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Wash.)

HAMILTON v. RAMAGE

(No. 12788.) HAMILTON v. RAMAGE. (Supreme Court of Washington. Feb. 17, 1916.) 1. BILLS AND NOTES 518-CONSIDERATION -PARTIAL FAILURE EVIDENCE.

In an action on a note, evidence held sufficient to establish a partial failure of consider

ation.

[Ed. Note. For other cases, see Bills and Notes, Cent. Dig. §§ 1816-1820; Dec. Dig. 518.] 2. BILLS AND NOTES 97-CONSIDERATIONPARTIAL FAILURE.

to on the same date between appellant and the company, by the terms of which contract respondent was to receive, in consideration of the payment of the $500 and the giving of the two notes, the following: (1) He was to receive from the company its mortgage bonds of the face value of $3,800, being a portion of a series of mortgage bonds issued by the company and secured by a mortgage upon its properties, of which there were then outstanding approximately $170,000; (2) he was to receive 38 shares, of the par value of $100 each, of the capital stock of the company, fully paid up and nonassessable; (3) he was to receive upon completion of the company's cement plant and its going into operation a quantity of cement of a specified quality, equal to $3,800 worth, to be measured by market val3. BILLS AND NOTES 97- ASSIGNMENT NOTICE OF DEFENSES EXISTING BEFORE AS-ue L o. b. at the company's plant, without cost

In an action on a note by the payee, where a partial failure of consideration is shown to exceed the amount due thereon, a defense pro

tanto is successfully established.

[Ed. Note.-For other cases, see Bills and Notes, Cent. Dig. §§ 166-173, 175-181, 185-192, 196-198, 200, 202-205, 208-212, 1372-1376; Dec. Dig. 97.]

SIGNMENT.

A defense of failure of consideration is properly maintainable against an assignee of a note before maturity, who took it with knowl

edge of such infirmity.

see Bills and
[Ed. Note.-For other cases,
Notes, Cent. Dig. §§ 166-173, 175-181, 185-192,
196-198, 200. 202-205, 208-212, 1372-1376;
Dec. Dig. 97.]

Appeal from Superior
Department 2.
Court, Spokane County; Bruce Blake, Judge.
Action by Boyd Hamilton against James
S. Ramage. From a judgment for defendant,
plaintiff appeals. Affirmed.

F. R. Monfort and Lawrence Jack, both of Spokane, for appellant. A. E. Barnes, of Spokane, for respondent.

PARKER, J. The plaintiff, Boyd Hamil ton, commenced this action in the superior court for Spokane county to recover upon a promissory note executed and delivered by the defendant, Jas. S. Ramage, to Orofino Portland Cement Company, which note was thereafter before maturity assigned by that company to the plaintiff as collateral security One of the defenses made against for a loan. the note was failure of consideration, which it is alleged was known to the plaintiff at the time he acquired the note from the company. The other defense need not be here noticed. Trial before the court without a jury resulted in findings and judgment in favor of the defendant and for cancellation of the note, from which the plaintiff has appealed.

On September 30, 1913, respondent paid to Orofino Portland Cement Company the sum of $500 in money, and at the same time executed and gave to that company his two promissory notes for the sum of $1,650, each payable, respectively, two and four months after date. This action is upon the note maturing four months after date; the other note having been paid at or near its maturity. The consideration for the payment of this money and the giving of these notes to the company is evidenced by a written contract entered in

to him. These three items, to wit, the bonds,
the stock, and the cement, constituted substan-
tially all of the consideration to be given
for the execution of the notes and the pay-
ment of the $500 by respondent. Neither the
bonds nor the certificates evidencing the 38
shares of stock were delivered to respondent,
but were held by the company to be delivered
For pres-
to him upon payment of the notes.
ent purposes, however, we may regard the
title of the bonds and of the stock as passing
to respondent upon execution and delivery of
the notes and payment of the $500, though we
do not so decide as a matter of law. At the
ing of this contract the company had not con-
time of the giving of these notes and the mak-
structed its plant. At that time its officers
made representations to respondent leading
him to believe that its plant had been financ-
ed and would be constructed within a rea-
sonable time, when it would be able to fur-
nish the cement as agreed in the contract.
Touching the failure of the company to fur-
nish the cement and its inability to do so in
the future, the trial court found as follows:

"The court finds that the Orofino Portland
Cement Company has not been able to finance
said project, has never erected the plant for the
no funds with which to erect said plant, and
manufacture of Portland cement, that it has
that one unit of such a plant would cost about
$350,000, and that said Orofino Portland Ce-
ment Company is unable to carry out the con-
to $3.800 of its bonds as hereinbefore set out,
tract which it made to secure the subscription
and that said Orofino Portland Cement Com-
consideration whatsoever for said note."
pany has not paid, and is not able to pay, any

The trial court also found that appellant, when he acquired the note here involved, had full knowledge of the contract existing between the company and respondent evidencing the consideration for which the note was given, and also had full knowledge of the fact that such consideration had failed. Appellant has been the president of the company in charge of its business since prior to the date of the giving of these notes and the entering into this contract by the company with the respondent.

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

[1] The theory of the trial court in dispos- | infirmity. Gross v. Bennington, 52 Wash. ing of the cause in respondent's favor seems 417, 100 Pac. 846.

to be that there was an entire failure of consideration as to both notes and for the $500 cash payment made by respondent. We do not find it necessary to go to this length in affirming the judgment, but we do agree with the trial court to the extent that there was a partial failure of consideration, at least equal to the amount of this note. It is plain that the bonds are in no event worth more than their face value. Indeed, the terms of the contract and the evidence touching the financial condition of the company argue very strongly that the bonds are not worth their face value, which fact was understood and recognized by the parties to the contract. As to the stock, it is equally apparent that it has nothing more than a speculative value, has no market value, and that the parties so regarded its value. The cement to be furnished respondent as a part of the consideration was, by the express terms of the contract, to be of the market value of $3,800. It seems plain then that the consideration failed in so far as the furnishing of the cement is concerned, at least to the extent of the amount of the note here sued upon.

In Bay View Brewing Co. v. Tecklenberg, 19 Wash. 469, 53 Pac. 724, the doctrine of partial failure of consideration being a defense pro tanto was recognized by this court. At page 471 of 19 Wash., at page 725 of 53 Pac., the court quotes with approval from 4 Am. & Eng. Ency. Law (2d Ed.) 195, as fol

lows:

"Though some of the earlier cases denied the doctrine, there is now no question, in the light of recent decisions, that a partial failure of consideration is a defense pro tanto, when such fail

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EXECUTORS AND ADMINISTRATORS 231
PRESENTATION OF CLAIM
PENSES-STATUTES.

FUNERAL Ex

Rem.& Bal. Code, § 1472, provides that if a claim is not presented within one year after the first publication of notice to creditors of the that no claimant shall maintain an action unestate, it shall be barred. Section 1479 provides less his claim has been first presented to the administrator. Section 1543 provides that no of the estate unless the claim, or some memoadministrator shall be chargeable with a debt randum thereof, is in writing, signed by him. Held, that the claim of plaintiff for goods furnished and services performed at the funeral of presented within one year from notice, was the deceased upon the order of the widow, not barred.

[Ed. Note.-For other cases, see Executors and Administrators, Cent. Dig. §§ 804, 828, 829; Dec. Dig. 231.]

Department 2. Appeal from Superior Court, King County; J. T. Ronald, Judge.

Action by E. R. Butterworth, sole trader doing business as E. R. Butterworth & Sons, against Rea F. Bredemeyer, administratrix of the estate of J. A. O. Bredemeyer, deceased. Judgment for defendant, and plaintiff appeals.

Affirmed.

ure is liquidated in amount, or can be definitely Jay C. Allen and Philip Tindall, both of Karr & Gregory, of Seattle, for appellant. ascertained by computation."

That was before the passage of the negotia-Seattle, for respondent. ble instruments statute, which seems to state even a more liberal view of such defense as follows:

"Absence or failure of consideration is matter of defense as against any person not a holder in due course; and partial failure of consideration is a defense pro tanto, whether the failure is an ascertained and liquidated amount or otherwise." Laws 1899, p. 346; Rem. & Bal. Code, § 3419.

See 3 R. C. L. 945.

