Devlin v. Moore

• Decision Date: 25 February 1913
• Citation: 130 P. 35,64 Or. 433
• Parties: DEVLIN v. MOORE et al.
• Court: Oregon Supreme Court

130 P. 35

64 Or. 433

DEVLIN v. MOORE et al.

Supreme Court of Oregon

February 25, 1913

Appeal from Circuit Court, Multnomah County; W.N. Gatens, Judge.

Action by Thomas C. Devlin, as receiver of the Oregon Trust &amp Savings Bank, against Walter H. Moore and others. From a judgment in part for plaintiff, plaintiff, defendant named and another appeal. Judgment modified as stated.

This is a suit by Thomas C. Devlin, as receiver of the Oregon Trust &amp Savings Bank, to recover of the defendants on the ground that they were negligent in the discharge of their duties as directors of the bank, and that they misappropriated the property and funds of the same. The circuit court rendered a decree in favor of plaintiff and against W. Cooper Morris Walter H. Moore, and Henry A. Moore, from which the two latter appeal, and in favor of defendants Elmer E. Lytle Lonner O. Ralston, Leo Friede, Albert T. Smith, and W.H. Copeland, from which part of the decree plaintiff appeals.

The bank was incorporated in March, 1904, under the name of Oregon Savings Bank, which name was subsequently changed to Oregon Trust & Savings Bank. It was organized with a capital stock of $100,000 by defendants Lonner O. Ralston and W. Cooper Morris, together with J.E. Lancaster and C.L. Devins, the first three named taking stock to the amount of $25,000 each, and the fourth subscribing to the amount of $24,000, each depositing his note in the bank therefor. The bank opened for business in the city of Portland, Or., about May 5, 1904. Shortly after the corporation was organized, Devins and Lancaster entered into an agreement with Ralston and Morris, whereby they surrendered their stock and withdrew their notes. Starting in this manner, the bank did a large business of general savings and commercial banking, until the deposits amounted to about $2,250,000. The bank purchased Tacoma telephone bonds of the par value of $400,000, and Omaha telephone bonds of the par value of $500,000, receiving stock in the respective companies as a bonus for like amounts. Both of the companies that issued these bonds are now in the hands of a receiver. On August 21, 1907, in a suit for that purpose, Thos. C. Devlin was appointed by the court as receiver of the bank.

It is alleged in the complaint, among other things, that immediately after the organization of the bank Lonner O. Ralston was elected a director and chosen president of the corporation, serving until September 15, 1905; that W.C. Morris was elected a director and qualified as such; that he served as cashier and secretary of the corporation, and was engaged in the active management of the affairs and business of the same during the entire period from its organization until the appointment of the receiver; that Albert T. Smith was elected a director of the bank about May 1, 1904, resigning the 15th day of September, 1905; that W.H. Copeland, was elected a director about the middle of November, 1904, and resigned about the 1st of January, 1905; that Henry A. Moore was named as a director about the middle of September, 1905, and served until the 21st day of August, 1907, but never qualified as such and had no stock in the bank; that defendant Elmer E. Lytle was elected a director on September 15, 1905, never qualified, and did not own any stock in the bank until the 16th of October, 1906; that Leo Friede was elected a director about the middle of September, 1905, and acted until the 21st day of August, 1907, but never qualified and owned no stock. It is further alleged that each of the directors during his respective term neglected and violated all and singular his duties and obligations, and that each was guilty of gross negligence and inattention in the discharge of his several duties and obligations, and of a reckless disregard of the interests of the corporation, its stockholders, and creditors, resulting in large losses (particularly set forth in detail), on account of loans to insolvent and irresponsible parties and misappropriations of funds and property by some of the officers of the bank. The complaint further avers that at the time plaintiff was appointed receiver, and for a long time prior thereto, and since, the corporation has been and was insolvent; that the assets of the corporation coming into the hands of the plaintiff as receiver were insufficient to discharge the debts and obligations thereof; that this suit is prosecuted in behalf of the corporation, its stockholders, and creditors; that the debts and obligations of the corporation duly filed and approved by plaintiff, amounting to about $300,000, are still unpaid; that this suit is prosecuted by order and leave of the circuit court; that no corporate records, minute book, or records of the transactions of the board of directors or stockholders of the corporation other than the ordinary account books of the bank and the stock certificate books have ever come into the possession of the receiver.

