Chapman v. Ross

• Decision Date: 22 May 1929
• Docket Number: 21596.
• Court: Washington Supreme Court
• Parties: CHAPMAN v. ROSS.

277 P. 854

152 Wash. 262

CHAPMAN v. ROSS.

No. 21596.

Supreme Court of Washington

May 22, 1929

Department 1.

Appeal from Superior Court, Spokane County; Joseph B. Lindsley Judge.

Action by Dr. William Chapman against W. G. Ross, receiver of the Rialto Building Company. Judgment for defendant, and plaintiff appeals. Affirmed.

W. B Mitchell and S. S. Bassett, both of Spokane, for appellant.

Danson Lowe & Danson, of Spokane, for respondent.

HOLCOMB J.

This case is based upon a claim by appellant against the receiver of the Rialto Building Company, a corporation, for the sum of $12,000, represented by a promissory note, and interest accrued thereon from the date of the note, praying that the claim be made a preferred claim against the corporation and a pipe organ, its principal asset, in the sum of $8,858.27, that the balance be allowed as a general claim and that the preferred claim be foreclosed on the pipe organ mentioned.

There are other claimants against the insolvent corporation and its assets, which besides known preferred claims amounting to $557, comprise presented claims amounting to, on their faces without interest, $3,836.21.

The indebtedness of appellant is the same as that involved in Brotherhood State Bank v. Chapman, 145 Wash. 214 259 P. 391, 56 A. L. R. 447.

Reference is made to the opinion in that case for the facts shown as to the relationship of the parties, the instruments relied upon, the assets of the insolvent corporation, and the decision of the court upon the showing there made that one Newton, who was manager of the corporation which became insolvent, and a stepson of appellant, who had given the note and mortgage in question, did not own the assets of the insolvent corporation, had no right to mortgage them; that the property belonged to the insolvent corporation; and that therefore the chattel mortgage which had been executed by Newton upon the assets of the corporation, even though Newton originally held all the stock of the company, did not justify the foreclosure of the mortgage as against the corporation and the creditors.

The principal facts presented in this case were also before the court in that case. It was alleged in that case by appellant in his cross-complaint that the $12,000 note had been executed by Newton; that Newton owed the amount thereof, together with interest computed; that Newton owned the assets, or at least had so represented to appellant; and it was admitted in the pleading that the chattel mortgage referred to was not executed by the corporation, or by its authority.

In this action, respondent admitted that appellant had loaned to Newton the $12,000 and had taken a mortgage to secure the loan. It was affirmatively alleged that the matter had been previously adjudicated in the action above mentioned; that in that action the corporation, Newton, appellant and this receiver, all became parties; and that in that action appellant here had contended that he loaned the money to Newton and that he took judgment against Newton for the amount thereof. A second affirmative defense alleged that in the action above mentioned all of these parties were parties and that appellant at all times claimed that the loan was made to Newton; that the debt was due from Newton; and that he recovered judgment accordingly. These allegations were denied by reply of appellant.

After trial the lower court denied appellant any recovery upon the ground that appellant had elected his remedy in the former proceeding and was estopped to change his position and absorb all of the assets of the insolvent corporation by a different remedy.

The pipe organ mentioned is the principal asset belonging to the insolvent corporation. The portion of the advances which appellant undoubtedly made to Newton, which can be definitely traced as payments upon the pipe organ, are two $500 advances made by appellant which were made when two of the installments on the purchase price of the organ had become delinquent, and at the maturity of the pipe organ contract a further advance of $5,556.74 was made by appellant.

The suggestion has been made among ourselves that, possibly, in equity, appellant should be allowed to subrogate his claim against the corporation and recover to the extent of these advances by way of equitable subrogation--a theory not distinctly advanced by appellant. This would mean the substitution of appellant--to the extent of his known advances--to the right of the organ company as vendor for the prevention of fraud and relief against mistake.

The obstacle in the way of this, in order to give appellant some relief, is that the corporation's other creditors knew nothing of appellant advancing these sums to the corporation for the specific purpose of paying purchase money on the pipe organ to the vendor. Hence, to allow equitable subrogation to these amounts would be to give appellant more than two-thirds of the value of all the available assets and take away the only valuable asset belonging to the corporation. Subrogation is not allowed in favor of a mere volunteer payor (25 R. C. L. 1367), nor where it will defraud other bona fide creditors or incumbrancers (Id., 1314). Nor where the prior debt has not been wholly discharged by the payor. State ex rel Nayberger v. McDonald (Or.) 274 P. 1104.

To grant it in this case would be to allow it when the party so favored knew all the facts, and would defraud all the other creditors, who knew none of them.

As in the former case, it is difficult to follow the contentions of appellant. Cases are cited from this court holding that principals are estopped to deny the authority of agents and to repudiate ddeceitful...