Oxley v. Linnton Plywood Ass'n

• Decision Date: 25 May 1955
• Citation: Oxley v. Linnton Plywood Ass'n, 284 P.2d 766, 205 Or. 78 (Or. 1955)
• Parties: , Blue Sky L. Rep. P 70,280 John J. OXLEY and Jay A. Williams, Respondents, v. LINNTON PLYWOOD ASSOCIATION, a cooperative association, Appellant.
• Court: Oregon Supreme Court

Page 766

284 P.2d 766

205 Or. 78, Blue Sky L. Rep. P 70,280

John J. OXLEY and Jay A. Williams, Respondents, v. LINNTON PLYWOOD ASSOCIATION, a cooperative association, Appellant.

Supreme Court of Oregon.

Argued April 28, 1955.

Decided May 25, 1955.

George E. Birnie, Portland, argued the cause for appellant. With him on the brief was Thomas H. Ryan, of Portland.

Wilber Henderson, Portland, argued the cause and filed a brief for respondent.

Before TOOZE, Acting C. J., and ROSSMAN, LUSK, LATOURETTE and PERRY, JJ.

TOOZE, Acting Chief Justice.

This is an action to recover the sum of $25,000 for services performed, brought by John J. Oxley and Jay A. Williams, as plaintiffs, against Linnton Plywood Association, a cooperative association, as defendant. The case was tried to the court without the intervention of a jury. Judgment was entered in favor of plaintiffs for the sum of $25,000, and defendant appeals.

Defendant was organized in February, 1951, as a cooperative association, under the provisions of §§ 77-501 to 77-525, incl., O.C.L.A., ORS 62.010 to 62.990, incl., to engage in the manufacture and sale of veneer and plywood products, and has its office and plant located in Portland, Multnomah county, Oregon. By its articles of association, defendant is authorized to issue 400 shares of common stock, each share having a par value of $5,000, and 250 shares of preferred stock, each share having a par value of $2,500.

Defendant's common stock was to be sold only to persons who could qualify as members of the association, such qualifications being that they would be engaged in the production of defendant's products.

On February 24, 1951, defendant entered into a written agreement with plaintiffs, whereby plaintiffs were authorized to secure members of the association and to sell them common stock, one share to each, for the price of $5,000, payable according to the terms of defendant's subscription agreement. On September 28, 1951, a new contract in writing was entered into between defendant and plaintiffs, replacing the original agreement, and it is upon the provisions of this latter contract that the instant action is based. That contract reads as follows:

'Portland, Oregon

'September 28, 1951

'Messrs. John J. Oxley and Jay Williams

'302 S. W. 4th Avenue

'Portland, Oregon

'Gentlemen:

'This will serve to confirm our agreement as follows:

'You have been previously authorized and you are hereby authorized to seek out and procure applications for membership with this association from persons who indicate interest in such. Also, you shall seek out and advise this association of the names of persons or firms which may desire to purchase from us one or more shares of our preferred stock.

'In each instance, you shall submit to this association full information concerning the qualifications of persons who propose membership and full information concerning the persons or firms which may be suitable as patrons of this association.

'In all instances, you shall give to persons or firms requesting information concerning this association a copy of such prospectus which we may from time to time authorize you to use in this connection, and you shall comply with the requirements of the Securities Act of 1933 and rules and regulations of the Securities & Exchange Commission.

'It is further understood that you will have no authority to sell either the common or preferred stock of this association or to admit persons to membership and that the full and exclusive power and authority to sell such stocks and to admit applicants to membership are reserved to and shall be exercised by only this association.

'As your fee for this service, this association will pay to you jointly a sum of money equal to five percentum of the sales price of the common and preferred stock which its board of directors authorizes for sale and has sold to stockholders. This fee shall be based upon previous sales of such stock, as well as sales to be made in the future. The fee is to be paid to you monthly.

'This will also serve to confirm our agreement that you will be paid nothing for services in connection with the securing of loans of money to this association and that any previous agreement relating to a fee for loan procuring services is hereby cancelled.

'This entirely supercedes and cancels any previous agreement between us pertaining to this subject matter. Your acceptance of the terms of this agreement is indicated by your signatures set forth below.

