Carnation Lumber & Shingle Co. v. Tolt Land Co.

• Decision Date: 30 September 1918
• Docket Number: 14816.
• Citation: 175 P. 331,103 Wash. 633
• Court: Washington Supreme Court
• Parties: CARNATION LUMBER & SHINGLE CO. v. TOLT LAND CO. et al.

175 P. 331

103 Wash. 633

CARNATION LUMBER & SHINGLE CO. v. TOLT LAND CO. et al.

No. 14816.

Supreme Court of Washington

September 30, 1918

Department 2. Appeal from Superior Court, King County; Boyd J. Tallman Judge.

Suit by the Carnation Lumber & Shingle Company, a corporation against the Tolt Land Company, a corporation, the National City Bank of Seattle, J. W. Maxwell, and others, wherein the Tolt Townsite Company, a corporation, intervened. From a decree dismissing the complaint, plaintiff appeals. Reversed and case remanded, with instructions to enter decree for plaintiff.

Edger C. Snyder and Farrell, Kane & Stratton, all of Seattle, for appellant.

J. A. Coleman, of Everett, S. H. Kelleran, of Seattle, Jesse Simmons, of Tolt, and Almon Ray Smith and Piles & Halverstadt, all of Seattle, for respondents.

CHADWICK J.

Following the lead of counsel, we shall refer to the appellant as the plaintiff, the Tolt Land Company as the land company, the National City Bank of Seattle as the bank, and the Tolt Townsite Company as the townsite company, or collectively as the several defendants.

On and prior to the 20th day of May, 1916, the land company was the owner of certain property consisting of a one-acre tract upon which was a shingle mill and a five-acre tract adjoining upon which was a sawmill. The bank was the holder of two notes which had theretofore been made by the land company and indorsed by the townsite company. The aggregate balance due on these notes at the time was $23,177.50. Both of these notes were secured by mortgages made by the land company to the bank. On the day mentioned, one Burnett and the land company entered into a contract of lease and option to purchase, whereby the land company leased to Burnett and his assigns the two tracts, together with the shingle mill and sawmill situate thereon, also all of the machinery and equipment therein contained, for a term beginning June 1, 1916, and ending May 31, 1918, at a monthly rental of $300 per month with the privilege of purchasing at a price of $18,750 if taken within two years and at a price of $14,000 if the option were exercised within eighteen months after June 1, 1916. It was further provided that Burnett or his assigns should keep the property insured at all times in an amount not less than $14,000 with loss payable to the lessor 'as its interests may appear.' That part of the lease providing for the application of disposition of insurance moneys in case of a loss is as follows:

'If the said property, or any of it, shall be destroyed or damaged by fire, during the term of said lease, the insurance money received shall be devoted to the repairing or rebuilding, of said property, if the party of the second part, or his assigns, shall determine that the application of same for said purpose will sufficiently reconstruct said property for the second party to continue operating under said lease and will so notify the party of the first part.'

The contract further provided that, if Burnett or his assigns should exercise their option to purchase within the time agreed upon, the land company would convey the two tracts by 'a good and sufficient warranty deed or deeds and would execute all other instruments necessary to affect the terms of the agreement.'

Burnett paid the sum of $900 being three months' rent in advance at the time the contract was executed. The bank having a money interest in the transaction as mortgagee, and to the extent of the full purchase price in case the option were exercised, and having been a party to the negotiations between the parties leading up to the execution of the writings, which were submitted for its approval, indorsed upon the contract the following:

'We, the undersigned, holders of valid subsisting lien claims against the property referred to in the foregoing agreement and fully described in the certain lease to which reference is made in the said foregoing agreement, do hereby, in so far as our interest appears, fully ratify, confirm and approve all of the terms and conditions of the said agreement and the said lease.

'Dated at Seattle, Washington, May 20th, 1916. National City Bank, by J. W. Maxwell, Pt. J. W. Maxwell. [Corporate Seal.]'

After the papers had been executed, Burnett assigned his interest to the plaintiff, a corporation organized for the purpose of taking over the property, and of which Burnett is the principal stockholder. The sawmill was not operated, but the shingle mill was operated to a certain extent. The mills were somewhat in disrepair, and plaintiff was put to some delay, annoyance, and expense in putting them in shape for operating. In consideration of this delay and expense, the land company, with the approval of the bank, allowed a credit for two months' rent, which carried the rent payments over September and October, 1916. After plaintiff had taken possession of the property, it encountered a claim of the Puget Sound Machinery Depot for $1,520, which was due from the land company for machinery which it had purchased under a conditional bill of sale and put in the mill. The claim was questioned to a certain extent by the company, and denied as an obligation by plaintiff. Pending a settlement no rent was paid. The machinery company finally took steps to enforce its claim through legal proceedings. A compromise was then reached. The amount due the machinery company was paid by plaintiff and allowed as rent to the extent of $1,390. Plaintiff then paid $710 in money, being $2,100 in all to the bank. It was received and credited upon the rent account. This paid the rent up to April 1, 1916. On April 2d $300 was paid by the plaintiff to the bank as rent for the month of April. On the 11th day of January, 1917, the shingle mill was partly destroyed by fire. The policies had been written in favor of the plaintiff, the land company, and the bank. A dispute arose as to the distribution, application, and ownership of the money realized upon the policies, and checks were therefore issued by the insurance compaines payable jointly to the several claimants. These were indorsed by the parties and the proceeds paid into the First National Bank of Seattle under a stipulation that the money should be held subject to the decree of the court in this action.

A few days prior to the making of the deposit of the proceeds of the insurance policies, plaintiff undertook to exercise its option. The balance due after crediting all sums paid as rent was $10,700. This sum was tendered to the bank and to the land company under a tender which recites:

'This tender being made firmly and nonconditionally, save only as to the following requirements, compliance with each and all of which is hereby demanded of you.'

The requirements were: First, a warranty deed from the land company. Second, a bill of sale of the personal property from the land company. Third, either a satisfaction or release of the mortgage held by the bank or a quitclaim deed from the bank. Fourth, 'a full discharge and release of said property from the liens of certain judgments.' Fifth, assignments to the plaintiff by the land company and the bank of all interest in the proceeds of the insurance policies. Sixth, payment to the plaintiff of $199.45 deducted by one of the insurance companies from the adjusted loss under its policy, under claim by that insurance company of an obligation to it from the land company wholly independent of the policy involved. Seventh, indemnity against any judgment in King county superior court cause No. 116025. Eighth, payment of the 1915 taxes.

The defendants were further notified that the tender would be kept good by bringing suit and paying the money into the registry of the court unless compliance was had with the several demands or conditions. The tender was refused, and plaintiff brought this action to compel specific performance. A short time after the action had been brought, the land company gave notice to the plaintiff that it had forfeited the contract for the nonpayment of the rent for May, June, and July, 1917. The court below hald in favor of the several defendants, and from a decree dismissing plaintiff's complaint this appeal is prosecuted.

It is the contention of the several defendants that plaintiff has forfeited its contract by the nonpayment of rent; that it abandoned the property; that it now has no interest in the proceeds of the insurance policies; and that if cannot now maintain a bill for specific performance.

Waiving for the time the questions of forfeiture and abandonment, the case really comes down to this: Whether the bank having mortgages on...