Exeter Co. v. Holland Corp.

• Decision Date: 06 July 1933
• Docket Number: 24285.
• Citation: 172 Wash. 323,23 P.2d 864
• Parties: EXETER CO. v. HOLLAND CORPORATION et al.
• Court: Washington Supreme Court

23 P.2d 864

172 Wash. 323

EXETER CO. v. HOLLAND CORPORATION et al.

No. 24285.

Supreme Court of Washington, En Banc.

July 6, 1933

Appeal from Superior Court, King County; John A. Frater, Judge.

On rehearing.

Former opinion overruled and set aside, and judgment appealed from affirmed.

For former opinion, see 20 P.2d 1.

Philip D. Macbride, Charles T. Donworth, George W Williams, and Stedman & Stedman, all of Seattle, for appellants.

Poe Falknor, Falknor & Emory, of Seattle, for respondent.

McMicken Ramsey, Rupp & Schweppe, of Seattle, amici curiae.

MITCHELL, Justice.

This cause was heard in a department of the court and a decision was reached, which is reported in 20 P.2d 1. Thereafter a rehearing was granted, and the cause has been heard en banc.

The controversy arises out of a lease, dated February 5, 1927 executed by the Exeter Company, a corporation, as lessor, to the Moon Realty Company, a corporation (afterwards Holland Corporation, a corporation), to certain improved business property in Seattle for the term of 99 years. The lessee took possession of the property and operated it.

Under the contract, the lessee agreed to pay a monthly rental in advance and all taxes, charges, and assessments, general and special, on the property. Two other provisions of the lease of special importance here are as follows:

'6. The lessee has, at the time of the execution of these presents, paid to the lessor the sum of thirty-five thousand dollars ($35,000.00) in cash as security to the lessor for the full performance on the part of the lessee of all the terms, covenants and conditions in this lease on the part of the lessee to be performed.'

'11. The whole amount of rent reserved and agreed to be paid hereunder, and each and every installment thereof, and all sums agreed hereunder to be treated as rent, and all reasonable costs and expenses, including attorney's fees which may be incurred in enforcing the provisions of this lease, or on account of any delinquency of the lessee in carrying out any of the provisions of this lease, or incurred in defending claims or liens based upon acts of the lessee and asserted against the lessor's interest in said demised premises, shall be and they are hereby declared to be a first and valid lien upon all sub-rent or other income, issues and profits of the demised premises. * * *'

The lessee failed to pay the monthly rent due June 1, 1931, and also failed and neglected to pay real property taxes due May 31, 1931, whereupon, on June 5, 1931, the Exeter Company brought this action to collect for such delinquencies. The Holland Corporation and its subtenants were made parties defendant. At the commencement of the action the plaintiff obtained an order appointing a receiver, which order, upon a later hearing, was continued until the further order of the court, to collect, hold, and from time to time pay out, as the court ordered, the rents due and paid by the subtenants of the Holland Corporation. The receiver made such collections. Later the complaint was amended, among other things, by bringing in First Leasehold Corporation, a corporation, First Realty Corporation, a corporation, Realty Investment Corporation, a corporation, m. Ross Downs and his wife, and William Edris and his wife, as additional defendants. The amended complaint was supplemented, so that at the trial it included complaints as to other defaults and delinquencies at that time on the part of the lessee under the terms of the lease. The Holland Corporation and those spoken of as additional defendants filed answers, and the Holland Corporation a cross-complaint to which a reply was filed, and upon these issues trial was had without a jury.

Findings of fact, conclusions of law and judgment were entered for the plaintiff. The Holland Corporation has separately appealed; First Leasehold Corporation, First Realty Corporation, and M. Ross Downs and wife have jointly appealed; and Realty Investment Corporation and William Edris and wife have jointly appealed.

The essential findings, in substance or in the language of the court, are as follows:

III. That the corporations involved are doing business in this state; and there are further findings as to the marital relations of Mr. and Mrs. Downs and Mr. and Mrs. Edris.

IV. That on February 5, 1927, the respondent leased the real property, describing it, to the Holland Corporation for 99 years, according to the contract referred to and made a part of the findings.

