128 Wash. 192 | Wash. | 1924
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, Washington, 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 and John W. Maloney concerning the management of the affairs of the timber company and the ownership of its one thousand 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 two hundred and seventy-seven shares, Carstens & Earles twenty-seven shares, Maloney two hundred shares, and Ben R. Kunze four hundred and seventy-six shares.
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 represented 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
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 should be noticed. Upon the death of George W. Kunze, Maloney, who formerly worked for the timber company, but who had not done so for some considerable time, went back to its place of business and with Ben ft. Kunze took charge of all its affairs. From that time on there was open hostility between them on one side against the other stockholders. Choosing themselves as sole trustees and as president and secretary at the meeting on March 10 they well knew was not recognized by other stockholders, because of the claim that a majority of the stock was not represented at that meeting. However, it must be taken that they thereby became, and that they knew they were, officers de facto of the timber company. It was they who as such officers had the power under the law to decide, and who did decide,
Very shortly after the admission of indebtedness, Ben R. Kunze and John W. Maloney commenced negotiations through a representative to purchase the claim against the corporation whose affairs they alone were handling. Those negotiations continued until the latter part of April, when the' claim was purchased by the same representative for only $25,000, the money being furnished by Ben R. Kunze and John W. Ma-loney, other than a small amount by another person. In taking the assignment of the claim, the name of their then attorney was used as assignee, and he in turn executed and delivered a reassignment in blank and delivered it, together with the bonds, to the representative of Ben R. Kunze and John W. Maloney, who in turn, some weeks thereafter, filled in the name of George M. Mitchell as assignee and delivered it with the bonds for suit about the time suit was commenced by O. E. Thompson, trustee.
Still other important facts must be noticed. The trial court found that the assets of the timber company, as shown by its books, exceeded its liabilities (not including its capital stock) and that the book value of its stock was over par; that there was not sufficient money on hand to meet its first mortgage bonds nor to purchase the Sloan Corporation claim, and “that no attempt was made bv Ben Kunze and John Maloney, its de facto managing agents and officers, to raise money with which to take care of said indebtedness of said company.” In this respect the evidence shows that, at the date of the death of George W. Kunze, and when Ben R. Kunze and John W. Maloney took charge of affairs, there- was on hand manufactured lumber, $49,-496.66; Liberty JBonds and stamps, $9,953.87; bills receivable, $8,400.07; and cash in bank, $1,949.45. There
Much less than that close scrutiny suggested and enjoined by all authority will detect in the line of conduct of these two trustees and officers a purpose and plan to proceed contrary to the settled rule that trustees and officers of a corporation are bound to the exercise of the utmost good faith, to the end of conserving its property and furthering its interest. To the extent it was necessary, they kept under cover to avoid the exposure that would be necessary in appearing as plaintiffs in a suit against a corporation that only they were the trustees of, in the collection of a claim that they, as such trustees, had adjusted against the corporation in the matter of a disputed account. Such conduct is wholly at variance with the principles of equity and was manifestly designed to create a large personal profit, to the injury of the corporation they alone were qualified to represent.
At the sale of the claim it became necessary, in order to procure the bonds from the depositary, to have the consent of all the stockholders of the timber company that the bonds be delivered, and because Anna L. Kunze, by her attorney, and Carstóns & Earles gave their consent it is now claimed that they must be held to have ratified the sale. Ratification is a matter of intention. It involves a knowledge of the facts to which it relates, and there is no proof in the record that those now charged with ratification knew to whom the sale was being made. It was specifically stated at that time by those who did know that the purchase was not being made for the timber company, but for “undisclosed principals.” It is quite true, as stated
In our opinion, the trial court quite properly refused a recovery for any amount in excess of $25,000 and interest. Nor are we disposed to disturb the allowance of $1,000 attorney’s fees, on appellant’s contention that it is insufficient.
On the cross-appeal of Anna L. Kunze, the first point made is a motion to dismiss the appeal of George M. Mitchell on the ground that his notice of appeal was not served on the First National Bank of Stanwood. "We have already considered that appeal on its merits because the present motion to dismiss it should be denied. As already stated, the bank received a favorable judgment with reference to a small portion of property, and it appears that the appeal of George M. Mitchell does not include that portion of the judgment, and therefore the bank has no interest whatever in that appeal. Sipes v. Puget Sound Electric R. Co., 50 Wash. 585, 97 Pac. 723.
■It is assigned as error that the court erred in appointing a receiver and in subsequently enlarging his powers to that of a general receiver. This assignment cannot be considered on the merits because the orders were not appealed from within the time provided by statute.
It is assigned that error was committed in refusing to consolidate the cases of Brokaw v. Anna L. Kunze et al., and Bank of Stanwood v. Anna L. Kunze et ah, pending before the same court, with the present case for trial, as those cases involved a portion of the bonds mentioned in the complaint herein of O. E. Thompson, trustee. The matter of consolidation of cases for trial is in the discretion of the court, while the controversy over a portion of the bonds has been decided adversely to the contention of the cross-appellant, Brokaw v. Kunze, 127 Wash. 593, 221 Pac. 590.
The challenge to the good faith of Thompson, trustee, in claiming a default on the bonds involved in this suit was properly denied by the trial court. The trustee had a duty to perform in behalf of the interests of the creditors. His course was directed by the terms of the bonds, together with the failure of the timber company to meet those terms.
It is assigned that there was error in the allowance of attorney’s fees in favor of O. E. Thompson, trustee, and George M. Mitchell. The mortgages involved in the complaints of those parties specifically provide for reasonable attorney’s fees in case of suit and the amounts allowed appear to he reasonable. The same attorneys appearing for both parties, there being no conflict in their respective interests, the one holding first and the other second mortgage bonds, was evidently taken into consideration by the trial court in fixing the amount of attorney’s fees to he allowed in each case.
The judgment appealed from is in all respects affirmed.