[2] It seems plain to us that whatever difficulty there might be in computing with exactness the proportionate extent of the fail ure of consideration in this case, such failure in any event exceeds any amount which would be due upon the note here sued upon. It follows that respondent has successfully maintained his defense of failure of consideration at least to that extent.

[3] It also seems quite plain to us that this defense was maintainable by respondent as against appellant the same as he could have maintained it against the company, the original payee of the note, since appellant acquired the note with full knowledge of this

HOLCOMB, J. Appellant, who furnished goods and performed services for the funeral of J. A. O. Bredemeyer, deceased, upon the order of his surviving widow, Rea F. Bredemeyer, failed to comply with sections 1470 and 1472, Rem. & Bal. Code, which require all claims against deceased to be presented for allowance or rejection within one year from the date of the first publication of notice to creditors. The lower court held that the claim is barred.

Appellant asserts that a claim for funeral expenses does not come within the provisions of the statutes. It is contended that the claim is not a debt of the deceased, and that the rule is that the statutes, requiring claims to be presented, refer to claims arising out of transactions with deceased which mature either before or after death. It is said that: "By the great weight of authority, the reasonable costs and charges of the funeral constierly, a charge upon the estate for which the tute a claim against the estate, or, more propexecutor or administrator is liable as such to the extent of the assets in his hands; in such

For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

cases the law implies a promise to pay therefor." | istrator did it not also intend to provide that 8 Am. & Eng. Ency. Law, 1024.

Text-writers and authorities are cited to the effect that statutes of nonclaim only require the presentation of demands arising out of contracts or transactions with the decedent, and do not apply to demands arising out of contracts, express or implied, with the executor or administrator; that a claim for funeral expenses or for taxes assessed after the death of the property owner need not be presented; that a limitation provided by statute for commencement of an action upon a rejected claim does not apply to a claim which it is not necessary to present to the executor or administrator, as one for funeral expenses. 8 Am. & Eng. Ency. Law, 1064; 1 Ross, Probate Law and Practice, p. 531; 1 Church, Probate Law, 700; Id. 749; Potter v. Lewin, 123 Cal. 146, 55 Pac. 783; Dampier v. St. Paul Trust Co., 46 Minn. 526, 49 N. W. 286; Hildebrand v. Kinney, 172 Ind. 447, 87 N. E. 832, 19 Ann. Cas. 788.

such claims shoud be presented for payment."

The above language must be construed sensibly, of course, for it is not to be considered that the government would be required to file a claim against an estate for taxes due upon the estate, either before or after the decease of the owner. Taxes are a primary obligation, and must be paid regardless of the presentation of any claim therefor. The same may be said of the court fees and costs incurred during the administration of the estate. In Ward v. Magaha, 71 Wash. 679, 129 Pac. 395, it was held that the proper presentation of the claim was a matter which the administrator or executor could not waive in view of our special statute of nonclaim; that "all claims against estates are collectible under the statute, and not otherwise;" that the statute says that "no holder of any claim against an estate shall maintain an action thereon, unless the claim shall have been first presented to the executor or administrator;" that "this section has been held mandatory by this court." The party rendering such service, if he sees fit or agrees with the administrator to do so, may look directly to the administrator for payment of his claim, being governed, of course, by another provision of the statute (section 1543, Rem. & Bal. Code), to the effect that no executor or administrator shall be chargeable to pay the debts of the testator or intestate, unless the claim or some memorandum or note thereof is in writing, signed by such executor or administrator, etc. If he claims that the estate is indebt

In this state we have several statutes relating to the presentation and allowance of claims against a decedent's estate. Section 1472, Rem. & Bal. Code, provides that, if a claim be not presented within one year after the first publication of the notice, it shall be barred. Section 1474, same, provides that, upon the presentation of such a claim properly verified, the administrator or executor shall allow or reject the same. If rejected, the claimant shall be notified forthwith. Section 1477 provides that, when a claim is rejected by the executor or administrator or the court, the holder must bring suit in the proper court against the executor or admin-ed to him for the value of his goods or servistrator within three months after its rejection, or the claim shall be forever barred. Section 1479 provides:

"No holder of any claim against an estate shall maintain an action thereon, unless the claim shall have been first presented to the executor or administrator."

ices and seeks to hold it liable, he should, under the provisions of section 1479, supra, authenticate and present his claim for allowance and approval as other debts of the estate, and when this is done it will be classified and paid according to its order of priority. Gammage v. Rather, 46 Tex. 105.

