Graham v. Coos Bay, R. & E.R. & Navigation Co.

• Decision Date: 03 March 1914
• Citation: 139 P. 337,71 Or. 393
• Parties: GRAHAM v. COOS BAY, R. & E. R. & NAVIGATION CO.
• Court: Oregon Supreme Court

139 P. 337

71 Or. 393

GRAHAM v. COOS BAY, R. & E. R. & NAVIGATION CO.

Supreme Court of Oregon

March 3, 1914

Department 2.

Appeal from Circuit Court, Coos County; L. T. Harris, Judge.

Action by R. A. Graham against the Coos Bay, Roseburg & Eastern Railroad & Navigation Company. From a judgment for defendant plaintiff appeals. Affirmed.

This is an action by R. A. Graham against the Coos Bay, Roseburg &amp Eastern Railroad & Navigation Company, a corporation, to recover the sum of $53,552.53, with interest, for salary as manager of the defendant company. The cause was tried by the court and jury, and a verdict rendered in favor of the defendant. From a judgment entered accordingly, plaintiff appeals.

It is alleged in the amended complaint, in effect, that on or about August 7, 1894, plaintiff, Graham, was employed by the defendant railroad company as its general manager at a compensation of $10,000 per year, which was not to become due or payable until 620 of the first mortgage bonds of the company, aggregating $620,000, then held by J. D. Spreckels &amp Bros. Company as collateral security, and for sale on commission, should be sold by the latter. It is also alleged that he duly performed the services of general manager until the 15th day of December, 1899, but that he was prevented from rendering further services by the wrongful and unlawful acts of J. D. Spreckles & Bros. Company, in that it took forcible possession and control of the property and business of the railroad company, and ejected him therefrom, that his compensation became due him on the sale of the bonds to the Southern Pacific Company July 2, 1906, and that no payments have been made thereon.

The answer of the defendant company, after denying all the material allegations of the amended complaint, sets up for a first and separate defense, in substance, that at the first meeting of the stockholders of the defendant its board of directors and president executed a written contract with the plaintiff, of date August 19, 1890, whereby plaintiff agreed to construct a railroad from Marshfield to the city of Roseburg, Or., and defendant agreed to transfer to plaintiff certain subscription subsidies and guaranties owned by it to the amount of $225,000, and also its first mortgage bonds to the amount of $25,000 per mile of said proposed road, the bonds to be secured by a first mortgage of defendant upon all its property, the same to be due in 30 years, with interest at 6 per cent.; that thereafter plaintiff entered upon the construction of the railroad, and from time to time the defendant caused said bonds to be issued and delivered to plaintiff; that on August 19, 1890, and annually thereafter until August, 1898, at each annual meeting of the board of directors of the defendant company plaintiff caused himself to be elected as general manager of the railroad company that at the time he was first elected, when he participated as a director, the board duly adopted a resolution that all officers and agents of the defendant company should hold office at the pleasure of the board, and should receive only such compensation as should be fixed by it; that it was then and there understood and agreed between plaintiff and defendant company that, during all the time he was acting as general manager, he should serve as such without any compensation other than such profits as he might obtain by reason of his stock ownership and control of the defendant company, and by reason of the contract to construct the railroad from Marshfield to Roseburg, Or.; that no resolution was ever passed by the board of directors, and no by-law of the corporation ever adopted, fixing any compensation to be received by the plaintiff as general manager of the defendant company, nor did the latter ever agree to pay plaintiff any compensation as such manager.

For a second defense, defendant sets up an agreement entered into between plaintiff and the J. D. Spreckles & Bros. Company, of date June 8, 1899, which agreement, and the acts and conduct of the plaintiff in relation thereto, defendant pleaded as an estoppel and a release in settlement of all claims between the parties to the contract, as well as between the Coos Bay, Roseburg & Eastern Railroad & Navigation Company and Graham.

For a third and further defense, the answer sets up the statute of limitations as a bar to plaintiff's claim.

The fourth defense pleads a settlement entered into between the plaintiff and the attorney for the Farmers' Loan & Trust Company for himself and the parties to that suit in the case of the Farmers' Loan & Trust Company against the Coos Bay, Roseburg & Eastern Railroad & Navigation Company, filed in the Circuit Court of the United States for the District of Oregon on the 5th day of October, 1904, and the resulting judgment of dismissal of plaintiff's petition for intervention as a bar, abandonment, and waiver of his claim for salary.

