Johnson v. Sheridan Lumber Co.

• Decision Date: 04 February 1908
• Citation: 51 Or. 35,93 P. 470
• Parties: JOHNSON v. SHERIDAN LUMBER CO. [*]
• Court: Oregon Supreme Court

93 P. 470

51 Or. 35

JOHNSON v. SHERIDAN LUMBER CO. ^[*]

Supreme Court of Oregon

February 4, 1908

Appeal from Circuit Court, Polk County; George H. Burnett, Judge.

Action by J.H. Johnson against the Sheridan Lumber Company. Judgment for plaintiff, and defendant appeals. Reversed, and a new trial ordered.

This is an action by J.H. Johnson against the Sheridan Lumber Company, a corporation, to recover the amount of a promissory note given August 12, 1905, for $4,200, payable six months thereafter, with interest, at the rate of 7 per cent. per annum from that time, containing a stipulation to pay a reasonable sum as attorney's fees in case suit should be instituted thereon, and purporting to have been executed to the plaintiff by the president and secretary of the corporation on its behalf. The amended answer admits the incorporation of the defendant, but denies all the other allegations of the complaint. For a further defense it is averred that the note sued on is without any consideration. For a second defense it is stated, in effect, that in January, 1905, the plaintiff and Henry Stevenson, E.M Yeaton, and A.A. Brace entered into an agreement to purchase a sawmill and timber lands, and to organize a corporation to engage in the manufacture of lumber. That the plaintiff and Stevenson were skilled in estimating the value of such property, and for that reason they were selected to make the purchase thereof; that, conspiring to cheat, wrong, and defraud Yeaton, Brace, and the corporation thereafter to be formed, the plaintiff and Stevenson entered into a contract with one T.H. March to purchase certain real property agreeing to pay therefor $16,000. That thereupon the defendant corporation was organized with a capital stock of $50,000, of which sum the plaintiff subscribed $10,000 falsely representing that one-half thereof was for Stevenson one Emil Schreier subscribed $10,000, Yeaton $5,000, and Brace $10,000; that pursuant to their intent to cheat, wrong, and defraud the defendant the plaintiff and Stevenson falsely stated to it that the price agreed to be paid for the land was $21,000; that, conformable to such fraudulent purpose, the plaintiff procured a deed of the land to be made by March to Stevenson to hold the title for the benefit of the defendant, and thereupon the plaintiff proposed to cause the premises to be conveyed to the corporation upon the payment of the several subscriptions mentioned, "and this defendant, through its board of directors, then and there relying upon the said representations, duly passed a resolution to the effect that, in consideration" of the plaintiff, Brace, Yeaton, and Schreier conveying the real property to the defendant, the stock so subscribed should be declared fully paid; that the plaintiff further represented to the defendant that he had paid March $5,000, the remainder of the purchase price above $16,000, and that the corporation owed him that sum, when he had not paid any part thereof; "that the said note was executed for and on behalf of this defendant, but without authority of the board of directors thereof, to the said J.H. Johnson in reliance upon the said false and fraudulent representations, and was pretended to be made on behalf of the said corporation without any other or further consideration than as hereinbefore stated." The reply denied the allegations of new matter in the answer, and averred, in substance, that the plaintiff, having agreed with the defendant to cut for it certain saw logs whereby he could have made a large profit, surrendered all his right under the contract to the corporation August 12, 1905, and transferred to it 84 shares of its capital stock, in consideration of $8,400, evidenced by two promissory notes, each for $4,200, one of which had been paid, and the other instrument is the note described in the complaint. The reply states further facts by way of estoppel, which are not deemed necessary to a decision herein. The cause was tried and judgment rendered in favor of the plaintiff for the amount of the note and $350 as attorney's fees, which sum was stipulated by the parties as reasonable therefor, and the defendant appeals.

Martin L. Pipes, for appellant.

Bert E. Haney, for respondent.

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

It is contended by defendant's counsel that the court erred in admitting in evidence the original answer filed in this cause, and in holding that an averment in that pleading afforded competent proof of the defendant's execution of the promissory note described in the complaint, and in refusing to instruct the jury as requested. To render the legal principles thus insisted upon intelligible, it becomes necessary to advert to the bill of exceptions, which contains all the evidence given at the trial, and shows that the plaintiff offered in evidence the books of the corporation, which contained the minutes of its proceedings as they consecutively occurred. An inspection of the record discloses that at a meeting of the board of directors held August 12, 1905, a resolution was adopted, authorizing the making of the note sued on in payment of certain stock of the defendant corporation, and also shows the consummation of a logging contract on behalf of the company with the plaintiff. It appears, however, that the meeting was special, at which only three of the five directors of the corporation were present, and the books do not indicate that any notice of such assembly was given to the absent officers. The parties having stipulated that the records of the corporation after August 12, 1905, do not contain any reference to the note in question, the court sustained an objection to the admission of books in evidence on the ground that they failed to show any authority on the part of the president and secretary of the corporation to make the note. An amended answer in this cause having been filed, the note sued on, and the original answer, which was verified by the secretary of the corporation, were received in evidence over the defendant's objection and exception. E.M. Yeaton, a stockholder of the corporation, appearing as its witness, after answering a few preliminary questions, was directed as follows: "Now you may state whether or not you and Mr. Brace and Mr. Johnson (the plaintiff herein) and Mr. Stevenson had any conversation or arrangement between yourselves for the purchase of a sawmill and timber land." An objection to such inquiry having been interposed on the ground that the amended answer failed to state facts sufficient to constitute a defense, the defendant's counsel thereupon offered to prove by the witness the substance of the agreement thus alleged as new matter, and to show that during all the negotiations Johnson and Stevenson represented that the purchase price of the mill and lands was $21,000; that the directors of the corporation, being ignorant of the facts, relied upon such representations, in pursuance of which they adopted a resolution accepting a deed of the property in full payment of the subscriptions for stock; that Schreier sold his stock to the plaintiff, who, by reason of the declarations that he held his own stock and that which he had so purchased, received a certificate for 84 shares of the par value of $8,400, which he thereafter sold to the corporation; that the directors did not know that he had not paid any sum on account of his subscription or for the stock; that two of the directors were absent from the state on August 12, 1905, and two other directors--there being five in all--undertook to authorize the execution of the note in question. The defendant's counsel offered to prove by T.H. March, the...