The judgment of the lower court is right, and is affirmed.

MORRIS, C. J., and MOUNT, PARKER, and BAUSMAN, JJ., concurring.

Section 1568 gives priority in the order of payment of debts and claims against the estate to funeral expenses. In view of section 1479 and of our construction thereof in Barto v. Stewart, 21 Wash. 605, 59 Pac. 480, we must still consider that the decisions in other states that a funeral claim, not being a debt against the decedent, is not within the statutes requiring a claim to be presented ROSS et ux. v. ERICKSON CONST. CO. et al.

to the executor or administrator do not apply in this state. In the Barto Case it was said:

(No. 12747.)

(Supreme Court of Washington. Feb. 17, 1916.) 1. MASTER AND SERVANT 872, New, vol. 16 Key-No. Series-INJURIES TO SERVANTWORKMEN'S COMPENSATION ACT-EFFECT OF.

"If we are to give effect to all the provisions of the statute, and the general rules of statutory construction applicable thereto, it is ob- The Industrial Insurance Law (Laws 1911, vious that the word 'claim' must have a uni- p. 345) provides that the state of Washington, form sense throughout the statute, and be held exercising its police and sovereign power, deto include every species of liability which the clares that all phases of the premises are withexecutor or administrator can be called on to drawn from private controversy, and sure and pay, or to provide for the payment of, out of certain relief for workmen, injured in extrathe general fund belonging to the estate. It is hazardous work, and their family and dependunreasonable to suppose that the Legislature ents, is provided, regardless of questions of would have made provision for the payment of fault, and to the exclusion of every other remecontingent claims by the executor or admin- dy, except as otherwise provided in the act.

Sections 5h and 12c provide for readjustment | the Erickson Construction Company, and was of compensation in case of aggravation of dis- injured in the course of his employment. ability, or if the circumstances so warrant; while section 6 provides that, if injury or death The accident occurred on the 21st day of Deresults to a workman from the deliberate inten- cember, 1913. Plaintiff was taken to the hostion of his employer to produce such injury or pital conducted by McGillivray, and remaindeath, the workman, his survivors, or depend-ed under his treatment until February 12, ents, shall have a cause of action for any excess of damages over the amount received in the act. The purpose of the act was to provide a system of industrial insurance. Prior to the act an employé, not only had an action for injuries received, but, if the master assumed to collect fees out of the wages of employés for the purpose of furnishing medical treatment, the employer was bound to exercise due care in selecting physicians, a failure rendering him liable for the malpractice of such physicians; while, if the master retained part of the employés' wages for his own benefit, agreeing to furnish medical service, he was answerable for the lack of skill of the physician furnished, or in case he failed to furnish one he was liable to the employé for the malpractice of one whom the employé secured. Held that, as the purpose of the act was to remove from the courts personal injury actions by employés, and the act was intended to cover, not only the injuries, but all aggravations, a servant, whose injuries were aggravated by the negligence of a physician engaged by the master and paid out of sums deducted from the wages of employés, having received an award under the act, cannot maintain a second action against the master and the physician for the malpractice.

2. CONSTITUTIONAL LAW 70-PROVINCE OF JUDICIARY-POLICE POWER.

As the determination of the measure of damages is within the police power of the state, the courts will not interfere with the awards provided for in the act.

[Ed. Note. For other cases, see Constitutional Law, Cent. Dig. §§ 129-132, 137; Dec. Dig. 70.]

3. MASTER AND SERVANT 872, New, vol. 16 Key-No. Series-WORKMEN'S COMPENSATION ACT-EFFECT.

The Industrial Insurance Law does not affect an employé's right of action for independent injuries after an injury for which he is entitled to compensation under the act, although the award will include all matters arising out of the original injury.

4. INSURANCE 615 ACTION DEFENSES -WORKMEN'S COMPENSATION ACT.

Accident insurance being a matter of private contract, the Industrial Insurance Law, providing for payment of fixed compensation to injured employés, will not affect their rights to recover on accident policies.

