Whiting v. Rubinstein

• Citation: 7 Wn.2d 204,109 P.2d 312
• Decision Date: 20 January 1941
• Docket Number: 28145.
• Parties: WHITING v. RUBINSTEIN et al.
• Court: United States State Supreme Court of Washington

109 P.2d 312

7 Wn.2d 204

WHITING v. RUBINSTEIN et al.

No. 28145.

Supreme Court of Washington

January 20, 1941

Department 2.

Action by E. P. Whiting, as receiver of Suryan's Incorporated against Carl Rubinstein and another, copartners, doing business under the firm name of Rubinstein & Caraco, to recover the value of canned salmon allegedly received by defendants as preferred creditors. From a judgment of dismissal, plaintiff appeals.

Affirmed.

Appeal from Superior Court, King County; Howard M. Findley, judge.

C. E H. Maloy and Julian O. Matthews, both of Seattle, for appellant.

Skeel McKelvy, Henke, Evenson & Uhlmann, of Seattle, for respondents.

SIMPSON Justice.

The receiver of Suryan's Inc., a corporation, brought this action to recover the value of canned salmon alleged to have been received by defendants as preferred creditors of Suryan's, Inc., an insolvent corporation.

The complaint contained allegations to the effect that Suryan's was a corporation; that it had been insolvent since the beginning of the year 1938; and that plaintiff was the receiver of the insolvent corporation.

It was further alleged that: 'Prior to July 31, 1938, Suryan's Inc., a corporation, was indebted to the defendants, Carl Rubinstein and Eliezer Caraco, copartners doing business under the firm name of Rubinstein & Caraco, and Seattle-First National Bank, in the sum of approximately $125,000.00 on account of loans made by said defendants to Suryan's Inc. Said indebtedness arose by reason of loans and advance made by Rubinstein & Caraco and Seattle-First National Bank to Suryan's Inc., a corporation, and said defendants had no security therefor. During the summer of 1938 Suryan's Inc., a corporation, was engaged in the business of catching and packing salmon in the Territory of Alaska and shipping said salmon to the City of Seattle for storage and warehousing. Between July 31, 1938 and September 15, 1938, Suryan's Inc., a corporation, by and through the defendant, R. D. Suryan, as its president and director, and its Board of Directors, and with the active participation of said defendant, R. D. Suryan, transferred and delivered to said defendants, Carl Rubinstein and Eliezer Caraco, copartners doing business under the firm name of Rubinstein & Caraco, and Seattle-First National Bank, approximately 27,574 cases of canned salmon as security for the payment of said pre-existing debt due by Suryan's Inc. to said defendants, which salmon was of the value of approximately $130,964.60. Said defendants held said canned salmon in pledge and as security for such pre-existing indebtedness until between September 9, 1938, and March 31, 1939, they sold said salmon and from the proceeds of said sales applied and credited the sum of $106,273.65 upon the notes held by them of Suryan's Inc., a corporation.'

In their amended answer defendants denied generally the allegations of the complaint and set up three affirmative defenses.

The first affirmative defense alleged the execution and delivery of a financing agreement, dated March 5, 1938, entered into between Suryan's Inc., and defendants Rubinstein & Caraco, by the terms of which defendants agreed to assist Suryan's in was alleged that by the terms of the contract the 1938 pack of salmon was pledged the 1938 pack of salmon was pledged and assigned to respondents as of March 5, 1938, for the purpose of insuring repayment of all advances made to Suryan's. It was then alleged that the parties agreed that the creation of the 1938 pack would be made possible only by reason of the financial assistance to be provided by defendants, and that the delivery of the salmon when packed was made to defendants pursuant to the agreement.

The second affirmative defense was that advances made by defendants pursuant to the terms of the contract for supplies, materials and credits, wages, freight and other items, exceeded the value of the canned salmon, and that defendants had a right to offset against the sum sought to be recovered by the receiver all sums paid after the receipt of the salmon.

The third affirmative defense was that, even disregarding the agreement of March 5, 1938, the defendants had received the pack more than four months prior to the appointment of the receiver without knowledge of insolvency and that the receiver was not entitled to have the transfer set aside as a preference.

