Phillips v. Colfax Co.

• Decision Date: 23 April 1952
• Parties: PHILLIPS v. COLFAX CO., Inc.
• Court: Oregon Supreme Court

Page 276

243 P.2d 276

195 Or. 285

PHILLIPS v. COLFAX CO., Inc.

Supreme Court of Oregon.

Argued and Submitted April 8, 1952.

Decided April 23, 1952.

William L. Josslin, Portland, argued the cause and filed briefs for appellant.

Glen McCarty, Portland, argued the cause for respondent. With him on the brief was J. W. Rosacker, Portland.

Before BRAND, C. J., and LUSK, LATOURETTE, WARNER and TOOZE, JJ.

WARNER, Justice.

Gordon J. Phillips, plaintiff, brings this action to recover $2,280 which he alleges he loaned to the defendant, Colfax Company, Inc. From a judgment in favor of plaintiff for that amount, defendant appeals.

To fully comprehend the instant matter, one must clearly understand the several legal entities involved and the respective composition and dominant ownerships in each.

Carl Fossi and his brother Albert, for some years prior to the transactions which are the basis of this action, were engaged in the construction business as partners under the name of Fossi Bros. We will hereinafter refer to this business as the 'partnership.'

Prior to August 18, 1947, Carl and Albert were the owners of a parcel of real property in Portland, Oregon, upon which they desired to build an apartment house. On that date Carl and Albert, together with their then attorney, organized a corporation known as the Colfax Company, Inc. We will refer to it as the Colfax Company. Upon completion of the corporrate organization, Carl and Albert Transferred to it the parcel of Portland property referred to above. In the Colfax Company Carl became the owner of 75 shares of capital stock, his brother Albert 74 shares and their attorney one qualifying share. The three persons named constituted the entire stock ownership and the entire directorate. Carl became president of the corporation, and Albert officiated as its secretary. The corporate structure thus established was a necessary preliminary to securing a F. H. A. guaranteed mortgage loan for the purpose of financing the apartment house which was shortly after erected on the real property conveyed to the corporation by Carl and Albert.

The Colfax Company's president and secretary were authorized by resolution of the directors to employ contractors and borrow funds for the apartment house construction. About December 2, 1947, pursuant to this authority, they obtained a loan of $165,000 through the Investors Syndicate upon the security of the corporation's note and mortgage. About the same time they entered into a written contract in the name of the corporation with the partnership, Fossi Bros., for the construction of the apartment house.

This construction was begun by the partnership, as independent contractors, and completed about January, 1949. During this period the proceeds of the loan were delivered by the Investors Syndicate as mortgagee to the corporation from time to time as the work progressed. The Colfax Company thereafter disbursed it to the partnership as payments due under the construction contract.

During the months of October and November, 1948, the months in which plaintiff alleges he made the loans sued upon, Carl Fossi, as a sole proprietor, was operating a used car business in Portland under the assumed name of Personality Motors.

By way of recapitulation we find at the time plaintiff began loaning his money, there were existent the following business entities which directly or indirectly were brought within the ambit of plaintiff's transaction: the defendant Colfax Company, owned in its entirety by Carl and Albert Fossi; Fossi Bros. partnership, the construction contractors for the corporation and consisting solely of Carl and Albert Fossi; and Personality Motors, then owned by Carl Fossi alone.

Plaintiff alleges that between October 15, 1948, and November 17 of the same year, at the special instance and request of the defendant corporation, he loaned the corporation $2,280 which the corporation agreed to repay. The defendant filed an answer in general denial. At trial it was stipulated that plaintiff had advanced the sum of $2,280. Carl Fossi admits receiving that amount but contends it was money loaned to him personally and not to the Colfax Company. The only issue, therefore, is: Did the Colfax Company receive and become obligated to pay the borrowed money?

Appellant's first two assignments of error are addressed to the court's refusal to grant defendant's motions for involuntary nonsuit and defendant's later motion for a directed verdict.

A motion for a nonsuit and a motion for a directed verdict are alike in that they challenge the legal sufficiency of the evidence and present the same questions. Such a motion admits not only all that the evidence proves but all that it tends to prove. Johnson v. Hoffman, 132 Or. 46, 56, 284 P. 567. A motion for a directed verdict cannot be granted if the evidence in behalf of either party contains some competent evidence supporting each material allegation of the complaint. Smith v. Industrial Hospital Association, Or.1952, 242 P.2d 592.

