Lycette v. Green River Gorge, Inc.
| Decision Date | 27 November 1944 |
| Docket Number | 29423.,29424 |
| Citation | 21 Wn.2d 859,153 P.2d 873 |
| Court | Washington Supreme Court |
| Parties | LYCETTE v. GREEN RIVER GORGE, Inc., et al. TRETHEWEY et ux. v. SAME. |
Department 1.
Action by John P. Lycette against Green River Gorge, Inc., and others to foreclose a mortgage, consolidated with an action by W. J. Trethewey and his wife against Green River Gorge Inc., and others to set aside such mortgage and an easement. From a decree for plaintiff in first action, defendants appeal; and, from a dismissal in second action, plaintiffs appeal.
Reversed and remanded with directions in each instance.
Appeal from Superior Court, King County; James T. Lawler, judge.
Vanderveer Bassett & Geisness, of Seattle, for appellants.
Lycette Diamond & Sylvester, of Seattle for respondent.
Green River Gorge, Inc., is a domestic corporation which owned and operated a pleasure resort in King county. W. J. Trethewey and wife, who operated the corporation's resort for seventeen years, owned twenty-five per cent of the capital stock of the corporation. Elmer B. Campbell and wife owned seventy-five per cent of the capital stock of the corporation. John P. Lycette, who owned none of the stock of the corporation, was attorney for and also a director and secretary of the corporation. Mr. Campbell was president, Mrs. Campbell was vice-president, Mrs. Trethewey was treasurer of the corporation. The three directors of the corporation were Mr. Campbell, Mr. Trethewey and Mr. Lycette.
March 31, 1942, the Tretheweys commenced an action against the corporation to recover back salary in a considerable amount for their services as managers of the resort property. While the action was pending Mr. Campbell and Mr. Lycette met in the office of the latter and as president and secretary of the corporation these two executed a note in favor of Mr. Lycette in the amount of $1,250 to cover his services as attorney in defending the action brought by the Tretheweys. At the same time they executed a mortgage to secure payment of the note and granted to the Campbells, in consideration of their advancing money to pay court costs in the action, an easement for a pipe-line over the corporation's property and the right to use water from the corporation's reservoir. The real estate subject to the mortgage constitutes substantially all of the property owned by the corporation.
At the meeting to consider the matter of defending the corporation against the action instituted by the Tretheweys only two directors were present: Mr. Campbell and Mr. Lycette. Mrs. Campbell, a stockholder, was present, but Mrs. Trethewey, one of the three directors and a stockholder of the corporation, and her husband, who was a stockholder of the corporation, were absent. No formal meeting was held to decide the action the corporation should take, no written minutes were kept, and no notice was given to the Tretheweys of the meeting at which the mortgage to Mr. Lycette was executed in order to obtain his services as attorney to represent the corporation. Mr. Lycette testified that no notice was given to the Tretheweys because their position was antagonistic to the interests of the corporation and for the additional reason that if they had been notified they would have attached the property of the corporation.
The Tretheweys were successful in their action to collect unpaid salaries. Trethewey v. Green River Gorge, Inc., 17 Wash.2d 697, 136 P.2d 999.
An action was instituted in 1944 by Mr. Lycette against the corporation and the Tretheweys to foreclose the mortgage which had been executed to secure payment of the note representing his fee for services in defending the corporation in the above entitled suit. Answering, the Tretheweys pleaded that they were minority stockholders and that there was another action pending in which they sought to set aside and cancel the note given by the corporation to Mr. Lycette, and also to cancel the mortgage which Mr. Lycette sought to foreclose upon the ground that same were not authorized by the corporation and that the persons executing the instruments were disqualified by reason of personal interest from performing such acts for and on behalf of the corporation. In this action the court entered a decree in favor of the plaintiff.
The second action, which was consolidated with the first was brought by the Tretheweys against the corporation, the Campbells and Mr. Lycette to set aside mortgage and easement. Plaintiffs alleged that they were minority stockholders, that they secured a judgment in the amount of $10,373.52 against the corporation for unpaid salary, and that without notice to plaintiffs the note, mortgage and easement described above were executed without authority. Judgment was entered dismissing the action. The Tretheweys appealed from the decree and the judgment.
The first question presented is whether respondent corporation is liable to counsel for services rendered in the former action Trethewey v. Green River Gorge, Inc., supra.
The fact that the Campbells, who owned seventy-five per cent of the capital stock of the corporation, insisted on employment of counsel and resistance of action against the corporation by the Tretheweys, who owned twenty-five per cent of the capital stock of the corporation, did not transmute the action from one against the corporation to an action against the Campbells.
The president (E. B. Campbell) of respondent corporation retained counsel (Mr. Lycette) to defend an action brought by two creditors (Tretheweys), who were also minority stockholders of the corporation, to recover back salary for an amount in excess of all of the assets of the corporation. The president was the managing officer of the corporation and as such had authority to employ counsel without any express delegation of power to do so. McKevitt v. Golden Age Breweries Inc., 14 Wash.2d 50, 126 P.2d 1077. Having accepted the services rendered by counsel retained by its president, the corporation is obligated to pay the reasonable value of such services. It does not follow, however, that whether they acted in good or bad faith in so doing, two of the corporation's three directors, Mr. Campbell and Mr. Lycette were authorized to encumber or dispose of all of the corporate property to secure payment of Mr. Lycette's fee. Whatever the motives of the two directors the mortgaging of all of the corporation's property...
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