Williams v. Commercial Nat. Bank of Portland

• Decision Date: 02 July 1907
• Citation: 49 Or. 492,90 P. 1012
• Parties: WILLIAMS et al. v. COMMERCIAL NAT. BANK OF PORTLAND et al. (LEONARD, Intervener).
• Court: Oregon Supreme Court

90 P. 1012

49 Or. 492

WILLIAMS et al. v. COMMERCIAL NAT. BANK OF PORTLAND et al. (LEONARD, Intervener).

Supreme Court of Oregon

July 2, 1907

Appeal from Circuit Court, Multnomah County; Alfred F. Sears, Jr. Judge.

Action by George H. Williams and others against the Commercial National Bank of Portland and Wells Fargo & Co., in which H.C. Leonard intervenes. From a judgment for plaintiffs against the Commercial National Bank, Wells Fargo & Co. appeals. Affirmed.

This is a suit by Williams and others to collect from defendant Wells Fargo & Co., hereafter referred to as defendant company judgments rendered in favor of plaintiffs severally against defendant the Commercial National Bank. Decree was rendered for plaintiffs, and the defendant company appeals. In 1894 plaintiffs were stockholders in the Commercial National Bank and, the bank being in financial straits, the stockholders sought the defendant company to come to its aid by purchasing part of its stock, and thus lend its name to give the bank standing, and on January 1, 1894, 1,000 shares of the capital stock of defendant bank were purchased, the certificates for which were taken in the names of officers and stockholders of defendant company, and thereafter, on March, 1894, the capital stock of the defendant bank, at the request of the new stockholders, was increased from $250,000 to $500,000 and the stock for the whole of such increase was issued in the names of various officers and stockholders of defendant company. New directors were named by them, who thereafter controlled the defendant bank, and in September, 1896, the new management procured from the Comptroller of the Currency an order requiring that an assessment of 50 per cent. be made upon said capital stock. Eighty thousand dollars of such stock was owned by the plaintiffs and other small stockholders, and the balance by such new management; and, in default of payment of such assessments by plaintiffs, the bank directors sold their stock on May 5, 1897, to pay the assessments thereon. Soon thereafter the stockholders of defendant bank passed a resolution to liquidate the bank, fixing October 4, 1897, for such liquidation, and on that date the defendant company took over the principal part of the assets and business of the defendant bank and continued the bank business at the same place and on the same assets, but in the name of Wells Fargo Bank, assuming to pay all defendant bank's depositors, after which defendant bank ceased to do business as such. Thereafter, on July 13, 1898, defendant company purchased from the defendant bank the remaining assets of the bank for the consideration of $250,000. In such purchase no money changed hands, but the transaction was strictly a matter of entries in the books of the two concerns, and it is claimed by the defendant company that the $250,000 was distributed to the stockholders of the defendant bank as dividends, and in December, 1899, plaintiffs each brought action against defendant bank for damages for the conversion of its stock in the sale made on May 5, 1897. Such actions were defended by the defendant company, and by it appealed to the state Supreme Court, and thereafter to the United States Supreme Court, which resulted in final judgments in favor of plaintiffs in the United States Supreme Court on January 18, 1904. On March 2, 1904, mandate therefrom was filed in the circuit court and executions issued and returned nulla bona, and thereafter this suit was commenced September 9, 1904, in which it appears that defendant bank had no officers, clerk, or agent, and but two stockholders, in this state at the time of the commencement thereof, or for several years prior thereto.

Wallace McCamant, for appellant.

Geo. H. Williams, in pro. per. Chester V. Dolph, for intervener.

Thos. O'Day and Geo. H. Durham, for respondent.

EAKIN J. (after stating the facts).

The principal questions involved in this case are: (1) Is the defendant company liable to plaintiffs either as a stockholder for dividends received upon its stock, or by reason of having caused the liquidation of the defendant bank and having taken over its assets? (2) Is it necessary that the plaintiffs procure a lien upon the property before they have a standing in equity to sue defendant company? (3) Are plaintiffs barred by the statute of limitations? That is, is this a concurrent, equitable proceeding to which the statute applies? (4) If the statute applies, does it begin to run from the date of plaintiffs' judgments, or from the date defendant company received the property?

