Scott v. Rainier Power & Ry. Co.

• Decision Date: 22 November 1895
• Citation: 42 P. 531,13 Wash. 108
• Court: Washington Supreme Court
• Parties: SCOTT ET AL. v. RAINIER POWER & RAILWAY CO. ET AL.

42 P. 531

13 Wash. 108

SCOTT ET AL. v. RAINIER POWER & RAILWAY CO. ET AL.

Supreme Court of Washington

November 22, 1895

Appeal from superior court, King county; T. J. Humes, Judge.

Action by Francis E. Scott and another, copartners under the firm name of Scott & Hartley, against the Rainier Power & Railway Company and M. F. Backus, receiver of the company. From a judgment for plaintiffs, Backus appeals. Reversed.

Lichtenberg Shepard & Lyon, for appellant.

E. P Dole, for respondents.

HOYT C.J.

The Rainier Power & Railway Company, a domestic corporation, on the 21st day of December, 1892, entered into a written agreement with Francis E. Scott (who subsequently entered into partnership with T. J. Hartley, who acquired an interest in said agreement), whereby it was agreed that said Scott was to cut from a certain tract of land, and deliver to the Rainier Power & Railway Company, saw logs of suitable length, as said corporation from time to time should order, at a certain stipulated price. These logs were to be used in a mill, which, as a part of the property of the corporation, was operated by it. On June 13, 1893, pending the determination of a suit in the United States circuit court for the district of Washington, the appellant was appointed receiver of the corporation, with directions to operate and continue its business pending said suit; and he ever since that date has been, and now is, the receiver of said corporation, and in possession of its assets. Subsequent to the appointment of the receiver, the plaintiffs tendered to him a quantity of saw logs under said agreement. He investigated the contract, and, finding it was not for the interest of the creditors of the corporation to carry it out declined to receive the logs, or to in any manner comply with the conditions of said contract; whereupon plaintiffs instituted this suit to recover the value of the logs so tendered, and of the timber suitable for saw logs remaining upon the land. The receiver, among other things, set up in his answer, by way of an affirmative defense, the facts as to his investigation of the contract, and his determination that it was not for the interest of the defendants or the creditors of the corporation, and that, for that reason, he had refused to carry it out. There was nothing in the pleadings or in the evidence introduced at the trial tending to show that the receiver had made the contract his own by agreement, approval or in any other manner. The above-stated facts appeared from the undisputed proofs, and, upon the claim that they were insufficient to show any liability on the part of the receiver as such, he made a motion for a nonsuit. The court denied this motion, and instructed the jury that the receiver had no more or greater right to break said contract, or to refuse to carry it out than the defendant corporation. Upon this denial and the instruction to the jury, error has been duly assigned.

From the record it clearly appears that the court, throughout the trial of the case, determined the law to be that the receiver, as such, was liable for the damages flowing from the breach of the contract, the same as he would have been if it had been one entered into by him. It follows that, if the law is as claimed by the appellant,-that he had the right to refuse to carry out the contract, and would not be liable in an action by the plaintiffs on account of such refusal,-the judgment must be reversed. If, on the contrary, the law is as contended for by the respondents,-that the receiver is liable to the same extent as the corporation,-it must be affirmed. Hence the only question for determination is as to the right of the receiver, under the circumstances disclosed by this record, to refuse to carry out the contract in question. If he had a right to refuse to carry it into effect, it was because it was not binding upon him; and, if it was not, he would not be liable for damages flowing from its breach, for the reason that only those who are bound by a contract can be called upon to answer in damages for its violation. Claims for which a receiver, as such, is liable, are first entitled to be paid in full before anything is paid upon the liabilities of the corporation. Hence, if the contention of the respondents should be sustained, the result would be that the liability of the corporation flowing from the execution of this contract would constitute a preferred claim, and be entitled to payment in full before anything was paid upon the liabilities of the corporation growing out of other contracts entered into by it at the same time or subsequent thereto, before the appointment of the receiver. To state it differently, it would result from such a ruling that if this contract and another in exactly the same terms had been entered into on the same day, and under one of them the logs had been all delivered before the appointment of the receiver, and none of them paid for, and under the other a portion only of the logs had been delivered, the beneficiaries of one would receive full payment out of money coming into the hands of the receiver, while those under the other would have to abide the result of the receivership, and might not receive anything. It is not claimed that the contract in question was of such a nature that the corporation, before insolvency, could have been compelled to specifically perform it. It is only claimed that, if it failed to perform, it would be liable for the...