North Anson Lumber Co. v. Smith

• Decision Date: 21 June 1911
• Citation: 209 Mass. 333,95 N.E. 838
• Parties: NORTH ANSON LUMBER CO. v. SMITH.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

209 Mass. 333

95 N.E. 838

NORTH ANSON LUMBER CO. v. SMITH.

Supreme Judicial Court of Massachusetts, Middlesex.

June 21, 1911

COUNSEL

Chas F. Choate, Jr., and John H. Stone, for plaintiff.

Stover & Sweetser and Homer Albers, for defendant.

OPINION

RUGG J.

This is an action to recover one-half the principal and interest of eight promissory notes made by the defendant's intestate jointly with James E. Freeman and Charles T. Leavitt to the order of Emery Porter & Co. At or after maturity they were indorsed in blank without recourse and delivered to the plaintiff. The circumstances of the transaction appear not to have been much in dispute, and might have been found to be these: Emery Porter & Co. owned a sawmill in North Anson Me., in 1905, and substantially all the capital stock of the North Anson Water Power & Improvement Company, a corporation authorized to develop and dispose of water power, together with a large quantity of logs and timber. As a result of several agreements, Freeman, Smith and Leavitt purchased the timber and logs, and took a bond for a conveyance of the mill property and stock in the water power company, entered into possession of all the real and personal property, and started to carry on the business of sawing and selling lumber. They decided to form a corporation to be called the North Anson Lumber Company. Notes of the proposed corporation were proffered in part payment of the real and personal property but these were refused by the sellers, who insisted upon notes signed by the individual purchasers. In payment for the property and for starting the business, Freeman and the defendant's intestate each advanced six thousand dollars, and signed the eight notes here in suit. On April 10, 1905, the plaintiff corporation was organized by Freeman, Smith and Leavitt, who had previously to that time conducted the business under that name. Leavitt, although participating in the organization, went no further in the enterprise, furnished no money, and drops out of the case. Upon its incorporation the North Anson Lumber Company took over the business, previously conducted by Freeman, Smith and Leavitt, as a going concern, and substantially all the property bought by them of Emery Porter & Co., but no change whatever was made in the way it was carried on. There was no formal offer of sale by Freeman, Smith and Leavitt, or acceptance by the corporation, or transfer of title to property, but the corporation simply took possession of and used in its own business from that time on all the property purchased. The logs were sawed into lumber and sold by the plaintiff in ordinary course of trade, and the proceeds all went into its treasury. The books originally opened by Freeman, Smith and Leavitt were continued without change or interruption by the plaintiff corporation, and no distinction was made as to the business conducted before and after the date of the incorporation. The corporation entered into possession of the real estate described in the bond. The defendant's intestate was the first president of the company, but after a few months his mind failed, and a conservator was appointed who cared for his estate until his death. Freeman has always been the treasurer of the plaintiff, and, after the incapacity of the defendant's intestate, became also its president, and has been exclusively in charge of its affairs as general manager. After the incorporation certificates of stock were issued to Freeman and to the defendant's intestate for 125 shares each, although up to that time each had contributed only $6,000. In January, 1906, Freeman, in whose custody the Smith certificate had been placed, mutilated it and issued a new one for 60 shares, which corresponded at par with the cash he had paid in, making an entry upon the stub in the stock book that 'the balance 65 shares were never paid for.' Six of the eight notes now in suit were paid on or about their maturity by the plaintiff with its own money, and were at Freeman's request surrendered to him after being indorsed without recourse by the payees. It was claimed by the plaintiff that Freeman had paid one-half these notes, and it seeks to recover from the defendant only the remaining half, this being based upon the testimony of Freeman that he and the defendant's intestate had an understanding that each was to pay one-half the notes and take stock in the corporation to an equal amount. Freeman, however, did not testify that he paid the notes or one-half of them with his own money, but that he had paid money into the treasury of the plaintiff as he was able and had taken stock for it. He was unable to point however to any specific payments to this end or to any entries upon the books of the plaintiff of money paid to it for the purpose of meeting these notes, or which corresponded to the date of the payments. The entries upon the books of the corporation show that all the notes, except the two given for the real estate and water power company stock, were paid with...