The reply put in issue the allegations contained in the answer.

Trial was had to the court, which entered a judgment of dismissal. Plaintiff has appealed.

The assignments of error are that the court erred in dismissing appellant's action, in denying appellant's motion for a new trial, and in entering a decree in favor of respondent Rubinstein & Caraco.

The facts involved in the appeal now Before us are in brief as follows: Suryan's Inc. was engaged in the business of fishing for and canning salmon in Alaskan waters. Respondents were partners whose business was that of salmon packers and brokers. In the early part of 1938 the officers of Suryan's, having found that they did not have sufficient funds to care for their fishing and canning operations for the season of 1938, appealed to respondents for financial assistance. As the result of several conferences respondents decided to underwrite the 1938 fishing and canning operations of Suryan's Inc., and entered into a contract to that effect.

The contract was dated March 5, 1938, and contained, among others, the following provisions: Paragraph one appointed respondents as agents of Suryan's for the purpose of handling and selling the 1938 pack. Respondents were authorized to use their own judgment in making sales. Paragraph two provided allowances for swells, cash discount, labelling, brokerage, etc., to which respondents were entitled. By the terms of paragraph three Suryan's agreed to carry on their operations to the best of their ability and gave the right to respondents to take over all the property and equipment and continue the operations under certain circumstances and conditions.

It was also agreed: 'All salmon and other products are to be shipped by First Party to Second Parties on straight bills of lading in the name and to the order of Second Parties at Seattle, Washington, who shall have and be entitled to full possession and control thereof. * * * In connection with making the advances against the pack as hereinafter provided, it is understood that Parties of the Second Part contemplate using the bills of lading, warehouse receipts and other evidences of title as collateral to procure the funds from the banks and others. It is understood that they have full right to do so and also to make all necessary deliveries of warehouse receipts and bills of lading in connection with making sales of the product.'

The fourth paragraph provided for commissions to be paid respondents.

Paragraph five provided: '* * * sell the merchandise on hand to reimburse them for the amount then owing them, and in the event of any termination of this contract, Second Parties shall have the immediate right to possession of all of the consigned cans and the contents thereof, together with all other materials, supplies and merchandise furnished.'

Paragraph six provided: 'It is understood that the Parties of the Second Part are to make said advances of funds and furnish supplies in order to assist the Party of the First Part in its 1938 operation, the nature of which is now herein more fully defined. It is understood that First Party is obligated to purchase and recondition a scow or barge with living quarters and storage space thereon; to recondition the boat 'Commander'; to place its equipment and fishing appliances in proper shape and condition for efficient use; to obtain ample insurance upon its properties and pack; to have available money with which to procure supplies and equipment, and said parties warrant that this will require an advance by Second Parties of approximately $30,000.00, and they agree to make such advance up to the sum of $30,000.00 on orders of First Party. This $30,000.00 shall be advanced for purchases, insurance, labor all kinds of preparatory supplies, and operating expenses as needed, provided that the items shall be specified and the amounts paid only upon invoices carrying out the purpose of this contract, approved by Parties of the Second Part. * * * Second parties further agree to furnish or advance sufficient money to purchase cans and fibre boxes as needed by first party. As the pack is produced the same shall be promptly shipped and consigned to Parties of the Second Part at Seattle, Washington upon order bill of lading, and upon arrival and passing inspection, or sooner at their option, Second Parties agree to make further advances up to 65% of the then net market value of the salmon so actually consigned to and received by Parties of the Second Part. Any advances beyond the above percentage shall be optional with the Second Parties. This 65% advance shall be above and addition to the mortgage loan of $30,000.00. Said advances within the above percentage include the cost of cans and containers. So far as cans and other packing material and supplies are concerned, these shall be considered a consignment of raw material for the purpose of manufacture and title is reserved in Second Parties until the completed product, consisting of canned salmon, shall be sold and the Second Parties paid. Title to the contents shall follow the cans until such time as the contents shall be sold. The advances above mentioned shall include all freight, shipping expenses, insurance charges and other incidental expenses which Second Parties may pay for the account of First Party. * * * Whenever any salmon is sold all proceeds shall be used to pay...