Manhattan Trust Co. of New York v. Seattle Coal & Iron Co.

• Decision Date: 23 February 1897
• Court: Washington Supreme Court
• Parties: MANHATTAN TRUST CO. OF NEW YORK v. SEATTLE COAL & IRON CO. ET AL. [1]

48 P. 333

16 Wash. 499

MANHATTAN TRUST CO. OF NEW YORK v. SEATTLE COAL & IRON CO. ET AL. ^[1]

Supreme Court of Washington

February 23, 1897

Appeal from superior court, King county; J. W. Langley, Judge.

Bill by the Manhattan Trust Company of New York against the Seattle Coal & Iron Company for the appointment of a receiver of defendant. A receiver was appointed, and he took possession of the property. Murphy, Grant & Co. and other creditors filed separate petitions, asking that their several claims be declared prior to the lien of a trust deed executed to plaintiff as trustee, on defendant's property, etc. From a judgment against the petitioners, they appeal. Reversed.

Bausman, Kelleher & Emory, Donworth & Howe, and Strudwick & Peters, for appellants.

Struve, Allen, Hughes & McMicken, for respondent.

REAVIS, J.

In 1887, the defendant, the Seattle Coal & Iron Company, was organized as a corporation, in King county, with its principal office at Seattle, for the purpose of purchasing and leasing lands containing coal, iron ore, and other minerals, and also of improving and developing such mineral lands as it might own or lease, of opening mines, and selling the products thereof, and, in conducting such business, of owning houses, machinery, and other personal property, docks wharves, vessels, tugs, and barges, and generally to do anything in connection with such business. The capital stock of such corporation was made $5,000,000. On the 30th of September, 1887, the stock was fully subscribed. Four shares were subscribed by four persons, each taking one. Four thousand nine hundred and ninety-one shares were subscribed by D. H. Gilman. Four other shares were subscribed by four individuals, by Gilman as agent. Before the organization of this corporation, Mr. Gilman negotiated with and purchased of L. B. Andrews certain coal lands in King county, for about $70,000, he, by direction of Mr. Gilman making a conveyance of the property to Franklin M. Jones trustee. On September 20, 1887, Jones addressed a communication to the board of trustees of the Seattle Coal &amp Iron Company, saying: "As common trustee for myself and others, I hold the legal title to a large amount of land in King county, Washington Territory, containing several well-defined veins of coal thereon; and I am also the owner of certain valuable interests in other coal and mineral lands in said territory. *** I hereby offer to your company to convey to it [with covenants of further assurance] all my present right, title, and interest to all of said lands described as follows: [Here is inserted a description of the lands purchased from Andrews; and continuing:] for the sum of $5,000,000, for which the company is to make, execute, and deliver to me its negotiable promissory note for said sum, payable at the banking house of Jameson, Smith & Cotting, in the city of New York, on demand, with interest at six per cent. per annum, and, in addition thereto, $320,000 of coupon bonds of your company of an issue not exceeding $1,000,000, bearing five per cent. interest, and to be secured by a mortgage upon all of the coal lands, mines, plant, and property, of every description, of your company, now owned or at any time hereafter to be acquired." Upon the receipt of this offer, the following resolution was adopted: "That this company hereby accepts the proposition this day submitted to it by Mr. F. M. Jones, of New York City, and the president and other officers of this company are instructed to do any and all acts, and execute and deliver all papers, necessary and proper to carry out and comply with the terms of said proposal, and especially to prepare, execute, and deliver all such bonds as are necessary to make the agreed payment for the conveyance of such properties. Resolved, further, that the secretary be instructed to forthwith notify the said Franklin M. Jones that his proposition is accepted, and to send him a certified copy of these resolves, and to notify him that this company is ready to receive title and conveyance of properties in his proposal specified, and to execute and deliver to him the note and agreed amount of bonds therefor." At a stockholders' meeting, May 17, 1888, the following was adopted: "Resolved, that the action of the executive committee of said company, taken on the 26th day of November, 1887, accepting the conveyance from Mr. Franklin M. Jones of the coal lands aforesaid, approving and accepting the same, and authorizing the proper officers of the company to execute and deliver to the said Franklin M. Jones, trustee, a note for $5,000,000, and simultaneously with such delivery to have indorsed upon the same, as part payment of the same, $4,999,100, which amount is due and unpaid upon the subscription of $4,999,100 of the capital stock of the company, made by D. H. Gilman, which has since been transferred and assigned to Franklin M. Jones, trustee, with the consent of the company, and upon such indorsement of credit upon the $5,000,000 note the proper officers of the company were instructed to deliver to the said Franklin M. Jones, trustee, certificates of the paid-up capital stock of the company to the amount of $4,999,100, and a duebill for $320,000, of the first mortgage bonds of the company, deliverable when engraved and certified, be, and the same hereby is, in all respects ratified, approved, and confirmed." At the September, 1887, meeting, the following preamble and resolutions were unanimously adopted: "Whereas, this company intends to purchase a large amount of coal and other mineral lands, and to open mines, and develop the same, and secure a large and profitable output of such mine products, which purchases and developments will make it necessary for this company to borrow a large sum of money, which it is duly authorized to do by law: Therefore, be it resolved, that to enable this company to borrow money to purchase coal and other mineral lands, and to open mines thereon, and develop and operate the same, and to purchase cars, tools, machinery, and appurtenances therefor, and to provide a working capital, the president and proper officers of this company shall prepare, seal, and execute an issue of $1,000,000 of bonds, being one thousand bonds of $1,000 each, bearing date of December 1, 1887, and maturing on December 1, 1917. Such bonds shall bear interest at the rate of five per cent. per annum, payable in New York on the first days of June and December in each year, to be evidenced by coupons attached to said bonds, which shall bear the engraved signature of the treasurer. Such bonds shall be certified by the Manhattan Trust Company of New York, trustee, and no bond shall be valid until certified by such trustee. To secure the payment of the principal and interest of such bonds, the president and secretary of this company shall prepare, sign, seal, execute, acknowledge, and deliver to the Manhattan Trust Company of New York City a deed of trust or mortgage on all the property of this company, whether real, personal, or mixed, and also all property of any kind which it may hereafter acquire in law or equity. *** Resolved, further, that the executive committee be, and it is hereby, authorized to call in the capital stock of this company, at any time it may see fit, to enable the company to meet its obligations." At the same meeting, the resignation of Thomas Burke as trustee was read and accepted, and T. M. Logan, of Richmond, Va., was appointed to fill the vacancy, and the following trustees were appointed members of the executive committee: D. H. Gilman, T. M. Logan, and W. R. Thornell. On August 27, 1889, John H. Bryant, the present receiver of the corporation, was elected president. At this meeting, and all others, the stock of the corporation was all voted together, and usually by one of the local trustees at Seattle. D. H. Gilman was the first president of the company, and continued as such until the election of John H. Bryant. Bryant continued as president and trustee of the company until the 26th of February, 1894, when he tendered his resignation as president. He was succeeded by Mr. Maurice McMicken as trustee, Mr. McMicken being one of the firm of counsel for plaintiff, the Manhattan Trust Company.

