Harrison v. Puga

• Decision Date: 11 January 1971
• Docket Number: No. 372--41330--I
• Citation: Harrison v. Puga, 480 P.2d 247, 4 Wn.App. 52 (Wash. App. 1971)
• Court: Washington Court of Appeals
• Parties: , 46 A.L.R.3d 415 W. Bradford HARRISON and Merle H. Davis, Respondents, v. George PUGA and Jane Doe Puga, his wife, Appellants.

Page 52

4 Wn.App. 52

480 P.2d 247, 46 A.L.R.3d 415

W. Bradford HARRISON and Merle H. Davis, Respondents, v. George PUGA and Jane Doe Puga, his wife, Appellants.

No. 372--41330--I.

Court of Appeals of Washington, Division 1, Panel Two.

Jan. 11. 1971.

Robinson, Landerholm, Memovich, Lansverk, Whitesides & Marsh, Dale V. Whitesides, Vancouver, for appellants.

John Ranquet, Seattle, for respondents.

HOROWITZ, Acting Chief Judge.

Plaintiffs Harrison and Davis recovered a joint judgment against the defendants individually and as a marital community in the sum of $16,000 for monies advanced or paid. Defendant George Puga, hereinafter referred to as defendant, and his wife, appeal. Defendants make no attempt to distinguish between themselves on the question of liability nor do they otherwise complain of the form of the judgment. Accordingly, we likewise do not differentiate between them nor do we pass on the form of the judgment.

The evidence supports the following statement of the case. Prior to March 29, 1967, plaintiffs resided in Seattle, Washington and defendants resided in Portland, Oregon. They met in Seattle. While there, they orally agreed to go into a cable television business together in the Portland, Oregon area. In that connection, they discussed the purchase of defendant's Happy Valley Cable Television System in Clackamas County, Oregon, the system being worth about $10,000. Plaintiffs paid defendant George Puga $200 for an option to purchase it.

The parties next met in Portland, Oregon for further discussions. They contemplated that 100 per cent outside financing would be sought be plaintiffs to finance the acquisition of a new cable television system. Each party would then have an equal share of that part of the ownership not taken by the person supplying the financing. The parties then orally agreed to invest $500 each by way of stock subscriptions in the corporation to be formed. To pay the $1,000 investment required of them, plaintiffs paid an additional $800. This sum, together with the $200 theretofore paid, made up the agreed capital stock investment.

About March 27, 1967, defendants' attorney in Portland prepared a written contract (hereafter referred to as contract) embodying their understanding and mailed it to the plaintiffs in Seattle, Washington for signature. After the plaintiffs signed the contract in Seattle, they mailed it back to Portland where it was signed by the defendant.

The contract names the defendant and each plaintiff as parties. The recitals in the contract state the relationships and thinking of the parties. Paragraph one recites that Harrison and Davis are desirous of entering into the cable television business in Portland, Oregon; that Puga is the owner and operator of a cable television system in the Happy Valley area of Portland. Paragraph two states that Harrison and Davis desire to form an Oregon corporation to engage in the cable television business and desire to acquire the Happy Valley Cable Television System for said corporation and secure the personal services of Puga as senior manager for the corporation. Paragraph three states that the parties recognize the necessity of obtaining financing and that it may be necessary to sell a controlling interest in the corporation to be formed.

Paragraph four of the contract contains the provisions of particular interest in the instant case. It provides in part:

To accomplish this purpose the parties agree as follows:

A. Puga agrees that if before June 29, 1967, the following conditions are met, he will transfer all his right, title and interest in and to his Happy Valley Cable T.V. system to the corporation to be formed:

CONDITIONS

1. He has been paid the sum of $20,000.00.

2. The corporation to be formed has been formed in the manner later set forth herein.

3. The corporation to be formed has executed a contract with him to employ him for a period of 5 years as set forth later herein.

B. Harrison and Davis agree:

1. To advance the expense, including legal fees, of the formation of the corporation.

2. To forthwith execute and file Articles of Incorporation for Cascade Cablevision Inc. an Oregon corp.

D. The parties agree to use their best efforts to obtain a franchise for a cable television system from the City of Portland for the East Portland area.

The contract contains other provisions describing the nature of the corporation to be formed, providing for equal $500 stock subscriptions and describing the nature of the defendant's employment contract to be entered into. The contract neither contains a clause making time of the essence nor a clause providing for forfeiture.

