Earl v. Roberts Fuel Oil, Inc. , 147 Or. 646 ( 1934 )

Action by D.M. Earl against the Roberts Fuel Oil, Incorporated, and another. Judgment for plaintiff, and defendants appeal.

REVERSED. This is an action at law to recover the sum of $509, alleged to be due on a promissory note executed by the Roberts Fuel Oil Co, Inc., in favor of the Fletcher Tire Company.

The action was originally commenced in the district court of Multnomah county, Oregon. The complaint was in the ordinary form of a declaration on a promissory note, and alleged that after maturity the note was assigned to plaintiff.

The answer was a general denial and a further answer of want of consideration and alleged that said note was "executed and delivered to the Fletcher Tire Company for certain tires and merchandise furnished by the Fletcher Tire Company to C.H. Roberts, individually and personally".

Plaintiff, in his reply to the new matter in the answer, alleged that the promissory note in question was executed:

"* * * by Roberts Fuel Oil, Inc. by said C.H. Roberts, president and general manager, and was given in payment to the Fletcher Tire Company for tires and truck equipment which said tires and truck equipment was placed on trucks belonging to and used by the Roberts Fuel Oil, Inc. and the Roberts Fuel Oil, Inc. is now estopped to deny the said obligation or the authority of said C.H. Roberts."

On this state of the pleadings, judgment was recovered by the plaintiff in the said district court for the full amount of his claim. Defendant appealed to the circuit court and the cause thereafter came on for trial before the court, the parties waiving a jury. After the evidence was all in, plaintiff moved to amend his reply by alleging that the note was executed by Roberts Fuel Oil, Inc., for payment of merchandise consisting of tires and truck equipment which were "placed on trucks belonging to Roberts Fuel Oil Service and the Roberts Fuel Oil, Inc., is the successor to Roberts Fuel Oil Service and is now estopped to deny the said obligation or the authority of said C.S. Roberts".

The motion was allowed over the objection of defendant. The cause was then submitted to the court who made findings and gave judgment in favor of plaintiff for the full amount of his claim. Defendant appeals.

The first assignment of error is based upon the court's action in permitting the above amendment to plaintiff's reply, on the ground that the amendment was a substantial departure.

The second assignment of error is based on the finding of the court:

"That the Roberts Fuel Oil, Inc. is the successor to the Roberts Fuel Oil Service and that it took over the good-will, business and assets of the Roberts Fuel Oil Service. That when the Roberts Fuel Oil, Inc. took over the assets of the Roberts Fuel Oil Service, it agreed to pay the obligations of the Roberts Fuel Oil Service to the Fletcher Tire Company."

The testimony shows that Claude Roberts, for several years prior to April 25, 1930, was doing business as a sole trader under the assumed name of Roberts Fuel Oil Service; that he had contracted certain financial obligations which he was unable to pay and on that date made a voluntary application to the bankruptcy court to be declared a bankrupt and was thereupon so declared. The record of the bankruptcy proceedings is not before us so we must assume that it was the ordinary proceeding in which the bankrupt turned over all his assets to, and listed all his liabilities, including the account for which the note was given, with, the referee in bankruptcy.

On May 12, 1930, there was duly organized a corporation under the name of Roberts Fuel Oil, Inc. The stock of this corporation was subscribed for and owned as follows: Claude Roberts, one share; J.M. Hickson, one share; Mrs. Claude Roberts, twenty-four shares. The par value of the stock was evidently considered at $100 per share, as the evidence shows that Mrs. Roberts paid that amount for her shares of stock. Claude Roberts turned over some office furniture, his good-will, and personal knowledge of the business to the corporation for his one share of stock. He was elected president and manager of the corporation. The evidence does not show that he had any contract with anybody left after turning all of his assets to the bankruptcy court. When the corporation began doing business, it did get the agency for the Texas Oil Company as the distributor of its products. The evidence does not show that Claude Roberts as an individual theretofore had any contract with said Texas Oil Company or that he distributed any of its oil products. He testified that he endeavored to pick up, as and for the corporation, all the customers to whom he had rendered services as an individual prior to his bankruptcy.

