Court Opinion

ID: 6908100
Source: CourtListenerOpinion
Date Created: 2022-07-23 22:03:58.90494+00
Date Added: 2024-06-11T16:06:26.611200
License: Public Domain

COSHOW, J.
It is stated in respondents’ brief that the court concluded that the complaint did not state sufficient facts, and that the contract made between the parties was void because against public policy. Respondents have set out in their brief purported findings of fact and conclusions. From these, it appears that the Circuit Court considered the contract an attempt to dissolve the corporation without *269following the method prescribed by the statutes of the state, and a sale of all the property of the corporation contrary to the statutes.
The statutes having provided the method for dissolving corporations, that method is exclusive. But the plaintiffs are not proceeding upon the theory that the corporation is dissolved. On the contrary, the plaintiffs recognize the corporation to be existing.
There was no attempt to sell and transfer the business as a whole. On the contrary, there was a division of the property among the stockholders looking to a dissolution. This division was made subject to the payment of all the debts. This is permissible: 1 Cook on Corp. (7 ed.), 15, §3; 2 Cook on Corp. (7 ed.), 1618, § 548; 14 C. J. 870, note 37 et seq.
The stockholders are the equitable owners of the property of the corporation. After the debts against the corporation have been paid, the remaining property should be divided among the stockholders in proportion to their stock. The transaction, in the instant case, amounted to a dividend of specific property: 14 C. J. 811, 863, 864, notes 9 and 10, p. 865, note 30; Grants Pass Hardware Co. v. Calvert, 71 Or. 103, 118 (142 Pac. 569); 2 Cook on Corp. (7 ed.), 1564, § 535; 6 Fletcher’s Cyc. Corp. 6118, § 3678; In re Wilson’s Estate, 85 Or. 604 (167 Pac. 580).
“So long as corporate creditors are paid, no one is injured by the stockholders distributing among themselves the assets.” 2 Cook on Corp. (7 ed.), 1618, § 549; 6 Fletcher’s Cyc. Corp. 6118, § 3678.
The creditors are not complaining here. This ' suit was instituted for the purpose of compelling the defendants to pay creditors of the corporation whom it is alleged defendants agreed to pay. There is evidence supporting these allegations. The defendants *270and plaintiffs constituted all of the stockholders of the corporation and were its directors. They all participated in the division of the assets. Having participated in that transaction, they are not allowed to complain of the informality with which it was conducted: Woodbridge v. Pratt & Whitney Co., 69 Conn. 304, 330 (37 Atl. 688); Benbow v. Cooh, 115 N. C. 324 (20 S. E. 453, 44 Am. St. Rep. 454, 460); Handley v. Stutz, 139 U. S. 417 (35 L. Ed. 227, 11 Sup. Ct. Rep. 530, see, also, Rose’s U. S. Notes); 1 Cook on Corp. (7 ed.), 15, note 13.
“A corporation may sell all its property and distribute the proceeds among its stockholders, if all its stockholders assent. * * ” 1 Cook on Corp. (7 ed.), p. 15, § 3.
Bartholomew v. Derby Rubber Co., 69 Conn. 521 (38 Atl. 45, 61 Am. St. Rep. 57); 14 C. J. 870, § 1330; Rossing v. State Bank, 181 Iowa, 1013 (165 N. W. 254); 3 Cook on Corp., 2172, § 670, note 5; 7 R. C. L. 708, § 713.
The plaintiffs recognize that the assets of the corporation, received by them under the contract in question, are subject to the debts of the corporation. They allege that the defendants agreed to pay these debts, but had refused to do so. To relieve their property of the burden of that indebtedness by compelling defendants to perform, this suit was instituted. Equity has jurisdiction to entertain the suit.
“Equity will enforce a contract * * to exonerate * * property from liability.” 3 Willison on Contracts, 2530; 1 Cook on Corp., pp. 41, 42, § 9.
Slattery v. Gross, 96 Or. 554, 561 (187 Pac. 300, 190 Pac. 577); Davis v. First Nat. Bank, 86 Or. 474, 486, 487 (161 Pac. 931, 168 Pac. 929); Garetson Lumber *271Co. v. Hinson, 69 Or. 605 (140 Pac. 633); 2 Cook on Corp. 1614, § 548.
The defendants answered. Both parties allege mistakes in drawing the contract and seek to have it reformed and then performed. There can be no question about equity having jurisdiction to reform and specifically perform the contract.
The contract, among other things, provides:
“The corporation heretofore existing under the name and style of the Anders on-Burgess Lumber Company, doing business in Lane County, Oregon, is this day dissolved by mutual consent.”
The contract was signed by all the stockholders. While this did not dissolve the corporation, it did prevent it from carrying on business as a corporation after that date: 7 R. C. L. 708, § 713; Woodbridge v. Pratt & Whitney Co., 69 Conn. 304, 330 (37 Atl. 688); Wallamet F. C. & L. Vo. v. Kittridge, Fed. Cas. No. 17,105 (5 Sawy. 45).
Evidence was adduced to the effect that proper steps were taken to dissolve formally, but were not completed. Even if the corporation had been formally dissolved, creditors would have opportunity to present and collect their claims: Section 6877, Or. L.; 7 R. C. L. 708, 709, note 9; 1 Cook on Corp. 41, § 9.
The evidence discloses that the corporation had in a bank $3,500, which the defendants received, as well as other property. The amount of the indebtedness and the names of the creditors were disclosed.
Under the proceedings, the Circuit Court could have ascertained which of the parties had agreed to pay the indebtedness and enforced its decree by execution against the property belonging to the corporation and received by the parties. Complete justice to all parties interested could have been *272administered. It was error to dismiss the complaint. The case is reversed and remanded for further proceedings not inconsistent with this opinion.
It may be helpful to suggest that the complaint could be profitably amended by making all the creditors of the corporation parties, and alleging that the defendants had accepted and retained the benefits of the contract: State v. Richardson, 48 Or. 309, 314 (85 Pac. 225, 8 L. R. A. (N. S.) 362); Brundage v. Monumental G. & S. M. Co., 12 Or. 322 (7 Pac. 314).
Reversed and Remanded.
McBride, O. J., and Burnett and Rand, JJ., concur.