Promptly after the contract was signed, Cascade Cablevision, Inc. was formed with the defendant as president and general manager and with the plaintiffs as the other officers. The corporation by written contract employed the defendant at a monthly salary of $1,000 and entered into other financial commitments. Defendant undertook his duties as general manager on April 1, 1967. Between April 27, 1967 and September 28, 1967, the corporation paid the defendant a total salary of $6,000, reimbursed him for his automobile expenses for several trips to Seattle, and paid other corporate expenses for defendant's mail and telephone calls to Seattle. The sole, or virtually the sole, monies obtained by the corporation came from payments made by the plaintiffs.

Plaintiffs sought to obtain the 100 per cent financing contemplated. Pending the receipt of that financing, defendant and Cascade Cablevision, Inc. wanted money. In addition to the $1,000 earlier paid into the corporation, plaintiffs, between April 3, 1967 and August, 1967 and at defendant's request, paid or advanced $15,000. Of the $16,000, plaintiff Harrison paid or advanced $12,700 and plaintiff Davis paid or advanced $3,300. The advances to Cascade Cablevision, Inc., made at defendant's request, consisted of an advance of $5,000 on April 3, 1967 and $2,500 in August, 1967. The payment to the defendant consisted of two payments, one on May 27, 1967 in the sum of $5,000 and one on July 30, 1967 in the sum of $2,500. Defendant retained the sums paid to him. The corporation subsequently expended the total sums paid to it, by way of salary to the defendant, acquisition of certain corporate assets and expenses.

Shortly after formation, Cascade Cablevision, Inc., in its own name, acquired certain assets needful in the enterprise. In addition, defendant, on or about April 10, 1967, in the performance of his duties for the corporation, but in his own name, acquired a necessary and valuable franchise to install a cable television system in the eastern half of Multnomah County, Oregon. About September 8, 1967 defendant, again in his own name, obtained a necessary and valuable pole attachment agreement for use in connection with the cable television system authorized by the franchise. The value of the franchise and pole attachment agreement was $50,000. Defendant mailed copies of the franchise and pole attachment agreement and maps to the plaintiffs in Seattle. Defendant explained that the franchise and pole attachment agreement were taken in his own name as a matter of convenience because Cascade Cablevision, Inc. was insolvent. Meanwhile, plaintiffs were continuing their efforts to obtain the 100 per cent outside financing contemplated. In July, 1967, plaintiffs introduced defendant to a company known as H & B American as a possible source of future financing. As later shown, that company, sometime after December 13, 1967, supplied the defendant with the financing needed.

It began to be evident as early as October, 1967, that plaintiffs, despite their continuing efforts to do so, were apparently unable to obtain the financing contemplated. By December, 1967, after fruitless meetings in Seattle and Portland, this inability to obtain financing continued. Plaintiffs, however, had not abandoned their efforts. The court impliedly declined to credit defendant's testimony that in December, 1967, plaintiff Harrison notified defendant that plaintiffs could not exercise their 'option' and that defendant should act to preserve his own interest as best he could.

Meanwhile, defendant had made other contacts for outside financing. On December 13, 1967, defendant mailed a letter to the plaintiffs in Seattle, notifying them that the contract between the parties was terminated and that the defendant was no longer under any obligation to the plaintiffs. Defendant had not theretofore sent or given notice to the plaintiffs setting forth this position or giving plaintiffs an opportunity to finally comply with the condition as to payment described in paragraph four A of the contract.

Thereafter, defendant treated all of Cascade Cablevision, Inc.'s assets as his own. He formed a new corporation, Radiant Cable Systems, Inc., to which he transferred Cascade Cablevision, Inc.'s assets, including the franchise and pole attachment agreement theretofore held in defendant's own name. In February, 1968, defendant caused Radiant Cable Systems, Inc. to be merged with another corporation in which H & B American--the company to which plaintiffs had introduced defendant--obtained an interest. Defendant ultimately received the sum of $45,000 in cash plus 20 per cent of the outstanding stock in Radiant Cable Systems, Inc., together with a monthly employment agreement for the assets received and his Happy Valley Cable System.

Plaintiffs treated defendant's letter of December 13, 1967 as a breach of contract, and made demand upon defendants to repay the $16,000 above described. Upon defendants' refusal to comply, this litigation followed.

Defendants' 16 assignments of error fall into three categories: the sufficiency of the evidence to support the findings; the sufficiency of the findings to support the conclusions concerning defendants' liability; and the sufficiency of the evidence to show jurisdiction of the court below...