Peyton v. Minong Lumber & Lath Co.

Winslow, C. J. The Minong Lumber & Lath Oompcmy had an authorized capital stock of 10,000 shares. Under the most favorable view of the evidence only 4,561 of these shares were ever subscribed for, hence the corporation was never authorized to transact business with any others than its members, it could have no meetings, elect no officers, and its affairs could only be legally directed by the signers of its articles of incorporation. However, it became a legal corporation by virtue of the due éxecution, recording, and filing of its articles of incorporation, and it afterwards acquired property, and the questions arising here are simply whether certain attempted transfers of that property as security for the repayment of moneys advanced to de facto officers of the corporation for corporate uses are valid transfers. If the question arose between creditors of a de facto corporation on the one side and its officers or stockholders upon the other, there might be some serious difficulties presented, but it does not so arise. The contending parties here were both stockholders in the corporation, and knew all the facts not only as to the amount of stock issued, but as to the in [73] formal way in which the business was carried on. The evidence shows that J. V. Gilbert, Laura L. Gilbert, Frank Bpafford, and II. H. Peyton were the sole persons beneficially interested as stockholders in this corporation, for the one dollar interest of Mr. Newton, who signed the articles simply as a matter of convenience and has not been heard of since, may properly be treated as negligible. The four people above named by general consent carried on the business of the corporation during its whole brief and troubled existence in entire disregard of any statutory provisions, and in fact without attempting to observe the most familiar and usual methods of transacting corporate business. It is true that they used the corporate name; Mr. Gilbert called and signed himself president; Mr. Spafford called and signed himself treasurer, and Mrs. Gilbert in the same way rejoiced in the title of secretary. Letter-heads and bill-heads and checks flourished the imposing corporate name of the concern, but there was little else to indicate that any of the parties had the idea that the corporate name was more than a mere figurehead. Mr. Spafford's testimony shows this to be the case more clearly than that of any of the other parties. He never apparently treated the corporation idea seriously; he never read through the articles of incorporation; he didn’t know he was doing business with Mr. Gilbert for the corporation, or that he was doing it as treasurer; he never attended or heard of a meeting of stockholders or directors; Gilbert said he was going to be president and he (Spafford) said nothing about it, — “things were moving pretty fast and we did this by'common consent; did a lot of business in an informal way.” It is certainly true that the corporation did, in this informal way, considerable business. It erected a sawmill, bought logs, manufactured 80,000 feet of lumber, contracted debts aggregating nearly $10,000, and had several thousand dollars worth of logs and material on hand when the Caleson contract was made. We can reach no conclusion except that all parties con [74] sented to the doing of the business in just the way it was done; that it was in fact regarded by all parties rather as a partnership between Gilbert and Spafford, with Mrs. Gilbert as a nominal secretary and Mr. Peyton as a friendly banker with a slight interest, than as a real corporation. Were we to pass upon the question as an original one we should have no difficulty in reaching the conclusion that Mr. Spafford, by his acts and general conduct, to all intents and purposes consented that business should be done just as it was done, and that Mr. Gilbert should manage the affairs of the business, make loans and give securities upon the corporate property. Apart from this, however, is the testimony ®f both the Gilberts to the effect that Spafford was consulted before the execution of the various securities in litigation here, and consented to them, and the finding of the court to the effect that the three instruments were executed and delivered by the authorized agents of the company. We construe this finding to mean that the Gilberts became such agents by consent of the parties interested,, especially in view of the fact that in the opinion filed by the trial court he places his decision as to the validity of the contracts upon the ground that the corporation transacted its business in the manner in which it did with the knowledge and consent of all its stockholders. In this view of the case we do not reach the numerous and doubtful questions as to the powers of de facto officers of corporations, or the validity of transfers of property made by insolvent corporations on the verge of collapse. Where a number of people are jointly interested in the same enterprise they may, by consent, do many things which will be entirely valid and binding as between themselves which would not stand for a moment if the rights of third parties were involved. In this case the only rights involved are the rights of persons who have consented either impliedly or expressly to everything that has been done, and they cannot now be heard to complain. [75] One further question of some difficulty is presented. The Oaleson contract made August 25, 1908, was never filed in the town clerk’s office, and hence cannot have effect as a chattel mortgage as against the levy made under the Spafford execution, unless actual possession of the property was taken by the plaintiff prior to the levy. The complaint alleges that possession of the whole property was taken by the plaintiff on or about August 25, 1908, and has ever since been retained. The answer of the defendant Spafford alleges “that neither the plaintiff nor Eli Caleson ever had peaceable possession ... of the mill, logs, or lumber, but that possession was taken and held against the protest of the defendant Frank Spafford, and not otherwise.” This seems to be an admission that possession was in fact taken and held by the plaintiff; but, as the corporation itself is a party appellant and made answer denying the allegation of possession, it seems necessary to consider the question on the evidence. The court below concluded that Caleson’s possession, taken early in September and- retained until some time in December when the sheriff made his levy under the Spafford execution, was in legal effect the possession of Pey-ton. It seems to us that this conclusion was correct. By the Caleson contract the whole mill property was leased to Oaleson until December 31, 1908, and the entire stock of logs and lath on hand was conveyed to Peyton as security for the company’s indebtedness to him, and Caleson was authorized to manufacture the logs into lumber and lath under the supervision and control of Peyton, who was to pay the expenses of manufacture and then pay the indebtedness to himself, after which any balance remaining was to be paid by him to the corporation. As matter of fact there was practically no possibility of there being any surplus to be returned to the corporation. The whole beneficial interest in the logs was vested in Peyton, and he was given absolute control over them, Caleson being in actual possession as his agent or bailee [76] for hire. The property was not capable of manual delivery, and we think that the delivery of the same to Caleson for the purpose of manufacturing the logs into lumber for the benefit of Peyton and under his control must logically be considered as a delivery to Peyton, and that Oaleson’s possession during such manufacture must be considered as Peytons possession. By the Court. — Judgment affirmed. Vinje, J.; took no part.