Case Name: Robert Nisbet, Plaintiff, v. Great Northern Clay Company, Defendant, A. L. Brown, as Receiver etc., et al., Respondents, Ohio Ceramic Engineering Company, Appellant
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1905-12-21
Citations: 41 Wash. 107
Docket Number: No. 5722
Parties: Robert Nisbet, Plaintiff, v. Great Northern Clay Company, Defendant, A. L. Brown, as Receiver etc., et al., Respondents, Ohio Ceramic Engineering Company, Appellant.
Judges: 
Reporter: Washington Reports
Volume: 41
Pages: 107–115

Head Matter:
[No. 5722.
Decided December 21, 1905.]
Robert Nisbet, Plaintiff, v. Great Northern Clay Company, Defendant, A. L. Brown, as Receiver etc., et al., Respondents, Ohio Ceramic Engineering Company, Appellant.
Receivers — Sales — Confirmation. The confirmation of a receiver’s sale, consented to by all the creditors excepting one, should not be set aside at the instance of a single creditor, where it is not shown that any higher sum could be realized upon a resale, and the highest sum possible seems to have been obtained.
Same — Receiver’s Certificates — Priority. A creditor is in no position- to contest the priority of receiver’s certificates which recited that they were a first lien on the assets, where his rights were based upon a similar receiver’s certificate reciting that the others were prior liens; nor could he contest the priority of another earlier certificate which by inadvertence was not mentioned in his certificate.
Same — Claims for Labor — Priority. A receiver’s certificate is junior to the claims of laborers for services performed for the receiver, under Laws 1897, ch. 43; especially where it states on its face that it is subject to the expenses of the trust.
Receivers — Sales — Certificates as Part of Purchase Price. A receiver’s sale cannot be attacked on the ground that the purchaser had an understanding with the court that certain receiver’s certificates should be received as part of the purchase price where such certificates were entitled to priority and must first be paid out of the proceeds of the sale.
Receivers — Sales—Notice. It is not necessary to give creditors notice of a receiver’s sale, where the sale is made in good faith and is for the best interests of the trust.
Receiver — Allowance for Pees. An allowance of $2,000 for a receiver and his attorney out of an insolvent estate from which $11,200 was realized held not excessive on the showing made.
Appeal from an order of the superior court for King county, Bell, J., entered January 7, 1905, after a hearing on the merits, denying a petition to vacate a receiver’s sale and order of confirmation.
Affirmed.
Allen, Allen & Stratton, for appellant.
Kerr & McCord, James Kiefer, and M'Cafferty & Kane, for respondents.
Reported in 83 Pac. 15.

Opinion:
Hadley, J.
This appeal is from an order denying a petition to vacate an order confirming a receiver's sale. The original action was brought by Robert Nisbet against the Great Northern Olay Company, a corporation. Insolvency of the corporation was alleged and admitted, and a receiver was appointed. The receiver, by authority of the court, conducted the business of the corporation for some months, with unprofitable results. The first receiver appointed conducted the business for a few weeks, when he was succeeded by J. E. Ballou, who managed the receivership* and affairs of the corporation for some months, when he left the state leaving liabilities of the receivership aggregating a large sum. Ballou was then removed as receiver and A. L. Brown was appointed as his successor. The disastrous results ap pear to have been due to the management of receiver Ballou.
During such management, the property deteriorated in value and was in a dilapidated condition when Ballou left it. The expenditure of some thousands of dollars was necessary by way of repairing and improving the brick plant before it could be successfully operated. The receiver was unable to do this inasmuch as the trust was insolvent. The business could no longer be conducted through the receivership. The property was constantly depreciating in value, and with this condition of affairs confronting him the present receiver Brown entered upon his duties. It was the desire of the court and the receiver to prevent further depreciation in value of the assets and thenceforth the efforts of both were directed to the end that the assets of the trust might be converted into cash for the benefit of creditors as speedily and advantageously as possible.
For a better understanding of the questions involved on this appeal, a further definite and somewhat extended state ment as to certain facts becomes necessary. On October 1, 1903, a receiver's certificate was issued by receiver Ballou to the First National Bank of Seattle, for $3,000, bearing interest at eight per cent per annum, and on the 2d day of November of the same year, another certificate was issued by the same receiver to the same bank for $2,000, bearing the same rate of interest. Upon the face of the first certificate, it was declared to be a first lien upon all the assets and property of the corporation. The second one was declared to. be a lien upon all the assets prior to all other liens and claims except that of the said $3,000 certificate. The said certificates were issued by the authority of the court, and were approved by it. The amount of money represented by the two certificates was loaned by said bank to the receiver.
