Pacific General Contractors, Inc. v. Slate Construction Co. , 196 Or. 608 ( 1952 )

ON THE MERITS

LUSK, J.

This is an appeal from a judgment in favor of the plaintiff, Pacific General Contractors, Inc., a corporation (hereinafter called Pacific), and against the defendant, Slate Construction Company, a corporation, in the sum of $38,844.00.

Two of the assignments of error in defendant’s brief are based upon the circuit court’s rulings with respect to an equitable defense interposed in the answer. Questions of procedure thereby raised will first be disposed of.

The complaint states a cause of action at law for the recovery of moneys of the plaintiff had and received by the defendant for the use and benefit of plaintiff during the months of May, June, July and August, 1948, in the aggregate amount of $43,844.00.

To this complaint the defendant filed an answer consisting of a general denial and affirmative matter which is claimed to be an equitable defense under § 9-102, OCLA. In substance, the answer alleges that the plaintiff and defendant corporations engaged in a joint enterprise in the carrying out of a contract which had been awarded to the defendant for the construction of a road in the vicinity of Roseburg, Douglas County, Oregon; that the funds mentioned in plaintiff’s complaint were in part used in furtherance of this venture; that the defendant had not received any money from the plaintiff other than moneys thus used; that the work is nearing completion; that institution of the action is in violation of the terms of said joint enterprise; that the plaintiff has caused property of the defendant to be attached and the performance of the contract to be delayed; and that the conduct of the plaintiff in bringing the action and attaching the defendant’s property will cause irreparable loss to both corporations and bring about the failure of the objects of the joint enterprise. By the prayer the defendant asks that the action at law be enjoined and the writ of attachment canceled; that the court decree the parties are joint adventurers in the performance of such contract, and that the money mentioned in the complaint was advanced in furtherance of such joint enterprise; that upon completion of the contract an accounting be had to determine the amount of money due to each of the parties, and for general relief.

Plaintiff filed a demurrer to the affirmative answer on the ground that it did not state facts sufficient to constitute a defense in equity or otherwise to the cause of action stated in the complaint. No order on the demurrer was made or entered. When the cause came on to be tried the equitable issues were first heard in accordance with a stipulation of counsel entered into in open court. After completion of the evidence on the equitable issues the court advised counsel that he would hold against the defendant on that branch of the case. Counsel for defendant thereupon requested the court to enter a decree to that effect and presented to the court a form of decree of dismissal of the equitable answer. The court refused to enter any decree. Counsel for defendant then asked and obtained leave to file an amended answer. By this pleading the defendant admitted that it had received from plaintiff certain moneys and that plaintiff had demanded the return of such moneys, but denied the remaining allegations of the complaint, and particularly denied that said moneys were received by defendant to or for the use of plaintiff or that defendant was obligated in any way to return said moneys to plaintiff until a time subsequent to the commencement of the action. The equitable answer was omitted from this pleading.

The court then proceeded with the trial of the issues of law, and, upon the conclusion thereof, entered findings of fact, conclusions of law, and a judgment. The findings recite that the defendant had failed to establish its equitable defense and the equitable matter “had been withdrawn by the court”; that the defendant, by permission of the court, had filed its amended answer; and the case “was allowed to proceed at law upon the issues thus formed. ’ ’ There is a further recital that counsel for plaintiff and defendant had “theretofore stipulated in open court to the effect that in the event the court should hold against the equitable defense interposed in defendant’s answer, then the court should proceed to hear and try the law issues without a jury.” This is followed by a general finding that the defendant is indebted to the plaintiff for money had and received in the sum of $38,844.00.

The defendant has brought to this court a bill of exceptions which includes all the evidence relating both to the issues in equity and at law.

The defendant contends, first, that there is no evidence whatever to support the judgment. It is virtually conceded that there is evidence that defendant received from the plaintiff a sum in excess of $36,770.00. Defendant urges, however, that this money was the plaintiffs ’ contribution to a joint adventure between the parties for the performance of a road construction contract awarded to the defendant, which is referred to in the testimony as the North Umpqua job. Since the contract had not been completed at the time this action was brought and the joint adventure was still in operation, the argument is that the money sued for was not due at the time the action was brought. Counsel for defendant might also well have argued, on the assumption of the existence of such joint adventure, that, until there had been a settlement of an account and a balance struck, no action at law by one partner against another would lie. McKee v. Capitol Dairies, 164 Or 1, 5, 99 P2d 1013. See, also, 40 Am Jur 452, Partnership, §465. We think there can be no doubt that evidence supporting this defense was admissible under the general denial. This is an action of assumpsit in which, under the plea of non assumpsit, the defendant is entitled to show almost every defense which tends to prove that no debt was due at the time when the action.was commenced. Vogler v. Webb, 181 Or 377, 382, 182 P2d 361; 7 CJS 131, Assumpsit, § 26. And, in view of the stipulations of the parties to which we have referred and the course which the trial took, evidence received during the trial of the equitable issue in support of the claim of a joint adventure is to be considered as evidence in the action at law. Much of the former is pertinent to the latter, but it is clear that this court is not concerned with the equitable defense and that it is not empowered to review the case as one in equity and to try the issues de novo. Even though the circuit court had entered a decree dismissing the equitable defense this court would not have reviewed such decree in the absence of an appeal from it. This is the law as established in the carefully considered opinion of Mr. Justice Habéis in Gellert v. Bank of California, National Association, 107 Or 162, 214 P 377. It was there said, after a full review of the points of difference, as well as of likeness, between the practice before 1917, when the amendment was adopted which permits equitable defenses to actions at law (now § 9-102, OCLA), and the practice under the new procedure :

