Griffith v. Seattle Consol. St. Ry. Co.

• Citation: 36 Wash. 627,79 P. 314
• Parties: GRIFFITH v. SEATTLE CONSOL. ST. RY. CO. et al.
• Decision Date: 30 January 1905
• Court: Washington Supreme Court

79 P. 314

36 Wash. 627

GRIFFITH v. SEATTLE CONSOL. ST. RY. CO. et al.

Supreme Court of Washington

January 30, 1905

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

Action by L. H. Griffith against the Seattle Consolidated Street Railway Company and others. From a judgment dismissing the cause, plaintiff appeals. Affirmed.

Sachs & Hale and Bausman & Kelleher, for appellant.

Piles Donworth & Howe and Thomas R. Shepard, for respondents.

HADLEY J.

By this action the appellant seeks relief from acts connected with what he alleges was as to him a fraudulent corporate reorganization scheme. His fourth amended complaint, upon which he stands, is now before us for review upon demurrer. The complaint is very long, and avers many details. We shall endeavor to state, in as condensed a manner as practicable what we understand to be facts appearing by the complaint which are necessary to an understanding of the case.

The corporate existence of the following is alleged, namely Seattle Electric Railway & Power Company, Seattle Consolidated Street Railway Company, the Seattle Traction Company, and the Seattle Electric Company, and said corporations are thereafter respectively mentioned in the complaint as 'first company,' 'second company,' 'third company,' and 'present company.' It further appears that on the 15th day of March, 1890, the first company executed a deed of trust to the Illinois Trust & Savings Bank, a corporation. The said deed of trust, for brief reference, is mentioned throughout as the 'first company's mortgage.' By said mortgage the first company attempted to convey to said trustee all real and personal property of the mortgagor consisting then of a line of street railway, and including both real and personal property in the city of Seattle. It is alleged that the mortgage was void as to the personal property, for the reason that there was not attached to it an affidavit of good faith, as required by the laws of Washington; that the personal property and franchises of the first company were then of the value of $1,000,000, and that said property has constantly increased in value from that time to the present. The mortgage was made to secure bonds of the first company to the extent of $400,000, of which sum bonds were actually issued to the extent of $381,000. It appears that on March 31, 1891, the first company, by its deed of that date, conveyed to the second company all the property, real and personal, then owned by the former company, and on the next day the second company executed a deed of trust covering said property to the Central Trust Company of the city of New York. Said trust deed is for brevity called the 'second company's mortgage.' This mortgage was made to secure bonds of the second company to the extent of $1,000,000, of which sum bonds were actually issued to the extent of $480,000, the appellant being the holder of $160,000 thereof. It is alleged that after the first company conveyed its assets to the second company the latter acquired a large amount of corporate property, both real and personal, from its own earnings and from contributions by its own stockholders, without any contribution or assistance from either the first company or its mortgagee; that this additional property was in no way affected by, or subject to, the lien of the first company's mortgage, and was subject only to the lien of the second company's mortgage. Further allegations state that the second company, in accepting its deed from the first company, did undertake to pay, when due, the first company's bonds, but that the conveyance contained no language by which the second company pledged to the first company or its mortgagee any part of the second company's assets, or created any incumbrance in favor of the first company's mortgagee beyond what was already covered by that company's mortgage. Afterwards the first company's mortgagee instituted suit in the Circuit Court of the United States for the District of Washington, by which it sought to foreclose its mortgage, and in that suit it made parties defendant, among others, both the first and second companies and the second company's mortgagee. Said defendants appeared in that suit by demurrer, and objected to a decree therein so far as the personal property was concerned, because of the absence of the affidavit of good faith heretofore mentioned. Further objection was made to a decree in that action enforcing any lien against certain described real estate on the ground that it was acquired by the second company after the transfer to it of the first company's assets. It is alleged that the second company's mortgagee, trustee for the bonds held by appellant, as a defendant in the foreclosure suit appeared by answer, and denied the execution of the first company's mortgage and the priority of its lien; that the said several defenses should have been maintained and established by the defendant second company and its mortgagee for the benefit of the bonds, including appellant's; that the various demurrers and denials were filed in said cause in the month of March, 1895, and no active steps were thereafter taken until the entry of a final decree by consent on May 20, 1896, to which reference will be further hereinafter made. It is further averred that about November, 1895, the second company conspired with the first and second companies' mortgagees and their various bondholders, excepting appellant, and without the knowledge or consent of the latter, to deprive him of his rights and property in the bonds held by him. The plan of the alleged conspiracy, as set forth in the complaint, briefly stated, was as follows: Certain persons organized themselves as a committee called 'the organization committee,' and as such they effected the plan whereby the second company's mortgagee, the trustee for appellant's bonds, should relinquish its claim, as set up in its answer in the foreclosure suit, in favor of the holders of bonds of the first company, thus allowing the latter to take a decree and bid in the property for a nominal sum at mortgage sale, and in return therefor the second mortgage bondholders should participate in the reorganized company. But it is alleged that the appellant was to be excluded from participating in such reorganization, he being then absent from the United States. The interposed defenses in the foreclosure suit were withdrawn, and decree of foreclosure thereupon entered on the date aforesaid. The plan of the reorganization required that all holders of stocks and bonds of the second company should, within 16 days, deposit with the first company's mortgagee alml stocks and bonds held by them, together with a sum of money equal to 10 per cent. of the face value of all such bonds and floating debts and 2 1/2 per cent. of the par value of all such stocks; that the payment of the money, however, might be made by installments, one-fourth at the time of the deposit of stocks and bonds, one-fourth on or before three months, and the balance on or before six months from said time; that, failing in that, such holders of stocks and bonds should forfeit and lose all rights therein and in the property covered...