Devlin v. Moore ( 1913 )

Mr. Justice Bean

delivered the opinion of the court.

It appears from the evidence that George Estes was employed by the Oregon Trust & Savings Bank from November 1, 1906, until May, 1907; that Estes was secretary, treasurer, and manager of the Pacific & Eastern Railway Company; that each of the four men interested agreed to pay $12,500 into the corporation. Estes testified that he and Dr. Stryker paid in approximately $9,000 to liquidate some of the floating indebtedness. In regard to the adjustment involving the bonds of the Pacific & Eastern, he stated that it was a three-cornered settlement, and that the bonds held by the Estacada Bank were surrendered to the Oregon Trust & Savings Bank or to its receiver; that the Oregon Trust returned the certificate of deposit to the Estacada Bank, and that thereupon the bonds of the Pacific & Eastern, amounting to approximately $150,000, were surrendered to J. F. Reddy, receiver, in consideration of the certificates of deposit issued by the Oregon Trust & Savings Bank of $81,500.

The situation and transactions relative to the Pacific & Eastern were complicated, and contemplated deals, hindered and delayed by the financial panic of 1907, during which time most of the banks in this State were closed, from about the 28th day of October, 1907, until the latter part of December of that year, during which time so-called “bank holidays” were proclaimed by the Governor of this State. It appears that the purchase of the Pacific & Eastern Railway was a personal transaction. The sum of $14,327.69 advanced by the Oregon Trust & Savings Bank was a loan to and for the benefit of the four men, Morris, W. H. Moore, Estes, and Stryker. The bonds held by the bank, while appearing on the records as a purchase, were in reality security for the money advanced and credit extended by the Oregon Trust & Savings Bank. The bank was not to make any profit on the bonds. The promoters and owners of the road hoped to profit by the deal. They were practically doing business in the name of the Pacific & Eastern Railway Company. The certificates of deposit for $81,500 and the check for $1,000 were issued by the Oregon Trust & Savings Bank before the Pacific & Eastern was in existence. W. H. Moore testified in regard to this deal as' follows:

“Well, these certificates were put up for the four parties. * * It was the intention all the time, it was for the four. We were not organized at that time, but intended to organize, which was done in a few days. * * If we bought now before we organized, we would pay for it as four as you will see, paid for it after the organization would be paid for as a corporation by the same parties.”

In equity and good conscience these four men should be answerable for the loan. In disposing of the Pacific & Eastern bonds held by the bank as security, the receiver was able to realize only the amount of the certificates of deposit leaving the account, $13,327.69, and check for $1,000 still unpaid. Negotiations for this arrangement were pending for some time, and it appears that the receiver obtained the largest amount possible. It does not appear that the four promoters of the Pacific & Eastern Railway Company had any objections to this adjustment.

It seems that Mr. Estes acted for the Estacada State Bank in making the adjustment, whereby that bank had the certificates of deposit for $41,500 returned to it. Mr. Estes was also manager of the Pacific & Eastern Railway Company, and it is not to be presumed that he took any action against the interests of his associates. All the parties interested in the Pacific & Eastern seem to have been anxious to obtain all the bonds of the corporation so that a sale of the railroad might be made to eastern parties, which sale was afterwards accomplished. We cannot understand how the releasing of securities given by these four defendants by the receiver could in any way prejudice their rights. They had each obtained $12,500 par value of shares of stock in the Pacific & Eastern Railway Company with the money and credit furnished to them by the Oregon Trust & Savings Bank, without, in the first instance, paying a dollar of their own money. The surrender of the bonds of the Pacific & Eastern which was accomplished in the adjustment was an advantage to them. Evidently the $50,000 in bonds held by the Estacada Bank could not be delivered without a surrender of the certificate of deposit for $41,250. This certificate of deposit appears to have been issued as security for one-half of the original purchase price of the road, and in lieu of payment therefor, by defendant Estes and Stryker. It was issued to the Oregon Trust & Sav-. ings Bank to be used as a basis of the certificate of deposit issued by that bank in payment for the road.

It does not appear from the evidence that. Henry A. Moore was connected in any way with this deal, and we do not think that the allegations of the complaint are sustained as to him. We find that they are sustained by the evidence as to defendants W. H. Moore, S. W. Stryker, and George L. Estes in regard to the $14,327.69, cash advanced (including the cashier’s check which was paid). Interest should be computed on this sum from August 21, 1907. These defendants at the time the so-called adjustment was made and the certificates of deposit were surrendered must have known that there had never been any money deposited in the Oregon Trust & Savings Bank in connection with the Pacific & Eastern deal, and that the bank was not indebted to the Pacific & Eastern. They should not be allowed to profit by obtaining possession of the certificates of deposit based upon an erroneous account in the books, whereby it appeared that the Oregon Trust & Savings Bank was indebted to the Pacific & Eastern Railway Company on an open account, and thereby escape paying the amount justly due. This would be as unconscionable and inequitable as it would be to allow one who had been paid $100.00 by mistake in counting money to retain the same. The receiver swears that he did not know that the credit appearing on the books in favor of the Pacific & Eastern was based on the certificate of deposit of the Estacada State Bank. It appears that on December 17, 1907, when the Estacada Bank certificate was surendered, the receiver was paid $827.69. This amount should be credited by plaintiff as of that date.

Defendants claim that there should be an additional credit of $4,416.49, an account of claims against the Oregon Trust & Savings Bank held by different corporations and individuals which were settled and canceled. We think that these claims were liquidated in another transaction pertaining to the Pacific & Eastern note, and should not be allowed as a credit on this claim.

The decree of the lower court will be modified in accordance herewith. - Modified.