Portland Ass'n of Credit Men v. Earley

• Decision Date: 17 March 1953
• Docket Number: No. 32133,32133
• Citation: 254 P.2d 758,42 Wn.2d 273
• Court: Washington Supreme Court
• Parties: PORTLAND ASS'N OF CREDIT MEN, Inc. v. EARLEY et al.

Page 273

42 Wn.2d 273

254 P.2d 758

PORTLAND ASS'N OF CREDIT MEN, Inc. v. EARLEY et al.

No. 32133.

Supreme Court of Washington, Department 1.

March 17, 1953.

Rehearing Denied April 28, 1953.

Ned Hall, Vancouver, for appellant.

Henderson, Carnahan, Thompson & Gordon, Tacoma, for respondent.

WEAVER, Justice.

This is an appeal from a judgment dismissing plaintiff's action.

By reason of a contract made September 1, 1945, Roy T. Earley (defendant and respondent in this action) became indebted to George Haley. Shortly thereater, Haley became insolvent. On February 12, 1946, Haley made a written common-law assignment for the benefit of his creditors to Louis Schaefer, a Vancouver lawyer, and the Portland Association of Credit Men, Inc., an Oregon corporation (plaintiff and appellant in this action). Earley, notified promptly of Haley's assignment for the benefit of his creditors, disputed the amount he owed. He negotiated for several months with the assignees. The parties finally agreed that Earley owed $4381.50. The amount, however, was not paid.

January 8, 1947, one Ina Yelton secured a judgment in Cowlitz county against Haley for $8362.46. May 8, 1947, she had a writ of garnishment issued on the judgment and served on Earley.

May 21, 1947, Earley answered the writ of garnishment. In it he admitted his indebtedness to Haley prior to February 12, 1946; alleged Haley's common-law assignment to plaintiff on February 12, 1946; and admitted Haley's assignment of his claim against Earley.

Specifically, garnishee defendant Earley's answer set forth:

'IV. That because of the facts set forth in the next preceding paragraph hereof, this answering garnishee defendant alleges that it is in doubt as to whom said money may belong and therefore tenders into Court herewith said sum of four thousand three hundred eighty-one dollars and fifty cents ($4,381.50) to await the outcome of said garnishment proceedings and the final determination of the Court as to whom said money belongs.

'V. This answering garnishee defendant further alleges upon information and belief that there are taxes and other charges against the aforesaid sum of four thousand three hundred eighty-one dollars and fifty cents ($4381.50) in favor of the State of Washington and in favor of the United States of America which may be a prior lien on said fund; that this answering garnishee is not informed as to the amount of said taxes and other charges.'

At the time of filing his garnishment answer, Earley deposited $4381.50 with the Cowlitz county clerk. Respondent Earley's present counsel did not represent him in the garnishment proceeding. Two days later (May 23), counsel for Mrs. Yelton had 'Judgment On Answer of Garnishee Defendant' entered ex parte, directing the clerk to pay Earley $25 attorney's fees and to pay the balance to Mrs. Yelton's attorney.

The order provided that the payment thereunder would release Earley from any and all further liability to 'George Haley and/or Avis I. Haley, and the Yelton Plumbing and Heating Company, and their assignees.' (Italics ours.) Regarding this, the Pierce county superior court, which tried the instant case, said in its memorandum opinion

'* * * the court [of Cowlitz county] was fraudulently induced to sign an order directing the fund to be paid to Mrs. Yelton's attorney.'

The plaintiff (Portland Association of Credit Men, Inc.) and Louis Schaefer did not know of the Cowlitz county action until after the judgment was entered in the garnishment proceedings.

Having learned of the Cowlitz county action, Schaefer and the Portland Association of Credit Men, Inc. filed a complaint in intervention in the garnishment proceedings on June 9, 1947. They asked that the order of May 23, 1947, be set aside since it had been entered without hearing and without notice to them; that Mrs. Yelton be directed to redeposit the funds in court; that they, as assignees of Haley, be decreed entitled to the funds; and that, in the event Mrs. Yelton refused to deposit the funds in court, they have judgment against her. The complaint in intervention was served upon counsel for Mrs. Yelton. He made a general appearance for her.

The Cowlitz county action was permitted to rest for almost three years. Louis Schaefer died in May, 1948. March 30, 1950, counsel for Mrs. Yelton filed a general demurrer.

The present action by the Portland Association of Credit Men, Inc. (plaintiff and appellant) was filed in Pierce county against Roy T. Earley (defendant and respondent) May 29, 1950. It alleged Earley's debt to Haley; Haley's assignment of the debt to plaintiff; and the nonpayment of the debt.

