Dooley Co. v. Seattle Elec. Supply Co. , 140 Wash. 227 ( 1926 )

This is a controversy between claimants to the assets of the Seattle Electrical Supply Company, a corporation, for which a receiver had been appointed. The appellant, W.E. Dooley Company, a corporation, seeks priority for itself and other claimants over the claim of M.V. Underwood which had been assigned to Ella Underwood. This latter claim will be referred to as though M.V. Underwood was the claimant and respondent. The trial in the superior court resulted in an order fixing all the claims as general and denied the priority contended for. It is from this order that W.E. Dooley Company appeal.

[1] It is first contended that the evidence fails to establish the claim of the respondent. The appellant introduced no evidence in resistance thereof, and the testimony in its support was given by the respondent. The trial court found that the claim was just and valid against the receiver and was for money loaned to the Seattle Electrical Supply Company. With this finding we are in accord, after an examination of the evidence. The respondent testified directly that he advanced the money in the amount claimed, and the record furnishes no reason for disbelieving him.

[2] The next contention is that the respondent should be estopped from asserting his claim because, as president and manager of the company, he had made a statement, when borrowing money from the bank, which covered not only the financial affairs of the corporation but his own financial status as well. The dual statement was required by the bank because the respondent was to endorse the note evidencing the loan. A similar statement was given to Dun Company, to be furnished to a creditor in a distant state who is not involved in this proceeding. A copy of one of these statements came into the possession of the appellant through the Northwest Credit Association. The respondent made no statement of the corporation's financial condition to the appellant at the time the indebtedness upon which the claim is based was created. The fact that the appellant got possession of a copy of the statement from an outside source is not sufficient to work an estoppel against the respondent. The statement was not made for the purpose of influencing the respondent in extending the credit. This case differs from that of Schweitzer v.Equitable Sav. Loan Assn., 98 Wash. 139, 167 P. 111, in that there the statement of an authorized agent was made directly to the one extending credit and influenced the action.

[3] It is further claimed by the appellant that the respondent should in equity be denied relief because, as directing head of the corporation, he permitted two stockholders to surrender their stock and delivered to them their notes. The respondent testified that he did this because both of the stockholders wanted to leave the corporation and that, if judgments had been obtained upon the notes, neither of them would have been collectible. He thought it was better for the corporation to receive back the stock and deliver up the notes. In the case of Barto v. Nix, 15 Wash. 563, 46 P. 1033, it was held that a corporation had authority to receive from a stockholder his certificate of stock in payment of his indebtedness to it when such transaction was bona fide and for the purpose of protecting the corporation from loss. In the case now before us, the appellant, in accepting the surrender of the stock and delivering the notes to the respective makers, was acting within the scope of the holding in that case.

[4] If, however, it should be assumed that the respondent had no right to accept the surrender of the stock and deliver the notes it would not change the result. In that event, the stockholders would still be liable on their notes and the creditors would not be harmed. In Murphy v. Panton, 96 Wash. 637,165 P. 1074, it was held that it was no defense to a receiver's action for an unpaid stock subscription that the stock was cancelled in consideration of money advanced and the endorsement of a note for the corporation.

The judgment will be affirmed.

TOLMAN, C.J., MITCHELL, MACKINTOSH, and PARKER, JJ., concur.