Smith v. Solomon Valley Dredging Co.

• Decision Date: 13 March 1928
• Docket Number: 20897.
• Citation: 147 Wash. 69,264 P. 1009
• Parties: SMITH v. SOLOMON VALLEY DREDGING CO.
• Court: Washington Supreme Court

264 P. 1009

147 Wash. 69

SMITH v. SOLOMON VALLEY DREDGING CO.

No. 20897.

Supreme Court of Washington

March 13, 1928

Department 1.

Appeal from Superior Court, King County; Douglas, Judge.

Action by Leslie A. Smith against the Solomon Valley Dredging Company. Judgment for plaintiff, and defendant appeals. Affirmed.

H. E Foster, of Seattle, for appellant.

Byers &amp Byers and Jas. A. Dougan, all of Seattle, for respondent.

MITCHELL J.

This action was brought in the superior court of King county in June, 1927, by Leslie A. Smith against the Solomon Valley Dredging Company, a corporation having its principal place of business in Seattle, to recover judgment in the sum of $1,431.17 alleged to be the balance due on account of labor performed for the defendant in the year 1926. It was further alleged that the corporation was insolvent and unable to pay its debts in the ordinary course of business, and that its assets were in danger of being dissipated. Among other things, the appointment of a receiver was asked. In response to a show cause order, the defendant appeared and resisted the application for a receiver. The application was heard upon affidavits. A receiver was appointed. The defendant has appealed.

Section 741, Rem. Comp. Stat., provides:

'A receiver may be appointed by the court in the following cases: * * *

'5. When a corporation has been dissolved or is insolvent or is in imminent danger of insolvency, or has forfeited its corporate rights. * * *'

We have examined the proof in this case, and find that it clearly shows outstanding indebtedness, including a judgment, in considerable amounts altogether against the appellant not being paid, and that its business was carried on at a loss of approximately $4,000 the last year.

In this state the rule is that as against creditors a corporation is insolvent when it is unable to pay its debts in due course of business. Nixon v. Hendy Machine Works, 51 Wash 419, 99 P. 11; Ronald v. Schoenfeld, 94 Wash. 238 162 P. 43; McKay v. Sperry Flour Co., 95 Wash. 209, 163 P. 377; McKnight v. Shadbolt, 98 Wash. 665, 168 P. 473.

Appellant relying on High on Receivers (4th Ed.) § 406, contends, as we understand, that the power to appoint a receiver will not be exercised in favor of general creditors whose rights rest only in contract not yet reduced to judgment, and who have acquired no lien upon the property of the debtor. It may be admitted that, generally speaking, such is the rule. However, it has been modified by our statute in the case of insolvent corporations. Oleson v. Bank of Tacoma, 15 Wash. 148, 45 P. 734; Davis v. Edwards, 41 Wash. 480, 84 P. 22. It is...