In re Pendleton Hardware & Imp. Co.

• Citation: 33 P. 544,24 Or. 330
• Parties: In re PENDLETON HARDWARE & IMP. CO.
• Decision Date: 28 June 1893
• Court: Supreme Court of Oregon

33 P. 544

24 Or. 330

In re PENDLETON HARDWARE & IMP. CO.

Supreme Court of Oregon

June 28, 1893

Appeal from circuit court, Umatilla county; M.D. Clifford, Judge.

Assignment of the Pendleton Hardware & Implement Company. Proceeding by the Oregon Marble & Lime Company and other creditors, under Hill's Code, § 3179, excepting to certain claims presented against the estate. Decree, from which a part of the creditors appeal. Modified.

MOORE, J.

This is a proceeding on the part of certain creditors, under section 3179 of Hill's Code, excepting to the claims presented against the estate of an insolvent debtor, and grows out of the following facts: The Pendleton Hardware & Implement Company, a private corporation, on February 6, 1891, made a general assignment for the benefit of its creditors. An assignee was appointed, who duly qualified, and published the required notice to creditors, who presented their claims against said estate, and among them were the following Oregon Marble & Lime Company, for a balance on account for lime sold and delivered, $409; R. Sargent, B. Selling, J.M Elgin, and M.J. Green, upon a note of $5,000; and United States Investment Company, Limited, upon a note of $6,000. The other creditors who had presented their claims against said estate excepted to the claim of the Oregon Marble & Lime Company for the reason that the insolvent debtor was incorporated for the purpose of operating a hardware and implement store, and could not deal in lime, and that the lime claimed to have been sold was a consignment for sale on account of the claimant; to the claim of R. Sargent et al for the reason that said note was not given for moneys borrowed or used by the insolvent debtor, or on its account or for its own use or benefit; and to the claim of the United States Investment Company, Limited, for the reason "that the note therein mentioned was executed and delivered without any authority, and that it does not appear that the same was executed and delivered for any debt of the insolvent company or any consideration was given therefor." These claimants answered the exceptions, to which the others replied, and the matter was then referred to T.G. Hailey, who took the testimony, and the court, upon the hearing, made an order disallowing the claim of the United States Investment Company, Limited, from which it appeals, and allowing the claims of the Oregon Marble & Lime Company and of R. Sargent et al., from which the other creditors appeal.

The testimony clearly shows that the lime was sold and delivered by the Oregon Marble & Lime Company to the insolvent debtor, and there is no dispute as to the amount due therefor. We do not think it necessary to pass upon the question whether the debtor could deal in lime, since the contract under which the lime company makes its claim had been fully executed, the lime had been delivered to and disposed of by the debtor, and the proceeds arising therefrom formed a part of its assets. The assignee holds the legal title to the property of the insolvent debtor, and the fund arising from the sale thereof, for the payment of the just claims against the estate, and he can acquire no greater or better title than his assignor had. He is subject to the same duties and obligations with reference to the estate, and must pay, so far as he is able, any and all claims which could have been enforced against the debtor if no assignment had been made. The test should be, could the claim, to which the exceptions are taken, have been enforced against the debtor? The sale of lime was not prohibited by the debtor's articles of incorporation, nor was it prohibited by statute. If no assignment had been made, the debtor could not have kept the lime, and refused to pay for it, because it was not hardware; nor could it keep the proceeds arising from the sale thereof. It must either return the goods or pay for them. To say that it may retain the proceeds which have come into its possession, without making any compensation whatever to the person from whom it has obtained them, savors very much of an inducement to fraud. Green's Brice, Ultra Vires, (2d Amer.Ed.) 721. There would be no equity in a rule which would permit the creditors of an insolvent estate to reap the benefit of the assets derived from such a source, and then plead that it was ultra vires. The debtor having received the benefit, the assignee, who stands in his place, should pay the claim as any other.

As to the claim of R. Sargent et al., the evidence shows that the insolvent debtor was incorporated with a capital stock of $20,000, and that subscribers thereto gave their notes amounting to $12,000, in payment thereof; that on January 24, 1889, at a special meeting of the board of directors, a resolution was adopted which authorized the secretary to negotiate a loan not to exceed $12,000, and the president and secretary were authorized to give the notes of the corporation, and sign the same, for the amounts desired, and also to deposit, as collateral security, the notes of the individual stockholders; that, in pursuance of this resolution, R. Sargent, as president, and M.J. Green, as secretary, on September 30, 1889, borrowed from the Farmers' Savings Bank of Walla Walla, Wash., $5,000, and gave the note of the corporation therefor, payable in three months; that to meet the payment of this note one Simon Selling, of Portland, Or., on February 20, 1890, loaned $5,000, and the said president and secretary, with J.M. Elgin and B. Selling, directors of the corporation, signed a note therefor, payable in one year, but through inadvertence and mistake omitted to sign the name of the corporation thereto; that on February 21, 1890, the money received from Selling on account of said loan was deposited in the Pendleton National Bank, of Pendleton, Or., and on the same day was, by check of the corporation, paid over to the Farmers' Savings Bank of Walla Walla, together with $215.60...