Ryan v. Plath

• Decision Date: 25 August 1943
• Docket Number: 29004.
• Citation: 140 P.2d 968,18 Wn.2d 839
• Parties: RYAN v. PLATH et al.
• Court: Washington Supreme Court

140 P.2d 968

18 Wn.2d 839

RYAN v. PLATH et al.

No. 29004.

Supreme Court of Washington

August 25, 1943

Department 1.

Action by Maude F. Ryan against Fred B. Plath and others to establish a constructive trust in respect of certain property, to compel restitution thereof, and for an accounting. From the decree, plaintiff appeals, and defendants cross-appeal.

Modified and affirmed.

Appeal from Superior Court, Yakima County; James B. Kinne, judge.

D. V Morthland and Lane Morthland, both of Yakima, for appellant.

Velikanje & Velikanje, of Yakima, for respondents.

STEINERT Justice.

This was an action to establish a constructive trust in respect of certain real and personal property; to compel restitution of the lands and chattels involved therein; and to obtain an accounting of all assets, income, and accruals acquired or derived by the alleged corporate constructive trustee and its principal officer during the period in which they respectively had held, managed, and operated the property and the industry in which the property was used. The action was tried as an equity case Before the court without a jury. At an initial hearing on the merits the court first determined that the acts of the defendants established a constructive trust for the benefit of the plaintiff and her assignors and then ordered a full accounting by the defendants. Thereafter another hearing was had Before the court upon the account so rendered and the exceptions thereto by the plaintiff. At the conclusion of the final hearing, the court made findings, from which it drew certain conclusions and thereupon entered a decree establishing the right of ownership of the property in the plaintiff; settling the account of the defendants as of a certain date; and determining the amount, as shown by the result of the accounting, which plaintiff should pay into the registry of the court as a condition upon which she would be let into possession of the property and thereafter have a further accounting for the period subsequent to the time of the latter hearing. The plaintiff appealed from that portion of the decree which was adverse to her, and the defendants in turn cross-appealed from that portion which was unfavorable to them. We shall hereinafter refer to the plaintiff as appellant, and to the defendants as respondents.

This litigation grows out of the administration of the estate of Delbert J. Foster, a bachelor, who died intestate in Yakima county in 1931. For many years prior to his death, Foster had operated a farm in that county consisting of approximately forty acres, of which thirty-two acres were in orchard. The land, together with certain farm equipment and other personal property thereon, was held under an executory contract entered into on October 6, 1919, by one James D. Bean, as seller, and Nettie L. Kneebs, Edward J. Preece, and Delbert J. Foster, as purchasers. The purchase price stated in the contract was $20,500, of which $2,000 was paid in cash, and the balance of $18,500 was to be paid out of the annual gross receipts from the crops. On July 2, 1923, that contract was replaced by another contract between the same parties, reciting the purchase price as $15,350, of which $5,000 was to be paid by the assumption of a mortgage in that amount then held by a mortgage and loan company, and the balance of $10,350 was to be paid by the semiannual application of the net receipts from the products grown and harvested on the land. The respective interests of Preece and Kneebs in the second contract were thereafter conveyed or assigned by them to Foster at times on or Before January 9, 1926.

Prior to the death of Foster, James D. Bean had passed away, and upon the administration of his estate the Guaranty Trust Company of Yakima became the holder of the legal title to the real estate described in the contract, in trust for the heirs of Bean.

Delbert J. Foster died April 6, 1931, leaving as his heirs at law W. O. Foster, a brother residing in Chicago, Illinois, Bert E. Foster, a brother residing in Minneapolis, Minnesota, and Maude F. Ryan, appellant herein, a sister by adoption, residing in Sioux City, Iowa. A short time prior to the commencement of this action on April 8, 1941, the two surviving brothers assigned to the appellant all their interest and claim in and to the estate of the deceased.

