Roy & Co. v. Scott, Hartley & Co.

• Decision Date: 14 March 1895
• Citation: 11 Wash. 399,39 P. 679
• Court: Washington Supreme Court
• Parties: ROY & CO. v. SCOTT, HARTLEY & CO. ET AL.

39 P. 679

11 Wash. 399

ROY & CO. v. SCOTT, HARTLEY & CO. ET AL.

Supreme Court of Washington

March 14, 1895

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

Action by Roy & Co., a corporation, against Scott, Hartley & Co., a corporation, J. F. McNaught, and C.J. Johnson. From a judgment for the plaintiff, defendants appeal. Affirmed.

Battle & Shipley, for appellant McNaught.

Brady &amp Gay, for appellant Johnson.

John W Corson, for respondent.

GORDON, J.

This action was brought by respondent, a corporation, to foreclose a chattel mortgage given to secure two promissory notes aggregating $3,000, said notes and mortgage bearing date September 2, 1893, executed by Scott, Hartley & Co., a corporation; also a bill of sale, absolute in form, but intended as a mortgage to secure a note for $500, to Barre Bros., which bill of sale also bears date September 2, 1893 and covers all of the property described in the mortgage first mentioned, and, in addition thereto, also includes one pair of horses not covered by said mortgage. The last-mentioned note and bill of sale intended to secure it were duly assigned to respondent prior to the commencement of this action. Appellants McNaught and Johnson were made parties defendant in the action, and filed separate answers. Appellant McNaught, having recovered a judgment against the corporation of Scott, Hartley & Co., on March 13, 1894 caused an execution to be levied upon the property included in the bill of sale and mortgage. The appellant Johnson claims a portion of the property by virtue of a chattel mortgage executed by the corporation of Scott, Hartley & Co., on the 14th of February, 1894, to secure its note to said Johnson, of even date therewith, in the sum of $455. At the time when respondent's mortgage and bill of sale were executed, all of the property in controversy was in King county, and said mortgage and bill of sale were duly filed and recorded therein. In January thereafter, pursuant to an arrangement between the corporation of Scott, Hartley & Co., mortgagor, and the respondent, that part of the property in question which is embraced in Johnson's mortgage (consisting chiefly of horses and their harnesses), was intrusted to one Lynch, and by him taken to Whatcom county, to be used in logging; the said Lynch promising in writing to return all of said property to King county on or before February 15, 1894. Respondent failed to record its mortgage and bill of sale in Whatcom county within 30 days after the removal of said property to said county, or at all; and it was while said property was in Whatcom county that the mortgage was given to Johnson, who duly filed and recorded the same in said Whatcom county. Prior to March, 1893, F. E. Scott and Thomas Hartley were copartners in the logging business, under the firm name of Scott & Hartley, and as such were the owners of nearly all the property in question; and said firm was at that time largely indebted to the respondent. In March, 1893, the corporation of Scott, Hartley & Co. was organized by said F. E. Scott, Thomas Hartley, and Eugene Roy, sole incorporators and trustees, said Roy being also at that time and at all times thereafter the president of respondent corporation; and, upon its formation, the firm of Scott & Hartley transferred to it all of the property here involved, except a small portion which was subsequently acquired. Thereafter said corporation of Scott, Hartley & Co. continued to deal with respondent, and respondent extended credit to it. On August 8, 1893, Hartley sold all his stock in the corporation of Scott, Hartley & Co. to Roy, who assumed, as part consideration for such transfer, "all of the liabilities of T. J. Hartley upon the obligations of the firm of Scott & Hartley, including, an account to Roy & Co., also a note of $1,330, due Roy & Co., and *** all other obligations of T. J. Hartley in said firm of Scott & Hartley."

Appellants assail the validity of respondent's mortgage and bill of sale, and urge, among others, the following objections: (1) The want of corporate authority to execute the mortgage; (2) that they were given without any consideration, and were fraudulent; (3) that, inasmuch as Roy was the common president of both mortgagor and mortgagee corporations, the transaction between them was and is void; (4) that the bill of sale intended as a mortgage is void for want of the affidavit required by section 1648 of 1 Hill's Code, concerning mortgages. And the further point is made by appellant Johnson, viz. (5) that his mortgage is a first lien upon the property described therein, because of respondent's failure to record its mortgage in Whatcom county.

The testimony upon the trial was very conflicting, especially as to the condition of the accounts between the corporations of Scott, Hartley & Co. and respondent at the time when the mortgage to respondent was given; but, in so far as the propositions here urged are concerned, the court found: "That the said chattel mortgage and bill of sale in the plaintiff's complaint set forth were executed and delivered by Eugene Roy, as president, and F. E. Scott, as secretary, of the defendant corporation, Scott, Hartley & Co.; and that, upon the date of such execution and delivery as aforesaid, the said Eugene Roy and Frank E. Scott were the only stockholders in the corporation of Scott, Hartley & Co. That there is no evidence that the said mortgages, or either of them, were given for the purpose of defrauding other creditors of Scott, Hartley & Co.; and that there is no evidence that Scott, Hartley & Co. was on the 2d day of September, 1893, in any way indebted to the defendant (appellant) J. F. McNaught. That the defendant Johnson took his mortgage upon portions of the identical property covered by the plaintiff's mortgage, and covered also by the said bill of sale, with full knowledge and notice of the mortgage of the plaintiff upon said property and the bill of sale *** of the same property, and took the said mortgage as security for an antecedent debt."

This court has held in Webster v. Thorndyke (decided March 9, 1895) 39 P. 677, that, "under the provisions of the statute of 1893, the findings of the trial court in an equity cause stand upon substantially the same footing as those of the court or jury in a law case; and, if a finding is supported by proof which reasonably established the facts found, it will not be disturbed because there is testimony to the contrary, even although this court might be of opinion that such testimony was entitled to greater weight than that which tended to support the finding." An examination of the record has satisfied us that there was competent proof in the court below tending "reasonably to establish" the facts found; and under the rule laid down in Webster v Thorndyke, supra, this...