McMillan v. National Wool Warehouse & Storage Co.

• Decision Date: 30 November 1928
• Docket Number: 5349.,No. 5348,5348
• Citation: 28 F.2d 793
• Parties: McMILLAN v. NATIONAL WOOL WAREHOUSE & STORAGE CO. FALK MERCANTILE CO., Limited, et al. v. SAME.
• Court: U.S. Court of Appeals — Ninth Circuit

28 F.2d 793 (1928)

McMILLAN v. NATIONAL WOOL WAREHOUSE & STORAGE CO.

FALK MERCANTILE CO., Limited, et al. v. SAME.

Nos. 5348, 5349.

Circuit Court of Appeals, Ninth Circuit.

October 8, 1928.

Rehearing Denied November 30, 1928.

Conley, Conley & Conley, of Fresno, Cal., and Richards & Haga, of Boise, Idaho, for plaintiff in error.

Richards & Haga, of Boise, Idaho, for appellants Boise City Nat. Bank, McMillan, and St. Clair, trustee.

Chas. M. Kahn, of Boise, Idaho, for appellant Falk Mercantile Co.

Dean Driscoll, of Boise, Idaho, for defendant in error and appellee.

Before GILBERT and RUDKIN, Circuit Judges, and ST. SURE, District Judge.

PER CURIAM.

The McMillan Sheep Company, Limited, was organized as a corporation under the laws of the state of Idaho in 1909, and the entire authorized capital stock of $100,000 was issued to Thomas McMillan. In 1910 McMillan sold and transferred $75,000 par value of the capital stock to Hugh Sproat, a nephew, and in 1917, or 1918, the remaining $25,000 par value to two other nephews, Dave and Rex Sproat. Since the date of these transfers the three nephews have been the owners of the entire capital stock of the corporation, except one qualifying share held by a director. Hugh Sproat has been director, president, treasurer, and general manager of the corporation at all times since he became a stockholder; Dave Sproat has at all times been director and secretary; and Rex Sproat has at all times been director and vice president. At the time of the purchases the three Sproats executed their promissory notes to McMillan for the purchase price of the stock. Some time prior to the year 1921, Hugh Sproat indorsed on his individual note to McMillan the name of the sheep company; but this indorsement was made without consideration, and it does not appear that it was made with the knowledge or consent of any stockholder, director, or officer of the corporation other than himself. In 1921 the Hugh Sproat note to McMillan was renewed for two years for the balance of $15,000 then due, and there was again indorsed on the renewal note the name of the sheep company; but, as before, the indorsement was without consideration, and it does not appear that it was made with the knowledge or consent of any stockholder, officer, or director of the corporation other than Hugh Sproat.

On April 22, 1922, the sheep company executed its promissory note in the sum of approximately $7,500, payable November 1, 1923, to the National Wool Warehouse & Storage Company, and on the same day a like note in the sum of $8,000, payable November 1, 1924. Since the execution of these notes there has been paid on the Hugh Sproat note to McMillan the sum of approximately $12,000, on the Dave Sproat note to McMillan the sum of approximately $5,000, and on the Rex Sproat note to McMillan the sum of approximately $1,400. All of these payments on the individual notes of the three Sproats were made from funds belonging to the sheep company and were made by checks drawn in favor of McMillan against the Boise City National Bank; such checks being signed by the sheep company through Hugh Sproat, its president. At the time the several payments were made, McMillan had actual knowledge that the payments so made were from funds belonging to the sheep company and had like knowledge that the three Sproats were the officers, directors, and stockholders of the sheep company. The sheep company never declared or paid a dividend and at all times since September 8, 1924, has been insolvent, and McMillan at all times had knowledge of such insolvency. Such is a brief summary of the findings of ...