The Roberts Fuel Oil, Inc., continued in business with the same set-up of stockholders and manager until October, 1930, when all its stock was bought by the Albina Fuel Company which thereafter continued the business. The price of the stock was fixed at the net value of all the assets of the corporation; that is, the stockholders sold their stock on what the vendors and vendees considered the net value of the assets as shown by the books of the Roberts Fuel Oil, Inc. The sale of the stock did not in any manner change the identity of the corporation. It was still the owner of its assets and liable for its debts.

The note in this action, at the time the stock was transferred to the Albina Fuel Company, did not appear on the books of Roberts Fuel Oil, Inc., nor was it taken into consideration in fixing the value of the stock. Nor was anything said about it to any of the officers of the Albina Fuel Company until the latter had paid for the stock, after which time Mr. Roberts testified that he thinks he mentioned it to them.

The evidence shows further that the note was given in payment of merchandise that was bought by Claude Roberts for his own use and benefit while he was doing business as the Roberts Fuel Oil Service and not one dollar's worth of it ever became the property of or was turned over to the Roberts Fuel Oil, Inc. While Claude Roberts was on the witness stand, the court asked him:

"Q. But didn't you say that the Roberts (Fuel Oil) Service was extinct long before that and had no rolling stock? How could you buy tires and chains for trucks that were not?

A. They were rolling up until about the 20th or 25th of April, 1930.

* * * * * Q. Consideration of a note can always be inquired into. Someone ought to know what it was given for.

A. It was given for merchandise received from the Fletcher Tire Co. and were put on the trucks that were rolling for the Roberts Fuel Oil Service.

* * * * * Q. Why was not this note signed by Roberts Fuel Oil Service instead of Roberts Fuel Oil, Inc.?

A. I do not know. That was probably a mistake on my part in signing that way."

Roberts further testified that the merchandise, in payment for which the note was given, was used on trucks that the Roberts Fuel Oil Service had bought on a sales contract in which the title remained in the seller until paid for, and that all these trucks including their tires and equipment which were bought from the Fletcher Tire Co. were repossessed by the vendors thereof at the time he was declared a bankrupt; that none of said trucks ever afterwards came into possession of Roberts Fuel Oil, Inc.

The testimony clearly shows that there was no consideration moving to the Roberts Fuel Oil, Inc., for the note. There is no evidence that the corporation ever agreed to pay any obligation that Roberts individually owed to Fletcher Tire Company, or that it was in any way liable thereon. Roberts did not testify, nor did any one else so testify, that he had any authority to bind the corporation. He did testify that at the time he executed the note as "Roberts Fuel Oil, Inc., by C.H. Roberts, president and manager", he intended to pay the obligation himself. On his direct examination, he was asked:

"Q. Did the Roberts Fuel Oil, Inc. assume the obligations of the Roberts Fuel Oil Service as far as the Fletcher Tire Company was concerned?

A. Well, I do not know as far as the Fletcher Tires. I personally assumed several of the bills of the Roberts Fuel Oil Service as the Roberts Fuel Oil, Inc."

The articles of incorporation of the Roberts Fuel Oil, Inc., were introduced in evidence. These articles do not authorize the corporation to lend its credit to any one or to become an accommodation endorser for any one: Carney v. Duniway, 35 Or. 131 (57 P. 192, 58 P. 105); 3 R.C.L. 1091.

We are mindful of the rule that where an action at law is tried by the court its findings have the same force and effect as the verdict of a jury. But in the instant case there is no competent evidence to support the findings of the court. Taking this view of this assignment of error, the other assignment of error becomes immaterial and does not require a decision.

The judgment of the circuit court will be reversed and the cause remanded with instructions to enter judgment for defendant. It is so ordered.

RAND, C.J., and BAILEY, J., concur.