Haynes v. Central Business Property Co.

• Decision Date: 25 October 1926
• Docket Number: 19784.
• Citation: 140 Wash. 596,249 P. 1057
• Court: Washington Supreme Court
• Parties: HAYNES et al. v. CENTRAL BUSINESS PROPERTY CO. et al. (MATTHEWS et al., Interveners.

249 P. 1057

140 Wash. 596

HAYNES et al. v. CENTRAL BUSINESS PROPERTY CO. et al. (MATTHEWS et al., Interveners.

No. 19784.

Supreme Court of Washington

October 25, 1926

Department 2.

Appeal from Superior Court, Spokane County; Witt, Judge.

Action by A. W. Haynes on behalf of himself and all others similarly situated, owners of units or bonds issued by the Trustee Company of Spokane, against the Central Business Property Company and another, wherein W. H. Matthews and another intervene. From a judgment of dismissal, plaintiff appeals. Affirmed.

Merritt & Curtiss and C. C. Lantry, all of Spokane, for appellant.

Don F Kizer, Graves, Kizer & Graves, Danson, Lowe & Danson, Hamblen & Gilbert, Lund & Dodds, and Wakefield & Witherspoon, all of Spokane (Harry T. Davenport, of Spokane, of counsel), for respondents.

MAIN J.

By this action the plaintiff sought the appointment of a receiver for, and the sale of, a business property. The trial to the court without a jury resulted in a judgment of dismissal from which the plaintiff appeals.

Some years ago the Trustee Company, a corporation, was the owner of five properties in the city of Spokane, referred to respectively as the Wolverton building, the Hyde building the Eagle building, the Temple Court building, and the Empire State building. That company transferred these properties to the Union Trust Company, a corporation, in trust. The present action involves the Wolverton building only but a like suit was brought as to each of the other properties. The trust deeds in each case provided for the creation of units which would be sold by an instrument in the nature of an investment bond. After the properties were transferred to the Union Trust Company, the Trustee Company sold bonds or units covering each property. The units were of the par value of $1,000. The amount of the unitization of the buildings was as follows: Wolverton, $250,000; Hyde, $600,000; Eagle, $300,000; Temple Court, $491,200; and Empire State, $443,900. There was a provision by which these bonds could be divided into ten equal parts and sold in that manner. One-tenth of a unit in the Wolverton building was purchased by N. J. Dolph, the certificate for which recites that it was issued on the 1st day of June, 1915. On March 12, 1925, Dolph assigned this one-tenth of a unit of the par value of $100 to the appellant A. W. Haynes. The appellant also acquired one-tenth of a unit in each of the other properties, with the exception of one, and in that one he acquired two-tenths, making him in all $600 worth of units out of a total unitization on the five buildings of $2,085,100. After acquiring one-tenth of a unit in the Wolverton building, he brought the present action, and, as stated, brought separate like actions with reference to each of the other properties. No other unit holder has joined with him in the action. It will be assumed for the purposes of this case only, but expressly not decided, that the appellant can stand as the representative of a class.

The appellant's first position is that the association of unit holders as created by the trust deeds is a common-law trust and illegal. There are two reasons why this position cannot be sustained; the first of which is that, if a common-law trust exists, and is assuming to exercise the powers and functions of a corporation, the state is the only one that can complain. Frost v. Puget Sound Realty Associates, 57 Wash. 629, 107 P. 1029. In the case of State ex rel. Range v. Hinkle, 126 Wash. 581, 219 P. 41, State ex rel. Colvin v. Paine (Wash.)

243 P. 2, the action was brought on behalf of the state. The other reason why the appellant cannot complain is that, having acquired in the open market, years after the fraud is alleged to have been committed by assignment, one-tenth of a unit, he cannot now question the validity of the original transaction. In the Washington Co-operative Egg & Poultry Ass'n v. Taylor, 122 Wash. 466, 210 P. 806, it was held that in an action upon a contract the defendant was not entitled to show that at the time the contract was entered into the capital stock of the corporation which was bringing the action had not been subscribed and paid for, as required by statute, because, having made a contract with the plaintiff, he was in no position to contend that it was not entitled to engage in business. It is true that that case was with reference to a corporation, but there is no reason why the same rule should not apply in the present case.

The second contention is that there was fraud in the transfer of the property in trust and the sale of the units, in that the unitization was greater than the cost of the properties to the Trustee Company. At the time the transfer was made to the Union Trust Company, the Trustee Company...