On the 10th day of November, after the issuance of the last certificate above mentioned, another certificate was likewise issued by the receiver to the Ohio Ceramic Engineering company of Cleveland, Ohio1, for $1,500, bearing interest at six per cent per annum. This certificate stated upon its face that it was a prior lien upon all the assets of the corporation, except the $3,000 certificate above mentioned and the costs and expenses of the trust. The certificate was issued in payment for one hundred dryer cars, purchased by receiver Ballou from said payee named in the certificate. Receiver Ballou also employed certain laborers while operating the plant, and premised to pay them sums aggregating $2,077.70. The claims of these laborers were assigned to said First National Bank of Seattle. The total amount thus held by said bank against the trust including the two certificates mentioned and the assigned labor claims, was, with interest, $7,248.86, on the day of the confirmation of the sale which it is here sought to set aside.
On the 9th day of February, 1904, Robert Nisbet, the plaintiff in the action wherein the receiver was appointed, filed his petition with the court, asking an order for the sale of all the property of the Great Northern Olay Com pany, then in the hands of the receiver. Such an order was made authorizing the receiver to sell the property at public auction to the highest bidder for a minimum price of $20,000, and requiring not less than ten days' notice of the sale. Notice as prescribed in the order of sale was given, and the time fixed for the sale was March 5, 1904, at which time the receiver offered the property for sale hut received no bids-, and thereupon he continued the sale until March 10. Immediately after the said adjournment of sale, the receiver and his attorneys, together with the attorneys of substantially all the parties who had appeared in the action, went before the superior court then in session, and in open court reported the failure to sell. Discussion was had between court and counsel with reference to the emergency for immediate sale. The court thereupon instructed the receiver .to re-offer the property for sale as before for the sum of $20,000, and if that sum could not be obtained, to offer the property regardless of price, subject to the confirmation and approval of the court. Thereupon Ernest Carstens offered in open court to bid for the property provided the aforesaid claims of the Eirst National Bank of Seattle should be received as a part of the purchase price. This was made in the presence of the court and counsel at the time they were together as aforesaid. The court thereupon stated in the hearing of all present that, if said Carstens would bid at the adjourned sale a sum which should be accepted and approved by the court, the amount of the claims of said bank would he accepted as a part of the purchase price, if said Carstens could acquire the claims. It was in this manner and through.this understanding with the court and counsel for interested parties that Mr. Carstens became involved in the matters which led to the controversy brought here by this appeal.
Accordingly, on March 10, the property was again offered for sale by the receiver, and Mr. Carstens bid therefor the sum of $11,200, conditioned upon the use of the obligations of the receiver to the Eirst National Bank of Seattle as a part of the purchase price. The receiver reported the offer to the court and notice of hearing thereon was given to all parties to the action and to all creditors who had filed appearances in the action. At the hearing the advisability of accepting the offer was fully discussed and considered in the presence of counsel, who represented substantially all of the interested parties, and the court, believing that the offer was the best that could be obtained, directed the receiver to accept it.' Thereupon Mr. Oarstens paid the receiver $11,200, of which sum $7,248.86 consisted of receiver's certificates and assigned labor claims held by the bank as aforesaid, and the balance, $3,951.14, was paid in cash. The sale was confirmed by the court and by its order a conveyance was executed by the receiver, transferring all the property to Mr. Oarstens.
Therafter the Ohio Ceramic Engineering Oompiany filed a petition asking that the sale, the order approving it, and the conveyance be set aside. The petition recites the facts heretofore stated with reference to the issuance of the $1,500 receiver's certificate to- the petitioner, and alleges that the petitioner had no notice of the sale or of any of the proceedings had in connection therewith. It is also alleged that-,' as a consequence of said proceedings, all the- purchase price of the property was appropriated by the receiver to the payment of claims other than that of the petitioner, and which were ini fact subordinate and inferior in right and equity to the claim of the petitioner. It is also alleged that allowances were made to- the receiver in the sum of $1,200 for his own services, and $800 for his attorney's services, which sums are charged to -have been excessive; and it is asked that the order of allowance be set aside. The petition was denied and from the order of denial the petitioner is prosecuting this appeal.
Erom the record we are satisfied that all parties thereto were advised of the proceedings concerning the sale of the property, and assented to the confirmation thereof, except the appellant. At least, no one except appellant has raised any objection to the proceedings. We are furthermore satisfied that the highest possible sum was obtained for the prop erty. Appellant has in no manner pointed out how a greater sum might have been realized, if it had been present and had actually participated in the proceedings. Without discussing the question of its right to notice of the proceedings, and assuming that appellant is in position to contest the regularity thereof, it is nevertheless true that, with its opportunity at the hearing of its petition, it has not 'shown that the trust had been in any sense the loser by the sale and its confirmation. We therefore think the court was fully justified in entering the judgment which was rendered upon the hearing of appellant's petition, which in terms reaffirms and reapproves the sale. This was an order entered after a full hearing from appellant, and it seems to us that appellant is now concluded thereby so far as any question of notice is concerned. Tt has had its day in court and an opportunity to' be heard upon the questions it is urging, and unless some substantial right has been violated, the order of confirmation should stand.
