lowson, Peter Moir Cochrane, and other parties residing in Scotland, contemplating the incorporation of the appellant, and on its behalf, agreed to take said property and stock, and furnish the money used in its purchase prior to the incorporation of the appellant. As a means of carrying out the scheme and advancing the interests of the appellant, the Oregon Railway Company (Limited)...