V. That the Holland Corporation has failed to pay any part of the monthly rentals for June, 1931, to July, 1932, in the total sum of $42,000, and failed to pay real property taxes on the property for 1930 and the first half of 1931; that David W. Baldwin has been appointed receiver for collecting subrentals of the property, so that the same might be subjected to respondent's lien under the lease, and to save them from being dissipated by the appellants; that the receiver has collected subrentals in the sum of $38,215.11, out of which, by order of court, he has paid taxes on the property in the sum of $6,015.47, and also paid $24,471.53 for the purpose of repaying expenses and charges of operating the real property involved, leaving in the hands of the receiver the sum of $7,758.11 up to July 5, 1932, and also expended still another sum of $1,654.51.

VI. This paragraph sets out paragraphs 6 and 11 of the lease already mentioned above, and then states that respondent is in possession of the $35,000 and has a first and valid lien thereon.

VII. 'That the entire capital stock of the defendant Holland Corporation, a corporation, was at all the times herein referred to owned by the additional defendant, First Leasehold Corporation, a corporation; that the capital stock of the additional defendant First Leasehold Corporation, a corporation, was at all the times herein referred to owned by the additional defendants, First Realty Corporation, a corporation, and Realty Investment Corporation, a corporation, said additional defendant First Realty Corporation owning 51% thereof and the additional defendant Realty Investment Corporation owning 49% thereof; that additional defendant William Edris was at all the times herein referred to president of additional defendant Realty Investment Corporation, a corporation, and a member of the board of trustees of the defendant Holland Corporation, a corporation; that additional defendant M. Ross Downs was at all the times herein referred to president of additional defendant First Realty Corporation, a corporation, president of additional defendant First Leasehold Corporation, a corporation, and president of defendant Holland Corporation, a corporation. * * *'

VIII. That in April, 1931, and prior thereto, the Holland Corporation was unable to earn sufficient subrentals to meet the payments required to be made by it, that it had no other assets with which to pay its obligations under the lease, and would continue to be unable to pay such obligations, which facts were known to the additional defendants First Leasehold Corporation, First Realty Corporation, Realty Investment Corporation, M. Ross Downs, and William Edris, all of whom at that time knew of the provision in paragraph 11 of the lease that the Exeter Company had a lien on all subrents and income from the property for all unpaid rents or other obligation, and that at that time the Holland Corporation's leasehold interest in the premises had been conveyed by it to the Bank of California, N. A., as trustee under a mortgage, for the purpose of securing an issue of bonds, all of which bonds were then and at all times during the transactions herein involved owned by additional defendant Realty Investment Corporation.

IX. 'That during the month of April, 1931, and prior to the 25th day thereof, defendant Holland Corporation, a corporation, having been unsuccessful in previous endeavors to secure from plaintiff an agreement reducing the monthly rentals specified in said lease or a moratorium therefor decided to abandon the premises so leased by it and to pay no further rent or other obligations under said lease; that at said time Henry P. Russell, Lawrence Miller, C. R. C. Steers, Harry B. Butcher, William G. Devereaux, George G. Bass, John Clark Burgard and W. G. Van Pelt, copartners doing business as Russell, Miller & Company were tenants of the defendant Holland Corporation, a corporation, occupying the second floor of said demised premises under a written indenture of lease executed March 31st, 1930, said lease providing for a monthly rental of $550.00 and running for a period of eight years and ten months from the date of the execution thereof. That said copartnership doing business as Russell, Miller & Company are and were entirely solvent and that said lease between said copartnership and said defendant Holland Corporation, a corporation, had on the 25th day of April, 1931, a fair cancellation value of $10,000.00. That for the purpose of fraudulently voiding and thwarting and causing plaintiff to lose its lien upon the sub-rents, issues and profits of said demised premises, and with the further object of effecting a cancellation of said sublease with said copartnership doing business as Russell, Miller & Company, to the end that the lease of the defendant Holland Corporation, a corporation, with the plaintiff and the premises therein described might be abandoned by said defendant Holland Corporation, a corporation, in a debilitated and worthless condition, and with knowledge of the priority of plaintiff's claim of lien upon the sub-rents, issues and income of said demised premises, the defendant Holland Corporation, a corporation, and the additional defendants herein, did on the 25th day of April, 1931, acting in...