Wool Growers Service Corp. v. Ragan

• Decision Date: 30 July 1943
• Docket Number: 28125.
• Parties: WOOL GROWERS SERVICE CORPORATION et al. v. RAGAN et al. (OLSON, Intervener).
• Court: Washington Supreme Court

140 P.2d 512

18 Wn.2d 655

WOOL GROWERS SERVICE CORPORATION et al. v. RAGAN et al. (OLSON, Intervener).

No. 28125.

Supreme Court of Washington, En Banc.

July 30, 1943

Rehearing Denied Oct. 6, 1943.

See 141 P.2d 875.

Action to foreclose three mortgages by Wool Growers Service Corporation against Simcoe Sheep Company and Polonio Allarbe and others, wherein Simcoe Sheep Company and Polonio Allarbe filed a cross-complaint against Ellis Ragan and Alex Dunnett copartners doing business as Ragan & Dunnett, and others, and wherein Harry L. Olson, as receiver of the Simcoe Sheep Company intervened. From an adverse judgment, Simcoe Sheep Company and Polonio Allarbe appeal.

Reversed in part and cause remanded with directions.

SIMPSON C.J., and MILLARD, J., dissenting; BLAKE, J., dissenting in part.

Appeal from Superior Court, Yakima County; Arthur McGuire, judge.

Hubbert & Mullins, of Yakima, for appellants.

Bonsted & Nichoson, F. C. Palmer, Jr., Richards, Conklin & Delle, and Cheney & Hutcheson, all of Yakima, and Dana E. Brinck and J Webster Hancox, both of Spokane, for respondents.

ROBINSON Justice.

This action was on trial for approximately two months. The clerk's transcript is 477 pages in length. The appellants' abstract of record alone runs to 1,457 pages; the respondents' supplemental abstract to 98; and there are more than 400 numbered exhibits, of which some are voluminous books of account, and others, thick bundles of checks and papers. An opinion containing an adequate discussion of the evidence would preempt the greater portion of an entire volume of our reports. Under the circumstances, only an outline of the case can be given, leading to conclusions which may, in some instances, appear quite abrupt and without sufficient evidentiary support.

The principal characters involved are as follows: Wool Growers Service Corporation, engaged at Yakima in the business of lending money to sheep operators; J. F. Sears and Dale Simmons, its president and secretary; Ragan and Dunnett, copartners, large sheep operators in the Yakima district; Polonio Allarbe, an uneducated Spaniard, unable to read English or write it, except to sign his name; Simcoe Sheep Company, a corporation, organized by Ellis Ragan, Allarbe, and Severiano Galanena, another uneducated Spaniard, who could neither read nor write English; and Federal Intermediate Credit Bank, a corporation organized under the Agricultural Credit Act of 1923, 12 U.S.C.A. § 1151 et seq., with an office at Spokane, which had for many years extended credit to Wool Growers on notes and mortgages assigned to it representing loans made by Wool Growers to its customers.

The action, as finally pleaded, was brought to foreclose three mortgages held by Wool Growers on all of the sheep and equipment of Simcoe. Allarbe and Simcoe filed a cross-complaint against Ragan & Dunnett and Wool Growers, Simmons, and Federal Intermediate Credit Bank, alleging that these cross-defendants entered into a conspiracy to cheat and defraud them of large sums of money, praying an accounting and judgment for $37,000. Cross-defendants filed an answer denying the charges of fraud and setting up as affirmative defenses a settlement agreement signed by Allarbe and Simcoe.

At the conclusion of the evidence offered by cross-complainants, the trial court sustained a challenge to the sufficiency of the evidence to present a case against Federal Intermediate Credit Bank. At the conclusion of all of the evidence, the court announced its decision that the evidence did not establish fraud in the procurement of the settlement agreement, and thereafter judgment was entered in favor of Wool Growers against Simcoe for various amounts, totaling a sum in excess of $21,000 and decreeing foreclosure of the mortgages. Pending the suit, and sheep were sold by a receiver under order of court, and net proceeds, $4,125.46, were applied on the judgment, leaving a balance owing by Simcoe of $17,153.21.

September 18, 1930, Ragan & Dunnett, Allarbe, and Galanena entered into some kind of an understanding or oral agreement to engage in the sheep business by purchasing Oregon lambs, and possibly the Kays' outfit hereinafter referred to, Ragan & Dunnett to have a one-third interest, Galanena, a one-third interest, and Allarbe, a one-third interest in the business. The circumstances surrounding the making of this agreement were as follows:

In the summer of 1930, Ragan & Dunnett owed Wool Growers $65,000 on a note and mortgage which Wool Growers had indorsed and transferred to the Federal Intermediate Credit Bank. They owed the First National Bank of Yakima $65,000. They had entered into contracts with a firm in Oregon for the purchase of seven thousand lambs. They owed other obligations, and were without funds to pay them.