Upon receipt of notice of the death of Delbert J. Foster, appellant and her brother Bert proceeded to Yakima to attend the funeral. Appellant had visited her brother Delbert the year Before his death and at that time had become acquainted with respondent Fred B. Plath, president and general manager of respondent Washington Fruit & Produce Company, a corporation engaged in packing, storing, and selling fruit and produce in Yakima. Plath owned fifty-eight per cent of the capital stock of the corporation, and the remaining capital stock was owned by two other individuals associated with him in the business. For approximately eight or ten years prior to 1931, the Washington Fruit & Produce Company had handled the fruit and produce grown and harvested by Foster on his farm.

After the funeral, the appellant and her brother Bert requested Plath to act as administrator of their deceased brother's estate, and after much persuasion Plath consented to do so. Probate proceedings were thereupon commenced on the petition of appellant and Bert E. Foster, and at their request Plath was appointed and qualified as administrator on April 27, 1931.

On July 1, 1931, the administrator filed an inventory and appraisement of the estate showing real estate consisting of the farm valued at $23,750 and personal property valued at $1,250, or a total appraised value of $25,000. At the time of the death of Delbert J. Foster there were in cold storage at the plant of Washington Fruit and Produce Company 3,882 boxes of Winesap apples belonging to the estate which were not listed in the inventory. There apples were later sold for $4,351.80. Plath testified upon the trial that this amount was included in an account and report filed by him on October 6, 1933, although the specific amount does not appear in that report as a separate, distinct item.

The record discloses that at the time of Delbert J. Foster's death the financial situation with respect to the farm and the real estate contract involved was this: The Guaranty Trust Company held the legal title to the property in trust for the heirs of James D. Bean, deceased; the equity of the Bean heirs under the contract was $7,000; the trust company, as trustee for one Chrysler, also held a mortgage on the land in the principal sum of $5,000; there was thus a total indebtedness of $12,000, for which the land was security. Up to that time, however, all requirements of the contract except the payment of taxes for 1930 had been met.

On October 30, 1931, the above mentioned Nettie L. Kneebs filed with the administrator two claims against the estate aggregating $11,685 with interest, represented by two promissory notes purportedly signed by Delbert J. Foster. The administrator rejected both of these claims, and thereafter on December 18, 1931, Miss Kneebs brought suit against him seeking to have her claims allowed. On January 9, 1932, the administrator responded to her complaint by an answer in the form of a general denial, but he did not file it until December 4, 1936. On December 12, 1936, that action was dismissed with prejudice, for want of prosecution. The significance of those claims and of the manner of their ultimate disposition, as bearing upon the present controversy, will appear a little later herein.

Plath, as administrator, operated the farm during the period between April 27, 1931 and October 14, 1936, comprising the greater portion of six 'fruit' years. These operations were conducted with the knowledge and consent of the heirs of the estate.

In the beginning, the estate had but little money and only a small amount of personal property that could be converted into cash. The heirs at no time advanced any funds to the administrator. The only source of revenue for conducting the operations therefore was the receipts from the sales of fruit and such advances as the Washington Fruit & Produce Company, the packer, would make from time to time. Concededly that was the method under which Foster had operated the farm during his lifetime.

At any rate, Plath, the administrator, set up in the books of the Washington Fruit & Produce Company, of which he was the president, manager, and principal stockholder, an account in the name of the Delbert J. Foster estate. In this account he credited the small amount of cash on hand at the time of Foster's death, also $600 received from the sale of an automobile, and the proceeds of the sales of fruit produced from year to year. Against these he charged the expenses of operating the farm, including labor, material, and the cost of improvements, and also the expenses of transporting, packing, storing, and selling the fruit. As the fruit was harvested from year to year it was hauled to the plant of the Washington Fruit & Produce Company in Yakima, where it was washed, packed, stored, shipped, and sold in the usual manner. For the services rendered by the produce company in handling and marketing the fruit, the estate was charged upon the same basis as were other producers with whom the company regularly did business.

Unfortunately the operations of the farm were not successful from a financial point of view during the six-year period to which we have just referred. In only one of those years was there a profit, shown as a credit balance in the account of the estate. According to the record, this condition, of affairs was due to a steady run of unfavorable weather and market...