Case Name: Dr. William Chapman, Appellant, v. W. G. Ross, as Receiver, Respondent
Court: Washington Supreme Court
Jurisdiction: Washington
Decision Date: 1929-05-22
Citations: 152 Wash. 262
Docket Number: No. 21596
Parties: Dr. William Chapman, Appellant, v. W. G. Ross, as Receiver, Respondent.
Judges: 
Reporter: Washington Reports
Volume: 152
Pages: 262–268

Head Matter:
[No. 21596.
Department One.
May 22, 1929.]
Dr. William Chapman, Appellant, v. W. G. Ross, as Receiver, Respondent.
W. B. Mitchell and 8. 8. Bassett, for appellant.
Danson, Lowe S Danson, for respondent.
Reported in 277 Pac. 854.

Opinion:
Holcomb, J.
This case is based upon a claim by appellant against the receiver of the Rialto Building Company, a corporation, for the sum of $12,000, represented by a promissory note and interest accrued thereon from the date of the note, praying that the claim be made a preferred claim against tbe corporation and a pipe organ, its principal asset, in the sum of $8,858.27, tbat tbe balance be allowed as a general claim and tbat tbe preferred claim be foreclosed on tbe pipe organ mentioned.
There are other claimants against tbe insolvent corporation and its assets which, besides known preferred claims amounting to $557, comprise presented claims amounting to, on their faces, without interest, $3,836.21.
Tbe indebtedness of appellant is tbe same as tbat involved in Brotherhood State Bank v. Chapman, 145 Wash. 214, 259 Pac. 391.
Eeference is made to tbe opinion in tbat case for tbe facts shown as to tbe relationship of tbe parties, tbe instruments relied upon, tbe assets of tbe insolvent corporation and tbe decision of tbe court upon tbe showing there made tbat one Newton, who was manager of tbe corporation which became insolvent, and a step-son of appellant, who bad given tbe note and mortgage in question, did not own tbe assets of tbe insolvent corporation, bad no right to mortgage them; tbat tbe property belonged to tbe insolvent corporation and tbat therefore tbe chattel mortgage which bad been executed by Newton upon tbe assets of tbe corporation, even though Newton originally held all tbe stock of tbe company, did not justify tbe foreclosure of tbe mortgage as against tbe corporation and tbe creditors.
Tbe principal facts presented in this case were also before tbe court in tbat case. It was alleged in that case by appellant in bis cross-complaint tbat tbe $12,000 note bad been executed by Newton; tbat Newton owed tbe amount thereof, together with interest computed; tbat Newton owned tbe assets, or at least bad so represented to appellant, and it was admitted in the pleading that the chattel mortgage referred to was not executed by the corporation, or by its authority.
In this action, respondent admitted that appellant had loaned to Newton the $12,000 and had taken a mortgage to secure the loan. It was affirmatively alleged that the matter had been previously adjudicated in the action above mentioned; that, in that action, the corporation,. Newton, appellant and this receiver all became parties; and that, in that action, appellant here had contended that he loaned the money to Newton and that he took judgment against Newton for the amount thereof. A second affirmative defense alleged that, in the action above mentioned, all of these parties were parties, and that appellant, at all times, claimed that the loan was made to Newton; that the debt was due from Newton; and that he recovered judgment accordingly. These allegations were denied by reply of appellant.
After trial, the lower court denied appellant any recovery, upon the ground that appellant had elected his remedy in the former proceeding, and was estopped to change his position and. absorb all of the assets of the insolvent corporation by a different remedy.
The pipe organ mentioned is the principal asset belonging to the insolvent corporation. The portion of the advances which appellant undoubtedly made to Newton, which can be definitely traced as payments upon the pipe organ, are two $500 advances made by appellant which were made when two of the installments on the purchase price of the organ had become delinquent, and at the maturity of the pipe organ contract, a further advance of $5,556.74 was made by appellant.
The suggestion has been made among ourselves that, possibly, in equity, appellant should be allowed to subrogate bis claim against tbe corporation and recover to tbe extent of these advances by way of equitable subrogation — a theory not distinctly advanced by appellant. This would mean the substitution of appellant, to the extent of his known advances, to the rights of the organ company, as vendor, for the prevention of fraud, and relief against mistake.
The obstacle in the way of this, in order to give appellant some relief, is that the corporation's other creditors knew nothing of appellant advancing these sums to the corporation for the specific purpose of paying purchase money on the pipe organ to the vendor. Hence, to allow equitable subrogation to these amounts would be to give appellant more than two-thirds of the value of all the available assets and take away the only valuable asset belonging to the corporation. Subrogation is not allowed in favor of a mere volunteer payor (25 R. C. L. 1367), nor where it will defraud other bona fide creditors or incumbrancers (Id. 1314). Nor where the prior debt has not been wholly discharged by the payor. State ex rel. Nayberger v. McDonald, 128 Ore. 684, 274 Pac. 1104.
