State v. Morris

• Decision Date: 12 May 1922
• Docket Number: 16931.
• Citation: 207 P. 18,120 Wash. 146
• Parties: STATE ex rel. EWING v. MORRIS.
• Court: Washington Supreme Court

207 P. 18

120 Wash. 146

STATE ex rel. EWING v. MORRIS.

No. 16931.

Supreme Court of Washington

May 12, 1922

Department 2.

Appeal from Superior Court, Benton County; John Truax, Judge.

Action by the State of Washington, on the relation of Henry C Ewing, against C. L. Morris, on application by relator for order to show cause why defendant should not be punished for contempt. From an order adjudging defendant in contempt, he appeals. Affirmed.

Hovey J., dissenting.

Lee C Delle, of Yakima, for appellant.

Robinson, Murphy & Murphine, of Seattle, and Parker, La Berge & Parker, of Yakima, for respondent.

HOLCOMB J.

In March, 1916, a mortgage debt being in default by the Kiona-Benton Land & Water Company, hereinafter called the land company, to the North American Mortgage Company, foreclosure of the mortgage was instituted. At about the same time, there being another mortgage for a large amount from the same mortgagor, which had been assigned to the International Mortgage Bank, in April, 1916, foreclosure of that mortgage was commenced Both were commenced in the superior court for Benton county. It had been agreed between the mortgage companies and the mortgagor that separate mortgage foreclosures should be had, and that C. L. Morris, of Seattle, a stockholder in the Kiona-Benton Land & Water Company, a domestic corporation, who had had no act or part in the management of the land company, should be appointed receiver under the foreclosure proceedings, of the mortgaged premises, and take control and active management of the same, and determine whether the mortgages could ultimately be paid from the earnings of the property, or whether it would be necessary to prosecute foreclosure proceedings to final judgment and sale. It was also agreed at that time between the mortgage companies, the land company, and the receiver, that, by reason of the uncertain conditions of the outstanding sale contracts, and the general depreciated condition of the whole project, the records would not be incumbered with reports; but that the receiver should first make a preliminary report with his recommendations to each of the mortgage companies, and the land company, and annually thereafter make and file with each of the mortgage companies and the land company a report of his acts and doings for that year. The receiver agreed upon by the parties to the action was accepted by the trial court and was appointed, thereafter duly qualified, and entered upon his duties as such receiver. Pursuant to the agreement between the parties to the action and the receiver, the receiver made his preliminary reports and recommendations to each of the mortgage companies foreclosing, and the land company, and each year thereafter made and filed with each of the parties his annual report.

The land company continued to maintain its corporate existence, and there were no proceedings to liquidate it and end its corporate existence. The method above outlined of proceeding with the operation and management of the property and reporting to the parties continued until September 15, 1919, when there was a meeting of the stockholders and trustees of the land company at its office in Seattle, at which Receiver Morris was called upon for a report, and at which resolutions were unanimously adopted authorizing him to lease, sell, mortgage, or otherwise dispose of all or any part of the property of the land company, real, personal, or mixed, on such terms, conditions, consideration, and credits, and at such times, as in his judgment and discretion he should deem to be to the best interests of the corporation, with a proviso that that no sale of the corporation's property as a whole should be finally consummated without the approval of the board of trustees. All his acts and doings in relation thereto were ratified and confirmed. Thereafter the receiver filed a petition in the superior court on October 15, 1919, for, and obtained an order granting him the same power as had been conferred by the parties to the action. He then proceeded, through the agency of the Henry C. Ewing Company, a corporation in Seattle, to make a large number of sales of the land under foreclosure.

