Helenius v. Chelius

• Decision Date: 10 October 2005
• Docket Number: No. 53739-3-I.,No. 53738-5-I.,53738-5-I.,53739-3-I.
• Citation: 120 P.3d 954,131 Wn. App. 421
• Court: Washington Supreme Court
• Parties: Kevin HELENIUS and Jane Doe Helenius, and their marital community, and Alan Tilley, Appellants/Cross-Respondents, v. Craig and Lynn CHELIUS, Adam Feuer and Jane Doe Feuer and their marital community, Brian DiJulio and Jane Doe DiJulio and their marital community; Paul Brogan and Jane Doe Brogan and their marital community; Randall Burke and Jane Doe Burke and their marital community; Roger McCracken and Jane Doe McCracken and their marital community; Respondents/Cross-Appellants, Questar Microsystems, Inc., a Washington corporation, Plaintiffs, v. Send.Com, Inc., a Washington Corporation, dba InstantCourier.com; SC & B Services, Inc., a Washington corporation; Jeffrey Tillman and Jane Doe Tillman and their marital community; Bruce Glant and Jane Doe Glant and their marital community; Steve Henn and Jane Doe Henn and their marital community, Defendants.

120 P.3d 954

131 Wn. App. 421

Kevin HELENIUS and Jane Doe Helenius, and their marital community, and Alan Tilley, Appellants/Cross-Respondents, v. Craig and Lynn CHELIUS, Adam Feuer and Jane Doe Feuer and their marital community, Brian DiJulio and Jane Doe DiJulio and their marital community; Paul Brogan and Jane Doe Brogan and their marital community; Randall Burke and Jane Doe Burke and their marital community; Roger McCracken and Jane Doe McCracken and their marital community; Respondents/Cross-Appellants, Questar Microsystems, Inc., a Washington corporation, Plaintiffs, v. Send.Com, Inc., a Washington Corporation, dba InstantCourier.com; SC & B Services, Inc., a Washington corporation; Jeffrey Tillman and Jane Doe Tillman and their marital community; Bruce Glant and Jane Doe Glant and their marital community; Steve Henn and Jane Doe Henn and their marital community, Defendants.

No. 53738-5-I.

No. 53739-3-I.

Court of Appeals of Washington, Division One.

October 10, 2005.

COPYRIGHT MATERIAL OMITTED

David Lenci, Preston Gates & Ellis LLP, Catherine Drews, Foster Pepper & Shefelman PLLC, Seattle, WA, for Appellants.

Phillip Edgerton Cutler, Robert Nylander, Cutler Nylander & Hayton PS, Mark Stephen Davidson, Williams Kastner & Gibbs PLLC, Gary Marshall, Attorney At Law, Leonard J. Feldman, Malaika M. Eaton, Heller Ehrman LLP, Catherine Smith, Edward Sieh Smith & Goodfriend, Seattle, WA, for Respondents.

Larry Halvorson, Halvorson & Saunders PLLC, S. Richard Hicks, Attorney At Law, Bruce Wolf, Law Office of Bruce A Wolf PS, Seattle, WA, for Other.

OPINION PUBLISHED IN PART

SCHINDLER, J.

¶ 1 In exchange for Questar Microsystems, Inc.'s (Questar), and its owners', H. Alan Tilley and Kevin Helenius, agreement to sell their Send.com stock, Send.com assumed the Questar liabilities identified in the December 9, 1998 Stock Purchase Agreement (SPA) and agreed to indemnify and hold harmless Questar, Helenius and Tilley on these liabilities. One of the assumed liabilities was for wage claims of two former Questar employees, Craig Chelius and Adam Feuer. When Send.com refused to indemnify Questar, Helenius and Tilley on Chelius' and Feuer's May 2000 judgment, Questar, Helenius and Tilley sued Send.com for specific performance and breach of the SPA. After learning about an agreement between Send.com and Chelius and Feuer to prevent Questar, Helenius and Tilley from enforcing their rights to indemnification under the SPA, they amended their complaint naming the Send.com directors, and Chelius and Feuer as defendants and asserted claims for violation of the Washington State Securities Act (WSSA), abuse of process and tortious interference.

¶ 2 In a detailed and lengthy memorandum decision, the trial court ruled that Send.com breached the SPA; that Send.com and the Send.com Directors' intentional misrepresentations about settlement of Chelius' and Feuer's wage claim and the Agreement between Send.com and Chelius and Feuer violated the WSSA; and that Chelius and Feuer were liable for tortious interference and abuse of process. The court awarded Questar approximately $277,000 for Send.com's breach of the SPA. The award included $147,000 owed to Helenius and Tilley and the attorneys' fees incurred by Questar, Helenius and Tilley in the Chelius and Feuer wage claim lawsuit. As a remedy for Send.com and the Send.com directors' violation of the WSSA, the trial court ordered rescission of Helenius' and Tilley's SPA stock sale, enjoined enforcement of Chelius' and Feuers' judgment against Questar, Helenius and Tilley, and awarded attorneys' fees. For Chelius' and Feuer's tortious interference with the SPA and abuse of process, the court awarded Helenius and Tilley nominal damages but ruled that Chelius' and Feuer's judgment was void. Helenius and Tilley, Send.com directors Brian DiJulio, Paul Brogan, Randall Burke and Roger McCracken, and former Questar employees Chelius and Feuer, appeal. We affirm the trial court's decision.

