Week v. the Luthy Co.

SPENCE, J.

Plaintiff was both a creditor and a stockholder of The Luthy Company, a California corporation. Said corporation had financial difficulties and assigned its assets to defendant G. W. Brainard, as trustee. This action was brought to establish the amount of plaintiff’s claim as a creditor of the corporation and to have it decreed that

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the defendant trustee pay over to plaintiff his proportionate share of the assets assigned to the trustee by the corporation. From a judgment in favor of plaintiff for the full amount of his claim the defendant trustee appeals.

There is no dispute as to the amount of respondent’s claim except so far as it- may be affected by certain litigation in the courts of the state of Washington in which certain creditors of the corporation sought to enforce their rights as creditors under the law of the state of California against respondent as a stockholder in the corporation. Respondent by way of defense in those cases sought to offset the larger indebtedness of the corporation to him. The trial court in Washington denied respondent the right of set-off, but upon appeal the judgment was reversed in each of the cases “with directions to the superior court to dismiss the action”.

(McCann Co.

v.

Week,

139 Wash. 182 [246 Pac. 292] ; Id., 141 Wash. 702 [251 Pac. 858];

Cordes

v.

Week,

139 Wash. 695 [246 Pac. 295].)

It is appellant’s contention that respondent’s claim against the corporation has been fully satisfied by the previous litigation and that respondent is precluded thereby from any recovery in this action. The sole question considered by the Supreme Court of the state of Washington was that of the right of a creditor stockholder to offset his claim as a creditor of the corporation in an action brought against him by other creditors to enforce his liability as a stockholder. That court was divided on the question, but the offsets were allowed. Much is said in the briefs herein with respect to the views expressed in the majority opinions in those cases, but with the correctness of those views we are not here concerned. We may assume that a stockholder, who is also a creditor, should not be allowed to offset his claim as a creditor of the corporation in an action brought against him by other creditors to enforce his liability as a stockholder and we may further assume that the corporation or its assignee should not be allowed to offset the liability of a stockholder to the other creditors in an action brought by such stockholder, who is also a creditor, to enforce his creditor’s claim. The fact remains, however, that respondent has heretofore successfully urged his claim as a creditor of the corporation by way of offset in the actions brought by the other creditors seeking to