Lewis v. First Nat. Bank

• Decision Date: 28 November 1904
• Parties: LEWIS v. FIRST NAT. BANK.
• Court: Oregon Supreme Court

78 P. 990

46 Or. 182

LEWIS v. FIRST NAT. BANK.

Supreme Court of Oregon

November 28, 1904

Appeal from Circuit Court, Multnomah County; M.C. George, Judge.

Action by A.T. Lewis, substituted for J. Crane, against the First National Bank. Judgment for defendant. Plaintiff appeals. Affirmed.

This is an action to recover money. The complaint states that the defendant, the First National Bank of Portland, and the Oregon Pulp & Paper Company are corporations; that on July 22, 1901, a petition having been filed in the United States District Court for the District of Oregon praying that the latter corporation might be adjudged a bankrupt, a decree to that effect was rendered therein August 19, 1901, and E.E Merges duly appointed trustee; that on June 15, 1901, the Oregon Pulp & Paper Company sold and delivered to defendant paper of the reasonable value of $2,200, which sum it agreed forthwith to pay, but had paid no part thereof except $1,500 that on June 21, 1902, the trustee in bankruptcy, for a valuable consideration, sold, assigned, and transferred such account and claim to plaintiff, no part of which had been paid--wherefore he demands the sum of $700, with interest thereon from June 15, 1901. The answer denies all the allegations of the complaint, except the existence of the corporations, and that the Oregon Pulp & Paper Company was adjudged a bankrupt. For a further defense it avers that on June 14 and 25, 1900, the Oregon Pulp & Paper Company executed to the defendant promissory notes drawing 8 per cent. interest, payable in 90 days from such dates, and for the sums of $7,000 and $3,000, respectively; that no payments had been made thereon except the interest on each for nine months and the sum of $410.91 on account of the principal and that such notes constitute a set-off to the claim alleged in the complaint. The reply states, in effect, that defendant ought not to be permitted to set off any sum alleged to be due on the two notes executed to it by the Oregon Pulp &amp Paper Company, for that at the time they were given, and long prior thereto, the maker was insolvent, "all of which the defendant had reasonable cause to believe and know and did know"; that with intent to gain a preference, and with knowledge that the Oregon Pulp & Paper Company intended to give it, the defendant took from such company a mortgage, to secure the payment of the two promissory notes, of certain real and personal property, which security was given with intent to prefer the defendant, as it "had reasonable cause to believe and know and did know"; and that the mortgagor was adjudged a bankrupt within four months thereafter. For a second reply it is averred that defendant ought not to be allowed to assert that any sum due on its two promissory notes constitute a set-off against plaintiff's claim, for that during the months of June and July, 1901, and for a long time prior thereto, the Oregon Pulp & Paper Company was insolvent, "all of which the defendant at all of said times had reasonable cause to believe and know and did know," notwithstanding which it took from the Oregon Pulp & Paper Company the goods mentioned in the complaint; and that to allow any part of the two promissory notes to be set off against plaintiff's claim would create a preference over the other creditors of the bankrupt, to plaintiff's damage. For a third reply it is stated that the defendant ought not to be heard to say that any part of the sums due on its promissory notes should be set off against plaintiff's claim, for that on September 11, 1901, the defendant appeared before the referee in bankruptcy, and proved its demands, evidenced by such promissory notes, against the bankrupt estate of the Oregon Pulp & Paper Company, and claimed the principal sums named in each as due, allowing no credits on account thereof except for interest, thereby intentionally causing the trustee in bankruptcy and the plaintiff to believe that it had no just right to the claim sought to be recovered in this action, and would make no demand therefor; all of which was to its advantage and to plaintiff's injury; and that the trustee, relying thereon, caused the claim set out in the complaint to be listed and appraised, and now to allow a set-off against it would be to plaintiff's injury. For a fourth reply it is alleged that defendant ought not to be authorized to set off any part of the sums due on its notes against plaintiff's claim, for that on July 21, 1901, it commenced a suit in the circuit court of the state of Oregon for Multnomah county to collect its two promissory notes and to foreclose its mortgage, but did not give the Oregon Pulp & Paper Company credit on account of any of the paper received, thereby intentionally leading the trustee in bankruptcy and the plaintiff to believe that no claim would be made to the fund of the bankrupt's estate, causing the trustee to inventory the claim sued on in this action, and plaintiff, relying on such conduct, purchased the chose in action; and that if the plea of set-off be permitted, plaintiff will sustain damage, for which reasons the defendant is, and of right ought to be, estopped from asserting the same against his demand. The cause being at issue was tried without the intervention of a jury, the court stating the conclusions of fact and of law found, and, judgment having been rendered thereon dismissing the action, plaintiff appeals.

