Lee v. Ferryman, 19822-3-II

Citation88 Wn.App. 613,945 P.2d 1159
Decision Date31 October 1997
Docket NumberNo. 19822-3-II,19822-3-II
CourtCourt of Appeals of Washington
PartiesDarrell E. LEE, and The New Portland Meadows, Inc., Respondent, v. H.E. "Gene" FERRYMAN, Appellant.
Douglass Alan North, Maltman Reed North Ahrens & Malnati, Seattle, Ernest Lee Nicholson, Weber & Gunn, Vancouver, for Respondent

Darrell Eugene Lee, Lee & Associates, Vancouver, for Appellant.

BARBARA A. MADSEN, Judge Pro Tem. 1

This case arises out of a breach of contract action between two co-equal stockholders of The New Portland Meadows Inc. (TNPM), an Oregon corporation which operates the Portland horse racing track. The Clark County Superior Court granted summary judgment in favor of Plaintiff, Darrell Lee, holding that Defendant, Gene Ferryman, had activated the buy-out provisions of the company's "Stock Purchase Agreement." As a result, the trial court granted specific performance to Lee, compelling Ferryman to sell his stock in TNPM to Lee. Ferryman appeals this ruling and argues that a prior determination made by the Multnomah County Circuit Court of Oregon barred relitigation of this issue on collateral estoppel grounds. We agree and reverse the trial court's grant of summary judgment.

FACTS

Darrell Lee acquired The New Portland Meadows Inc. in 1991. While in the midst of financial troubles, Lee solicited the assistance of H.E. "Gene" Ferryman by requesting a loan in the amount of $250,000. Ferryman agreed to the loan and at the same time purchased an option to buy 50 percent of the total stock in TNPM Inc. This option was subsequently exercised and Ferryman and Lee became co-equal stockholders of the race track.

The agreement between Lee and Ferryman is embodied in two final written and signed documents executed in the fall of 1992, "The Amended Agreement Between Shareholders" (Amended Agreement) and "The Stock Purchase Agreement" (SPA). The Amended Agreement provides that Lee is to be President of TNPM and Ferryman is to be Vice President and Secretary/Treasurer. The second agreement, the SPA, sets forth a number of exigencies which would allow a buy-out of one of the parties pursuant to the terms of the agreement. Most importantly, in the case of a unilaterally declared deadlock in the management of TNPM, the defecting party has the option to demand in writing that they be bought out by the other shareholder. As Section Three of the SPA states:

Should there ever arise a situation in which the shareholders are deadlocked in the management of the affairs of the company and they are unable to resolve the deadlock, then either party may demand in writing of the other shareholder that he acquire the shares of stock of the demander.

Clerk's Papers at 210.

The initial optimism both parties shared in creating a profitable business venture began to fade as the fiscal status of TNPM rapidly declined. In the course of this financial downturn, litigation between the parties ensued. Two separate suits are relevant to this appeal: (1) the action filed by Ferryman in the Multnomah County Circuit Court of Oregon; and (2) the instant case filed by Lee in

Clark County Washington. Because the procedural history of these cases is long, only those details relevant to this appeal will be mentioned.

(1) Multnomah County Circuit Court

On April 7, 1993, Ferryman filed suit against Lee and TNPM in the Multnomah County Circuit Court of Oregon. In the complaint, Ferryman alleged that Lee had mismanaged the corporate assets of TNPM and that irreparable injury to TNPM was imminent because a deadlock existed between Ferryman and Lee. Ferryman sought appointment of a custodian to manage the affairs of TNPM, dissolution of the corporation, and an equitable distribution of the corporation's assets. In the alternative, he sought a decree removing Lee as a director of TNPM and barring his election to the TNPM Board for two years. In his answer, Lee asserted, by way of affirmative defense and counterclaim, that Ferryman had triggered the buy-out provision of the SPA. On October 4, 1993, Lee moved for summary judgment on this counterclaim. This motion was denied by an order of November 19, 1993. Immediately thereafter, Lee voluntarily withdrew his counterclaims against Ferryman and a dismissal was entered.

After several modifications Ferryman submitted his third amended and supplemental complaint, which sought: (1) an order dissolving TNPM or alternatively a ruling allowing TNPM or Ferryman to acquire Lee's stock; (2) a decree permanently barring Lee from TNPM's Board; (3) a declaratory judgment that Ferryman was not required to vote for Lee as President of TNPM; (4) a declaratory judgment that Ferryman had not breached the SPA as claimed by Lee; and (5) attorney fees and costs. On April 14, 1995, Ferryman filed a motion for partial summary judgment on the fourth claim for relief. After a memorandum of law and affidavits were submitted by Lee, the Oregon court granted Ferryman's summary judgment motion. An order was signed on May 30, 1995, and entered on June 5, 1995. This order was embodied in a final Oregon Lee appealed the judgments of the Multnomah County Circuit Court, which have been affirmed without opinion by the Oregon Court of Appeals.

