Seattle Ass'n of Credit Men v. Daniels

• Decision Date: 13 November 1942
• Docket Number: 28682.
• Citation: 130 P.2d 892,15 Wn.2d 393
• Court: Washington Supreme Court
• Parties: SEATTLE ASS'N OF CREDIT MEN v. DANIELS et al.

130 P.2d 892

15 Wn.2d 393

SEATTLE ASS'N OF CREDIT MEN v. DANIELS et al.

No. 28682.

Supreme Court of Washington

November 13, 1942

Department 2.

Action by the Seattle Association of Credit Men, as common-law assignee of Eba's Incorporated, against Olaf B. Daniels and Oscar E. Turnquist, copartners, doing business under the firm style and name of Daniels and Turnquist, to recover, as a preference, a payment made by plaintiff's assignor to the defendant. From a judgment dismissing the action, the plaintiff appeals.

Reversed and remanded with directions.

Appeal from Superior Court, King County; Wm. G. Long, Judge.

Patterson & Patterson, of Seattle, for appellant.

Caldwell Lycette & Diamond, of Seattle, for respondents.

BLAKE Justice.

June 29, 1940, Eba's Inc. made an assignment for the benefit of creditors to Seattle Association of Credit Men. The assignee brought this action to recover, as a preference, a payment of $280.23 made by the assignor to the defendants Deniels and Turnquist, on April 10, 1940.

The facts out of which the controversy arose are as follows: On or about February 9, 1940, Eba's Inc. entered into a contract with the defendants, who are building contractors for the repair and alteration of the store front of premises occupied by the former at 500 Queen Anne Avenue in Seattle. The work was done 'on time and material basis plus 10% for overhead and profit.' Payment was to be made ' upon presentation of receipted bills and pay roll * * * and when said bills for materials and pay roll have been audited and found correct to be paid in full.' (Italics ours.) The work was completed about February 15th. On March 22d, defendants presented a statement, accompanied by receipted bills for labor and materials, amounting to $280.23. On the same day, the president of Eba's Inc. made the following notation on the statement: 'O. K. Pay about 10th of month.' Accordingly, under date of April 10th, a check was issued in payment of the account.

In addition to the foregoing facts, the trial court found that Eba's Inc. was in possession of the premises under a lease giving it the right to make alterations and repairs on the building up to $1,000, and that, ' if such repairs were made the lessee would pay a reduced rent to reimburse itself for said repairs' (italics ours); that the president of Eba's Inc. discussed with, and had the consent of, the owner 'the making of the said repairs by said Daniels & Turnquist'; that, if Daniels and Turnquist had not received payment as provided for in the contract, they 'could have liened the said premises as security for the payment of the said sum due them.' Accordingly, under the rule that a payment made by an insolvent to discharge a lien against its property does not constitute a preference, the court entered judgment dismissing the action. Plaintiff appeals.

The appeal presents two questions for determination: (1) whether respondents had a lienable claim against the property; and (2) whether the payment can be regarded as having been made for a present consideration rather than upon an antecedent debt.

First. If respondents had an enforcible lien, even though inchoate, for the work performed and materials furnished, the payment was not a preference. 4 Remington on Bankruptcy, 4th Ed., p. 648, § 1709; In re Lynn Camp Coal Co., C.C., 168 F. 998; Stewart v. Hopkins, 30 Ohio St. 502, affirmed Libby v. Hopkins, 104 U.S. 303, 26 L.Ed. 769; Public Nat'l Bank & Trust Co. v. Fortinberry, Tex.Civ.App., 53 S.W.2d 113. We think, however, that respondents did not have an enforcible lien.

In the first place, the lease under which the court found Eba's Inc. to be in possession of the premises did not run to Eba's as lessee. The named lessee was Dutch Maid Foods Inc. The lease provided that 'the lessee may assign this lease to Eba's Mutual Groceries, Inc., * * * and, upon acceptance of such assignment by and agreement of said company to perform the covenants of this lease, the lessee hereunder shall be released from all liability under this lease.' Whether Eba's Mutual Groceries, Inc., and Eba's Inc. are one and the same corporation does not appear from the record. Assuming that it is, however, the assignment provided for in the above-quoted clause was never consummated by an agreement of Eba's Inc. 'to perform the covenants of this lease.'

So, as far as Eba's Inc. is concerned, there was no interest in the realty upon which a line could be levied. For, at best, it was but a month to month tenant of Dutch Maid Foods Inc. But it is suggested by respondent that the latter and Eba's Inc. should be regarded as one and the same corporation because the stock of each corporation was owned by one and the same person. The evidence, however, falls far short of the requirements of the rule permitting corporate entities to be disregarded. To invoke that rule, something more than common ownership of stock and common management must be shown.

'In order to justify the judicial disregard of corporate identities, one, at least, of two things must clearly appear. Either the dominant corporation must control and use the other as a mere tool or instrument in carrying out its own plans and purposes so that justice requires that it be held liable for the results, or there must be such a confusion of identities and acts as to work a fraud upon third persons.' Pittsburgh Reflector Co. v. Dwyer & Rhodes Co., Inc., 173...