Kays, owners of a band of sheep, owed Wool Growers approximately $32,000 on a note and mortgage indorsed and transferred to Federal Intermediate Credit Bank. It appears that they owed Wool Growers a further amount on a note and mortgage which had not been transferred to the bank. They owed the government $20,000 in back range fees, of which Wool Growers had guaranteed payment of a part. The Kays loan was in a very unsatisfactory state.

Olney, owner of a band of sheep, owed Wool Growers approximately $12,000 on a note and mortgage indorsed and transferred to Federal Intermediate Credit Bank. He owed the government $5,300 in back range fees. Ragan and wife were sureties on Olney's bond for payment of the range fees. This loan was in a very unsatisfactory condition, and Federal Intermediate Credit Bank had notified Wool Growers that it would not be renewed in the fall.

Allarbe had approximately $47,000 in cash, which he had obtained in a settlement with a former partner, Sanchez. Ragan knew that Allarbe had this amount, having been called in by Freece, Allarbe's attorney, to advise Allarbe whether or not he should accept the settlement.

Sears, president of Wool Growers, told Ragan that the Kays sheep would be for sale. Ragan imparted this information to Galanena and sent him to see Allarbe, who was herding sheep for Coffin Bros., south of Wapato. Later, Ragan and Galanena went to Wapato and proposed to Allarbe that the three of them purchase the Kays outfit.

The sheep business was not in a prosperous condition. We quote from a letter received by Sears, president of Wool Growers, from Buel, of Evans, Snider, Buel Commission Company of Chicago, dated August 27, 1930, reporting on the sale of a shipment of Kays lambs: 'Mr. Sears, with these heavy supplies and a limited demand, prices for lambs are very discouraging to the owner and at this time it hardly looks like the wool and lambs that the sheep man sells will pay running expenses this year. All the middle states have lots of sheep and while last year they were increasing their holdings today they are decreasing them and the low prices do not stop their shipping too many to market. Poor crops and tight money markets are going to cause these feeding lambs to sell very low the latter part of September and October and it does not look advisable to hold lambs back that are expected to come to market this fall.'

On September 18, 1930, Ragan learned that Allarbe was in Yakima and telephoned Rodrick, a Spanish friend of Allarbe's, and had him bring Allarbe and Galanena to his house. Here, at Ragan's house, Allarbe larbe agreed to put up $15,000 for the purchase of Oregon lambs.

On the same day, September 18, 1930, Ragan, Galanena, and Allarbe went to the First National Bank of Yakima where Allarbe kept his money, and Allarbe signed a check for $15,000, prepared by an officer of the bank, payable to Ragan & Dunnett, which Ragan immediately deposited in the bank account of Ragan & Dunnett. The balance in Ragan & Dunnett's bank account immediately after the deposit of this check was $16,028.12. On September 22, 1930, it was $2,736.44. Ragan used the money given him to purchase Oregon lambs and to pay obligations owing by Ragan & Dunnett.

On the same day, Ragan, Galanena, and Allarbe went to White Swan to look at some Oregon lambs which had been delivered at that point for Ragan & Dunnett, but which had not been paid for. A few days later, Ragan, Galanena, and Allarbe went to Oregon to take delivery of more Oregon lambs. Ragan testified that this trip to Oregon was made September 27, 1930, and produced a little black book in which he had made memoranda of the date, number, weight, and price of the lambs, which price, according to these memoranda, was five, six, and seven cents per pound.

Sometime later, Ragan, Galanena, and Allarbe drove to the mountains to look at the Kays sheep. Ragan remained in his car beside a river at the foot of the mountain while the two Spaniards went up the trail in search of the sheep. When they returned, according to Ragan's testimony, they were well pleased with the sheep and agreed to their purchase. Ragan never saw the sheep until they were delivered to him for the joint enterprise sometime later in October.

On October 13, 1930, Allarbe gave Ragan a check for $22,900, which Ragan immediately deposited in the bank account of Ragan & Dunnett. The balance in Ragan & Dunnett's bank account, immediately prior to the deposit of this check, was $44.10. On November 10, 1930, it was $16.37. Ragan used all of this money given him to purchase sheep, except $5,000 which he gave to Wool Growers, as hereinafter stated, to pay obligations owing by Ragan & Dunnett.

On October 14, 1930, Ragan, Galanena, and Allarbe met Sears president of Wool Growers, at Wool Growers' office, and Sears prepared a letter addressed to them in which he agreed to sell them the Kays sheep, consisting of about 3,500 ewes, at a price of $11.50 a head,...