[No. 18357. Department Two. November 26, 1924.]
SKIBSAKTIESELSKAPET BESTUM III, Appellant, v.
JOHN P. DUKE, as Supervisor of Banking,
et al., Respondent. «1»
ESTOPPEL (28) - IN PAIS - INCONSISTENT CLAIMS - INTEREST IN
CONTRACTS. Where contracts to build ships for foreign owners
were repudiated by the owners because not authorized by the agent
executing them, and the assignor of the contracts remained
quiescent for two and one-half years without claiming any interest
while the construction had been taken over by others, the assignor
is estopped to assert that the repudiation or annulment of the
contracts was not final.
CONTRACTS (159) - BREACH - RIGHTS AND LIABILITIES ON PARTIAL
PERFORMANCE. One claiming an interest in vessels constructed under
an agreement requiring a bond guaranteeing performance, has no
right to the sum deposited in lieu of a bond to secure payment for
performance of the work, where there was a heavy deficit after
applying the deposit, which was paid to the contractor.
APPEAL (389) - REVIEW - AMENDMENTS. Under Rem. Comp. Stat.,
§ 1752, the supreme court will consider an answer amended to cure
a defect that was capable of amendment.
«1» Reported in 230 Pac. 650.
468 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
EVIDENCE (130, 139) - DOCUMENTARY EVIDENCE - COPIES - EFFECT
OF STIPULATION - AUTHENTICATION OF DOCUMENTS. Upon an issue as
to plaintiff's rights, as assignor of contracts for the
construction of ships, which contracts had been repudiated, it
cannot be objected that a large volume of documentary evidence was
inadmissible, as not properly identified or connected with the
parties, and hearsay, where, to obviate technical proofs, it was
all attached to a stipulation agreeing that the correspondence was
had between the parties purporting to send the same, and it
appeared that differently named persons were, in substance, but
one party, acting for a single interest.
CONTRACTS (161) - PERFORMANCE - EVIDENCE - ADMISSIBILITY. Upon
an issue as to the repudiation of a contract for the construction
of ships, it is not immaterial to show the expenditures thereafter
incurred by others who had taken over the work, while the
repudiator remained silent and asserted no rights.
Appeal from a judgment of the superior court for
Thurston county, Wright, J., entered August 13, 1923,
upon findings in favor of the defendants, in an action
to establish claims against an insolvent bank, tried to
the court. Affirmed.
Cosgrove & Terhune, Battle, Vandiver, Levy & Van
Tine, and Charles S. Mackenzie, for appellant.
W. V. Tanner and John P. Garvin, for respondents.
FULLERTON, J. - This is an action brought by the
Skibsaktieselskapet Bestum III, a corporation of the
Kingdom of Norway, as plaintiff, against John P.
Duke, as the supervisor of banking of the state of
Washington, and the Scandanavian American Bank
of Seattle, as defendants, to establish against the funds
of the insolvent bank in the hands of the supervisor a
general claim for the sum of $400,000, and to establish
against the same fund as a preferred claim the further
sum of $75,000. The first of the claims is founded on
the contention that the bank named, while a going concern,
converted to its own use the hulls of two twin
screw wooden motor vessels, the property of the
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 469
Nov. 1924 Opinion Per FULLERTON, J.
assignor of the plaintiff. The second of the claims is
founded on the contention that the fund therein mentioned
was the money of the assignor of the plaintiff
deposited with the bank in trust, likewise while a going
concern. The cause was tried in the court below without
the intervention of a jury, and resulted in a judgment
in favor of the defendants. From this judgment,
the plaintiff prosecutes the present appeal.
The record discloses the following facts: In the year
1917, Christoffer Hannevig, Incorporated, a corporation
organized under the laws of the state of New York,
was engaged in the ship brokerage business, operating
generally throughout the United States and Canada.
In the same year, a concern of Christiania, Norway,
doing business at that place under the name of
"Hannevig Bros. A/S," was desirous of having constructed
for it a number of wooden hull, motor-propelled
vessels, according to plans and specifications
prepared by naval architects of Christiania, Norway.