[Ed. Note. For other cases, see Insurance, Cent. Dig. §§ 1530, 1532-1534; Dec. Dig. 615.]

Department 1. Appeal from Superior Court, King County; J. T. Ronald, Judge. Action by Harry L. Ross and wife against the Erickson Construction Company and another. From a judgment for plaintiffs, defendants appeal. Reversed and remanded,

1914. McGillivray was employed to do the surgical and hospital work for the construction company, and was paid for his services out of a fund made up by deducting the sum of $1 from the monthly wages of the employés. After leaving the hospital plaintiff made claim under the Industrial Insurance Law and accepted a final award. This action was thereafter brought against the defendants for the recovery of damages laid in the sum of $15,000. A trial upon the merits was had, resulting in a verdict for plaintiffs in the sum of $1. A new trial was granted upon the grounds of newly discovered evidence. From the order granting a new trial defendants have appealed.

Appellants set up in their answer and maintained throughout the trial that no recovery could be had against either of them, for the reason that respondent Harry L. Ross had been compensated for all injuries resulting from the primary injury, or proximately attributable thereto. This contention is urged on appeal, and our conclusion will make it unnecessary to consider the questions raised by other assignments of error; for, if respondents cannot recover at all, other questions become academic. In discussing the question we shall consider the state of the law at the time the Industrial Insurance Law was passed, and the Industrial Insurance Law, its objects and purposes, its accomplishments, and its relation to causes of action that had theretofore been considered as independent of the primary cause of action.

[1, 2] At the time the Industrial Insurance Law was passed, one who had been injured by or through the negligence of an employer could maintain an action and recover all damages proximately traceable to the primary negligence. If the master assumed to collect fees out of the wage of the employé for the purpose of maintaining medical and surgical treatment and hospital service without deriving any profit therefrom, he was bound to exercise due care in providing a proper place for treatment and in selecting physicians and surgeons. A breach of this duty made him liable in damages for the malpractice of the physician or surgeon. Richardson v. Carbon Hill Coal Co., 10 Wash. 648, 39 Pac. 95; Wells v. Ferry-Baker Lbr. Co., 57 Wash. 658, 107 Pac. 869, 29 L. R. A. (N. S.) 426; Wharton v. Warner, 75 Wash. 470, 135 Pac. 235; Simon v. Hamilton Log Co., CHADWICK, J. Plaintiffs brought this ac- 76 Wash. 370, 136 Pac. 361; Wharton & tion for the recovery of damages alleged to Stille's Med. Jurisp. vol. 3, p. 505; Labatt's have been suffered by reason of the mal- Master & Servant, vol. 5, p. 6216. If the maspractice of defendant McGillivray. Plaintiff, ter retained a part of the fee for his own use Harry L. Ross, was employed by defendant and profit, he became liable as a principal For other cases see same topic and KEY-NUMBER in all Key-Numbered Digests and Indexes

with directions to dismiss.

Corwin S. Shank and H. C. Belt, both of Seattle, for appellants. George C. Congdon, of Seattle, for respondents.

with the physician and surgeon, and answer- | able for his negligence or lack of skill and learning. Sawdey v. Spokane Falls & Nor. Ry., 30 Wash. 349, 70 Pac. 972, 94 Am. St. Rep. 880; Richardson v. Carbon Hill Coal Co., 6 Wash. 56, 32 Pac. 1012, 20 L. R. A. 338; Labatt's M. & S. vol. 5, p. 6214; Wharton & Stille's Med. Jurisp. vol. 3, p. 506; Shearman & Redfield on Negligence, vol. 2, § 331. If the master did not employ medical and surgical attendance, the one suffering from his negligence could, using ordinary care and diligence only, employ his own physician or surgeon, and if he became the victim of malpractice he could recover his damages from the master. Baldwin v. Lincoln County, 29 Wash. 512, 69 Pac. 1081; Chicago City Ry. Co. v. Cooney, 196 Ill. 466, 63 N. E. 1029; City of Dallas v. Meyers (Tex. Civ. App.) 55 S. W. 742; Seeton v. Town of Dunbarton, 73 N. H. 134, 59 Atl. 944; Garrahan v. N. Y., N. H. & H. R. Co., 171 Mass. 211, 50 N. E. 610.

proceeding or compensation, except as otherwise provided in this act; and to that end all civil actions and civil causes of action for such personal injuries and all jurisdiction of the courts of the state over such causes are hereby abolished, except as in this act provided." Sess. Laws Wash. 1911, p. 345.