The reply, after admitting and denying certain allegations in defendant's answer, sets up, as a further reply to the second further and separate defense, that the agreement of June 8, 1899, was intended to be a mortgage only on the capital stock and bonds of the Coos Bay, Roseburg & Eastern Railroad & Navigation Company, and was not a sale thereof.

Upon the trial of the cause the court submitted special findings to be made by the jury, among which was the following: "Q. 1. Did the plaintiff and defendant, in August, 1894, agree that plaintiff should be paid $10,000 per year for his services as general manager?" The jury answered, "No," and rendered a general verdict in favor of defendant.

The history of the transaction relating to the plaintiff's connection with the defendant railroad company which may be necessary in order for a proper understanding of the question involved is about as follows: In 1890 the people of Coos and Douglas counties, being interested in a plan for a railroad connection between Marshfield and Roseburg, secured written subsidies for the project, aggregating about $225,000. The citizens' committee, by correspondence, induced Graham to go to Marshfield about August 5, 1890, with a view to engaging in the construction of the road. After investigation, pursuant to an understanding between him and the committee, the Coos Bay, Roseburg & Eastern Railroad & Navigation Company was incorporated on August 19, 1890, with a capital stock of $2,000,000, divided into 20,000 shares of $100 each, of which F. W. Burnett, R. A. Graham, W. E. Baines. T. R. Sheridan, E. G. Flanagan, and W. B. King subscribed for one share each, and O. J. Seeley subscribed for the remainder, and the said company was thereupon organized with the above-named persons as directors, with T. R. Sheridan, president. The subsidies were turned over to the corporation. Thereupon a contract for the construction of the road from Marshfield to Myrtle Point was entered into with Graham, whereby he was to have as his compensation all the subsidies, and $25,000 per mile, payable in first mortgage bonds as each five-mile section should be finished. By August 23, 1893, Graham completed the road from Marshfield to Myrtle Point, a distance of about 25 miles. This road, with the track and equipment, cost about $630,000, of which amount J. D. Spreckels & Bros. Company loaned to plaintiff $185,000. It was expected, though not expressed in terms, that the J. D. Spreckels & Bros. Company would finance the construction of the road from Marshfield to Roseburg, and it was arranged for that company to sell the bonds. Graham continued the grading beyond Myrtle Point until late in 1894, when J. D. Spreckels & Bros. Company, on account of the difficulty in negotiating the sale of the bonds and the general stringency in the money market, required him to suspend operations until money could be procured on the sale of the bonds. It is claimed by plaintiff that when his work was suspended he announced to the J. D. Spreckels & Bros. Company, as well as to the directors of the company, that he would be compelled to take his grading outfit and go elsewhere to work, unless he should be allowed a salary during the suspension of the work, which was then supposed would be temporary only. Plaintiff asserts that at the next regular meeting of the board of directors, on or about August 20, 1894, a typewritten resolution was adopted by the affirmative vote of every member of the board, except J. W. Bennett and R. A. Graham, allowing him a salary of $10,000 a year, but payable only upon sale of the bonds by J. D. Spreckels & Bros. Company; that he continued to act as manager from that time until December 18, 1899; that J. D. Spreckels & Bros. Company continued to advance money whenever needed to meet deficits in the operation of the road until November 1, 1897, when such advances and the previous advances for the construction of the road, and for the opening and working of the Beaver Hill coal mine in connection therewith, and interest, and bonus as provided by agreement of September 3, 1892, aggregated $523,162.52, for which amount he gave his note, bearing interest at 6 per cent., payable monthly, dated November 1, 1897, and with the following stipulation before his signature: "And as collateral security for the payment of the above note, and the interest to grow due thereon, I have deposited with the J. D. Spreckels & Bros. Company the following property, to wit: Certificate 10--10,001 shares of the capital stock of the Coos Bay, Roseburg & Eastern Railroad & Navigation Company. Bonds of the Coos Bay, Roseburg & Eastern Railroad & Navigation Company, as follows: * * * Total, 620 ($1,000 bonds, giving the numbers). Deed to the following property: All of 32 blocks and 35 lots in Railroad addition to Marshfield."

About June 13, 1898, J. D....