To that end they communicated with the New York
corporation, and on receiving assurances that such
vessels could be contracted for, sent the plans and
specifications to that corporation with authority to enter
into such contracts. The Norway concern was desirous
of having the vessels so constructed as to meet the
approval of the British corporation known as Lloyds,
and so advised the New York corporation. That corporation
submitted the plans to an agent of Lloyds and
received his approval after some changes were made
therein. On receiving this approval, the New York corporation
entered into contracts for the construction of
two of the vessels with the Anderson Shipbuilding
Corporation, a corporation organized under the laws
of this state having its shipyards at Seattle. These
contracts were in writing, and were executed in
triplicate. They were executed in the name of John
470 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
Prebensen in behalf of the Norway concern, who at that
time was a member of the concern. His name is signed
to the documents by the New York corporation as his
agent. In brief, the contracts provide for the construction
of the vessels by the Seattle corporation,
called the builder, for the sum of $380,000 each. The
contract price was agreed to be paid in instalments, the
first instalment on the execution of the contract, and
the remaining as the work on the vessels progressed.
The contracts further provided that the builder should
furnish a bond with some responsible and reliable
surety company in the sum of $75,000, conditioned for
the faithful performance of the work. This bond was
not furnished in the form provided by the contracts,
but in lieu thereof the builder procured a guarantee
from the respondent Scandanavian American Bank.
When this was made known to the Norway concern, it
objected to the guarantee, whereupon the builder deposited
with the bank the sum of $75,000 in cash to
take the place of the bond required; the money so deposited
being from the money paid as the first instalment
due on the contract.
The communications between the Norway concern
and the New York corporation had been up to this
time wholly by cable messages. After the execution of
the contracts, they were forwarded to Norway by the
New York corporation. On their receipt by the Norway
concern, they were immediately repudiated, both
by it and by John Prebensen, in whose name the contracts
ran. This repudiation was positive and emphatic.
On receipt of the plans, the Norway concern,
under date of February 4, 1918, sent to the New York
corporation the following cablegram:
"No. 11: - Referring our cable 31st August 1917
we gave you authority to contract two wooden motorships
contracts specifications and drawings made out
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 471
Nov. 1924 Opinion Per FULLERTON, J.
by Arnesen Christensen & Smith which you have confirmed
we have resold same. Have now received
copies contracts specifications drawings which have
not slightest resemblance with those made out by
Arnesen Christensen & Smith consequently we must
refuse same as you have no authority from us to accept
other ships we will not pay any further instalments.
Must also hold you responsible all claims. H. J. Hansen
account Bygdones claiming kroner 1,200,000 kroners
plus lost profit K. Einersen account Bestum 3 claiming
dollars 394,000 plus lost profit. Please remit and we
will have all documents transferred to you."
Under the date of the next day it sent the following
letter:
"We did Saturday morning the 2d inst. receive. . .
copies of the contracts of yard numbers 8 and
by Anderson Shipbuilding Corporation, Seattle.
"We also received arrangement plans and midship-section
for the Sandstrom contracts, which we immediately
passed on to our experts, Messrs. Arnesen,
Christensen & Smith of this town, in order to get their
view upon same and to get their expert report, as it
did seem to us, that there were large differences as
well in the contracts as in the midship-section, which
were worked out by them and sent you for contracting.
"Enclosed we beg to hand you translated copy of
their report, from which you will yourselves see that
the contracts, which you have made up for our account
without any authority whatever from us to alter same,
as well regarding Sandstrom's number 5 and 6 as
Anderson contracts 8 and 9, - have not the slightest
likeness with the contracts made out by Messrs.
Arnesen, Christensen & Smith and sent you to New
York, - but they are quite like those contracts and
those specifications which we refused to accept from
Mr. Petersen, when he was here in July.
