Strong v. Sunset Copper Co.

• Decision Date: 14 June 1941
• Docket Number: 28069.
• Citation: 114 P.2d 526,9 Wn.2d 214
• Parties: STRONG v. SUNSET COPPER CO.
• Court: Washington Supreme Court

114 P.2d 526

9 Wn.2d 214

STRONG v. SUNSET COPPER CO.

No. 28069.

Supreme Court of Washington, En Banc.

June 14, 1941

Suit by N.C. Strong, as trustee, against Sunset Copper Company, a corporation, and others, to foreclose a real estate and chattel mortgage executed by defendant Sunset Copper Company as security for a bond issue. From portions of the decree adverse to plaintiff, plaintiff appeals opposed by N. Dotson and others.

Reversed with direction.

Appeal from Superior Court, Snohomish County Ralph C. Bell, Judge.

Bogle Bogle & Gates and Warren Brown, Jr., all of Seattle, for appellant.

Houghton, Cluck & Coughlin and Emil P. Schubat, all of Seattle, for respondents.

STEINERT, Justice.

This action was brought to foreclose a real estate and chattel mortgage executed by defendant Sunset Copper Company as security for a bond issue. A number of the defendants including Sunset Copper Company, defaulted, and certain other defendants, employees whose labor liens on the mortgage property had been foreclosed in a former suit, answered and pleaded affirmatively that plaintiff's action was barred by the statute of limitations. The cause was tried to the court, without a jury, and, after the court had orally announced its decision to the effect that the action was barred by the statute, plaintiff moved for judgment notwithstanding the oral decision. The motion was denied. Plaintiff further moved, in the alternative, for an order reopening the case for further evidence, or, for an order granting a new trial. The alternative motion was supported by affidavits claiming newly discovered evidence. That motion was also denied, on the ground of lack of due diligence on the part of plaintiff. The court thereupon entered a decree foreclosing plaintiff's mortgage, but adjudging the lien thereof to be subordinate to the rights of the labor lien claimants. From the portions of the decree adverse to him, plaintiff appealed.

On April 8, 1921, defendant Sunset Copper Company, being the owner of certain mining property in Snohomish county, executed and delivered to Central Securities Company, a corporation, as trustee, a mortgage and trust deed covering that property. The purpose of the mortgage and deed of trust was to secure the payment of a $200,000 bond issue evidenced by two hundred bonds, each of the par value of one thousand dollars, to be issued by Sunset Copper Company. The maturity date of the bonds was April 1, 1931, and interest on the bonds was payable on April 1 and October 1 of each year.

On March 28, 1927, the trustee resigned, and the record does not disclose whether or not any successor was appointed prior to July 28, 1938. On the latter date, appellant, N.C. Strong, one of the bondholders, was named trustee to fill the vacancy.

Of the two hundred bonds provided for by the trust deed, one hundred twenty-one, having an aggregate par value of $121,000, were issued. Of these, ninety-one were sold to investors, and thirty were delivered to Diamond Ice Co., a corporation, to be held by it as collateral for a note for $30,000 which Sunset Copper Company had given to the ice company some time prior to 1931.

On, or shortly Before , April 1, 1931, the maturity date of the bonds, Sunset Copper Company, through its president, requested an extension of time of payment thereof, and during that year fifteen of the bondholders, including appellant, representing a total of $55,000 secured by the bonds, respectively signed agreements in which, after certain recitals, appeared the following provisions: '* * *, the undersigned [bondholder] hereby extends the time of the payment of said bonds for a period of two years from and after April 1, 1931, provided that the interest each six months shall be promptly paid. A failure to pay interest each six months as the same accrues will render this extension null and void.'

Diamond Ice Co. was not among the signers of the extension agreements. It is also to be noted that Sunset Copper Company, the obligor upon the bonds, did not sign any of those instruments.

No payment of either principal or interest on the bonds was made either during, or after, the period covered by the above-mentioned extension agreements.

