North Coast Dry Kiln Co. v. Montecoma Inv. Co.

• Decision Date: 16 November 1914
• Docket Number: 11865.
• Citation: 144 P. 58,82 Wash. 247
• Court: Washington Supreme Court
• Parties: NORTH COAST DRY KILN CO. v. MONTECOMA INV. CO. et al.

144 P. 58

82 Wash. 247

NORTH COAST DRY KILN CO. v. MONTECOMA INV. CO. et al.

No. 11865.

Supreme Court of Washington

November 16, 1914

Department 2. Appeal from Superior Court, Chehalis County; Mason Irwin Judge.

Action by the North Coast Dry Kiln Company against the Montecoma Investment Company and another. From a judgment for defendants, plaintiff appeals. Affirmed.

Paul B. Phillips, Milo A. Root, and W. G. McLaren all of Seattle, for appellant.

Hayden Langhorne & Metzger and Sullivan & Christian, all of Tacoma for respondents.

FULLERTON J.

This is an appeal from a judgment rendered against the appellant after demurrers had been sustained to its complaint and after it had elected to stand thereon. The ultimate question presented by the appeal, therefore, is: Does the complaint state facts sufficient to constitute a cause of action?

The facts set forth in the complaint are in substance the following:

On December 5, 1910, the appellant sold to the Syverson Lumber & Shingle Company, a corporation, under a conditional sale contract, and delivered to it, as its shingle mill at Montesano, certain dry kiln fixtures and furnishings at the agreed price of $1,790, of which sum $442.22 was subsequently paid. The conditional sale contract was regular in form, and provided that the title to the whole of the property should remain in the appellant vendor until the full purchase price was paid. The shingle company was organized in Pierce county, Wash., and its head office and legal residence was at Tacoma therein. The respondent G. A. Onn was an officer of the shingle company, and signed the conditional sale contract on behalf of the company, as such officer. The appellant failed to file the conditional sale contract for record in the auditor's office of Pierce county, the legal place of residence of the shingle company, but did file it for record in the auditor's office of Chehalis county.

Prior to January 7, 1911, the respondent Onn had advanced for the use of the shingle company various sums of money, aggregating $21,000, and had become its surety for a loan made to it by the National Bank of Commerce of Tacoma in the sum of $13,500. On the day named he agreed to advance to the use of the shingle company such further sums as it might require up to the sum of $9,000. To secure this indebtedness and liability, the shingle company, on the same day, executed to him a mortgage on all of its property in Chehalis county, including the property described in the conditional contract of sale. Of the sums agreed to be advanced, Onn subsequently advanced $5,500, and later on paid the note due the National Bank of Commerce. The shingle company was then indebted, or subsequently became indebted, in large sums to general creditors, some of whose claims had been 'underwritten or guaranteed' by the respondent Onn. On April 27, 1912, the shingle company was adjudged insolvent at the suit of an unsecured creditor, and a receiver was appointed, who immediately took possession of all its assets and property, and, as alleged in the complaint, now has possession of such property, 'and has and does now manage and control said property and assets of said insolvent company.' At or about the time of the commencement of the action in which the receiver was appointed, certain of the general creditors of the shingle company, whose claims had been guaranteed by Onn, organized and became stockholders in the respondent corporation, Montecoma Investment Company. This company afterwards took an assignment from Onn of his interests in the mortgage executed to him by the shingle company, and, as a consideration for the assignment, agreed to and did assume the liability of Onn arising out of his guaranty of the claims of its stockholders.

On June 14, 1912, the appellant filed with the receiver its verified claim for the unpaid portion of the purchase price of the dry kiln fixtures and furnishings as a preferred or secured claim, asking, as an alternative, in case the claim should not be allowed as a preferred or secured claim, for the return to it of the fixtures and furnishings. The receiver refused to allow the claim as a preferred claim or to return the fixtures, but allowed the claim as a general creditor's claim, and so notified the appellant. The appellant thereupon presented a petition to the court, in which the receiver action was pending, praying that the receiver be required to recognize and allow its claim as a preferred claim, or return to it the property, as demanded in its claim presented to the receiver. The receiver, answering the petition, objected to the relief demanded on the ground that the conditional sale contract had not been recorded as required by statute, and the sale was, in virtue of the statute, absolute as to purchasers, and incumbrancers of the property, and subsequent creditors of the shingle company who had become such in good faith, and that there were such incumbrancers and creditors. The court entered upon a hearing of the issues raised by the petition and objections thereto, at which hearing (to quote from the appellant)----

'* * * it was agreed in open court that the only matter then to be determined was whether the conditional sale contract was so filed as to be notice to subsequent creditors, having no actual knowledge or notice of the claim and priority of this plaintiff, and it was further agreed that the determination as to which creditors, if any, subsequent to this plaintiff, became such with actual knowledge of the title of this plaintiff in said dry kiln equipment should be postponed till after the final adjudication of the rights of creditors having no notice of this plaintiff's equity; and that thereafter, on, to wit, the 5th day of August, 1912, the prayer of said petition was denied denied by said court, and judgment was entered dismissing this plaintiff petition, from which judgment this plaintiff petition, the Supreme Court of the state of Washington, and that, after due proceedings and hearings, the decision of said Supreme Court was rendered, and the judgment of the trial court affirmed on the 17th day of March, 1913; but that no proceedings were ever had to determine the priorities between this plaintiff and the defendants herein or those claimants, or their assigns, if any, who were charged with notice to this plaintiff's security and equity.'

While these proceedings were pending, the Montecoma Investment Company presented its claim to the receiver for the amount of its assigned mortgage and accumulated interest, the whole amounting to upwards of $45,000, asking that it be allowed as a preferred claim against the shingle company and its general creditors to the extent of the property covered by its mortgage. The claim was so allowed by the receiver and by the court, and afterwards, on February 5, 1913, the receiver, under the direction of the court, offered the mortgaged property for sale, at which sale the Montecoma Investment Company bid therefor the full amount of its claim, and the same was sold to it on such bid. The sale was afterwards approved by the court, and suitable and proper conveyances were made to the investment Company evidencing the sale. Subsequently the investment company sold and delivered a part of the property, which part included the dry kiln fixtures, to the Hoquiam Sash & Door Company, for a valuable consideration.

It is then alleged that the Montecoma Investment Company has not satisfied the assigned mortgage of record, and still holds...