"Consequently, those ships which you have contracted
anti signed are not at all ours, and we are not
going to accept same and hereby absolutely refuse to
have anything further to do with those contracts.
472 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
". . . We feel quite confident that you yourselves
know absolutely best of all how awfully difficult our
position has been and still is as we have sold the
contracts as well from ourselves to Mr. Hansen as on
account of Mr. John Prebensen to 'Bestum III,' and we
are now absolutely unable to deliver the buyers what
we have sold them.
"You have contracted ships on your side, which we
specially and absolutely refused here. . . .
"On the other hand we are very sorry that we shall
have to get into difficulties with you, but nevertheless
we feel ourselves not only justified, but absolutely
obliged to refuse to accept the contracts, and we must,
of course, keep you responsible for all losses and
consequences which we have arrived at, by you having
contracted other ships than we have given you authority
to do.
"Regarding yard numbers 3 and 4 by Anderson
Shipbuilding Corporation, Seattle, contracted as yard
numbers 3 and 4, now according to later information
being 8 and 9, these contracts have, as informed you in
our cable of the 25th last. number 5 been sold to A/S
'Bestum III,' represented by Mr. K. Th. Einersen of
this town, for the sum of 500,000 dollars each, together
1,000,000 dollars.
"Mr. Einersen's claim amounts to about 394,000
dollars plus lost profit for account of the company
A/S 'Bestum III.'
"We therefore must insist that you pay Mr. Hansen
and Mr. Einersen their claims for having got other
contracts than they have bought, and that you are
keeping . . . Anderson Shipbuilding Corporation's
yard numbers 8 and 9 for your own account.
"Awaiting your remittance we meanwhile remain
"Yours faithfully, . . ."
Again on February 18, 1918, they cabled as follows:
"We have never given authority contract with
Sandstrom and Anderson ships as described in contracts
plans and specifications you sent us. When you
go outside our authority you must of course take the
responsibility. Please explain how ships could be
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 473
Nov. 1924 Opinion Per FULLERTON, J.
contracted without our agreement to alterations as contracts
and specifications sent us have not the slightest
likeness with authority given you."
On the same day, this cablegram was confirmed by
letter signed by John Prebensen in person, concluding
as follows:
"We consider the whole matter very bad indeed, and
think that the only reasonable thing is that you take
the vessels back again, having contracted them as you
have done."
Before the contracts had been received in Norway,
John Prebensen assigned his interest in them to K. Th.
Einersen, who, in turn, assigned them to the plaintiff.
As indicated in the cablegrams and the letters
quoted, the Norway concern had advanced to the New
York corporation, to be used in the construction of
the vessels, the sum of $154,000. After the receipt of
the plans of the vessels, however, it refused to make
any further advancements. Its efforts thereafter were
directed towards obtaining from the New York corporation
a return of the money advanced, and towards
obtaining a refund of the incidental expenses it had
incurred by reason of the contracts.
No settlement of the differences between the parties
was had, and the record fails to show that the New York
corporation ever formally agreed with the Norway
concern to take upon itself the burden of the contracts.
It did, however, in fact take them over, and either then
or a short time thereafter made it known both to the
Anderson Shipbuilding Corporation and to the
respondent bank, which was largely financing the
corporation, that it had so taken them over. The work
on the vessels proceeded, and, as the instalments became
due, they were met and paid by the New York
corporation from its own funds. It also maintained
474 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
its own inspector at the plant of the builder, it
authorized alterations in the plans of the vessels and agreed
to an additional payment because thereof, and it also
assumed certain obligations incurred by the builder for
materials furnished and for labor performed in the
construction of the vessels. In payment of the
instalments alone as they became due it expended more than
$350,000.
The respondent bank, as has been before stated,
largely financed the Anderson Shipbuilding Corporation.
Just prior to January, 1919, it was forced to advance
large sums in satisfaction of laborers' liens and
in satisfaction of liens filed by materialmen. In
February, 1919, the Anderson Shipbuilding Corporation
notified the New York corporation by letter that
it could not complete the vessels at the contract price,
or proceed further with the construction work on the
vessels without assistance from it. On the receipt of
this letter the New York corporation sent out its investigators
to inquire into the situation and ascertain
whether it would be profitable to complete the vessels.
