Thompson v. Mitchell

• Citation: 222 P. 617,128 Wash. 192
• Decision Date: 24 January 1924
• Docket Number: 18203.
• Court: United States State Supreme Court of Washington
• Parties: THOMPSON v. MITCHELL et al.

222 P. 617

128 Wash. 192

THOMPSON v. MITCHELL et al.

No. 18203.

Supreme Court of Washington

January 24, 1924

Department 2.

Appeal from Superior Court, Snohomish County; Alston, Judge.

Action by O. E. Thompson, trustee, against the Wisconsin Timber Company, Harry Lansdown as receiver, and others. Judgment for plaintiff and for defendant George M. Mitchell in an amount less than prayed for in his cross-complaint, and he appeals and defendant Anna L. Kunze, administratrix of the estate of George W. Kunze, deceased, and others bring a cross-appeal. Affirmed.

Clay Allen, of Seattle, and Cooley, Horan &amp Mulvihill, of Everett, for appellants.

W. P Bell and williams & Davis, all of Everett, for respondents.

MITCHELL, J.

At the time of the commencement of this action the Wisconsin Timber Company, a corporation (hereinafter called the Timber Company), owning a sawmill at Stanwood, Wash., had outstanding first mortgage bonds in the sum of $34,000. In the year 1917, subsequent to the issue of the first mortgage bonds, the Timber Company entered into an agreement with the Sloan Shipyards Corporation (hereinafter called the Sloan Corporation) by which the Sloan Corporation would advance $100,000 to the Timber Company for a given length of time to be secured by a bond issue and a mortgage on its property $100,000 of which bonds should be placed with a bank in Seattle to protect the loan. It was further agreed that the Timber Company should furnish lumber to the Sloan Corporation. The mortgage was given, the bonds issued and delivered to the depositary, and $100,000 was advanced to the Timber Company which thereafter made payments by the delivery of manufactured lumber. During this time George W. Kunze was a stockholder, and the president and active manager of the affairs of the Timber Company. He died on December 28, 1921, and his widow, Mrs. Anna L. Kunze, was appointed and qualified as the administratrix of his estate. Dissensions arose at once between her, Carstens & Earles, Ben R. Kunze, ane John W. Maloney concerning the management of the affairs of the Timber Company and the ownership of its 1,000 shares of capital stock. Mrs. Kunze and Carstens & Earles Claimed that the estate of George W. Kunze, Carstens & Earles and Ben R. Kunze each owned one-third of the stock, while Ben R. Kunze and John W. Maloney claimed that Mrs. Kunze owned 277 shares, Carstens & Earles 27 shares, Maloney 200 shares, and Ben. R. Kunze 476 shares. At the annual stockholders' meeting, March 10, 1922, Ben R. Kunze and John W. Maloney, voting the stock they claimed to own, elected themselves trustees and elected Ben R. Kunze president and John W. Maloney secretary of the Timber Company. This meeting was not attended by Mrs. Kunze or Carstens & Earles, who at all times have refused to recognize the legality of the meeting or the election of officers. Ben R. Kunze and John W. Maloney thereafter continued in possession and control of the property and affairs of the Timber Company. In the meantime the Emergency Fleet Corporation took over the affairs and property of the Sloan Corporation and it became necessary that the Sloan Corporation and the Timber Company adjust the account between them, over which there was considerable dispute. For that purpose a conference was held in Seattle, about February 15, 1922, of which it appears that Mrs. Anna L. Kunze had no notice, there being present Ben R. Kunze and John W. Maloney with the attorneys for the Timber Company, and the president and attorney of Carstens & Earles; no one representing the Sloan Corporation. It was agreed at the conference that the indebtedness due to the Sloan Corporation by the Timber Company was $68,000, which upon report to the Sloan Corporation was accepted by it through its attorney. It appears that the adjustment of the account was desirable in the settlement of affairs between the Sloan Corporation and the Emergency Fleet Corporation. The latter part of April, 1922, the $68,000 claim against the Timber Company was sold, and $100,000 of the second mortgage bonds obtained at that time from the bank were delivered to the person to whom the claim was assigned. That claim and those bonds are represented by George M. Mitchell, a party to this action.

After the sale of the claim of $68,000, O. E. Thompson as trustee commenced this suit to recover on $34,000 first mortgage bonds then due and payable and to foreclose the mortgage given to secure them. George M. Mitchell was made a defendant upon the allegation that he claimed some inferior right to or lien on the property. George M. Mitchell appeared and by answer admitted the superiority of the lien held by the plaintiff and made a cross-complaint against the Timber Company, setting up the claim of $68,000 assigned to him and the delivery to him of $100,000 of the second mortgage bonds, and asking judgment in the amount of his claim and for the foreclosure of the second mortgage in satisfaction of his judgment. Anna L. Kunze, as administratrix and in her own right and also as representing the Timber Company, intervened, asserting that $17,000 of the first mortgage bonds belonged to her individually, and she further alleged in substance that the suits by thompson and Mitchell were by reason of a fraudulent combination on their part and others to secure the property of the Timber Company. The affirmative matter of these answers was denied.

Before the trial a receiver was appointed, and later there appearing to be some question as to his powers an order was entered making the receiver a general one. The receiver thereafter appeared by pleading in the action, the effect of which is unimportant in our view of the case at this time. The trial resulted in findings and judgment giving O. E. Thompson as trustee judgment and first lien on the property in the amount pepresented by the $34,000 first mortgage bonds, and in favor of George M. Mitchell in the sum of only $25,000 and a second lien on the property, with an attorney's fee of $1,000. George M. Mitchell has appealed, and so has Mrs. Anna L. Kunze in the several capacities in which she appeared in the action.

The First National Bank of Stanwood was made a party defendant by the original complaint. The bank appeared and asserted a mortgage on a small amount of property of the Timber Company which was ordered foreclosed free from any lien on behalf of Thompson or Mitchell, neither of whom raises any question with reference thereto on this appeal.

Concerning the appeal of George M. Mitchell it should be stated that he appears only in a nominal way, that is as assignee for collection of the $68,000 claim, Ben Kunze and others being the beneficial parties therein. On his behalf it is contended that the judgment in his favor should have been for the full amount of the claim. The view of the trial court was that Ben Kunze and John Maloney bought the claim under circumstances that prohibited any recovery against the Timber Company in excess of the amount they paid. Some further facts...