The articles of incorporation of the Seattle Coal & Iron Company were filed February 1, 1887. The incorporators were Henry Crawford, of Chicago, D. H. Gilman, Thomas Burke, and Charles M. Sheafe, of Seattle, and Franklin M. Jones, of New York. The incorporators were also named in the articles as the board of trustees until May, 1887, and qualified as such. The capital stock in these articles was named at $2,000,000, but on September 7th following, by supplemental articles filed by the same incorporators, in which it was declared that none of the capital stock had been issued or subscribed for, the amount of the capital stock was increased to $5,000,000 divided into 50,000 shares of $100 each; and the trustees named in the original articles of incorporation were continued until the third Thursday in February, 1888. On January 4, 1888, it appears from the records that the Manhattan Trust Company was appointed registrar of the capital stock of the company. On the 1st day of December, 1887, a first mortgage or trust deed for $1,000,000 was executed by the Seattle Coal & Iron Company to the Manhattan Trust Company of New York, the present plaintiff, as trustee, as security for a series of bonds amounting in the aggregate to the sum of $1,000,000. each bond for the sum of $1,000, principal payable on the 1st day of December, 1917, and bearing interest at the rate of 5 per cent. per annum, payable semiannually on the 1st days of June and December of each year, in accordance with attached coupons, both principal and interest, payable...