Rule of Civil Procedure (ORCP) 67B 2 summary judgment entered on July 10, 1995, which explicitly stated that Ferryman had not triggered the buy-out provision of the SPA by declaring a deadlock and refusing to implement the provisions of the Agreement.

(2) Clark County Superior Court

Two days after Gene Ferryman's filing in Oregon, on April 9, 1993, Darrell Lee, with TNPM as a co-plaintiff, initiated the present action in the Clark County Superior Court. Lee's initial complaint sought monetary damages for the alleged misappropriation of TNPM corporate funds by Ferryman. 3 After the initial complaint, this action remained dormant until November 8, 1994, when Lee filed an amended complaint, dismissing TNPM as a plaintiff and substituting Vicki Lee, Lee's wife. Additionally, the new complaint alleged that Ferryman triggered the buy-out provision of the SPA by filing a lawsuit against Lee in Oregon. Lee alleged that the filing of suit constituted a written demand by Ferryman that he be bought out under the terms of the SPA, and Lee sought specific performance compelling Ferryman to sell his TNPM shares.

On March 14, 1995, the Lees filed a motion for partial summary judgment on the question of whether Ferryman had triggered the buy-out provision of the SPA. A hearing was held on April 11, 1995, at which time the court took

the motion under advisement. On June 2, 1995, the trial court orally granted the Lees' motion for summary judgment. In an order entered on August 4, 1995, the court found that Ferryman had triggered the buy-out provision of the SPA by filing a lawsuit against Darrell Lee and TNPM in the Multnomah County Circuit Court of Oregon. (CP 826) Ferryman appeals this ruling.

ANALYSIS

This is an appeal from a grant of summary judgment in favor of Lee. In such cases an appellate court engages in the same inquiry as the trial court. Ferryman, the non-moving party, is entitled to have all facts and reasonable inferences therefrom viewed in the light most favorable to him. Hanson v. City of Snohomish, 121 Wash.2d 552, 556, 852 P.2d 295 (1993); Scott v. Pacific West Mt. Resort, 119 Wash.2d 484, 487, 834 P.2d 6 (1992). Lee, as the moving party, has the burden of demonstrating that there are no genuine issues of material fact and he is entitled to judgment as a matter of law. Hartley v. State, 103 Wash.2d 768, 698 P.2d 77 (1985). Questions of law are reviewed de novo. Hanson, 121 Wash.2d at 556, 852 P.2d 295.

FULL FAITH AND CREDIT

Ferryman argues that pursuant to art. IV, § 1 of the U.S. Constitution, the Full Faith and Credit Clause, the Clark County Superior Court is bound to give collateral estoppel effect to the final judgment of the Multnomah County Circuit Court of Oregon. Article IV, section 1 provides:

Full faith and credit shall be given in each state to the public acts, records, and judicial proceedings of every other state. And the congress may by general laws prescribe the manner in which such acts, records and proceedings shall be proved, and the effect thereof.

U.S. Const. art. IV, § 1. This constitutional provision has been codified by both Congress, 28 U.S.C. 1738, and the Washington Legislature, RCW 6.36.025.

The Full Faith and Credit Clause requires that "[a] judgment rendered by a court of one state, if valid, is entitled to recognition in the courts of another state by virtue of the full faith and credit clause." Effert v. Kalup, 45 Wash.App. 12, 14, 723 P.2d 541 (1986); see also: Riley et al. v. New York Trust Co. et al., 315 U.S. 343, 349, 62 S.Ct. 608, 612, 86 L.Ed. 885 (1942); 47 Am.Jur.2d Judgments 1218 (1969). "If the foreign court had jurisdiction of the parties and of the subject matter, and the foreign judgment is therefore valid where it was rendered, a court of this state must give full faith and credit to the foreign judgment and regard the issues thereby adjudged to be precluded in a Washington proceeding." In re Wagner, 50 Wash.App. 162, 166, 748 P.2d 639 (1987). Moreover, enforcement of a valid sister state judgment may not be denied, even if the claim upon which the judgment was based could not have been entertained in a Washington court. See Roche v. McDonald, 275 U.S. 449, 48 S.Ct. 142, 72 L.Ed. 365, 53 A.L.R. 1141 (1928), reversing 136 Wash. 322, 239 P. 1015, 44 A.L.R. 444 (1925). In effect, the Full Faith and Credit Clause compels an end to litigation. When a state court, having jurisdiction of the parties and subject matter, renders a final judgment, that judgment controls in other states to the same extent as it does in the state where rendered. Riley, 315 U.S. at 349, 62 S.Ct. at 612.

Lee does not dispute the jurisdiction of the Multnomah County Circuit Court, nor does he dispute that the Oregon judgment was...

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