St. Helens Quarry Co. v. F. T. Crowe & Co.

OLSON, J. Several assignments of error were made in the bill of exceptions, but these appear to be waived by the defendant in its brief, excepting as to-two points: First. Is the agreement upon which plaintiff’s-right of action is based a bill of sale giving plaintiff a right of action on the promise, or an assignment for the benefit of creditors? Second. Is defendant liable for the amount due from Yom Cleff & Lundy on account of the operation of the Sellwood dock? ' The contract entered into between the partnership and defendant is contradictory as to its terms. The first four paragraphs of said contract constitute a complete bill of sale of all the assets of the partnership to the defendant, with an obligation definite and certain on its part to pay for the same by paying the debts of said partnership arising out of the partnership business up to the amount of $12,764.47. The assignment is absolute in form and the promise is definite as to payment. The fifth paragraph of said contract, however, provides in effect that if the collections from the accounts receivable exceed the total sum of the indebtedness, the overplus thereof shall be paid to the partnership. This paragraph constitutes one of the badges of an assignment for the benefit of creditors in that the reversionary interest in the proceeds is — 291 — retained by tbe assignor thereof. The next paragraph of the contract sets forth in effect that said partnership, and the members thereof individually, shall be liable for any deficit occurring by reason of bills and claims outstanding in favor of the partnership not being sufficient to pay the debts. This paragraph is a badge of a bill of sale in that it is a guaranty of the consideration of the transfer. It is necessary therefore to determine what was the real intent of the parties when this contract was made. The answers of the defendant clearly set forth that at the time of making this contract the accounts receivable of Yom Cleff & Lundy, together with the cash on hand, all of which were by this contract transferred to defendant, exceeded in amount the sum of $12,764.47, named in such contract as the limitation of the debts contracted to be paid by defendant. This does not take into consideration the transfer of the lease of the warehouse assumed by defendant, nor the business and goodwill of the partnership, nor some other personal property of the partnership not yet disposed of. The partnership was engaged in the same general line of business as the defendant, and the business and the goodwill of said partnership, or at least the removal of a competitor had some value. The acts of the defendant in carrying out this contract are the most significant. Nowhere in the contract is there any provision indicating that the creditors are to be divided into two classes, one of them preferred creditors and the other class to share pro rata what is left; yet it appears from the answers of defendant that thirty-five creditors, whose bills aggregate $955.66, were paid in full and that the remaining creditors had received sundry payments on their claims, but from the pleadings it does not appear that any regular sys — 292 — tern was adopted in the paying of pro rata dividends upon the claims of those creditors who were not paid in :full. An inspection of the record shows that upon the claim of the St. Helens Quarry Co., amounting, as claimed by said company, to $3,312.99, or, as admitted by the defendant, $2,356.30, payments were made after the entering into of this contract as follows: November 30, 1912, $36.05; December 26, 1912, $1,000; April 23,1913, $250; August 30,1913, $100; and on February 28, 1914, $20.71. That on the claim of the Hawthorne Dock Co. assigned to plaintiff, amounting to $479.79 as claimed by said company, or $460.69 as claimed by defendant, the following payments were made: October 30, 1912, $138.21; November 30, 1912, $6.25; December 11, 1912, $46.07; March 30, 1913, $34.70, and August 27,1913, $23.03. It is apparent from an examination of these payments, as compared with the amount of the debts upon which they are paid, that no system wa£ adopted in regard to the making of said payments, especially as to a uniform date of payment or a uniform rate of payment, excepting the last payment made upon said account. It would seem, therefore, that at the timé of making said contract defendant understood it to be an absolute promise upon its part to purchase the assets of the partnership and to pay the debts of said partnership up to $12,764.47; that in pursuance of said intention of the defendant it paid the small creditors in full and made such other payments upon the larger creditors as convenient, until it became apparent that a substantial portion of the accounts receivable of said partnership would probably ■become worthless. 1, 2. There is no evidence in this case upon the record submitted here showing that the defendant notified — 293 — the other creditors that it had taken an assignment of the assets of said partnership for the benefit of all the creditors; nor does it appear that they were consulted at any time about the paying in full of the smaller creditors nor about the disposition of the assets. It is very significant that defendant in selecting the thirty-five creditors to be paid in full did not select the thirty-five smallest for the claim of one of the creditors so paid in full was larger than the claim of any of four creditors upon whose claim a pro rata distribution is sought to be made. To hold that this contract was an assignment for the benefit of creditors would be to disregard the positive provisions of three sections of the contract, because one section of said contract is inconsistent therewith. A sale is not invalid because the exact amount of the consideration is not contained in the bill of sale. A stock of goods can be purchased to be paid as per the inventory thereof. It does not invalidate the sale of the assets of the business that the consideration thereof shall be the paying of all the debts of the business, and the fact that a limit is placed upon such amount can make no difference. It is admitted by both the plaintiff and defendant in their briefs that an action lies in this state by a third person on a contract made for his benefit, therefore, it is not necessary to consider this further or cite authorities in support thereof. This contract is clearly made for the benefit of plaintiff and all other creditors of the partnership, and the consideration is ample to support it in an action at law: Feldman v. McGuire, 34 Or. 309 (55 Pac. 872). The plaintiff contends strenuously that this case is governed by Stout v. Watson, 19 Or. 255 (24 Pac. 230), in which a debtor transferred certain property to a — 294 — creditor in consideration of a sum due such creditor, and in further consideration of such creditor paying in full certain labor claims and applying any amount left over on the sale of the property transferred upon the claim of another creditor. The property transferred was attached by still another creditor and sold on sheriff’s sale and suit was brought by the transferee under the contract for the recovery of the value of the property from the sheriff. .The court held this contract to be an assignment for the benefit of creditors and not a bill of sale, but it is apparent that this case presents a different situation. In the case at bar there was a positive personal obligation to pay debts up to a certain definite amount, which the verdict of the jury has found to be the entire amount of the debts of the assignor. In the Stout v. Watson case, 19 Or. 255 (24 Pac. 230), there was no attempt to enforce the contract as between the parties thereto. The action brought was not against the assignor but against third parties, whose rights accrued entirely outside the contract, nor do we have — as in this case — a course of action upon the part of the vendee which is inconsistent with the idea that the contract was intended as an assignment for the benefit of creditors. As to the second point raised by defendant the only evidence before us is to the effect that the arrangement between the St. Helens Quarry Co. and Yom Cleff & Lundy in regard to the use of the dock at the foot of Linn Avenue, shows that the arrangement was for the use of said dock for the handling of building materials. The partnership had the lease upon said dock and was necessarily obligated for the expense and rental thereof. The plaintiff put in the use of certain machinery and appliances and building materials were handled over said dock, the expenses and profits to be — 295 — shared equally hy the plaintiff and defendant. There is no dispute as to the facts. The instruction requested hy defendant was peremptory in requiring the jury to eliminate this claim of $899.99 from consideration in this case. If the instruction had submitted to the jury the question as to whether or not the operation of the Linn Avenue dock was within the scope of the partnership dealings in building materials there might be some question, but the instruction as submitted was properly refused. Affirmed. McBride, C. J., and Bean and Burnett, JJ., concur.