Crawford v. Gordon

• Decision Date: 11 December 1915
• Docket Number: 12982.
• Citation: 153 P. 363,88 Wash. 553
• Parties: CRAWFORD v. GORDON et al.
• Court: Washington Supreme Court

153 P. 363

88 Wash. 553

CRAWFORD v. GORDON et al.

No. 12982.

Supreme Court of Washington

December 11, 1915

Department 1. Appeal from Superior Court, King County; A. W. Frater Judge.

Action by W. R. Crawford against the Seattle, Renton & Southern Railway Company, a corporation, and others, in which receivers were appointed and George W. Gordon and others filed claims. From a judgment against the claimants, they appeal. Reversed and remanded with directions.

Higgins & Hughes and Hyman Zettler, all of Seattle, for appellants.

Scott Calhoun, of Seattle, for respondent.

CHADWICK J.

Prior to July 1, 1912, and while certain receivers, appointed by the federal district court at the suit of Peabody Houghteling & Co. had charge of and were operating the defendants' property, the appellants sold to the federal receivers six cars at an agreed price of $43,800. The receivers paid $8,800 on the purchase price, and executed and delivered to the appellants, under the direction of the court, equipment bonds of the face value of $35,000. At the same time this proceeding had been begun and was pending in the state courts. The right of the federal court to appoint receivers and to take charge of defendants' property was first sustained. That court thereafter reversed its holding whereupon the receivers, who had theretofore been appointed by the state court, assumed charge of the property. To clear the records the judge of the federal district court made an order on the 29th day of August, 1912, which, inter alia, held for naught the appointment of the receivers, and further that:

'All of the orders heretofore made by this court in this cause, authorizing and allowing the said receivers to borrow money or to purchase cars and pay for the same partly in cash and partly by the issuance of receivers' certificates, be, and the same are hereby, vacated, set aside, and held for naught, in so far as the same affects the defendant, its property, and the subject-matter of the controversy in the courts of the state of Washington, there being a lack of jurisdiction in this court to make the same and each and every one thereof.'

At the time this order was made the cars had been delivered and had been in use for nearly two months. The cars had been sold under a contract of conditional sale reserving title in the vendors. The contract was filed for record in the office of the auditor of King county on the 15th day of July, 1915. On the 7th day of December, 1912, appellants made out a claim, setting forth the contract and notifying the receivers that they claimed title to the cars subject to the terms of the contract. Service of the claim was admitted by the receivers on the 16th day of December, 1912. It is stated in the briefs, and we understand the fact to be, that the receivers indorsed upon the original claim the words, 'Proof required.' No further proceedings were had until the 22d day of September, 1913, when appellants filed a petition, praying for an order requiring the receivers to forthwith pay the bonds then matured and the accumulated interest. No disposition seems to have been made of this petition. A like petition, praying for additional relief and asking that the court proceed to hear appellants' claim, was filed and brought on for hearing on March 20, 1915. The trial judge held the 'equipment agreement' under which the cars were sold, and the bonds issued by the federal receivers to be wholly void and in no way binding upon its receivers, and refused to permit appellants to prove the reasonable value of the cars unless they would waive, in open court, all claims under the 'equipment agreement' or contract of sale. This appellants refused to do, and the court----

'ordered and adjudged that the claim of said claimants, George W. Gordon and Charles N. Henderson be, and the same is hereby, disallowed, and is hereby declared to be null and void, and that said claimants take nothing by their claim filed herein.'

At the time the matter was before the lower court counsel for appellants admitted, in open court, that the act of the federal receivers was a void act. Upon this admission and the order of the federal court holding all of the acts of its receivers for naught, the trial judge seems to have based his order, and upon this premise counsel for respondents rest their case. That the order was void in the sense that the present receivers were not bound to carry it out may be admitted, but we cannot agree that it was inherently void or vicious. That the equipment was and is necessary to the operation of the defendants' property may be inferred from the fact that the receivers have held it under a claim of ownership, and have refused to redeliver or to pay for it. They claim it as upon a conversion subject to a judgment for its reasonable value. The contract was voidable, but not void. Like any lawful contract, it was subject to ratification. A ratification may be by express promise or by conduct of the parties. The term 'void' can be accurately applied only to such contracts as are mere nullities, because they are against law, illegal, criminal, or in contravention of law and incapable of confirmation or ratification. 3 Bouv. Law Dic. (Rawles' 3d Rev. Ed.) 3406. Surely the receivers might have ratified the contract in terms by a subsequent written approval, and we apprehend it will not be contended for a moment that they could have adopted the contract as made without express affirmance, and compelled its performance or recovered damages for its breach. If they could have done this, why can they not be held to its ratification by conduct, for mutuality is a prime essential of a contract, and courts will not release a party who has had the benefit of a contract and hold the other except in exceptional instances.

No cases just like the case at hand have been cited, nor have we found any. But if authority be essential, the principle involved may be sustained by reference to analogous cases. We see no difference between this case and one where a receiver comes into a property burdened with a lease or a contract providing for payments under an extended term or an executory contract that puts a burden upon the trust property. when a receiver comes into possession of property which is held under contract, it is his duty primarily to take possession of it, but he does not, by such act, adopt the contract. Scott v. Rainier Power & Railway Co., 13 Wash. 108, 42 P. 531; Casey v. Northern Pacific Ry. Co., 15 Wash. 450, 48 P. 53. But all the books hold that a contract that is voidable--that is no contract if the receiver elects so to declare--may be ratified by conduct as well as by an express affirmation. The rule and its limitation is stated in the case of Spencer v. Col. Ex., 163 Ill. 117, 45 N.E. 250. The limitation is thus expressed:

'But we have been referred to no case holding that where the lease or contract is of itself a thing of value to the creditors, and the receiver, under the order of the court, takes possession of the premises and conducts the business which the insolvent had been unable to continue, and, without any act of disaffirmance or notice that he would not be bound by the contract completes the term and receives the profits and all the benefits from such possession and continuance of the business, the receiver may then repudiate the contract and pay only on the basis of a quantum meruit.'

See, also, High on Receivers (4th Ed.) p. 273. Penn. Steel Co. v. N.Y. C. Ry. Co., 198 F. 721, 117 C. C. A. 503; Street v. Maryland Central Ry. Co. (C. C.) 59 F. 25; Sunflower Oil Co. v. Wilson, Receiver, 142 U.S. 313, 12 S.Ct. 235, 35 L.Ed. 1025; Central Trust Co. v. Continental Co., 86 F. 517, 30 C. C. A. 235; De Wolf v. Trust Co., 173 Ill. 435, 50 N.E. 1049; Easton v. Houston, etc., Ry. Co. (C. C.) 38 F. 784; Dayton Co. v. Felsenthall, 116 F. 961, 54 C. C. A. 537; In re Newdigate Colliery, [1912] 1 Ch. 468, Ann. Cas. 1912C, 949.

So too it is generally held that a receiver is not bound by contracts made by a preceding receiver, and that a succeeding receiver is not liable in damages for refusing to perform the contracts of his predecessors.

Stripping this case to its bare elements, we have the same situation as if the present receivers were repudiating a contract made by their own predecessors, for whatever process of reasoning we employ, it all comes down to this, that here is a transaction that the present receivers...