To grant it in this case, would be to allow it when the party so favored knew all the facts, and would defraud all the other creditors, who knew none of them.
As in the former case, it is difficult to follow the contentions of appellant. Cases are cited from this court holding that principals are estopped to deny the authority of agents, and to repudiate deceitful misrepresentations made by agents, which, by estoppel, at least, were held to be agents of the- principal. Typical of such cases are Wharton v. Tierney-Toner Co., 126 Wash. 216, 217 Pac. 998, and Stillwell v. Merriam Co., 127 Wash. 116, 219 Pac. 836.
In the first case, the principal attempted to deny the authority of an agent which had been held out by it to' be a general agent, and then attempted to repudiate representations made by tbat agent. Of course we held that the principal was estopped to deny such agency and such representations.
The second case was one where an agent borrowed money, gave a chattel mortgage and the corporation accepted the benefits of the loan and afterwards tried to deny its liability. We refused there to allow the corporation to repudiate the transaction after accepting the benefits.
Similar cases are those of Keyes v. Citizens State Bank, 128 Wash. 658, 224 Pac. 2; Colman v. Waterhouse & Co., 122 Wash. 259, 210 Pac. 387; Belt v. Washington Water Power Co., 24 Wash. 387, 64 Pac. 525.
Another case relied upon by appellant, Vancouver National Bank v. Katz, 142 Wash. 306, 252 Pac. 934, was an action against a partnership, where only one of the partners signed a note. The other partners had full knowledge of the fact that the active partner borrowed money, gave notes, and transacted partnership business generally. Obviously, the case does not apply here.
Appellant also misapplies our decision in Farmers State Bank of Newport v. Lamon, 132 Wash. 369, 231 Pac. 952, saying that we there held that, when an officer of a corporation signs a promissory note as an individual, he is individually liable on the note as well as the corporation and cannot be heard to deny his liability.
What we there held, citing other cases of like nature, was that the note being signed by the corporation itself, by its proper official and by the individual himself, although the corporation was bound by its corporate signature, the individual was also bound by his individual signature, and could not be heard to alter or add to his signature under the contention that he in tended to sign in Ms official capacity only. Such cases do not fit tMs case.
Here, appellant's own theory is that Newton was a general managing agent of the corporation. He knew that fact at all times. Knowing it, he extended credit to Newton, took Newton's note and mortgage for the entire amount, binding Newton individually and not the corporation. He also had Newton's corporate stock pledged to him as collateral security for Newton's personal loan.
Even though appellant may not be bound by the principle of res judicata by the decision in the Brotherhood State Bank case, supra, nevertheless he is bound by election. Knowing all of the facts prior to the institution of the former action and his participation therein, he elected to press his claim against Newton alone. He contended that Newton alone was the owner of the property. He knew all of the facts. He knew that Newton was dealing with the property as his own, according to his own pleadings and evidence, and contended that it was in fact the property of Newton. He knew that Newtoii was also acting as manager for whatever corporation was in existence and running the theater involved. If he chose to treat Newton as the principal, his election to hold him as principal discharged the liability of the corporation. Pennsylvania Casualty Co. v. Washington Portland Cement Co., 63 Wash. 689, 116 Pac. 284.
If, on the other hand, appellant chose to extend credit to the agent, having full knowledge of the principal, he cannot thereafter resort to the principal, and the latter is not bound, although the agent acted in the course of his employment and for the benefit of the principal. 2 C. J., p. 836, § 518.
He is thus bound, even though principal and agent are both liable, and a suit prosecuted to judgment against either, although without satisfaction, will discharge the remedy against the other. 2 C. J., p. 846, § 529. McDonald v. New World Life Ins. Co., 76 Wash. 488, 136 Pac. 702; Le Vette v. Hardman Estate, 77 Wash. 320, 137 Pac. 454, L. R. A. 1917B 222; Paige v. Stone, 10 Metc. (Mass.) 160, 43 Am. Dec. 420.
Cases cited by appellant upon the joint or severable suability of joint tort-feasors and cases involving cumulative remedies against one or more parties, who may be liable, as not binding the suitor by election, are not pertinent.
Eegrettable as it is that appellant must be the unfortunate loser to such a great extent by his misplaced confidence in the financial and managerial ability of his step-son, we see no relief that can be accorded him.
The judgment is therefore affirmed.
Mitchell, C. J., Tolman, Fullerton, and Beals, JJ., concur.