The Legislature undertook to withdraw "all phases of the premises from private controversy" and provide "sure and certain relief for workmen," and to that end abolished "all civil actions and civil causes of action for such personal injuries," and abolished all jurisdiction of the courts over such cases, except as in the act provided. The act was

"founded on the basic principle that certain defined industries, called in the act extrahazardous, should be made to bear the financial losses sustained by the workmen engaged therein through personal injuries, and its purpose is to furnish a remedy that will reach every injury Mc-industries, and make a sure and certain award sustained by a workman engaged in any of such therefor, bearing a just proportion to the loss sustained, regardless of the manner in which the injury was received." State ex rel. Davis-Smith Co. v. Clausen, 65 Wash. 175, 117 Pac. 1105, 37 L. R. A. (N. S.) 466.

In discussing the economic and sociological features of the law, the court, in the case just cited, noticed the omissions of the common law and the inadequacy of its remedies, and the purpose of the act to provide a remedy that would compensate for all injuries traceable to or incident to the hazards of the industry. The court notes that verdicts, just and unjust, had been rendered in personal injury cases:

One phase of the situation was that the workman might be compelled to try one action to secure compensation for the primary injury, and one or more to secure compensation for the secondary wrong; that is, the malpractice of the surgeon. Another phase, as the Legislature notes, was that "little of the cost of [to] the employer has reached the workman," and his remedies were "uncertain, slow, and inadequate." Then, too, the master might have to defend an action predicated upon the primary issue of negligence, and thereafter submit to a second recovery for "For the greater number of injuries the comthe final consequences resulting from the mal-mon law affords no remedy at all. For this practice of the physician employed by him. unscientific system, it is proposed to substitute Both master and servant were subject to the a system which will make an award in all cases of injury, regardless of the cause or manner of burden of protecting and defending rights its infliction; limited in amount, it is true, but within bounds limited only by the statute of commensurate in some degree to the disability State ex rel. Davis-Smith Co. v. limitations. Injustice to the laborer and suffered." Clausen, supra. hardships to the industries of the state alike called for some plan that would relieve the servant of the necessity of pursuing his remedy for compensation in the courts, and the master of the harassments, vexations, and uncertainties attending the trial of all cases

where men are called upon to defend against the charge of negligence.

The state, in the exercise of its sovereign power, recognized that the welfare of the whole people depends "upon its industries, and even more upon its wage-workers," and accordingly passed a law which was designed to compensate an injured workman, without reference to the manner of his injury, or the questions of negligence, contributory negligence, assumption of risk, or fellow servant. The state declared its power in the following comprehensive language:

"The state of Washington, therefore, exercising herein its police and sovereign power, declares that all phases of the premises are withdrawn from private controversy, and sure and certain relief for workmen, injured in extrahazardous work, and their families and dependents is hereby provided regardless of questions of

The purpose to remove "all phases of the premises" from the courts, and to put upon the contributing industries the burden of bearing the consequences of all injuries, and to make them bear the burden of caring for the injured man in the condition in which the state finds him, is recognized and emphasized in Peet v. Mills, 76 Wash. 438 (see page 439), 136 Pac. 685, 686, Ann. Cas. 1915D, 154: utes, seeking the correction of recognized er"It is a well-accepted rule that remedial statrors and abuses, in introducing some new regulation for the advancement of the public welfare, should be construed with regard to the former law, and the defects or evils sought to be cured, and the remedy provided; that, in so construing such statutes, they should be interpreted liberally, to the end that the purpose of the Legislature remedy be promoted, even to the inclusion of in suppressing the mischief and advancing the

cases within the reason, although outside the letter, of the statute. 36 Cyc. 1173."

See, also, page 440 of 76 Wash., 136 Pac. 686, Ann. Cas. 1915D, 154.

"To say, with appellant, that the intent of the act is limited to the abolishment of negligence as a ground of action against an employer

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