The report of the investigators seems to have been
unfavorable to the latter cause, and the corporation
concluded to expend no further sums upon them, but
to sell them in their then condition for such sums as
could be obtained for them. On notice being given it
of this conclusion, the Anderson corporation abandoned
work upon the vessels, and on April 18, 1919, notified
the bank of its action, authorizing it to deliver to the
New York corporation as forfeited the money it had
deposited with the bank in lieu of a bond. This money
the bank paid over as directed.
In July, 1919, the respondent bank purchased the incompleted
vessels from the New York corporation,
paying therefor the sum of $50,000. Thereafter it
completed the vessels at a cost to itself which, when
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 475
Nov. 1924 Opinion Per FULLERTON, J.
added to its prior advancements, aggregated approximately
$500,000. The bank was adjudged insolvent,
and was taken over by the supervisor of banking as an
insolvent institution on June 30, 1921. At that time
there were unpaid lien claims against the vessels aggregating
a large sum. These the liquidator of the
bank settled, expending of the bank's funds for that
purpose some $60,000.
The New York corporation was adjudged a bankrupt
by the United States district court for the southern
district of New York on March 18, 1921. Christoffer
Hannevig, the president of the corporation, seems, as
between himself and his corporation, to have taken .
upon himself personally the obligation to settle with
the Norway concern. He was likewise adjudged a
bankrupt by the district court named on May 15, 1921.
After these adjudications, the Norway concern began
an investigation of the affairs of the New York
corporation, and learned for the first time, so one of its
officers testified, that the respondent bank had taken over the
vessels. The claims against the bank were filed with the
supervisor of banking on November 15, 1921. The
claims were rejected, and the present action was
instituted within the statutory period thereafter.
Between the time the contracts were repudiated by
the Norway concern and the time the claims were filed
with the supervisor of banking, neither the plaintiff,
its predecessors in interest, nor the agency acting in
its behalf, ever communicated with the contractor who
undertook to construct the vessels. All of their
communications were addressed to the New York agency,
and these, as we have hereinbefore stated, were directed
towards a recovery of the advancements to that agency
made prior thereto, and the incidental expenses that
had been incurred in making the necessary preparations
to false care of the contracts.
476 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
In the foregoing recital of the facts, we have drawn
upon the evidence as a whole - that which was introduced
by the defendants as well as that introduced by
the plaintiff - and have recognized as competent and
relevant much of the evidence introduced by the defendants
to which the plaintiff objected in the court
below and to which it objects in this court. The
question of the admissibility of the evidence we will
notice later.
Assuming that it is properly in the record, it would
seem that argument is hardly necessary to demonstrate
that the plaintiff has no ground upon which to base a
recovery upon the general claim presented to the
supervisor of banking. The repudiation of the contracts by
the plaintiff (and in this term we include its predecessors
in interest), when consented to by the other
parties, became obligatory upon it. This is true whatever
may be the view taken of the legality of the contracts
in the first instance. If the agent exceeded its
authority when it entered into the contracts on the
plaintiff's behalf, the plaintiff was at liberty to
repudiate them when the excess of authority was first
made known to it, as a matter of right. On the other
hand, if the contracts were valid in their inception, the
repudiation and consent operated as an annulment of
them by agreement. There may be circumstances
where a party will be permitted to withdraw from such
a situation, but no such circumstances are presented
here. After its repudiation of the contracts, the
plaintiff remained quiescent for more than two and one-half
years, without in any way indicating it still claimed an
interest in the contracts. In the meantime the other
parties in interest and the defendant bank acted in the
belief that the repudiation was final. To allow the
plaintiff now to make a change of front would cause
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 477
Nov. 1924 Opinion Per FULLERTON, J.
a loss to the bank, if the plaintiff's claims are well
founded, of more than a half million of dollars. This
loss could have been prevented by even a somewhat
tardy notice of an intent not to be bound by its act of
repudiation. Manifestly, if there were no other legal
principle which could intervene, the plaintiff is now
estopped from asserting claims which must have their
foundation in a change of position.