FACTS

¶ 3 In 1979, Tilley founded Questar, a company that manufactured electronic and computer devices for use as industrial controls. Questar was a moderately successful company with twenty employees and annual revenues of approximately $1.3 million. In 1994, Helenius joined Questar as CEO and became a co-owner.

¶ 4 In the mid-1990's, Helenius and Tilley decided to develop the technology for an electronic document delivery system for business documents. To raise capital to develop the Internet Document Delivery System (IDD), Helenius and Tilley sold some of their Questar stock to private investors including Brian DiJulio, a licensed securities broker, Paul Brogan, a retired Boeing executive, Randy Burke, who runs a family-owned electrical contracting company, and Roger McCracken, a real estate investor and property manager. In 1996 and early 1997, Questar hired Craig Chelius and Adam Feuer to work on developing and marketing the IDD software.

¶ 5 By January 1998, Questar was in debt over $1 million and had virtually no operating capital. When Feuer and Chelius left in December 1997 and January 1998, Questar owed them over $170,000 in unpaid wages. At the time, Chelius offered to buy the IDD software for $600,000 but Helenius and Tilley believed the IDD software was worth much more and rejected Chelius' offer. In the spring of 1998, Chelius and Feuer sued Questar, Helenius and Tilley for the unpaid wages Questar owed them.

¶ 6 In early 1998, in an attempt to attract more investors, Helenius and Tilley restructured Questar and incorporated two wholly-owned subsidiaries, Westar and Send.com. Questar's industrial controls business assets were transferred to Westar. Questar's IDD software was transferred to Send.com subject to a "Source License Agreement."¹ Under the Source License Agreement, Questar gave Helenius and Tilley a non-exclusive license to use the IDD software. After Questar's assets were transferred to Westar and Send.com, Questar was left with approximately $1 million in liabilities and virtually no assets.

¶ 7 The Questar reorganization was approved at a shareholder meeting in June 1998. The minority shareholders exchanged their Questar stock for Send.com stock, one-for-one. Helenius and Tilley exchanged 80 per cent of their Questar stock and received one share of Send.com for each two Questar shares. The reorganization resulted in Helenius and Tilley owning 100 percent of Questar, and effectively controlling Send.com through their 40 percent ownership of Send.com stock and Questar's 21 percent ownership of Send.com stock. The Send.com Board of Directors consisted of DiJulio, Helenius and McCracken. DiJulio was also the President of Send.com.

¶ 8 After Send.com was incorporated, it attracted interest from investors and the Board explored alternatives for developing and marketing the IDD software.² DiJulio located a Texas software company, "Instant Documents," that was interested in acquiring Send.com's IDD software.³ In June 1998, DiJulio began negotiations with Instant Documents. After negotiations with Instant Documents fell through, DiJulio decided he wanted to acquire the IDD software for his own company, "Instant Courier."⁴

¶ 9 In September 1998, DiJulio resigned from the Send.com Board to negotiate with Send.com on behalf of his company, Instant Courier.⁵ Two critical issues discussed during the negotiations with DiJulio were Questar's liabilities and the IDD license retained by Helenius and Tilley. Creditors who had waited during the Instant Document negotiations were pressing their claims and seeking payment. DiJulio agreed to assume Questar's liabilities in exchange for acquiring IDD software. DiJulio also assumed responsibility to negotiate a settlement of Chelius' and Feuer's wage claim lawsuit against Questar. In October 1998, DiJulio told Helenius that Chelius and Feuer agreed to settle the wage claim lawsuit.

¶ 10 In November 1998, the relationship between Helenius, DiJulio and the Send.com Directors soured, in part, because Helenius was unwilling to relinquish his license for the IDD software to facilitate a deal with DiJulio's company. Helenius resigned from the Send.com board. Negotiations with DiJulio's company, Instant Courier, were abandoned and Send.com hired DiJulio to oversee the IDD project. Send.com then entered into negotiations to buy out Questar's, Helenius' and Tilley's interests in Send.com and assume Questar's liabilities.

¶ 11 On December 9, 1998, Send.com and Questar, Helenius and Tilley entered into a Stock Purchase Agreement (SPA). In exchange for Questar's, Helenius' and Tilley's Send.com stock, Send.com agreed to assume responsibility for certain Questar liabilities that were listed and identified in Exhibit A of the SPA.⁶ Send.com agreed to indemnify and hold harmless Questar, Helenius, and Tilley from the liabilities in Exhibit A and pay Helenius and Tilley $100,000. Under the SPA, Send.com assumed over $1 million dollars in Questar liabilities.

¶ 12 One of the liabilities identified in Exhibit A of the SPA was Chelius' and Feuer's $173,000 wage claim. Another liability identified was $147,000 owed to Tilley and Helenius. Send.com agreed in the SPA to pay the amount owed Helenius and Tilley pro-rata with the other assumed liabilities. The SPA also specifically refers to the already negotiated settlement of Chelius' and Feuer's wage claims:

(2) Purchaser will pay the $147,900 Assumed Liability payable to Alan Tilley and Kevin Helenius either (a) pro-rata with all Assumed Liabilities exclusive of those settlements already negotiated and undisputed unpaid claims of former Questar hourly employees, or (b) pursuant to a mutually agreed monthly installment agreement.⁷

¶ 13 Despite DiJulio's repeated assurances that Chelius and Feuer had agreed to settle their wage claims, no settlement agreement was executed and the lawsuit against Questar, Helenius and Tilley proceeded to trial in fall 1999. The trial court found in favor of Chelius and...