Sun River Stock & Land Co. v. Montana Trust & Savings Bank
| Decision Date | 06 January 1928 |
| Docket Number | 6190-6196. |
| Citation | 262 P. 1039,81 Mont. 222 |
| Parties | SUN RIVER STOCK & LAND CO. v. MONTANA TRUST & SAVINGS BANK. POWER v. SAME (six cases). |
| Court | Montana Supreme Court |
Appeal from District Court, Lewis and Clark County; W. H. Poorman and A. J. Horsky, Judges.
Suits by the Sun River Stock & Land Company, by Charles B. Power as guardian, by Charles B. Power individually, by Charles B Power, as trustee for Gordon Lamey, by Charles B. Power, as trustee for Ella G. Lamey, and by Charles B. Power, as administrator of the estate of Mabel L. Power, deceased, all against the Montana Trust & Savings Bank, as executor of the last will and testament and estate of John H. Burke deceased. Judgments for plaintiffs, and defendant appeals. Reversed, with direction, as to all judgments except judgment in suit brought by Charles B. Power individually; as to that affirmed.
W. G. Gilbert, of Dillon, and Harry P. Bennett and T. B. Weir, both of Helena, for appellant.
Walsh & Nagle, of Helena, for respondents.
Cooper, Stephenson & Hoover, of Great Falls, amici curiæ.
Argued before CALLAWAY, C. J., and MYERS, STARK, MATTHEWS, and GALEN, JJ.
These appeals are from judgments of the district court of Lewis and Clark county declaring that the creditors' claims hereinafter mentioned are just and valid claims against the estate of John H. Burke, deceased, and ordering their payment in due course of administration.
There are seven suits, numbered 6190 to 6196, inclusive. In each Montana Trust & Savings Bank, as executor of the last will and testament of John H. Burke, deceased, is defendant. In 6190 Sun River Stock & Land Company, a corporation, is plaintiff; in 6191 C. B. Power, as guardian, is plaintiff; in 6193 and 6194 C. B. Power, as trustee, is plaintiff; in 6196 C. B. Power, as administrator, is plaintiff; in 6192 and 6195 C. B. Power is plaintiff.
In all of the cases except 6192 the main issue is the same, and it is whether a concern called the Rock Creek Ranch Company was a corporation or a partnership.
In 1910 James P. Porter, as agent for D. A. G. Floweree, offered to sell to John H. Burke and Charles B. Power the Rock Creek ranch, near Wolf creek, in Lewis and Clark county. The offer appearing attractive Burke and Power, who were intimate friends, visited the property, and agreed to buy it for the sum of $85,000. Their intention was to engage in the live stock business upon a large scale. They started out with the understanding that they were to be equal partners. After they had agreed to purchase the ranch, and while matters were still in the preliminary stage, it occurred to them that the enterprise should be segregated in some manner, " more largely from a bookkeeping standpoint," as Mr. Power said, to keep it separate from the other activities of the actors. Burke had a live stock business run under his own name, and, whether at that time or later, he also was engaged largely in that business with one Taylor. Power, in connection with others, had live stock companies run under different names. In order to keep the new business " as an outstanding arrangement," said Mr. Power, " we put it in the form of a corporation." In the conduct of the business it was understood that Burke, being a competent live stock man, was to run the ranch, buy the stock, and to attend to " those details" ; " the office work and keeping track of its transactions" was to be the duty of Power. The two were to be equal owners in the enterprise.
Each advanced $5,000 in cash toward the purchase of the ranch; the remainder of the purchase price was borrowed.
In order to proceed with the incorporation Burke and Power called in their personal friend, Charles F. Word, an attorney at law, and on June 2, 1910, these three executed articles of incorporation for a ranch and live stock company, reciting that the name of the company should be Rock Creek Ranch Company. These articles were filed with the county clerk of Lewis and Clark county on June 13, 1910, and a certified copy of the articles was filed with the secretary of state, who issued his certificate of incorporation on that day. In the articles, Burke, Power, and Word were named as directors for the first three months.