The ultimate question to be determined here is whether the transaction is that of the defendant corporation within the meaning of the law. It is good pleading to allege that the money was loaned to the Colfax Company, and it is competent to prove that averment by showing that the loan was negotiated by Carl Fossi, as agent of the defendant duly authorized, or that it was afterward ratified by the defendant corporation. Scandinavian-American Bank v. Wentworth Lumber Co., 101 Or. 151, 157, 199 P. 624; Hinton v. Roethler, 90 Or. 440, 448, 177 P. 59; Masters v. Walker, 89 Or. 526, 529, 174 P. 1164.

Before proceeding further to discuss the evidence which supports or tends to support plaintiff's allegation that he loaned the money to the Colfax Company, it may be well to pause here and take an inventory of certain matters in evidence which stand uncontradicted. Taken together, they furnish a background against which certain proof hereinafter referred to is to be evaluated. Unless these uncontroverted matters are borne in mind, the observations and conclusions that follow may not carry persuasion.

The record reveals these things as undisputed as of the time of the transactions which are the basis for the instant action: That the Colfax Company was engaged in building an apartment house; that Fossi Bros., as independent contractors, had the construction contract; that the chief source of funds used in payment of the building costs was monies borrowed from Investors Syndicate on a F. H. A. mortgage; that these borrowed monies were disbursed from time to time in accordance with building progress reports; that by reason thereof, the Colfax Company was in debt to the partnership as the contractor at all times during the periods between the advances made by the mortgagee until the apartment house was completed; that construction by Fossi Bros. was not completed until some time in January, 1949; that Carl Fossi was president of the corporation and the officer of that organization giving more attention to its fiscal affairs than did his brother Albert; that Albert Fossi was the partner of Fossi Bros. who gave most of his time to the supervision of construction; that Carl Fossi was the sole proprietor of a used car business known as Personality Motors; that the plaintiff was a salesman employed by Carl Fossi in his used car business; that the plaintiff during the time alleged in his complaint delivered to Carl Fossi $2,280 in cash; and that this amount was the aggregate of six different items ranging from $100 to $625.

There is no dispute between the parties that coincident with the receipt of each of five of the six cash advances referred to, Carl Fossi gave plaintiff a check on the account of Personality Motors in a corresponding amount. It was defendant's theory that these five checks evidenced a direct loan from Phillips to Carl Fossi, whereas it was plaintiff's contention that these checks were received by him only as collateral security for Fossi's agreement as a guarantor of the defendant corporation's prime obligation to repay the loan. The jury resolved this issue of fact against the defendant and in favor of plaintiff.

There is no written evidence of a loan agreement between the defendant corporation and the plaintiff. The arrangements for the loan made by and between plaintiff and Carl Fossi were all oral. The plaintiff Phillips claims that Fossi approached him as an officer of the corporation for a loan to relieve the corporation's temporary financial embarrassment. In this plaintiff is corroborated by Vincent S. Hokanson, a fellow employee at Personality Motors who testified as follows concerning the initial advance:

'Q. Who was in the office [of Personality Motors] at the time? A. Gordon Phillips, Carl Fossi and myself.

'Q. What was said by Mr. Fossi? A. Well, Mr. Fossi stated that Investors Syndicate had held up their money and that he did not have the funds to pay the carpenters with, the men working on his apartment house, and he asked Mr. Phillips if he could borrow the money for Colfax, Inc., to pay the carpenters with and Mr. Phillips asked him--well, he sort of hesitated and Mr. Fossi made the statement that the corporation would pay him back and he personally would see that he obtained the money.'

From Hokanson we learn that substantially the same conversation was had between Phillips and Carl Fossi at the time of each subsequent advance under this loan. Hokanson also testified that the same formula of distribution of Phillips' funds was followed after Carl Fossi had received the money from plaintiff. These distributions constitute a significant item in the subject of our inquiry. We will refer to them more fully later.

Plaintiff adduced no evidence that Carl Fossi, as president of the Colfax Company, had been expressly authorized by that corporation to borrow funds from him for defendant's use and benefit. He claims, however, that such implied...