Southwestern Sur. Ins. Co. v. Pacific Coast Cas. Co.

• Decision Date: 29 August 1916
• Docket Number: 13457.
• Citation: 159 P. 788,92 Wash. 654
• Parties: SOUTHWESTERN SURETY INS. CO. v. PACIFIC COAST CASUALTY CO.
• Court: Washington Supreme Court

159 P. 788

92 Wash. 654

SOUTHWESTERN SURETY INS. CO. v. PACIFIC COAST CASUALTY CO.

No. 13457.

Supreme Court of Washington

August 29, 1916

Department 2. Appeal from Superior Court, King County; K. Mackintosh Judge.

Action by the Southwestern Surety Insurance Company against the Pacific Coast Casualty Company and others. Judgment for plaintiff, and the Casualty Company appeals. Reversed and remanded.

Geo McKay and Henry S. Noon, both of Seattle, for appellant.

Ballinger Battle, Hulbert & Shorts, of Seattle, for respondent.

CHADWICK, J.

The defendant, Charles Shubart, was appointed as receiver for an insolvent corporation. The appellant, which will be called the Casualty Company, became surety on his bond. The bond was conditioned for the faithful discharge of the duties of the receiver. One of the assets of the insolvent estate was a launch, then in the possession of one Miller. Miller refused to deliver possession to the receiver who began an action in replevin. He gave bond with respondent, which we will call the Surety Company, as surety, and took possession of the launch. Pending the trial, the receiver, without any order of the court, exchanged or traded the launch for a five-acre tract of land in Kitsap county. Miller answered in the replevin suit, setting up a lien in the sum of $627.35 for labor performed and material furnished in the repair of the launch, and claimed the right of possession pending the payment of his claim. The court entered a judgment against the receiver for the sum of $627.35, with interest and costs amounting in all to the sum of $773.88.

Miller then proceeded against the Surety Company, and it paid the full amount of the judgment which had been rendered against its principal, the receiver in the replevin action. The Surety Company then began this action to recover the amount so paid from the receiver and the Casualty Company upon the receiver's bond. From a judgment in favor of the Surety Company, the Casualty Company has appealed. It is first contended that the action cannot be maintained because the action was not begun with leave of the court.

This objection is not now material for two reasons: (a) It is likely that an order entered after the action was begun would cure the irregularity; (b) the objection does not go to the jurisdiction of the court. It is no more than an irregularity that may be waived, or cured, at any stage of the proceedings. Payson v. Jacobs, 38 Wash. 203, 80 P. 429.

The briefs have taken a wide range, but the main reliance of the Casualty Company is that the act complained of and its consequences were not within the contemplation of the parties, and that recovery for moneys paid upon a replevin bond are not within either the letter or the legal effect of the receiver's bond. The obligation assumed by the Casualty Company was that the receiver should faithfully discharge his duties as receiver. The duties of a receiver are to take charge of, and safely keep and account for, all of the assets of the estate, and to abide all orders of the court with reference thereto. 34 Cyc. 15-17; High on Receivers (4th Ed.) § 1.

The sale of the launch, pending a trial of the replevin action, was clearly a breach of duty on the part of the receiver, and subjects his surety to answer for his default. It was, in law, a conversion of the property. While, as we have said, the briefs take a wide range, counsel are in accord upon the fundamental principle. Counsel for appellant says:

'For the receiver's conversion of the launch the law fixes the legal consequences, viz., liability for its value.'

Counsel for respondent repeats many times that by his neglect of duty the receiver converted the launch to his own use.

As we view the case, therefore, there is but one question open to inquiry, and that is the extent of the Casualty Company's liability. In the replevin action the court entered a judgment:

'* * * That the defendant, Miller, is given possession of said boat and the plaintiff is not entitled to possession of the said launch Pacific, which was replevined by said plaintiff from said defendant herein, except on condition that said plaintiff pay to said defendant the said sum of $627.35, with legal interest thereon since April 15, 1912, together with the costs and disbursements herein.

'It is further ordered and decreed that the said Miller has a lien on said launch for the payment of said $627.35, with interest and costs, and was rightfully in possession of the same at the time of said replevy thereof.'

The value of the property was not determined by the court. In the trial of this case the court refused to permit appellant to show the value of the launch.

It is asserted that the Casualty Company is liable for the full amount paid by the Surety Company in satisfaction of the replevin bond, and that the court did not err when it denied the offer of appellant to show the value of the launch, for the reason that the receiver had alleged the value of the launch to be $800 in his complaint in the replevin case, and----

'* * * It makes no difference what the value of the launch was because the receiver had disposed of it without authority, converted it to his own use as found and decreed by the court, and a money judgment was rendered against him for the amount sued for in this case on account of the receiver's neglect. * * *'

Counsel for the Surety Company rightfully assumes that respondent is subrogated to the rights of Miller, and, while it can, no doubt, assert its judgment for the whole thereof against the receiver or possibly against the estate, we cannot agree that it may recover...