The defendants W.H. Moore, Henry A. Moore, E.E. Lytle, Leo Friede, Lonner O. Ralston, and Albert T. Smith, by way of plea in abatement, allege that plaintiff is not the real party in interest in the suit for the reason that on the 11th day of February, 1908, plaintiff, as receiver of the Oregon Trust & Savings Bank, for a valuable consideration, and pursuant to the order of the circuit court in the suit in which plaintiff was appointed as receiver, sold, assigned, and transferred to the German American Bank, a corporation organized and existing under the laws of the state of Oregon, the demands and cause of suit set forth in the complaint; and that the German American Bank has been the sole and exclusive owner and holder of such demand or right of suit ever since that date. Thereafter defendant W.H. Copeland filed a separate, identical plea in abatement. Issue being raised by replies to the plea, the matter was tried by the court, the findings of fact and conclusions of law were made, and a decree entered in favor of plaintiff.

The evidence relating to the plea in abatement is not contained in the record. It is admitted that plaintiff was appointed as receiver of the Oregon Trust & Savings Bank, and that the bank was organized with a capital stock of $100,000. The answers of the several defendants to the merits deny any liability, negligence, or misappropriation of the funds or property of the bank, and set forth the contract made by the receiver with the German American Bank, which is admitted to have been executed, and which provided for the assignment and transfer to the German American Bank of all the assets and property of the Oregon Trust & Savings Bank, in consideration that the former would assume and pay all the legal obligations of the latter, as shown in the report of Charles B. Pfahler. This contract was authorized by an order of the circuit court which was made a part thereof, and executed February 11, 1908. The German American Bank, in conjunction with the receiver, proceeded to carry out the terms of the above contract. A large number of the claims against the Oregon Trust & Savings Bank to the amount of approximately a million dollars were adjusted by transferring telephone bonds contained among the assets of the Oregon Trust & Savings Bank, many of which have since been claimed to be practically worthless. Some of the creditors seek to be relieved from such contracts, and to be paid in cash. Many of the creditors of the Oregon Trust & Savings Bank took stock in the German American Bank, amounting to some $75,000, in lieu of their claims in the former bank. This stock is now asserted to be valueless. A portion of the other claims was paid with the funds which came into the hands of the receiver from the Oregon Trust & Savings Bank. On February 11, 1910, in order to keep the German American Bank running, and to assist in carrying the burden it had assumed by the contract, Mr. P.L. Willis, one of its directors, furnished and deposited in a bank in San Francisco the sum of $200,000, to take care of the unsettled claims against the Oregon Trust & Savings Bank. As various claims were presented at the German American Bank for payment, they were paid with this money furnished by Mr. Willis, who took an assignment of such claims.

It is stated on behalf of plaintiff that all of these claims have been taken care of or purchased in this manner, except certain ones amounting to approximately $10,000, about which there is some question. Plaintiff contends that the claims assigned to Willis have not yet been paid or discharged, but have only been assigned or taken care of temporarily. The other issues and facts of the case will be referred to as they are reached without stating them at length here. The record contains about 2,800 pages of typewritten evidence, and a large number of voluminous exhibits.

Alfred E. Clark and Martin L. Pipes, both of Portland, for appellant Devlin.

C.W. Fulton, of Portland, for appellants Moore and another. J.N. Teal, of Portland (Teal & Minor and W.A. Johnson, all of Portland, on the brief), for respondent Friede.

John H. Hall, of Portland, for respondent Lytle.

J.M. Long, of Portland (C.A. Johns, of Portland, on the brief), for respondent Smith.

Jay Bowerman, of Portland, for respondent Ralston.

Samuel White, of Portland (Manning & White, of Portland, on the brief), for respondent Copeland.

BEAN, J. (after stating the facts as above).

The defendants unite in their contention that by virtue of the contract and the proceedings thereunder the receiver in this suit represents neither creditors nor stockholders, and that neither of these exist; that payment of all the expenses of the receivership, including the attorney's fees, was provided for by the contract; that according to the agreement the German American Bank was...