Defendant's first answer, filed June 19, 1950, disclosed the pendency of the Cowlitz county action. March 12, 1951, the superior court of Cowlitz county sustained Mrs. Yelton's demurrer to the complaint in intervention

'* * * on the grounds and for the reason that there was a final appealable order entered prior to the time of the filing of the Complaint in Intervention and that there was nothing left to intervene in. The Court, therefore, has no jurisdiction over the matters contained in the matters in the Complaint in Intervention.'

In his amended answer, filed April 3, 1951, defendant Earley admitted he had become indebted to Haley in the sum of $4381.50 but interposed three affirmative defenses:

First: That the plaintiff, a foreign corporation, in taking the common law assignment, had been doing business in the state of Washington without first qualifying to do business and without paying its license fees; hence it was precluded from maintaining this action.

Second: That the serving and filing by plaintiff of the complaint in intervention in the Cowlitz county garnishment proceedings constituted an election of remedies.

Third: That in response to the writ of garnishment in the Cowlitz county proceedings, defendant had made full disclosure of the alleged common-law assignment by Haley to plaintiff and had paid his (Earley's) indebtedness into court; that the deposit had been ordered paid to Mrs. Yelton.

The trial court concluded that plaintiff had a right to maintain this action and that the doctrine of election of remedies did not apply. As to the third affirmative defense, the trial court concluded:

'That the defendant [Earley] in its answer to the Writ of Garnishment made a full disclosure of all facts required by law to be made to said Court, which Answer was, in effect, that by reason of this assignment no funds were due George Haley and wife, which could be controverted by a reply and the issue tried out but that the Cowlitz County Court was fraudulently induced to sign and Order directing the funds to be paid to the attorney for Ina L. Yelton. That the defendant was not required to give notice to the plaintiff of its action in paying this money into the registry of the court; that the disclosure in its answer to the Writ of Garnishment was sufficient and that it then became the duty of the Cowlitz County Court either to accept the answer or cite in the third party claimant as a necessary party.' (Italics ours.)

Plaintiff appeals from a judgment dismissing its action.

We examine each of the defenses urged by defendant upon the theory that we will affirm the trial court if proper legal grounds exist, in spite of the fact that it may have based its decision upon an erroneous reason. Rawlins v. Nelson, 38 Wash.2d 570, 231 P.2d 281, and cases cited.

The trial court found that the action of plaintiff corporation, in accepting and carrying out the common-law assignment of February 12, 1946, constituted doing business in the state of Washington. Plaintiff commenced this action May 29, 1950. The certificate of the secretary of state discloses that plaintiff qualified to do business in this state as a foreign corporation July 16, 1951. The secretary further certified that the plaintiff

'* * * is duly qualified to do business in this state at the date of this Certificate [October 24, 1951] and is in good standing with all license fees paid to the end of the fiscal year, June 30, 1952.'

The case was tried November 14, 1951.

Rem.Rev.Stat. (Sup.), § 3836-12, cf. RCW 23.28.090, provides:

'No corporation shall be permitted to commence or maintain any suit, action, or proceeding in any court of this state, without alleging and proving that it has paid or contracted to pay as hereinafter provided, all fees due the State of Washington under existing law or this chapter.' (Italics ours.)

The present statute was enacted in 1937. Laws of 1937, chapter 70, § 12. The italicized portion above appears in Rem.Rev.Stat., § 3842, enacted in 1907. Laws of 1907, chapter 140, § 7.

A nonresident corporation, which is not engaged in business within the state, or which is engaged in interstate commerce, may maintain an action without alleging and proving that it has qualified to do business and has paid its license fees. Rawleigh Co. v. Harper, 173 Wash. 233, 22 P.2d 665; Rawleigh Co. v. Graham, 4 Wash.2d 407, 103 P.2d 1976, 129 A.L.R. 596; Proctor & Gamble Co. v. King County, 9 Wash.2d 655, 115 P.2d 962; Seavey Hop Corp. of Portland, Or. v. Pollock, 20 Wash.2d 337, 147 P.2d 310. However, if the foreign corporation is doing business within the state, then it must qualify and pay its license fee in order to maintain an action. Dalton Adding Mach. Sales Co. v. Lindquist, 137 Wash. 375, 242 P. 643, and cases cited.

As applied to domestic corporations, we have held that the license fee statute is a revenue measure, and that the prohibition of maintaining an action when the fees are unpaid is intended to enforce the collection of the tax. State ex rel. Preston Mill Co. v. Howell, 67 Wash. 377, 121 P. 861; Eastman & Co. v. Watson, 72 Wash. 522, 130 P. 1144; Commercial Bank & Trust Co. v. Wenatchee P. L. & I. Co., 106 Wash. 181, 179 P. 798. In Northwest Motor Co. v. Braund, 89 Wash. 593, 154 P. 1098, the plaintiff was permitted to pay its license fee...