On June 13, 1910, these three met as stockholders of the corporation and adopted a resolution which recited that whereas a proposition had been received from John H. Burke and Charles B. Power offering to sell and convey to the company 13,062 acres of land situate near Wolf creek in Lewis and Clark county, and known as the Rock Creek ranch, together with certain farming machinery and personal property thereon, in consideration of the issuance to them of all the capital stock of the company and the execution of a promissory note for $45,000 payable three years after date to the order of W. G. Langford, with interest at the rate of 7 per cent. per annum, and the execution of a mortgage upon the premises to Langford as security for the payment of the note, and whereas, in the judgment of the stockholders and subscribers to the capital stock of the company, the proposition seemed fair and reasonable and the property offered worth the price asked therefor, it was resolved that the board of directors be authorized and directed to accept the proposition and to purchase the property and to cause the stock to be issued and the note and mortgage to be executed and delivered, by the proper officers of the company.
The stockholders adopted comprehensive by-laws for the government of the Rock Creek Ranch Company, wherein provisions were made for stockholders' meetings; for the management of the company by three directors, the election of directors, meetings of the directors, and so forth; relating to officers of the corporation and their powers and duties; respecting the stock of the corporation; adopting a corporate seal; providing for the fiscal or business year of the company, the declaration of dividends, for the amendment and repeal of by-laws; and giving the board of directors power to make rules and regulations concerning the registration of certificates of stock of the company. The by-laws were signed by the three and attested by the secretary. On the same day the directors met and elected Burke president, Power vice president, and Word secretary and treasurer. During the meeting, the directors adopted a resolution in conformity with that adopted by the stockholders.
Burke and Power then caused Floweree and wife, under date of June 17, 1910, to execute a deed for the ranch property, to " Rock Creek Ranch Company, a corporation organized and existing under the laws of the state of Montana," and in due time the note and mortgage were executed to Langford. Burke as president and Word as secretary, on June 18, 1910, issued 249 shares of stock to Burke, 249 to Power and 2 to Word. These certificates were signed by Burke as president and Word as secretary, and the seal of the corporation was affixed to each. Word did not pay anything for his stock. He indorsed the certificate in blank.
The day the company started to do business it opened up a bank account in the corporate name, and all the ranch money went through that account.
Simultaneously with the purchase of the ranch, arrangements were made to finance the operations of the company. Burke and Power were to try to get the money from where each had the most direct connection. Burke, who was doing considerable business with the First National Bank of Great Falls, borrowed from that bank; Power borrowed from the American National Bank of Helena; and together they borrowed from the National Bank of Montana. For these loans notes were given, signed by Rock Creek Ranch Company, indorsed by Burke and Power.
On May 27, 1912, Burke and Power executed a continuing guaranty to the American National Bank in behalf of Rock Creek Ranch Company, whereby they guaranteed to the bank full and prompt payment at maturity on all notes executed by Rock Creek Ranch Company to the bank, and upon notes, bills receivable, drafts, acceptances, or other evidences of indebtedness, which the bank might thereafter discount or cash for the company. Apparently the company needed larger amounts of money than the banks were willing to supply, and resort was made to other sources. Large sums of money were borrowed for which notes were given in the corporate name. Those which are affected in these suits will now be mentioned.
On December 31, 1916, Mabel L. Power, the wife of C. B. Power, loaned to the company $115,950.78, and received a note for that amount dated on that day, signed by Rock Creek Ranch Company, by John H. Burke, president. Interest was paid for a time, after which notes were given for the interest. The principal note and the interest notes are the basis of action No. 6196.
On December 31, 1916, Charles B. Power as guardian of Margaret Power, Charles Benton Power, Jr., and Jane Elizabeth Power, minors, loaned to the company $55,242.63, for which the company executed its note, payable to Charles B. Power, guardian, in that amount. The note is signed " Rock Creek Ranch Company, by John H. Burke, President." Interest was paid on this note for a time, and thereafter notes were given for interest. Principal and interest notes are the basis of action No. 6191.
On January 2, 1920, C. B. Power, as trustee for Mrs. Ella Lamey loaned the company $20,000. As evidence of this indebtedness, there was executed a promissory note signed by Rock Creek Ranch Company, by C. B. Power, vice president. The note was also signed by C. B. Power. On March 1, 1920, C. B. Power, as trustee for Gordon Lamey, loaned the company $10,000, for which a note was executed, signed by Rock Creek Ranch Company, by C. B. Power. Some payments have been made on the...
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