H.B. Nicholas, for appellant.

M.W. Smith, for respondent.

MOORE C.J. (after stating the facts).

The only question presented for review is whether or not the findings support the judgment. The first three findings are unimportant, and state, in effect, that the defendant, the First National Bank of Portland, Or., and the Oregon Pulp & Paper Company are corporations doing business within this state, and that on August 19, 1901, the latter company was duly adjudged a bankrupt in pursuance of a petition praying therefor filed July 22, 1901. The other findings of fact are, in substance, as follows: (4) That the Oregon Pulp & Paper Company did not sell to the defendant any paper, nor did the latter agree to pay any sum therefor, nor is any sum due from it to plaintiff on account thereof. (5) That the Oregon Pulp & Paper Company executed to the defendant the two promissory notes described in the answer, on each of which the interest for nine months had been paid and the sum of $410.91 on account of principal. (6) That on June 20, 1901, the Oregon Pulp & Paper Company secured from defendant a loan of $1,500, giving its note therefor, due in 60 days, with 8 per cent. interest, securing the payment thereof by pledging warehouse receipts of manufactured paper, it being agreed that, if this note was not paid at maturity, the defendant was authorized to sell the paper, discharge the debt for which it was hypothecated, and credit the surplus on the notes aggregating $10,000. (7) It was further agreed between the maker and the payee of the notes for $7,000 and $3,000, respectively, that in consideration of the loan of $1,500 the Oregon Pulp & Paper Company would execute to defendant a second mortgage on its property to secure the payment of the $10,000 indebtedness. (8) That, the note for $1,500 not having been paid at maturity, defendant sold the manufactured paper, realizing therefor $1,955.67, and, after deducting all expenses, applied the sum of $1,544.76 in discharging such note, and credited the remainder of $410.91 on the other notes. (9) That the paper company, in pursuance of its agreement, executed to defendant a second mortgage, but, a prior incumbrance having exhausted all the property hypothecated, nothing was realized therefrom. (10) That on June 20, 1901, when the note for $1,500 was given and the second mortgage executed, "defendant did not know, or have reasonable cause to know, that the said Oregon Pulp & Paper Company was insolvent." (11) That the $1,500 was loaned and the second mortgage taken in good faith, and without intent to obtain a preference over the other creditors of the Oregon Pulp & Paper Company. (12) That on September 11, 1901, defendant filed in the bankruptcy proceedings instituted against the Oregon Pulp & Paper Company a claim for $10,000 and interest, as evidenced by its two promissory notes, but no credit was given for the manufactured paper, because at that time no money had been received therefor, for which reason the defendant is not estopped from claiming the proceeds thereafter arising from the sale of such property. (13) That on July 5, 1901, defendant commenced a suit to foreclose its second mortgage, given to secure the notes amounting to $10,000, and in the complaint no credit was alleged on account of such manufactured paper, because at that time no money had been received therefrom, and that any omission in this respect does not estop the defendant from claiming the proceeds thereafter arising from the sale of the property pledged to it. The court having declined plaintiff's request to find that the manufactured paper in question was delivered to defendant, or that the claim sued on was assigned to him, he contends that these facts were material to the issue, and that the refusal to make findings thereon constitutes reversible error.

When a court tries a cause without a jury, it must make findings of fact covering all the material issues, which, when entered in the journal, are tantamount to special verdicts, and constitute the foundation of the judgment; but, in the absence of a finding on a matter essential to the right of action or defense, such judgment must fail for want of support. Moody v. Richards, 29 Or. 282, 45 P. 777; Daly v. Larsen, 29 Or. 535, 46 P. 143; Breding v. Williams, 33 Or. 391, 54 P. 206; Wright v Ramp, 41 Or. 285, 68 P. 731. Though the findings...