“Now, as before the amendment of 1917, a party to secure a review of the decree, must appeal from it, and to secure a review of the judgment must likewise appeal from it; for an appeal from one will not operate as an appeal from the other, and an appeal from the judgment will not permit a review of the decree. ’ ’

Of course, there being no decree, there was nothing, so far as concerns the equitable defense, from which the defendant could have appealed. The defendant, however, was not remediless. That it was the duty of the court to enter a decree in accordance with its decision of the equitable issues, is the manifest implication of the Gellert case and of Friedenthal v. Thompson, 146 Or 640, 646, 647, 31 P2d 643, where it is said:

“It would appear that, where the defendant asserts an equitable defense and the parties stipulate that the court may hear the whole matter without the intervention of a jury, the court may and should dispose of the entire case in the equitable proceeding: Crossen v. Campbell, supra. However, where the court finds against the defendant on the equitable defense, a decree may be entered accordingly and the case be allowed to proceed at law.”

Performance of the court’s duty to enter a decree dismissing the equitable defense could have been compelled by mandamus. Nothing in the stipulation, properly interpreted, had the effect of waiving defendant’s right to have a decree entered from which it might have appealed. Instead, however, of invoking the remedy of mandamus, the defendant amended its answer by eliminating the equitable defense and making some changes in the denials. The defendant contends that this course was obligatory under the following provision of §9-102, OCLA:

<<* * * If, after determining the equities, as interposed by answer or reply, the case is allowed to proceed at law, the pleadings containing the equitable matter shall be considered withdrawn from the case, and the court shall allow such pleadings in the law action as are now provided for in actions of law.”

Defendant cites a dictum from State v. Fitzgerald, 154 Or 182, 196, 58 P2d 508, which appears to support its position. What was said upon the subject in that case was unnecessary to the decision. It is equally unnecessary to express an opinion upon it here. We are only concerned with the question of the scope of review. Since this is an appeal from a judgment in a law action and not from a decree in equity, the proceeding is governed by the rules applicable to such an appeal. Counsel for defendant has virtually recognized that this is the case by bringing to this court a bill of exceptions, a procedure entirely foreign to appeals from decrees in equity. Hence, we cannot concern ourselves with the assignments of error directed to the refusal of the court to enter a decree dismissing the equitable defense and to the court’s “withdrawing the equitable defense.”

The remaining assignments of error are based upon objections to the findings filed by the defendant and overruled by the court. These raise questions of the sufficiency of the evidence. Under the familiar and long established rule, the sole inquiry is whether there is any substantial evidence to support the findings. If there is such evidence the findings of the trial court are conclusive on appeal, notwithstanding the presence of evidence to the contrary. In re Wilkerson Estate, 187 Or 635, 639, 213 P2d 209; Conger v. Eugene Plywood Co., 184 Or 649, 654, 200 P2d 936.

The difficulty with defendants’ position is, that while there is evidence to sustain a finding that the money in question — or most of it — went into a joint adventure, there is also evidence to the contrary. The defendant, Slate Construction Company, in 1948 had for some 25 years been engaged in the business of highway construction. Its president was M. C. Slate. Mr. Slate talked to F. T. Glaser, William Glaser, D. E. Turnidge and P. L. Turnidge about the money to be made in the highway construction business, and as a result these men became interested, and with Slate and others organized in May, 1948, Pacific General Contractors, Inc., a corporation empowered, among other things, to engage in the business of constructing highways. The authorized capital stock was 40,000 common shares of the par value of $10.00 each and 1,000 preferred shares of the par value of $100.00 each. Subscribers to the stock included Slate, George Fritz and Webber Doughton, both directors of Slate Construction Company, and the two Glasers and two Turnidges. At the first meeting of stockholders held in Albany May 12, 1948, these men were elected directors' of the new corporation, and at the first meeting of the board of directors, held on the same day, Slate was elected president, Fritz vice president, and Dough-ton secretary-treasurer.

