Commercial Lumber Co. v. Ukiah Lumber Mills

WILSON, J. From a judgment in favor of defendant Ukiah Lumber Mills in an action brought to recover the balance alleged to be due under a written agreement, plaintiff appeals. Plaintiff has also purportedly appealed from the order denying its motion for a new trial.

The circumstances surrounding the transaction involved are as follows:

Plaintiff and defendant Lyons entered into a written agreement on or about April 9, 1946, whereby plaintiff loaned Lyons the sum of $15,000 and the latter agreed to ship and deliver to plaintiff approximately five million feet of lumber at the rate of five or more railroad carloads per week, the first shipment to commence on or before May 24, 1946. Plaintiff was to be allowed a credit deduction of $3.00 per thousand feet of lumber shipped and delivered until the loan had been paid in full. In the event the weekly shipments were not received by plaintiff the balance due was to be repaid on demand.

Prior to and at the time the agreement was entered into it was the understanding of the parties that Lyons was to form a corporation, erect a sawmill at Ukiah, California, and immediately commence the shipments of lumber to plaintiff in accordance with the agreement. The loan was made to give Lyons capital for this project.

About a week after the execution of the agreement Lyons, in association with John S. Bateman, acquired an existing corporation and caused its name to be changed to Ukiah Lumber Mills. He used part of the $15,000 received from plaintiff to purchase timber, turned the balance over to the corporation and on June 17, 1946, 125 shares of stock were issued to him and his wife jointly. Bateman invested $4,000 in the corporation, for which he received 200 shares of stock; he was to receive $400 a month for his services, which he agreed to take in stock, and he turned over to the corporation certain machinery owned by him in return for which it was understood he was to receive a reasonable price.

Lyons and his wife, Mabel Lyons, and Bateman were elected directors and at the same time Mabel Lyons was elected president, Lyons was elected secretary-treasurer and Bateman vice-president. In December, 1946, Bateman sold his stock and [218]Mr. and Mrs. Lyons sold 75 shares of their stock to Messrs. Goforth and MeGah. As a result of the transaction Mabel Lyons ceased to be a stockholder and resigned as director and president; Bateman resigned as director and vice-president. Messrs. MeGah and Goforth were elected directors, MeGah becoming president and Goforth vice-president. Lyons continued as a director and secretary-treasurer until September, 1947, at which time he resigned and John P. O’Shea was elected to those offices.