Deitz v. Stephenson

• Decision Date: 12 May 1908
• Citation: 95 P. 803,51 Or. 596
• Parties: DEITZ v. STEPHENSON et al.
• Court: Oregon Supreme Court

95 P. 803

51 Or. 596

DEITZ v. STEPHENSON et al.

Supreme Court of Oregon

May 12, 1908

Appeal from Circuit Court, Multnomah County; Alfred F. Sears, Judge.

Suit by A.J. Deitz against H.L. Stephenson and another. From a decree for plaintiff, defendants appeal. Reversed, and suit dismissed.

This is a suit to enforce the specific performance of the following contract: "This agreement made and entered into this 7th day of November, A.D. 1904, by and between H.L. Stephenson party of the first part, and A.J. Deitz, party of the second part, witnesseth that: Whereas, the party of the second part has this day agreed to take a one-fourth interest in the property and contents of the Scott Hotel, located on the corner of Seventh and Ankeny streets, in the city of Portland, for four thousand dollars ($4,000.00) paying herewith seventeen hundred and fifty dollars ($1,750.00), the balance to be paid as follows: The said second party and his wife are to take charge of the hotel at a salary of $125.00 per month, $60.00 of which amount is to be retained by said second party to meet his current expenses, and the balance is to be applied on the purchase price of the said fourth interest in the furnishings and property in said hotel. If an adjustment or settlement is made between the stockholders of the Scott Hotel Company so that the first party gets control of all the stock of said corporation, then the second party is to have one-fourth of the stock of said corporation, fully paid and nonassessable upon the completion of the payment of the $4,000.00 herein provided for. But should the stockholders of said Scott Hotel Company be unable to adjust their matters, a new corporation is to be organized for $16,000.00, and the second party is to have one-fourth of the stock and the first party herein is to have the other three-fourths. Said second party is to pay for said one-fourth interest as herein provided. If a new corporation is organized, all of said property in said hotel is to be turned over to the said corporation by the said first party it being understood and agreed that the said first party is to protect the fourth interest of said second party from debts and liabilities of the Scott Hotel Company. It is further agreed that in case the hotel does not meet its current expenses, the said $65 of salary that is to be applied on the purchase price of the stock is to be applied and contributed towards meeting the deficiency in expenses and in case the hotel makes a profit the second party's profit, which is one-fourth of the total profits, in addition to the $65 is to go to liquidate the balance of the purchase until the same is fully paid. It is further agreed that the second party shall have the right to purchase an additional one-fourth interest in said company at any time within sixty days from the date of this agreement for $4,000.00, $2,000.00 cash, and the balance on or before six months, the same to be secured by the stock of the corporation; and in case the said second party desires to purchase at any time after the sixty days and prior to six months he may do so by paying $4,500.00. It is further agreed that in case the said parties hereunto or the corporation they shall hereafter form, shall sell out their interest in the Scott Hotel Company, the second party herein shall be entitled to whatever profits arise upon the said one-fourth interest in the stock. It is further agreed that said property shall not be sold for less than $17,000.00, and that upon such sale the second party is entitled to one-fourth of the profits in addition to whatever amount he has paid upon the purchase price of his one-fourth interest. In witness whereof, the said parties to this agreement have hereunto set their hands and seals, in duplicate, the day and year first above written. H.L Stephenson. [ Seal.] A.J. Deitz. [ Seal.]"

After alleging the incorporation of the defendant Scott Hotel Company and the making of the contract, plaintiff avers: That on January 7, 1905, Stephenson extended the option therein given by the following writing: "Portland, Oreg., Jan 7, 1905. I hereby agree to extend the option given A.J. Dietz for one-half interest in Hotel Scott for thirty days from above date, terms as per original agreement. H.L. Stephenson." That on the date of the signing of the contract, and in pursuance thereof, he paid Stephenson $1,750; that thereupon Stephenson and the Scott Hotel Company put plaintiff in charge of said hotel, and that he and his wife managed it until February 11, 1905, when Stephenson wrongfully entered and by force and violence dispossessed them and took charge and possession of the property, books, and assets of the business, against the will and protest of plaintiff. That between November 7, 1904, and February 5, 1905, Stephenson caused to be made such adjustments and settlements between the stockholders of the defendant company that he obtained full and absolute control and management thereof. That each month plaintiff has applied $65 of his salary on the purchase price of this property. That on February 6, 1905, plaintiff elected to purchase the additional one-fourth interest in defendant corporation, and tendered to Stephenson $2,000 in payment of the first installment of the purchase price; but that Stephenson has refused to sell or transfer to plaintiff any of the stock of the company, and has repudiated his contract, and the plaintiff has, at all times, fully done and performed all of the covenants and conditions of the said agreement and the supplementary extension thereof to be by him done and performed. That the Scott Hotel Company was fully informed and knew of the making of the said contract and consented thereto and to the making of the payments set forth by plaintiff, and joined defendant Stephenson in the partial performance alleged. That the interest, which the company has or claims to have in the hotel or hotel business and lease, is inferior and subordinate to plaintiff's rights under said agreement, and that defendant Stephenson is so recklessly, carelessly, and badly managing the hotel and hotel business that the same is rapidly deteriorating in value, and, if continued, will inflict great and irreparable loss and damage upon plaintiff, and destroy his rights under the agreement. A decree is asked requiring Stephenson to return to plaintiff and his wife the charge and management of the hotel, and to transfer and deliver to plaintiff one-fourth of the capital stock of defendant corporation; that a receiver be appointed to conduct the business pending the suit; and that defendants be enjoined from taking charge thereof and from interfering or meddling therewith.

The corporation demurred to the complaint upon general grounds which being overruled defendants answered separately. Stephenson, after denying all the averments of the complaint, excepting the incorporation of the company, for an affirmative defense alleges, in effect, that prior to November 7, 1904, defendant company had been conducting an hotel in the city of Portland, known as the "Scott Hotel," under a lease, and that it owned the fixtures and had purchased, on the installment plan, furniture used therein; that about November 1st the corporation being financially involved, and he being a large creditor of, and stockholder in, the corporation, and a guarantor for the payment of the rent, to protect himself he entered into possession of the hotel, secured a new lease of the premises in his own name, and conducted the business for the interest of himself and the corporation; that relying upon plaintiff's representations alleged to have been made to defendant, to the effect that he was a competent and experienced hotel man, a competent and skillful bookkeeper, and that he was sober, honest, and industrious, defendant made, with plaintiff, the contract set forth; that these representations were false, and that plaintiff has been dissipated and intemperate, negligent, and dishonest in his management of the hotel; that he did not keep true or correct accounts and misappropriated the funds received by him from the business and converted them to his own use; that prior to the alleged tender, defendant notified plaintiff that, on account of the latter's incompetency, dishonesty, and misappropriation of funds, he would not further comply with the original contract, or with the supplementary agreement, and would not sell, transfer, or deliver to plaintiff any stock of the corporation; that thereupon he notified plaintiff that on account of his conduct he would discharge him from the management of the hotel, and upon an accounting of the money received by plaintiff, as manager, he (defendant) would repay plaintiff the $1,750 received and his salary for the time he served as such manager; that defendants, acting together, discharged plaintiff and employed another manager to conduct the hotel for them; that plaintiff received between $4,000 and $5,000 while acting as manager of the hotel, but has accounted for no more than $2,000. He prays, first, for a dismissal of the complaint, and, second, for the annulment of the contract, and for an accounting between plaintiff and defendant, and that defendant have judgment for all moneys unaccounted for after crediting plaintiff with the sum of $1,750 received by d...