Garetson-Hilton Lumber Co. v. Hinson

• Decision Date: 31 March 1914
• Citation: 140 P. 633,69 Or. 605
• Parties: GARETSON-HILTON LUMBER CO. v. HINSON.
• Court: Oregon Supreme Court

140 P. 633

69 Or. 605

GARETSON-HILTON LUMBER CO. v. HINSON.

Supreme Court of Oregon

March 31, 1914

Department 1.

Appeal from Circuit Court, Multnomah County; Robert G. Morrow Judge.

Action by the Garetson-Hilton Lumber Company against W. B. Hinson. Judgment for defendant, and plaintiff appeals. Affirmed, and action dismissed without prejudice.

This is an action to recover money. The material averments of the complaint are to the effect that on March 9, 1903, the plaintiff, the Garetson-Hilton Lumber Company, became, ever since has been, and now is, a corporation organized and existing under the laws of the state of Missouri, having at its creation a fully paid-up capital of $30,000, divided into 300 shares of the par value of $100 each; that on April 20 1904, its stock was increased to $50,000, fully paid-up capital, and divided into 500 shares, of which the defendant W. B. Hinson, then held and now is the owner of 55 shares that on May 18, 1910, by authority of the plaintiff's board of directors, all the real and personal property of the corporation, other than bills receivable, were sold and the proceeds arising therefrom were, pursuant to a dividend duly declared, distributed ratably to all its stockholders including the defendant; that thereafter all sums of money due the corporation that could be collected were accumulated, and other dividends thereof were declared whereby the defendant received his proportional part; that by oversight and neglect of the board of directors no provision was made for the payment of any debt that might be incurred subsequent to such distribution of the corporate assets; that thereafter a claim for $2,000 against the plaintiff was presented to it by the Garetson-Grason Lumber Co., another Missouri corporation, for clerical services rendered by its agents in accounting for and managing the affairs of the plaintiff; that the officers and directors of the latter corporation recognized the validity of such claim, but, having no assets with which to liquidate the demand, it was resolved January 25, 1912, by the stockholders by a vote of more than two-thirds of all of the stock of the plaintiff that its board of directors be authorized to call upon the stockholders to refund $4 per share of their stock; that the sum so due from the defendant is $220, but upon a demand therefor he refused to pay any part thereof. A demurrer to the complaint on the grounds, inter alia, that it did not state facts sufficient to constitute a cause of action and that the plaintiff did not have legal capacity to sue, was sustained. The plaintiff declining further to plead, the action was dismissed, and it appeals.

Q. L. Matthews, of Portland (Christopherson & Matthews, of Portland, on the brief), for appellant. Robert Tucker, of Portland (Tucker & Bowe, of Portland, on the brief), for respondent.

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

Is an action at law the proper remedy herein, and is the Garetson-Hilton Lumber Company the proper party plaintiff, are the questions to be considered. As a preliminary matter, it may be stated that in the absence of an enactment by the state in which a person resides, imposing upon him a particular liability as a stockholder in a foreign corporation, the statute of another state giving life to such artificial being, or the articles which it adopts, afford the rule regulating the liability to its creditors when suits are brought to establish a legal responsibility against a resident stockholder. Smith v. Huckabee, 53 Ala. 191; Shaw v. Boylan, 16 Ind. 384; Coffin v. Rich, 45 Me. 507, 71 Am. Dec. 559; Seymour v. Sturgess, 26 N.Y. 134; Merrick v. Van Santvoord, 34 N.Y. 208; Ex Parte Van Riper, 20 Wend. (N. Y.) 614. The complaint herein does not set forth the provisions of the statute of Missouri under which enactment the plaintiff was organized, nor does the initiatory pleading state any of the clauses of the charter adopted by the corporation respecting the liability of its stockholders, and in default thereof it will be assumed that the articles of incorporation are silent upon this subject, and also presumed that the law of Missouri governing the case is the same as the principles of the common law prevailing in or the statute in recognition thereof enacted by Oregon. Goodwin v. Morris, 9 Or. 322; Cressey v. Tatom, 9 Or. 541; Scott v. Ford, 52 Or. 288, 97 P. 99; Young v. Young, 53 Or. 365, 100 P. 656; De Vall v. De Vall, 57 Or. 128, 109 P. 755, 110 P. 705; Long v. Dufer, 58 Or. 162, 113 P. 59. No reference will therefore be made to the laws of the state under which the plaintiff was organized, except so far as the allusions to the statute of Missouri are made in decisions of the courts of that state upon the questions herein involved.

Whatever opinions may have been originally announced by the federal and state courts of this country, respecting the trust doctrine as applied to a corporation, the legal principle is now established that, until a corporation has either suspended its business or has become insolvent and its assets have been placed in the possession of a court of equity for administration and are in the course of final settlement and distribution, the capital stock of a corporation does not constitute a trust fund upon which general creditors have a lien for the payment of their demands. Thom. Corp. (2d Ed.) § 3421.

The existence of the trust doctrine as applicable to the assets of a corporation which is a "going concern" has been denied by this court. Sabin v. Columbia Fuel Co., 25 Or. 15, 34 P. 692, 35 P. 854, 42 Am. St. Rep 756. The rule has been settled by our adjudications that mere insolvency does not of itself convert corporate property into a trust fund; but, when a corporation ceases to transact business and is insolvent, its assets then constitute a trust fund for the payment of the corporate debts without the intervention of a court of equity to administer upon the property for the purpose of a final...