'Respectfully,

'Linnton Plywood Association

'By [Sgd.] Morris J. Scholten

'Attest: [Sgd.] Kermit Parsons

'[Corporate Seal]

'Accepted:

'[Sgd.] John J. Oxley

'[Sgd.] Jay A. Williams'. (Italics ours.)

It is to be observed that under the original agreement, plaintiffs were employed to secure members and to sell stock, while under the contract of September 28, they are expressly prohibited from admitting any persons to membership and from selling stock, their services being specifically limited to procuring applications for membership and submitting information concerning persons or firms suitable as patrons of the association to whom preferred stock might be sold. For their services in the respects noted, plaintiffs are to be paid five percent of the sales of the common or preferred stock sold by defendant itself to the persons accepted for membership or approved as patrons. It is obvious, of course, that plaintiffs are not to be paid anything in connection with applications for membership procured by them or for information furnished as to prospective patrons which defendant association does not act upon favorably.

Acting pursuant to the terms of the contract, plaintiffs admittedly procured persons whose applications for membership were approved by defendant and to whom defendant sold shares of stock in the total sum of $1,250,000. It also is admitted that defendant paid to plaintiffs on account of such transactions the sum of $37,500. Moreover, it is admitted by defendant that the total amount acruing on such sales made by it is the sum of $62,500, leaving a balance unpaid of $25,000, for the recovery of which this action was commenced.

Defendant denies plaintiffs' right of recovery upon several grounds as set forth in its amended answer to plaintiff's complaint. In its first further and separate defense, defendant alleges in part as follows:

'II.

'* * * That said shares of capital stock were offered to prospective purchasers through the facilities of interestate commerce and the United States Mail service and were and are subject to the jurisdiction and purview of the Securities Act of 1933, Public Law No. 22, 73rd Congress, 15 U.S.C.A. Sec. 77a, as amended, and herein referred to as the 'Act'. These securities of this defendant have been registered with the Securities and Exchange Commission pursuant to the requirements of the Act and that such registration became effective in September, 1951, and as amended by riders dated October 10, 1951, and October 17, 1951, was at all times herein mentioned in effect pursuant to the requirements of the Act.

'III.

'That on or about the 28th day of September, 1951, defendant and plaintiffs entered into an agreement in writing by the terms of which defendant employed plaintiffs to secure purchasers of defendant's securities. Said agreement is attached to and made a part of Plaintiffs' complaint on file herein and designated as 'Exhibit B', and that among other provisions, it specifies that plaintiffs shall comply with the requirements of the Securities Act of 1933 and the rules and regulations of the Securities and Exchange Commission.

'IV.

'a. Section 5(b)(1) of the Act makes it unlawful for any person to carry or to cause to be carried in the United States mails or interstate commerce any prospectus pertaining to any security registered under the Act unless such prospectus meets the requirements of the Act.

'b. Section 12 of the act makes it unlawful for any person to sell a security through the facilities of interstate commerce or the U. S. Mails by means of a prospectus or oral comunication which includes an untrue statement of a material fact or which omits to state a material fact necessary to render other statements not misleading.

'V.

'That after the effective registration of defendant's securities, plaintiffs transmitted and caused to be transmitted through the U. S. mails and in interstate commerce to each subscriber to defendant's securities and to each prospective subscriber thereto a prospectus which did not meet the requirements of the Act in that it violated the provisions of Section 12 thereof in that said prospectus contained untrue statements of material facts and omitted to state material facts necessary to render other statements not misleading, as follows:

'a. Said prospectus stated that defendant was the owner of timber lands in Lincoln County, Oregon, containing 30 million board feet of timber and that said timber land was located two miles from a highway; and that the cutting of said timber would necessitate the construction of a road over intervening property owned by the United States of America.

'In truth and fact, said timber land owned by defendant contained and contains not more than 21 1/2 million board feet of timber; that the distance between the highway and the timber land is some seven miles and that the intervening land is owned by private interests.

'b. Said prospectus omitted to state that said timber land is comprised of four separate, noncontiguous and scattered parcels separated by lands owned by others and that roadways to each of such tracts must be constructed in order that the timber could be removed therefrom.

'c. Said prospectus stated that as a result of the rescission offer made by defendant to subscribers to its securities, the total number of shares submitted for rescission was 18 shares and that the total amount of money which was refunded or was to be refunded to those who accepted such...