The next question to be considered is that of the consideration for the sale which was accepted by the receiver and ap>proved by the court. Appellant is not in position to contest the validity of the receiver's certificates as constituting prior liens upon the property of the trust, for the reason that the relief it now seeks is based upon such a certificate. Its certificate states upon its face that it is junior to one for $3,000 held by the bank aforesaid, and also that it is junior to the expenses of the trust. The fact was, however, that eight days before its certificate was issued, another one for $2,000 was issued to the bank, which fact was doubtless overlooked by inadvertence when appellant's certificate was drawn, and was not mentioned therein. The $2,000 certificate was, however, first in point of time, was for an actual cash loan, was declared to be a prior lien by order of the court, and appellant's certificate must therefore be held to be subject and junior to it.
Its certificate was also junior to the laborers' claims, for two reasons: The laborers Were entitled to a prior lien upon the property of the corporation under chapter 43, session laws of 1897, and the certificate itself says it is subject to the expenses of the trust. The labor was performed in behalf of the trust at the instance of the receiver, and by authority of the court. It follows that all the claims allowed by the court as part of the purchase price of the assets were liens upon the assets and prior to' the appellant's claim. Being prior liens upon the assets, the holder of the claims would, so far as appellant was concerned, have been entitled to the first money from the proceeds of the sale if the sale had been entirely for cash. By the application of the amount of the claims to the purchase price, the result was the same as though the full price had been directly paid in cash. We think respondent Carstens as the holder of those claims would have been entitled to turn them in as part of the purchase price even in the absence of the previous understanding had with the court. In Mercantile Trust Co. v. Kanawha etc. R. Co., 58 Fed. 6, the purchasers were permitted to deposit bonds in payment of the purchase price, after paying into court sufficient cash to' extinguish the costs and liens prior to the bonds. Of this the court said:
"This was precisely the same as if the purchasers had paid the whole price in money, and had then withdrawn, on distribution, their pro rata share of the proceeds. Their rights cannot be different because they did not go through this useless formality. The railroad property, to the extent that it was paid for by bonds, was, in the hands of the purchasing bondholders, proceeds of sale."
We therefore think the sale, its approval, and all the proceedings considered together, including the order of re-confirmation aforesaid, were of sufficient regularity, and that appellant's rights were not prejudiced thereby. We know of no statutory requirements regulating the sale of property by receivers in this state which make it necessary to give notice to all the creditors. The sale is made under the direction of the court as a court of equity, and it should be presumed that the court and its officer will make an honest effort to realize the greatest sum possible for the assets of the trust. When, therefore, a purchaser has bought in good faith, unless it is subsequently made to appear that the best interests of the trust would be served by not making any sale at all, or that the consideration is inadequate, his rights become established and should not be disturbed. Particularly should it be so when it appears that no higher sum could have been realized. Under such circumstances we are unable to see that a creditor's rights are prejudiced by the mere fact that he did not have actual notice of the sale. The record of this case shows that, if appellant had been present at the sale proceedings and at the time of the first confirmation, it would have been unable to effect a different result from that which was obtained. Its claim would necessarily have been postponed as junior to those applied upon the purchase price, for the reason that the law under the facts fixed its status so. Being subject to those claims, appellant's claim therefore becomes a first lien upon the remaining assets except expenses of the trust, for the reason that it is expressly made subject to such expenses.
Appellant's interest in the premises therefore seems to be confined to the right to share in the distribution of the balance with preference according to the terms of-its certificate. The purchaser paid to the receiver $3,951.14 cash, which exceeds the amount required to pay appellant's claim by considerably more than $2,000. Unless more than the excess is required to pay necessary expenses of the trust, appellant is still amply protected. The petition shows that, by an order of the court, the receiver and his attorneys were allowed for services the aggregate sum of $2,000. It is claimed that this was excessive and the petition asks that the order of allowance he set aside. After hearing testimony upon this subject, the court reaffirmed its former decision as to the value of the services. From all that is shown in this record we shall not undertake to say that the fin ding was erroneous. Other allowances said to have been made at different times during the administration of the trust are discussed in appellant's brief, but they are not mentioned in its petition, are not within the issues before us, and are not covered by the judgment from which the appeal is taken. They therefore involve questions that are not before us.
The judgment is affirmed.
Mount, C. J., Rudkin, Grow, Root, and Dunbar, JJ., concur.