1. We think it sufficiently appears from the pleadings and proof that the defendant Wells Fargo & Co. was the real purchaser of the 1,000 shares of stock in the defendant bank purchased in 1894 in the name of persons connected with defendant company, and also of the increase of the capital stock of the defendant company in that year, viz., 2,500 shares. The evidence relating to these matters was particularly within the control of defendant company. The account books of the defendant bank were called for by plaintiffs, being in defendant company's control and most of them without the state at the time of the trial, and the defendant company did not attempt to dispute the facts disclosed by the testimony produced by plaintiffs in relation to the ownership of the stock. Defendants' principal witness stated that, after the purchase of said thousand shares of stock in defendant bank, the management of the defendant bank and of the defendant company were identical. As stated by defendant company's counsel in his testimony at the trial, the good faith of defendant company in all these matters is questioned by the complaint and proof, and in an equity proceeding, questioning the integrity of the transfer, the defendant company cannot ignore the allegations and proof offered by the plaintiffs, and hold back proof, oral or record, that is exclusively within its control, without leaving the inference that such proof would be unfavorable to it. It is said in Helms v. Green, 105 N.C. 251, 11 S.E. 470, 18 Am.St.Rep. 893: "The fact that it is exclusively within the power of persons so nearly related (as the defendant in this case and his father-in-law ***) to explain every suspicious circumstance, if they did act in good faith, and the neglect to do so *** is to be considered as due to inability to show that their conduct was consistent with an honest purpose; *** and where the parties to it withhold testimony that is exclusively within their power to produce, and that would remove all uncertainty, if believed, as to its character, the law puts the interpretation upon such conduct most unfavorable to the suppressing party, as it does in all cases where a party purposely or negligently fails to furnish evidence under his control and not accessible to his adversary." To the same effect are Wharton on Evid. § 1266, et seq.; Knight v. Capito, 23 W.Va. 639; Glenn v. Glenn, 17 Iowa, 498; Shapira v. Paletz, 59 S., W. (Tenn.Ch.App.) 774; Chattanooga R. & C.R. Co. v. Evans, 66 F. 809, 14 C.C.A. 116; Mace v. Roberts, 97 Wis. 199, 72 N.W. 866.

The defendant bank's officers were out of the state at the time of the trial of this suit. Plaintiff sought to obtain the books of the defendant bank, and called as a witness defendant company's attorney, who had also been the attorney for the defendant bank, for the purpose of establishing the facts in relation to the ownership of the stock in defendant bank, and the transfer of the assets of defendant bank to the defendant company, the purchase of the remnant of the bank's property, and payment of dividends therefrom. Defendant company refused to produce the books or to disclose any thing in relation to these matters, and, even if the plaintiffs did not use due diligence to secure the bank books, yet, if the facts in relation to these matters were not as plaintiffs claimed, it was within the power of defendant company to produce the books and witnesses to show the truth; and it was to their interest to do so, and the law puts the interpretation upon such conduct most unfavorable to defendant company when it purposely or negligently fails to furnish evidence under its control and not accessible to its adversary. Plaintiffs produced as witnesses men who were officers of defendant bank up to the time of its liquidation and who were officers of defendant company's bank, as successor of defendant bank, from whose testimony and other circumstances proven the conclusion is irresistible that defendant company furnished the money for the purchase of the 1,000 shares of stock in January, 1894, and the 2,500 shares in March of that year, and dictated the policy of defendant bank, and was the real owner of such stock. At the time of the transfer the officers and stockholders of defendant bank and defendant company consisted largely of the same individuals, and the case calls for a disclosure of matters exclusively within defendant company's knowledge or control relating to the transaction; and we feel justified in holding that defendant company was the real owner of the 4,000 shares of the stock of the defendant bank during all the time after the purchase until the liquidation of the defendant bank (1 Cook, Corp. § 253; Nat. Foundry & Pipe Works v. Oconto Water Co. [ D.C.] 68 F. 1006), and had full knowledge of the defendant bank's affairs, its assets and liabilities, and its relations to plaintiffs. At the time of the liquidation of the defendant bank, which was brought about by the defendant company, said company took over the assets of the bank as owner, with the purpose to, and did, continue the same business in the same building and upon the same assets, but in its own name. It claims to have paid value for all it...