Hamilton v. Hamilton Mammoth Mines, Inc.

COSHOW, J. 1, 2. The Circuit Court was correct in treating the case as an action at law. The- allegations of the answer do not constitute a defense to the complaint. At most, the facts attempted to be alleged would constitute a counterclaim. Section 390, Or. L., does not authorize the pleading of equitable counterclaims in actions at law. In order to defend an action at law with matters cognizable in equity only, the matters relied upon must be material to the defense in the cause of action alleged in the complaint. The language of the statute in this regard was not materially changed by the amendment of 1917: Laws 1917, Chap. 95. — 550 — The language is as follows: “In an action at law where the defendant is entitled to relief, arising out of facts requiring the interposition of a court of equity, and material to his defense, he may set such matter up by answer, without the necessity of filing a complaint on the equity side of the court. * * Equitable relief respecting the subject matter of the suit may thus be obtained by answer.” Tooze v. Heighton, 79 Or. 545, 553 (156 Pac. 245); Heidel v. Shute, 86 Or. 210, 219 (167 Pac. 586, 168 Pac. 298). 3. This case being an action at law, this court is limited by the alleged errors brought to their attention by the bill of exceptions, to determine whether or not there is any evidence supporting the findings of fact, and whether or not the findings are sufficient to support the judgment: Section 159, Or. L.; Stark v. State Ind. Acc. Com., 103 Or. 80,110 (204 Pac. 151); Cannon v. Farmers’ Union Grain Agency, 103 Or. 26, 40 (202 Pac. 725). 4, 5. The only alleged error brought to the attention of the court in the bill of exceptions is a question propounded to the plaintiff by his attorney in rebuttal. This question called for testimony intended to meet the testimony adduced by the defendant in support of defendant’s affirmative answer. The defendant cannot, therefore, be heard to complain of the court’s action in permitting the question to be answered. The question and answer were probably immaterial, but the error, if any, was harmless. A litigant is not permitted to object to the testimony adduced by. his antagonist to meet immaterial testimony theretofore introduced by the former. In any event, the evidence was harmless and the case having been tried to the court, without the intervention of a jury, reversible error was not thereby committed. — 551 — 6. There is an abundance of evidence in the record to support plaintiff’s complaint. A written contract signed with the name of the corporation by its secretary, with its seal affixed, was introduced by the plaintiff; and in addition thereto, the plaintiff positively testified that he had performed the contract on his part. The only attempt to meet this evidence was. a contention on the part of the defendant, through its counsel, that the contract was not authorized nor approved by the board of directors of the defendant corporation. The written contract between the plaintiff and the defendant was introduced by the plaintiff and received without objection. “The authority of an officer of a corporation to execute an instrument is presumed where the instrument is under seal, although this presumption of authority is rebuttable.” 3 Fletcher’s Cyclopedia Corporations, 3140, § 1944. No contention has been made here that the judgment is not supported by the findings and conclusions. The findings are undoubtedly sufficient to support the judgment. The affirmative answer was not attacked by either demurrer or motion in the Circuit Court, but the plaintiff did object to the introduction of testimony in support of the affirmative answer for the reason that the answer does not state facts sufficient to constitute a defense or counterclaim. We do not deem it necessary, to a determination of the case in this court, to pass upon the sufficiency of the allegations in the affirmative answer to constitute a defense or counterclaim. 7, 8. The defendant attempted to state facts in its answer bringing it within the well-established rule of law, that one, who promotes the organization of — 552 — a corporation, will not be allowed to retain the secret profits made by selling property to the corporation at a fictitious value. To a large extent, a promoter of a corporation will be held to the same liability as a trustee. The affirmative answer, in this cause, sets out the following allegations: “That on or about April 3,1920, defendant through a board of directors especially secured by said Currier and Hamilton at its first meeting in Delaware, voted the acceptance of an offer in writing by said Hamilton to sell to the corporation all the aforementioned mining claims for the full consideration of the defendant’s entire capital stock, to wit, 1,000,-000 shares of the par value of $1.00 each and $75,000 of the corporation’s First Lien Premium Ore Bonds. # * “Thereafter and until the 1st day of July, 1921, the plaintiff by threats, warning telegrams, letters, fraudulent statements and misrepresentations obtained from one Leo B. Connolly, James Connolly and George V. Rogers, now deceased, the full sum of $22,500 more or less, which sum was to be applied to the escrow agreements as balance due on the mining claims.” It thus appears that the plaintiff Hamilton transferred to the corporation, the defendant, the mining claims referred to for the entire capital stock of the corporation. The corporation was not injured by the value placed upon the property transferred to it by Hamilton. It paid out no money and its capital stock was worth no more than the property owned by the corporation. The bonds were not liens upon the property, but were to become liens upon the ore that might be thereafter produced. In the case of Old Dominion Copper Min. & S. Co. v. Lewisohn, 210 U. S. 206, 212 (52 L. Ed. 1025, 1029, 28 — 553 — Sup. Ct. Rep. 634, 636, see, also, Rose’s U. S. Notes), the Supreme Court of the United States, in a decision rendered by Mr. Justice Holmes, held that under like circumstances the promoters would not be liable, and states the rule in this language: “At the time of the sale to the plaintiff, then, there was no wrong done to anyone. Bigelow, Lewisohn, their syndicate were on both sides of the bargain, and they might issue to themselves as much stock in their corporation as they liked in exchange for their conveyance of their land.” The case of Old Dominion Copper Min. & S. Co. v. Bigelow, 203 Mass. 159 (89 N. E. 193), involves the same state of facts, but in which the Supreme Court of the State of Massachusetts arrives at a different conclusion from the one reached in the United States Supreme Court. The same case is found in 40 L. R. A. (N. S.) 314, and in page 331, we find this language: “Numerous other cases which have been cited do not bear upon this point, for the reason that in each of them the owners of the property conveyed have owned either the entire capital stock of the corporation, or all that it was contemplated to issue.” (Citing a long list of authorities.) It thus appears that the authorities are uniform that, where a promoter organizes a corporation and transfers property to the corporation for all of its capital stock, the corporation itself has no right of action or suit against the promoter for secret profits. There seems to be no difference of opinion on that. If anyone has any cause of action or suit, by reason of the alleged secret profits made by the plaintiff Hamilton, it would seem to be those to whom he sold stock, to wit, Leo B. Connolly, James Connolly and — 554 — George Y. Rogers, who are not parties to the instant suit. The judgment of the Circuit Court is affirmed. Affirmed. Bean, McCourt and Rand, JJ., concur.