Daniels v. Spear

117 P. 737, 65 Wash. 121, 1911 Wash. LEXIS 902
CourtWashington Supreme Court
DecidedSeptember 19, 1911
DocketNo. 9487
StatusPublished
Cited by4 cases

This text of 117 P. 737 (Daniels v. Spear) is published on Counsel Stack Legal Research, covering Washington Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Daniels v. Spear, 117 P. 737, 65 Wash. 121, 1911 Wash. LEXIS 902 (Wash. 1911).

Opinion

Parker, J.

— The plaintiff seeks to have set aside a conveyance of shares of corporation stock made by Henry Brook, deceased, to Joseph H.' Spear, which it is alleged was made in fraud of creditors. To that end two separate actions were originally commenced in the superior court for Spokane county. These actions involved three separate corporations which are closely related to each other, not only in their business interests, but in the ownership of their stock. These actions were consolidated and tried in the superior court as one action. At the close of the plaintiff’s evidence, the court sus[123]*123tamed a motion for nonsuit made by counsel for the defendants and dismissed the cause. Thereupon, plaintiff appealed to this court.

On May 31, 1894, and for some years prior thereto, Henry Brook and Joseph H. Spear were the owners of all of the capital stock of the Washington Brick, Lime & Manufacturing Company, a corporation, amounting to 500 shares, each owning 250 shares. On that day Brook sold and transferred 249 shares of his stock to Spear. The evidence warrants the conclusion that they agreed that one share should remain in the name of Brook upon the books of the corporation for the sole .purpose of maintaining the formal corporate organization. It clearly was then intended that Spear was to become the real owner of all the stock. Brook was then, and remained until the time of his death, in 1908, the president of the corporation, so far as the records of the corporation are concerned. Spear was its secretary and general manager during all of this time, and as such directed and managed its affairs. Brook was apparently only president in name, and did not exercise any control over the affairs of the corporation. He, however, continued to render services to it. During all of this time, Spear was the owner of all of the stock, unless it be held that the transfer of the stock by Brook to him in 1894 was void. A short time before the death of Brook, in 1908, he signed the usual blank assignment upon the back of the certificate for the one share remaining in his name. This certificate and blank assignment was placed in the safe of the company with the understanding that it was to be turned over to Spear. It remained' in the safe of the company accessible to both Spear and Brook until Brook’s death, when it was taken possession of by Spear and cancelled, when he issued in lieu thereof a certificate to himself. He thereby became the record owner of all of the stock.

The original consideration for the transfer of the stock was a promissory note for $9,000, executed by Spear to Brook on May 31, 1894, the day of the original transfer, payable [124]*124ten years after date, with interest. Soon thereafter payment of this note was receipted for by Brook, and it was then agreed between them that in lien of this note Spear should provide Brook with a comfortable living during his natural life, though no special amount appears to have been then agreed upon for that purpose. Thereafter, from time to time, money was paid to Brook until his death in 1908, but without any apparent system or regularity, except for a short time before his death, when $250 was paid monthly in accordance with a later agreement as to amount. These payments were quite numerous, were made at frequent intervals during this period, and amounted to approximately $87,000 during the whole fourteen years. These payments appear to have been made by the corporation, and are shown upon its books. During all this period, however, Spear seems to have conducted the business of the corporation as if it was his private business, evidently considering that it made no difference, since he was the owner of all the stock.

In 1894, when Brook transferred his stock to Spear, some of Brook’s creditors were threatening garnishment proceedings against him. As to what extent Brook’s financial condition was impaired at that time does not very satisfactorily appear from the record, though it may be conceded he was financially embarrassed, and it may be conceded that one of the purposes of Brook in making this transfer was to prevent these threatened garnishments. He also hoped to secure thereby for himself and family a living in the future. Spear evidently knew of these purposes when he purchased the stock. Whether or not there was ever any actual legal steps taken by any of his creditors looking to the collection or the securing of their claims is not shown by the record. The claims here involved were not among those which were threatened to be enforced by legal proceedings at that time.

We think the facts shown do not warrant the conclusion that $9,000 was an inadequate consideration for the stock; and it is plain that Brook received thereafter fully this much [125]*125or more from, Spear, through the company, in addition to what was paid him by the company for services rendered it. During these fourteen years, Spear drew money from the company amounting approximately to $125,000. No dividends were ever declared. Since 1894, the business of the corporation has grown and its wealth lai’gely increased through the management of Spear.

On June 19, 1895, Brook executed and delivered to Mrs. Kate Robinson three promissory notes, aggregating $19,000, payable October 1, 1895, 1896, and 1897. This was for an existing indebtedness, some of which probably existed before the transfer of the stock to Spear, May 31, 1894. There were paid upon these notes, from time to time, many small sums, amounting for the most part to $10 and $20 each, and being a month or two apart. Mrs. Robinson seemed to well understand that Brook was able to make but small payments upon this indebtedness. Indeed, the payments seem to have been prompted rather more by the necessity of her having some income for support, rather than with any hope on the part of either her or Brook that the debt would be materially reduced. They were on very friendly terms.

Brook died in January, 1908, and his wife, Kezia, died soon thereafter. The plaintiff thereafter was appointed executrix under their wills. After the death of Brook and his wife, Mrs. Robinson assigned her claim to W. S. McCrea in consideration of MeCrea’s agreeing to pay her $25 per month during her natural life. She was then quite an elderly woman. Mc-Crea thereafter filed a claim against the estate based upon these notes. Both Mrs. Robinson and McCrea appear to have been well acquainted, and upon very friendly terms, with Brook during his lifetime, and knew in a general way about his straightened circumstances at all- times since 1894, and also knew that he had- some connection with the corporation, though they did not know exactly what that relation was until after his death. Their acquaintance with him, however, was such that they must have had reasons to believe that his in[126]*126terests in the corporation were nothing more than nominal during all these years.

On May 15, 189T, Brook executed and delivered to Sid Rosenhaupt two promissory notes, payable upon demand, aggregating $2,215.95. After the death of Brook and wife, he filed a claim against the estate based upon these notes.' He appears to have been well acquainted, and on very friendly terms, with Brook during his lifetime, and knew of his straightened circumstances, and that he had at one time been connected with the corporation, but did not actually know the-exact nature of that relation. We have carefully reviewed this voluminous record of approximately 1,000 pages of typewritten matter, and believe that the foregoing summary of the facts is as favorable to appellant’s position as can be stated therefrom.

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Cite This Page — Counsel Stack

Bluebook (online)
117 P. 737, 65 Wash. 121, 1911 Wash. LEXIS 902, Counsel Stack Legal Research, https://law.counselstack.com/opinion/daniels-v-spear-wash-1911.