On April 29, 1936, Sunset Copper Company, through its president, made another request for extension of payment, for a period ending May 1, 1937. In response to that request, each of the holders of the outstanding bonds, with the exception of Diamond Ice Co., signed an agreement in which, after certain recitals, appeared the following provisions: 'In consideration of the sum of One Dollar and other valuable consideration in hand paid, the receipt whereof is hereby acknowledged, the undersigned [bondholder] hereby extends the time of the payment of said bonds, both as to principal and as to interest now accrued and to accrue, for a period ending May 1, 1937. This extension is given for the purpose of enabling the company to finance itself and protect its properties.'

All of those agreements, except two, were dated either April or May, 1936; one was dated June 1, 1936; and one was undated, except for the year 1936. It is again to be noted that Sunset Copper Company did not sign any of those instruments.

The bonds were not paid on the extended maturity date, nor at any other time.

On June 19, 1938, respondents, former employees of Sunset Copper Company, obtained a judgment and decree in another action, previously brought by them in the superior court of Snohomish county, foreclosing their labor liens on Sunset Copper Company's real estate and mining claims, together with the improvements and machinery thereon, all of which property was covered by the trust deed and mortgage involved in the instant case. After the decree in the suit brought by the labor lien claimants had been entered, but Before a sale in pursuance thereof was made, appellant instituted the present action, on August 18, 1938, naming as defendants Sunset Copper Company, respondent labor lien claimants, and certain other parties who have not appeared upon this appeal.

The principal question to be determined here is whether or not appellant's action is barred by the statute of limitations. According to the provisions of Rem.Rev.Stat. §§ 155, 157, an action upon a contract in writing can be commenced only within six years after the cause of action has accrued. Respondents' contention is that appellant's action is barred because it was not brought within six years after April 1, 1931, the original maturity date of the bonds. It will be recalled that the action was not begun until August 18, 1938. Appellant, on the other hand, contends that the extension agreements, made in 1931 and 1936, respectively, were valid contracts, the legal effect of which was to fix new maturity dates of the bonds, from which latter dates, it is claimed, the statutory period is to be computed.

With respect to the 1931 extension agreements, respondents, in turn, contend, first, that, since Sunset Copper Company failed to pay interest as required by those agreements, the extension became 'null and void' by the very terms of the instruments, and therefore had no operative effect upon the original maturity date of the bonds. We will assume, arguendo, that respondents' contention in that respect is correct, and we therefore eliminate the 1931 extension from further consideration.

With respect to the 1936 extension agreements, respondents contend that they are invalid because of the requirements of Rem.Rev.Stat. § 176, which statute will be referred to again and discussed later in this opinion.

As stated above, the extension agreements executed in 1936 were at the request of Sunset Copper Company, the obligor upon the bonds. In granting the extension, the bondholders, each of whom signed one of the agreements, expressly agreed to extend the time of payment, and thereby obligated himself not to sue upon the bonds prior to the expiration of the extension period. By requesting and accepting the extension, Sunset Copper Company, in turn, not only waived the right to pay the obligation at once, and thus terminate further accrual of interest, but also impliedly agreed to pay the interest on the bonds, at the rate therein stated, during the period of the extension, and to pay the principal on the new maturity date. That such mutual agreements, even though partly implied, constitute a valid, binding contract between the parties has been definitely settled in this state.

In the case of Nelson v. Flagg, 18 Wash. 39, 50 P. 571, the makers and the holder of a promissory note dated November 21, 1893, entered into an arrangement whereby an extension of time of payment of the note for a period of one year was granted. The contract of extension was evidenced by a memorandum endorsed on the back of the note as follows: 'November 21, 1894. Extended one year from date at the request of makers, A. E. Flagg and Lola J. Flagg. (Signed) Ole Nelson.'

The makers did not sign the extension memorandum. In holding the contract valid and binding, this court said: '* * * we think that there are all the elements of a valid contract to be gathered from the indorsement under consideration. The effect of the indorsement in this case, in the light of the finding that it was at the maker's request and with his consent, was to postpone the time of payment for one year. The consideration flowing to the holder was the implied promise of the maker to pay interest during the full period of the extension, at the rate expressed in the instrument; and the promise of the holder to forbear suit for a definite period constituted a good consideration for the agreement upon the part of the maker to pay interest for such full period. Here are all the elements of a valid...