The Seattle post-intelligencer. [volume] (Seattle, Wash. Terr. [Wash.]) 1888-1914, 1895-08-16
THE MORTGAGE GOOD
Judge Hanford Decides in Fa.
yor of Whatcom Bank.
A PREFERRED CLAIM ALLOWED,
Readnsan Rues His Bargain with the
Patent Meter Man Inventory or
81. v. Stewards Estate.

In the United States court creditors
may be preferred, according 10 an epsn-
ioE handed down oy Judge Hanfore yes
tsTday. The case WAS that OF Elizabeth
Piankingfon, Frederick Abbott and Ed
ward K West vs.. the Underwood AZ Min
tnrn Company and the Belilnghan Bzy
National Bank of New whafcoya. .nvolv-
ing some Sl5.9oo on promissory notes and
mortgage
As grounds for his conclusion, the court
finds that the first mortgage executed by
the defendant corporation 20 the bank
was executed by the officers OF the bank
for a debt long past due at time when
the Underwood Il Minturn Company was
actively engaged In trading, and zItheugh
IL was insoigent, there was no intention Of
winding II UP. Its Strengthened fgaancsal
condition was caused by general stagna-
ton OF business. which its officers sun
posed would not continue A mortgage
given under such conditions to secure an
actual debt. although resulting In . r,rA
ference 10 one creditor 20 the detriment
OF others, the court holds n not Invalid
In Washington there Is no statute or To-
cal law controlling the decision Of .be
court az 10 the validity OF mortgages
EVEN hy an iasoiTent or prohibiting pre-
ferenees. The court adds:
This case must be decided aerorSfa--
10 the principles Of the common law and
general rules OF equity, and the eour, q
bound TO follow the decisions OF the ST.
pTeme court Of the United States The
rule which find TO be IN accordance WITH
the supreme court decisions In that As
long as corporation is a going concern
and It's managing officers have no inten-
ION OF ABANDONING the business. or the
object for which IL was created. a. has
the same control and dominion over its
property, including the Jus dlsponendi and
right OF preferriBE certain creditors In
paying debts or giving security therefor
that a natural person has over propertv
which he owns. The trust fund theory an
piies only after the assets OF an insolvent
corporation have passed into the handz
or court or some other authorized agent
OF the government. for the purpose of
settling ITS estate: or while the property
remains under the control OF its manag-
ing officers. after the corporation has In
fact abandoned pursuit OF the business
for which IL Was created
a second mortgage. given By the Under
wood a. Ainiufn Company. Judge Han
ford fipds was not demanded by the mort
sagees. but was given voluntarily as Sc
curity Tor promissory notes executed by
Its trustees, for that payment OF which
they were primarily responsible. lie
therefore declares IL 10 be void and an
nounces the rule as follows:
An insolvent corporation cannot law.
fully dispose OF It's property I'm payment OF
debts OF It's managing officers, TO the de-
triment OF Its own credItorE''
The court orders that "A decree be en-
tered In favor OF complainanss, establish
ing their claims 10 "A first lien for the
balance OF the principal remaining un-
paid on the first mortgage given TO the
bank. II any sum remains after payment
OF this claim In full and costs, III will be
distributed pro rata among the inter
venors The other parties are the Dun
ham. Corrigsn a Hayden Company. the
George ", Gibbs Company. the Phoenix
White Lead and Color Works Farweil
Oman, Kirk & Company, Whittier. Full
Ter s Company. and +. v. Dwyer a.
Bros. The case has been pending for sew
eral years.