On November 26, 1920, Henry C. Ewing, a stockholder of the land company, filed an application in both mortgage foreclosure suits demanding inspection of the books and records of the defendant corporation, and a report to the court of the receiver's doings as such receiver. The court duly issued a citation on these applications, and on December 14, 1920, the date on which the hearing was set, the mortgage companies, the receiver, and the defendant land company appeared in court and contested the petition. The court did not at that time enter an order, but took the matter under advisement, and later, and on March 17, 1921, made and entered an order reciting the hearing on December 14, 1920, on the petition of Ewing, and, on the answers of the receiver and the defendant land company, recited that Ewing did not appear in person, but appeared by his attorney, and that the receiver, Morris, appeared in person and was represented in court by his attorney. It was therein ordered that on or before April 6, 1921, Morris, as receiver, should file a full and complete report of his receivership from the time of his appointment to the date of the filing of such report, which report should show all amounts still owing and other details, and, in fact, furnish a general report of such receivership since the year 1916. It was specified that the receiver should report the amount paid as attorney's fees to date, and whether or not any charges by way of counsel fees remained unpaid at the date of the report, and that the receiver should set forth how much has been paid for his services rendered thus far, as well as the amount of his claim, if any, on account of services still remaining unpaid at the time of filing his report. The order contained other matters not here material. After the entry of the foregoing order and prior to April 6, 1921, Morries, as such receiver, made and filed a complete settlement with each of the mortgage companies. On April 6, 1921, a stipulation was filed in each cause, to the effect that the mortgage companies had been paid their indebtedness in full, including attorney's fees and costs, and had executed full and complete releases and satisfactions of their mortgages, and the notes secured thereby; stipulated that they had no further claim against the defendant land company, and that their actions should be dismissed with prejudice, and the lis pendens notice of record canceled and discharged. It was also stipulated that, upon the presentation and filing of the stipulation in each case, the court should forthwith, and without notice to either party thereto, make and enter an order dismissing the case with prejudice, no costs to be taxed to either party, and discharging the receiver and exonerating his bondsmen. It was further stipulated and agreed that the parties to each stipulation were fully satisfied with all the acts and doings of the receiver, Morris, and that the defendant land company was fully satisfied with all his acts and doings, and that at a meeting of the stockholders on April 2, 1921, by several resolutions duly and regularly adopted, it had ratified and confirmed the settlement made in the foreclosure actions and the acts of the receiver.

Upon the filing of the above stipulation, the court made and entered an order in each case, on April 6, 1921, reciting the reading and filing of the stipulations entered into between the plaintiffs and defendant in each case, and ordered and adjudged that the causes be dismissed with prejudice; that the lis pendens notices be canceled and dismissed; that no costs be taxed to either party, 'but that the receivership proceedings are not discharged and the receiver is required to file a report as heretofore ordered.'

Thereupon, on the same day, the defendant land company filed in court its verified petition asking the court to vacate and annul the order of March 17, 1921, requiring the receiver to file a report, and as grounds therefor alleged with great detail the formal proceedings of the stockholders and board of trustees of the land company, approving and ratifying and confirming the acts of Morris, and the settlement made with the plaintiff in each of the actions, and prayed that the actions be dismissed and the receiver be discharged without requiring him to file reports. This petition was also joined in by the receiver through his attorney by way of a separate motion supported by the affidavit of his attorney.

Before the proceedings to vacate the orders of the court could be brought on for hearing and examination in the court below Ewing, as relator, applied to and obtained from the trial court, on April 8, 1921, an order to show cause, returnable on April 13, 1921, why Morris should not be punished for contempt for failure to file the reports required by the order of March 17, 1921. The order of March 17, 1921, was set forth in a written application signed by the attorneys for relator, and the application was supported by an affidavit by one of the attorneys for relator, referring to the orders of March 17, 1921, and of April 6, 1921, requiring the receiver to file a full and complete report of his receivership from the date of his appointment to the date of such report, and that Morris, as such receiver, had failed to comply with the orders and had failed to file in the court below any kind of a report as required to be filed in such orders, or any report. On the return day of the citation, Morris appeared in person and by his attorney and demurred to the application and affidavit upon the grounds that: (1) There was a defect of ...