Noble v. Beeman-Spaulding-Woodward Co.

• Decision Date: 29 April 1913
• Citation: 131 P. 1006,65 Or. 93
• Parties: NOBLE v. BEEMAN-SPAULDING-WOODWARD CO. et al.
• Court: Oregon Supreme Court

131 P. 1006

65 Or. 93

NOBLE v. BEEMAN-SPAULDING-WOODWARD CO. et al.

Supreme Court of Oregon

April 29, 1913

Appeal from Circuit Court, Multnomah County; J.P. Kavanaugh, Judge.

Action by C.H. Noble against the Beeman-Spaulding-Woodward Company and others. From a judgment for plaintiff, defendant Milton G. Smith appeals. Modified.

Bean J., dissenting.

About March 30, 1908, the Beeman-Spaulding-Woodward Company hereinafter called the corporation, applied to the Hibernia Savings Bank, to be called the bank, for a loan of $2,500. The bank officers drew up a note of that date, of which here follows a copy: "$2,500. Portland, Ore., March 30, 1908. On demand, after date, without grace, I promise to pay to the order of Hibernia Savings Bank at the Hibernia Savings Bank of Portland, Oregon, twenty-five hundred dollars in gold coin of the United States of America, with interest at the rate of 8 per cent. per annum from date until paid; value received. Interest payable quarterly, and if not so paid the whole sum both principal and interest, to become immediately due and collectible at the option of the holder of this note; and I further agree to pay all taxes and assessments which may be levied or assessed to the holder of this note on account thereof; and in case suit or action is instituted to collect this note or any portion thereof, I promise to pay such additional sum as the court may adjudge reasonable as attorney's fees in said suit or action." This note was signed by the corporation and forwarded by the bank to its correspondent at Seattle, Wash., with this writing on the back, to be presented to the plaintiff there for his signature: "For value received, I hereby guarantee the payment of the within note at maturity, or any time thereafter, with interest at 8 per cent. per annum until paid, and hereby waive demand, protest and notice of nonpayment, and consent that the payment of this note may be extended from time to time without affecting my liability thereon." Noble refused to sign the writing last above quoted unless the defendants Julius Beeman, Lewis V Woodward, and M.G. Smith, who were members of the corporation, would sign the note as makers, and it was returned to the bank. The three individual defendants then signed the note, which was again sent to Seattle, where Noble signed the writing on the back, and, after again receiving it, the bank paid to the corporation $2,500, the principal of the note. It is admitted by all parties that this money was borrowed by the corporation for its own use, and that neither the plaintiff nor any of the individual defendants received any of it, though the latter were members of the corporation. The interest was paid to March 30, 1909.