The controversy turns principally on the question of what was the intention of the parties as to the part which Pacific should play in relation to the North Umpqua job, the contract for which was awarded to Slate Construction Company. The Glasers and Turnidges paid into the treasury of Pacific over $30,000.00 on their stock subscriptions; Doughton and Slate paid in $10.00 on theirs. There is evidence that Doughton, as secretary of Pacific, certified to the correctness of a resolution passed by the board of directors of Pacific on May 25, 1948, which recited that “this corporation is materially interested, through joint enterprise, in the transaction in which Slate Construction Company has applied to the General Casualty Company of America for bonds or undertakings in the amount of $ Various”, and authorized Doughton as secretary-treasurer of Pacific to execute agreements of indemnity required by the General Casualty Company of America as a prerequisite to the execution by it of such bonds or undertakings for Slate Construction Company. There is evidence, however, that no such resolution was ever actually passed. There is no dispute about the fact that the board of directors of Pacific authorized the use by Slate Construction Company of $30,000.00 of its capital and that a sum in excess of that amount was drawn out of Pacific’s bank account on checks signed by Slate as president and Doughton as secretary of Pacific, and made payable in many instances to Slate Construction Company. The larger part of these moneys went to meet expenses, such as payroll, incurred on the North Umpqua job, although a considerable amount was used in carrying out another contract of Slate Construction Company on what is referred to as the Estacada job. There is evidence that at the meeting of the board of directors of Pacific held May 25, 1948, when the authority to advance to Slate Construction Company the sum of $30,000.00 was granted, it was agreed that Pacific should become a joint adventurer with Slate Construction Company in carrying out the North Umpqua contract. But this evidence is directly contradicted by the testimony of D. E. Turnidge, Percy Turnidge, William Glaser and Prank Glaser. The minutes of the meeting of May 25 are inconclusive on the question of whether the $30,-000.00 was to be a contribution to a joint adventure or a loan. These minutes were corrected at a later meeting so as to show that the authorization was “to loan” the money “for carrying on work on the two present projects”, that is, the North Umpqua and the Estacada jobs. The question as to which version of the minutes was the correct one was for the trier of the facts, and, in view of the judgment that has been rendered, the trial judge must have found that the action taken was in accordance with the corrected version. We have no authority to disturb that finding. It is the plaintiff’s theory that Pacific was organized for the purpose of engaging in road construction work itself, and that the authorization to advance $30,000.00 to Slate Construction Company was made without any understanding as to when the money was to be repaid and with the expectation that such terms as the rate of interest and dates of payment were to be agreed upon later, and that this was never done. If these were the facts then the moneys became payable upon demand. Certainly there is evidence in support of plaintiff’s theory. The cheeks on the bank account of Pacific to which we have referred were drawn, and a record of them kept on the stubs, by Webber Doughton, who was not only secretary-treasurer of Pacific but was also, as has been stated, a director of Slate Construction Company as well as an employee of that company and the holder of about $18,000.00 of its stock. The stubs show that two of the checks made payable to Slate Construction, one for $5,000.00 and the other for $2,000.00, represented loans to Slate Construction Company. There is uncontradicted evidence that some of the funds thus obtained by Slate Construction Company were used in the prosecution of the Clackamas County job, notwithstanding the evidence on behalf of the defendant is to the effect that the alleged joint adventure was entered into for the purpose of carrying on the Eoseburg job. The record in the case is long, with numerous exhibits. Some of the transactions referred to in the testimony are quite complicated, and from them divergent inferences may be drawn as to the true relationship between the two corporations.

Where the issue is partnership vel non and the evidence is conflicting the question becomes one of fact. 40 Am Jur 190, Partnership, § 87; annotation 137 ALR 12. We have pointed out some of the major conflicts in the evidence. These, without more, are sufficient to demonstrate the want of merit in the assignment of error directed to the proposition that there is no evidence to sustain the judgment.

The other assignment of error with respect to the sufficiency of the evidence is as follows: “The court erred in finding for plaintiff in the amount of $38,-944.00. ” It is argued in support of this assignment that the greatest judgment which the evidence will sustain is $36,770.00, that being the amount of the total paid-in capital of Pacific. This argument overlooks evidence with respect to a shovel purchased by Slate Construetion Company with the proceeds of a loan obtained from the First National Bank of Portland, Albany Branch, by D. E. Tnrnidge, Webber Doughton, George Fritz and P. L. Tnrnidge. On May 3, 1938, these men signed a note to the bank for $38,000.00 and turned over the money thus obtained to Slate Construction Company. Slate Construction Company purchased a Lorain L 80 model shovel, paying therefor $35,926.53 from the proceeds of the loan. Slate Construction Company sold the shovel to Fred Slate, brother of Mae Slate for $36,456.86, and this sum was immediately deposited to the credit of Pacific. On June 2, 1948, Pacific paid the amount of the loan with interest, in all $38,158.33, to the bank. While Pacific had not been organized at the time the money was borrowed, yet the whole transaction shows that the money was borrowed on behalf of a corporation to be thereafter organized, and that it was Pacific’s money which paid the note. In these circumstances, any money remaining in the hands of Slate Construction Company out of the $38,-000.00, after paying for the shovel, in equity and good conscience belonged to Pacific and must be considered as money had and received by Slate Construction Company for the benefit of Pacific. The amount so retained, being the difference between what Slate Construction Company paid for the shovel, $36,456.85, and $38,000.00, the proceeds of the loan, is $2,073.47. Counsel for defendant virtually concedes in his brief that there is evidence that the defendant received from the plaintiff a sum equal to the total of the paid-in capital, namely, $36,770.00. That amount, added to $2,074.00 retained by Slate Construction Company from the shovel transaction, comes within 53 cents of the amount for which the court rendered judgment.

The judgment is affirmed.