The claim of the plaintiff to the money deposited
with the bank in lieu of a bond is based on the theory,
if we correctly understand the plaintiff, that the money
so deposited was its own and was wrongfully paid over
to the bank, and can be recovered on the right that a
person has to recover property of which he has been
wrongfully deprived from any person he may find in
possession of it. But it is clear that if the legal claim
it invokes in support of its general claim is correct,
the principle which it here seeks to invoke is without
application. If it be the fact that the contracts were
valid in their inception, that they have never been
annulled, and that it was the owner of the vessels at
the time the bank took them over, it has no rightful
claim to the fund. Under the facts assumed, the money
was rightfully paid to the contractor. On the payment,
it became its money absolutely. It could do with it as
it pleased, and the plaintiff has no legal cause of
complaint because it used it in the purchase of a bond.
Moreover, it would be a strange doctrine to hold that
the plaintiff has a property right in the vessels and
at the same time a property right in the money it advanced
for their construction. What might be the rule
were it shown that a sum equal to the advancements
had not been expended on the vessels at the time the
bank took them over, we need not determine. That
question is not here presented. The evidence is clear
478 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
that, at the time the bank took over the vessels, more
than twice the amount of the plaintiff's advancements
had been expended in their construction.
If, on the other hand, it is to be assumed that the
contracts were invalid in their inception, and that the
money was in consequence wrongfully paid to the contractor
by the plaintiff's agent, and that a part of this
same money was deposited in the bank, and that it
can be recovered on the theory that one may recover
in specie his own property from any person he may
find in possession of it, then the answer is that neither
the bank nor the supervisor of banking had possession
of the money at the time the demand was made for its
return. The proofs are that, long prior to the demand,
the bank paid out the money to the person to whom it
thought it rightfully belonged, and of course it cannot
be recovered in specie. Nor is the case aided by the fact,
if it be the fact, that the bank wrongfully paid out the
money. Under the conditions assumed, this might
render it liable in damages as for a wrongful conversion,
but this was not the claim presented to the supervisor
which furnishes the foundation for the action, nor
is it the theory on which recovery is sought.
Passing to the question of the admissibility of the
evidence to which objection was made, the principal
controversy is over the evidence introduced to show
the repudiation of the contracts by the plaintiff. The
first branch of the objection to the evidence is that the
defendants did not plead in their answer a revocation
of the contracts. The trial court seemingly held the
evidence admissible under the general denials in the
answer, and cases are cited to us which sustain its
holding. But whether these represent the better opinion,
we do not think we need inquire. If there was
a defect in the answer it was a defect capable of cure
by amendment, and this court is admonished by the
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 479
Nov. 1924 Opinion Per FULLERTON, J.
statute to consider all amendments as made which
could have been made. (Rem. Comp. Stat., SS 1752)
[P. C. SS 7336]. Under the cited section will be found
our cases wherein we have applied the rule, and no
repetition of them is necessary here. There are, it is
true, certain exceptions to the rule, as for example,
where the rule operates to prevent a party from presenting
his case. But nothing of this sort is here
present. The plaintiff was given all the opportunity
it desired to meet the evidence.
The second branch of the objection presents a different
consideration. From the nature of the case,
each side desired, if in fact it was not compelled, to
introduce quite a large volume of documentary evidence,
the technical proofs concerning which it was difficult
to obtain. To obviate the necessity of making such
proofs, the parties attached together a large number
of the documents and entered into a stipulation concerning
them. The cablegrams and letters from which
we have heretofore quoted were among the documents
so attached. Concerning these, the applicable parts of
the stipulation were the following:
"4. That certain letters and telegrams ( of which
copies are hereto attached, marked 'Stipulation
Exhibits 1 to 16' inclusive) were sent by the parties
therein mentioned purporting to send them, and received
by the parties to whom they are addressed, on
or about the dates therein mentioned. It is particularly
understood and agreed that said copies are for the
purposes of the trial of this action to be deemed
originals. Upon these documents being offered in
evidence, they shall be subject to such other objections
as might be raised if the originals were presented instead
of these copies.
