Barney v. Buswell

DRAPER, P. J.

Defendants are directors of an Oregon corporation which did business in California. Plaintiffs are judgment creditors of that corporation, who seek recovery from defendants individually, on the ground that they voted for and participated in an unauthorized distribution of the corporate assets.

Oregon law prohibits distribution of corporate assets to shareholders when the corporation is insolvent, or when the distribution will render it so (Ore. Rev. Stats., § 57.221[1][a]) and establishes joint and several liability of directors who vote for or assent to distribution contrary to that section (Ore. Rev. Stats., § 57.231[1][a]) without payment of “all known debts, obligations and liabilities of the cor

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poration” (§ 57.231[1][c]). Such liability may be enforced in the courts of California if the corporation does business here (Corp. Code, § 6601).

In the 1956-7 logging season, the corporation removed logs from plaintiffs’ land. Defendant directors knew of these acts, and of corporate liability therefor, before December 1, 1957. Nonetheless, they later assented to and participated in the distribution of the corporate assets to themselves and the other shareholders. Each defendant received property worth more than $8,000. Plaintiffs sued the corporation for damages for trespass, and had judgment for some $10,000. Only $4,000 was paid (by a codefendant), and this action was filed.

Plaintiffs moved for summary judgment, and filed an affidavit setting out facts which would support recovery by them. Defendants’ counteraffidavit asserted only that the corporation was insolvent before the distribution of its assets, and that the assets so distributed had no value to the corporation because all were about to be repossessed under conditional sales contracts which were in default. The trial court denied the motion for summary judgment. In doing so, it listed the fact issues raised by the counteraffidavit and directed that trial be limited to them. These issues, and that of knowledge of the trespass claim against the corporation, were fully tried. Plaintiffs had judgment for $7,819.26. Defendants appeal.

Defendants argue that the order limiting issues improperly restricted presentation of their case. But they made no offer of evidence outside that order, and never sought any modification of it. Even now, they point to no relevant facts they might have produced. Thus they show no prejudicial limitation as to fact issues. They do suggest that they were in some way precluded from urging issues of law. The record, however, does not support this claim. Such legal issues were determined by the trial court, and are argued here. Defendants did appeal from the order denying summary judgment, but now concede that the order is not appealable.