Miller v. Washington Southern Railway Co.

The opinion of the court was delivered by Scott, J. This action was brought by the respondent to recover on two promissory notes for $5,000 each, purporting to have been executed by the Satsop Railroad Company on the 10th of November, 1890, by J. R. McDonald and A. H. Anderson, president and secretary of said company, each of whom also indorsed said notes in a personal capacity. The Satsop Railroad Company was a corporation organized under the laws of this state, and was engaged in the construction and operation of a railroad. The plaintiff was the holder of two hundred and fifty shares of $100 each of the capital stock of said railroad company, and on the date aforesaid sold said stock to said corporation, acting by its president and secretary afore [415] said, for the sum of $18,000, $8,000 of which was. paid in cash and the notes in question given for the balance. After the transfer of said stock and the execution of the notes the Satsop Railroad Company sold all its property to the defendant, the Washington Southern Railway Company, which latter corporation assumed the payment of all the debts of the said Satsop Railroad Company. Judgment was rendered in favor of the plaintiff, and the Washington Southern Railway Company appeals. The questions raised are practically resolved into two. It is urged that the president and secretary of said corporation had no authority to execute or issue the notes in question; and it is further urged that the notes were without consideration, on the ground that the corporation could not become a purchaser of its own capital stock. In support of the first proposition, it is urged that this case is governed by Elwell v. Puget Sound, etc., R. R. Co., 7 Wash. 487 (35 Pac. 376), and it may be doubtful whether there is any distinguishing feature in this case sufficient to except it from the one cited. It does appear, however, that said sum of eight thousand dollars in money had been paid to the plaintiff upon the transfer of the stock, which was prior to the purchase of the property of the Satsop Railroad Company by the Washington Southern Railway Company. And it further appears that for something more than two years after the transaction aforesaid, which was shown by the books of the company, no one questioned the validity of said proceedings. If these facts are not sufficient to except it from the rule laid down in Elwell v. Puget Sound, etc., R. R. Co., supra, then it is at least questionable whether the decision in that case does not conflict with several former decisions of this court hereinafter mentioned, [416] which we prefer to follow, if there is conflict. We are of the opinion that the doctrines announced in the cases of Duggan v. Pacific Boom Co., 6 Wash. 593 (34 Pac. 157); Carrigan v. Port Crescent Improvement Co., 6 Wash. 590 (34 Pac. 148); Tootle v. First National Bank of Port Angeles, 6 Wash. 181 (33 Pac. 345), and Seal v. Puget Sound Loan, etc., Co., 5 Wash. 422 (32 Pac. 214), require an affirmance of this case. Appellant having purchased all the property of the Satsop Railroad Company, which included the stock purchased by said last company of the respondent, with full knowledge of the transaction, cannot raise the objection that the officers of the Satsop Railroad Company acted beyond the scope of their authority in the issuance of the notes. The Satsop Railroad Company never questioned the purchase of said stock, the payment of the $8,000, nor the execution of the notes, but in effect ratified the .same by the sale aforesaid to appellant. Nor are we required in this case to decide whether or not a corporation can purchase its own stock, as appellant is likewise, upon the grounds aforesaid, estopped from raising that question. Affirmed. Dunbar, Anders and Gordon, JJ., concur. Hoyt, C. J., concurs in the result.