"12. The first two payments on each vessel in the
total sum of $154,000.00 were made by John Prebensen
before receipt in Norway of the copies of plaintiff's
Exhibits 'A' and 'B.'
480 SKIBSAKTIESELSKAPET BESTUM III v. DUKE.
Opinion Per FULLERTON, J. 131 Wash.
"13. This stipulation (not including the attached
exhibits) may at the trial of the above entitled cause
be by either party introduced in evidence as evidence
of the facts and admissions therein stated and made,
and either party may present and offer in evidence
under this stipulation either, any, or all of the attached
exhibits, said offer or offers to be free from and
subject to objections as provided herein.
"14. Nothing herein shall be construed as limiting
either party hereto in offering for introduction further
evidence herein."
The particular objections to the testimony are, (1)
that the contracts for building the vessels were assigned
by Prebensen to the plaintiff prior to the time the
cablegrams and letters were forwarded, and that there
is no showing of authority on the part of the signers of
the instruments to then speak for the plaintiff; (2)
that it is not shown that the John Prebensen who signed
one of the letters is the same John Prebensen in whose
name the contracts were executed; and (3) that the
cablegrams and letters fall under the rule of hearsay
testimony. But we are not persuaded that either of
these objections is well founded. In the first place, the
general tenor of the evidence tends to show, in our
opinion, that the different parties, that is to say,
Hannevig Bros. A/S, John Prebensen, K. Th. Einersen,
and the plaintiff, Skibsaktieselskapet Bestum III, were
in substance but one party acting for a single interest,
and that, in consequence, the act of one is the act of
the other. In the second place, if further evidence than
the stipulation of the genuineness of the documents
is necessary, it is found in the testimony of a director
who testified personally at the trial. His testimony is
that the plaintiff in all of its complaints went to
Hannevig Bros. A/S., who in turn went to the New
York corporation. The corporation thus made Hannevig
Bros. A/S its agents to speak for it, and there can
SKIBSAKTIESELSKAPET BESTUM III v. DUKE. 481
Nov. 1924 Opinion Per FULLERTON, J.
be no presumption that it spoke without authority.
Before this contention can prevail there must be a
showing to that effect, and a further showing that the
other parties in interest had notice of the excess of
authority. One of the exhibits is a letter from
Hannevig Bros. A/S to Christoffer Hannevig, Incorporated,
which purports to set forth all of the cablegrams that
had theretofore passed between them. Certain of the
cablegrams announcing the repudiation of the building
contracts are included among these, and this fact
furnishes the foundation for the contention that the
evidence by which the defendants sought to prove the
repudiation was by hearsay testimony. But we think
these were as much "copies" of the cablegrams as
were any of the other instruments attached to the
stipulation, and this being so, they were admissible under
paragraph 4 of the stipulation quoted.
That part of the evidence showing the expenditures
of the New York corporation, the expenditures
by the defendant bank, and by the representative of
the supervisor of banking, in the completion of the
vessels, was objected to on the ground of immateriality.
But it was material from the defendants' standpoint
to show the injustice of permitting the plaintiff, after
repudiating the contract and remaining silent for so
long a period of time, to reassert rights under the
contract. The remaining objections to the evidence do
not require consideration. While we may concede that
some parts of it had little bearing on the issues, this
is not ground for reversal. Ignoring it, and considering
only the evidence legitimately in the record, there
is sufficient to warrant the judgment of the trial court.
The judgment is affirmed.
MAIN, C. J., BRIDGES, PEMBERTON, and MITCHELL, JJ.,
concur.