The complaint sets out the note and the writing on the back thereof in full, alleges the payment of the interest and that, the defendants having failed to pay the note, the bank compelled the plaintiff to pay the same, and he did pay it to the bank on April 14, 1910. It was agreed that he paid $2,700 on that date to take up the note, and he alleges that he has been and now is the owner and holder thereof. It is charged also that, by the terms of the note, the defendants promised and agreed to pay the bank the sum of $2,500 on demand, but that, although demand was made upon them by the bank, they had refused to pay the same or any part thereof; that the plaintiff never received any of the proceeds of the note but indorsed the same as stated for the accommodation of the defendants and to enable them to procure a loan of $2,500 from the bank. It is also averred that the plaintiff was compelled to employ a firm of attorneys to bring an action upon the note and agreed to pay them a reasonable attorneys' fee therefor, which the plaintiff alleges is $500. The plaintiff demands the amount paid by him on the note, together with interest at the rate of 8 per cent. per annum from April 14, 1910, and for $500 attorneys' fees. The summons was served on the corporation and the defendant Woodward respectively May 5, 1910, and May 10, 1910, but neither of them answered. It was served upon the defendant Smith May 20, 1910, and he is the only person who answered in the action. The first answer was filed May 28, 1910. On October 13th of that year, summons having been served upon the defendant Beeman by publication, his default was entered and judgment taken against him for the sum demanded in the original complaint. On December 23d Smith filed an amended answer upon which the case was tried. He admitted the execution of the promissory note set out in the complaint, but says that he executed it only as surety for the corporation and without any consideration to himself whatever. The execution and indorsement of the plaintiff's written guaranty of payment of the note as inducement to the bank to loan money to the corporation is also admitted, but Smith denies that it was an inducement to the bank to loan money to any one except the corporation. The answer concedes that the bank compelled the plaintiff to pay the note on April 14, 1910, but denies that he is the owner or holder of it or as such is in possession thereof. The employment of the attorneys and the necessity therefor, the reasonableness of the fee of $500, or any other sum, are all challenged by the answer. Further answering the complaint, Smith avers, in substance, that the $2,500 included in the note of March 30, 1908, was loaned to and received by the corporation for its sole benefit, and no part of the same was ever received or used by Smith; that he signed the note as surety only for the accommodation of the corporation and without any consideration whatsoever; and that the plaintiff both before and at the time he executed said written guaranty of payment of the note, and at the time he paid the same on April 14, 1910, had full knowledge and notice and well knew that said $2,500 was being loaned to the corporation alone for its sole and exclusive use, and that this defendant signed said promissory note as a surety only. As a second defense Smith avers substantially that the corporation borrowed said sum of $2,500 from the plaintiff for its own use and benefit alone, and gave the note, signed by itself as principal and by the other defendants as sureties, to secure payment of the same, and that, knowing all this, the plaintiff did on or about August 2, 1909, duly enter into an agreement with the corporation and its other creditors that it should assign all its property to S.C. Spencer in trust for the benefit of all said creditors to dispose of and convert the same into money, and, after deducting his necessary expenses in that behalf, to divide and distribute the residue among said creditors pro rata in full payment of their claims against the corporation, and that said assignment of the assets of the corporation to Spencer should release the corporation from all liability on account of all claims of its said creditors against it. He further states that, in accordance with this agreement and with plaintiff's assent thereto, the corporation transferred all its property to Spencer, who has converted and is converting the same into money in execution of the agreement, and that by reason of the premises Smith is released and discharged from all obligations or liability on the note. The amended answer of Smith was traversed by the reply.

The cause was tried before the court without a jury, and the judge found facts substantially according to the allegations of the complaint, and in addition thereto found that Smith signed the note as surety only, receiving no part of the proceeds of the loan nor any consideration for signing it, and that he executed the same only as an accommodation maker for the corporation. The judge also made this finding: "That on or about August 2, 1909, the corporation turned all of its assets over to S.C. Spencer in trust for the benefit of the creditors of the corporation, and that said Spencer was to reduce the assets of said corporation to money and take out his reasonable charges and expenses therefor and in connection therewith and pay the creditors of the corporation pro rata out of the net amount realized, so that the creditors of the corporation would receive said pro rata share in full of their claims against it, and that a large number of the creditors of the corporation signed this agreement with said Spencer, but that the plaintiff herein never did sign it; that said Spencer entered upon the duties of his trust and has reduced some of the assets to cash, but that he never paid said plaintiff anything for or on account of the note herein nor anything to the Hibernia Savings Bank." The answering defendant made various objections to the findings of the court, but the one principally relied upon is to the effect that it was not determined by the court whether the plaintiff assented to or became bound by the agreement between the corporation and its creditors and the transfer of its assets to Spencer as trustee in accordance therewith. The court disregarded all the objections to the findings and entered judgment against Smith for $2,700, with interest at 8 per cent. per annum from April 14, 1910, and $275 attorneys' fees, with costs and disbursements. From this judgment the defendant Smith appeals.

E.B. Watson, of Portland (Watson & Beekman, of Portland, on the brief), for appellant.

S.C. Spencer, of Portland (Wilbur, Spencer & Dibble, of Portland, on the brief), for respondent.

BURNETT, J. (after stating the facts as above).

It may be conceded that as to the bank the plaintiff, who signed the writing on the back of the note, and the defendants in this action, all of whom signed the note as makers, were all directly liable. Such is the doctrine taught by all the cases cited in ...