Weyerhaeuser Co. v. Clark's Material Supply Co.
| Decision Date | 13 April 1966 |
| Docket Number | No. 9610,9610 |
| Citation | 413 P.2d 180,90 Idaho 455 |
| Parties | WEYERHAEUSER COMPANY, a corporation, Plaintiff-Respondent, v. CLARK'S MATERIAL SUPPLY CO., Inc., a corporation, Defendant, Richard Rosenberry, Receiver for Clark's Material Supply Co., Inc., Respondent, D. Earl Clark and Florence E. Clark, Claimants-Appellants. |
| Court | Idaho Supreme Court |
Earl E. Reed, Nampa, for appellants.
Robert I. Troxell and Bert L. Poole, Boise, for respondent Weyerhaeuser Co.
Richard Rosenberry, Caldwell, for respondent receiver.
The following statement of facts is excerpted from the opinion of this court in a prior action between these parties, Rosenberry v. Clark, 85 Idaho 317, 319-320, 379 P.2d 638, 639 (1963):
'For a number of years, appellant D. E. Clark, operated a retail lumber business as a sole proprietorship, under the name of Clark's Material Supply Co. On or about April 16, 1959, he caused said company to be incorporated, at which time the abbreviation 'Inc.' was added to the corporate name (hereinafter referred to as the corporation). D. E. Clark owned all the stock of the corporation except three shares, one of which was owned by Florence E. Clark, his wife, and another by his son. D. E. Clark was president, manager and a director of the corporation. After incorporation the real estate and buildings in which the business of the proprietorship was being carried on were not transferred to the corporation the title thereto remaining in appellants.
'Under date of June 1, 1959, the corporation, together with D. E. Clark and Florence E. Clark, individually, executed a promissory note made payable to Eugene M. Kleiner in the sum of $50,000. As security for the payment of said note appellants, as husband and wife, executed a mortgage upon certain real property owned by them in which the business of the corporation was being conducted. As consideration for said note and mortgage Mr. Kleiner issued his check in the amount of $50,000 drawn payable to the order of 'Clark's Material Supply Co., Inc. of Nampa, Idaho and D. Earl Clark and Florence E. Clark, Nampa, Idaho'.
In that decision this court affirmed a judgment of the district court which declared the $50,000 in question to be an asset of the corporation and that Mr. and Mrs. Clark had to account for such sum (by stipulation of the parties in that action only $45,000 of the $50,000 loan was in dispute, the receiver apparently agreeing that the remaining $5,000 was Mr. Clark's personal property).
Because the Clark Corporation did not have the funds to repay the $50,000 loan, Kleiner foreclosed on the property advanced by the Clarks as security for the loan and the proceeds therefrom were used to satisfy his debt.
Sometime after this court rendered its decision in the Rosenberry case, supra, Mr. and Mrs. Clark filed a claim with the receiver for $45,000 in which they contended that when they secured the corporation's loan with their personal property which was later sold to satisfy the debt, they loaned that property to the corporation and thereby became creditors of Clark's Material Supply Co., Inc. The receiver disallowed the claim and at the same time instituted this action in the district court by filing a petition for an order disallowing the claim. The district court granted the petition, and the Clarks appeal from the judgment entered thereon.
The parties in this action have stipulated that all files, records, documents or testimony introduced in the Rosenberry case, supra, may be considered by the court as evidence herein.
In addition to the statement quoted from the Rosenberry opinion, there are additional facts and findings which are pertinent to the disposition of this matter.
Neither Mr. nor Mrs. Clark was listed on the corporation's records as a creditor or potential creditor nor was a note executed to the Clarks by the corporation promising to indemnify them in the event the property they posted as security was foreclosed to satisfy the Kleiner loan. Furthermore, at the time of the transaction, neither the Clarks nor the corporation regarded the security as a loan and in fact the first indication by the clarks that they regarded it as a loan did not occur until they filed a claim with the receiver after this court's decision in the Rosenberry case.
The proceeds of the Kleiner loan were to be used to alleviate the pressures from other creditors of the Clark Corporation and for other corporate purposes. However, although $45,000 of the $50,000 loan was deposited over the course of five weeks in the bank account used by the corporation (the corporation did not have its own bank account; it used the special account in the name of Max Clark, D. E. Clark's son, who was also the owner of one share of stock and a director), that money was almost immediately withdrawn and paid over to D. E. Clark. Clark testified that at no time were the proceeds of the $50,000 loan used in any respect in the operation of the corporation. Shortly after Clark's withdrawal of these funds, the corporation became insolvent and the receivership proceedings were commenced. The trial court below found that:
'Mr. Clark by withdrawing the $50,000.00 either caused or hastened the insolvency * * *.'
Upon reviewing the entire record, it appears there is substantial though conflicting evidence to support this finding. The advisory jury in the prior action, in response to two questions propounded to it, found:
'* * * that D. Earl Clark represented to creditors that he was securing or had secured a loan on behalf of, and for the use of Clarks Material Supply Co., Inc.
'* * * that Mr. Wood and Mr. Chapman acting as agents for Weyerhaeuser Sales Co. and Mr. Miller, acting as agent for the M & C Lumber Co. (both of which were creditors of Clark's Material Supply Co., Inc.) relied upon the following representations:
'That D. Earl Clark represented that he was securing or had secured a loan on behalf of and for the use of Clark Material Supply Co., Inc.'
The trial court adopted these answers in its findings and in addition found:
There is evidence that at least one creditor, Weyerhaeuser Company, extended additional credit to the Clark Corporation on the basis of Clark's representation that the proceeds from the Kleiner loan would be available to satisfy that additional credit.
Furthermore, although the $50,000 loan from Kleiner was delivered to D. E. Clark on June 6,...
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