Mitchell v. Holman

• Decision Date: 18 January 1897
• Citation: 30 Or. 280,47 P. 616
• Parties: MITCHELL et al. v. HOLMAN et al.
• Court: Oregon Supreme Court

47 P. 616

30 Or. 280

MITCHELL et al. v. HOLMAN et al.

Supreme Court of Oregon

January 18, 1897

Appeal from circuit court, Marion county; H.H. Hewitt, Judge.

Suit by S.Z. Mitchell and others against Thomas Holman and others. From a decree for defendants, plaintiffs appeal. Modified.

O.F. Paxton and G.G. Bingham, for appellants.

H.J Bigger and Tilmon Ford, for respondents.

BEAN J.

This suit arises out of the following facts: On February 24, 1893 the defendant Bush recovered judgment against the plaintiffs for the sum of $24,566.50 on a promissory note, of date August 31, 1892, executed by them to the defendant Holman and by him indorsed and transferred to Bush, before maturity as collateral security for about $16,000. Prior to the commencement of this suit, the plaintiffs paid Mr. Bush $22,379.97 on the judgment, and, as an offset to the balance of $2,938, tendered a receipt in full for a claim of that amount which they held against the defendant Holman, and demanded satisfaction of the judgment, which being refused, they brought this suit for the purpose of offsetting the amount due them from Holman against the balance of the Bush judgment. The amount paid Mr. Bush being sufficient to pay and discharge his demand against Holman, it is admitted that he has no interest in the balance due on the judgment, except as trustee for his co-defendant, and hence this controversy is between the plaintiffs and Holman. As a ground for equitable jurisdiction, it is averred that, at the time the action on the note was brought by Mr. Bush, and up to the trial, plaintiffs supposed and believed that he owned the note in his own right, and so had no opportunity, if otherwise permissible, to plead the amount due them from Holman as a set-off in such action, and that, at the time of the commencement of this suit, Holman was practically insolvent. These allegations are sufficiently supported by the testimony for the purposes of this case. The evidence shows that plaintiffs had no knowledge of the character or nature of Mr. Bush's interest in the note until it was developed on the trial, and that, when this suit was commenced, Holman was very largely indebted, and his property incumbered to such an extent as to render it highly inequitable and unjust for him to enforce the judgment under the circumstances of the case. We shall, therefore, without further reference to this branch of the case, proceed to a consideration of the merits.

On the 15th of April, 1893, a corporation, known as the Oregon Electric Light Company, of which Holman was the manager, was, and for a long time prior thereto had been, supplying certain of the state buildings at Salem with electric light, under a contract with the state, for the stipulated and agreed compensation of $5,000 per annum, payable quarterly, and at that time there was due and unpaid thereon the sum of $2,708.33. The capital stock of the corporation was divided into 500 shares of $100 each, of which the defendant Holman owned 220 shares, D.P. Thompson 220, and J. Loewenberg 60. On the day named, the defendant Holman and Thompson sold and assigned, for a good and valuable consideration, all their stock to the plaintiffs, Mitchell, Anson, and Paxton, and one E.P. McCornack, and delivered to them all of the corporate records and property. On the 17th of the same month a meeting of the stockholders was held, all the stockholders of the company being present either in person or by proxy, at which new directors were elected, who immediately qualified, and assumed control of the corporation, and elected a new set of corporate officers. On May 5, 1893, after he had parted with all his stock, and therefore ceased to be an officer of the corporation, and without any authority from it whatever, Holman, representing himself to be still the manager of the corporation, collected from the state the amount due the company on the lighting contract, and used a part thereof in payment of the operating expenses of the corporation during the time it was being earned, and retained the remainder. On the 12th of August, 1893, the Oregon Electric Light Company duly sold and assigned its claim against Holman, for the money so collected by him, to the plaintiffs in this suit, and they are now the owners and holders thereof, and seek to set off the amount of such claim against the judgment in favor of Bush, but which in fact belongs to Holman.

If these were all the facts in the case, there could be no question as to who should prevail in this suit. The money collected by Holman was due the corporation, and not the stockholders, and when he sold and assigned all...