Priestley v. Peterson

• Decision Date: 21 January 1944
• Docket Number: 29132.
• Citation: Priestley v. Peterson, 145 P.2d 253, 19 Wn.2d 820 (Wash. 1944)
• Parties: PRIESTLEY v. PETERSON et al.
• Court: Washington Supreme Court

145 P.2d 253

19 Wn.2d 820

PRIESTLEY v. PETERSON et al.

No. 29132.

Supreme Court of Washington, En Banc.

January 21, 1944

Rehearing Denied March 6, 1944.

Action by Elna G. Priestley against Emil Peterson and others for installments on a property settlement agreement. From a judgment for plaintiff, defendants appeal.

Reversed with directions.

Appeal from Superior Court, King County; Hugh Todd, Judge.

Weter Roberts & Shefelman and Wayne C. Booth, all of Seattle, for appellants.

H. A Martin, of Seattle, for respondent.

BEALS Justice.

The persons concerned in the operations which resulted in this litigation are:

Apex Gold Mines, Inc., a Washington corporation (herein referred to as Apex), having a capital stock of ten million shares which in 1940 was the owner of a lease on a gold mine located in the Cascade mountain range, which lease at that time had approximately ten years to run.

William J. Priestley and Elna G. Priestley, who in 1937 were husband and wife, and who, October 29th of that year, entered into an agreement for the purpose of settling, as between themselves, their property rights. At the time of the making of the agreement referred to, Mr. and Mrs. Priestley owned a large amount of the capital stock of Apex Gold Mines, Inc., their joint holdings aggregating 4,450,000 shares.

J. G. Priestley, a brother of William J. Priestley, a resident of the city of Seattle.

Reeves Aylmore, an attorney at law practicing in Seattle.

Emil Peterson, who was then also a resident of Seattle.

The agreement above referred to, entered into by Mr. and Mrs. William J. Priestley, after reciting that the parties thereto were husband and wife, and that differences had arisen between them which rendered it mutually advantageous to settle their property rights, continued by describing nine parcels of real estate in King county and a group of mining claims owned by the parties, and stated that they also owned a large amount of stock in Apex, some of which stood in Mr. Priestley's name, other shares standing in the name of his wife. The parties then stated their agreement that: '* * * for the purpose of this settlement the parties agree that a half (1/2) interest in all of the property owned or acquired by the parties hereto shall be fixed at Thirty-five Thousand ($35,000.00) Dollars.'

The agreement then continues:

'Now therefore, second party shall, upon the payments being made as hereinafter provided, convey to first party all her interest in and to all of the above described property and any other property belonging to the parties whether mentioned or not, and in consideration thereof, first party shall pay second party the sum of Thirty-five Thousand ($35,000.00) Dollars, as hereinafter provided.

'First party shall pay to second party the sum of One Thousand ($1000.00) Dollars in cash and the further sum of One Hundred and Twenty-five ($125.00) Dollars per month beginning December 1, 1937, all payments to apply upon the said sum of Thirty-five Thousand ($35,000.00) Dollars, which is to be paid without interest. In the event the Apex Gold Mines, Inc., becomes a producing property so that first party is able to draw therefrom his full salary as now agreed upon between him and said corporation, said payments to second party shall then be increased to the sum of One Hundred and Fifty ($150.00) Dollars per month. In addition thereto, in the event that said Apex Gold Mines, Inc., pays any dividends, one-half of the dividends so paid shall be applied upon the extinguishment of said Thirty-five Thousand ($35,000.00) Dollars.

'When the monthly payments are increased to One Hundred and Fifty ($150.00) Dollars per month, second party agrees to remove from the premises now occupied by the parties hereto as a home.

'First party shall endorse over and give to second party as security 25 shares of Seattle First National Bank stock and 5 shares of Puget Sound Power & Light Company stock. Second party shall not dispose of either of these stocks save in the event that first party becomes delinquent in the monthly payments provided for herein. In the event he does become so delinquent, second party shall have the right to dispose of either or both of these stocks as her necessities require, but the proceeds secured by her from said sale, or sales, shall be applied toward the extinguishment of said Thirty-five Thousand ($35,000.00) Dollars.'

The agreement contains certain other provisions not material to the questions here presented.

It appears that some time after the execution of this agreement, Mr. and Mrs. Priestley were divorced.

William J. Priestley was a practical miner, and at some previous time had been connected with the operation of the mining property upon which Apex held a lease. In the winter of 1940, the mine was not being operated, and it was supposed that mining operations upon its property might be resumed to advantage. At this time Mr. Priestley was indebted to Elna G. Priestley in an amount approximating $30,000, according to the terms of the agreement between them, hereinabove referred to, and it seems to be agreed that he was then delinquent in payments due to Mrs. Priestley, under the agreement, in the sum of $2,500. Mrs. Priestley was demanding that the delinquent payments be made, and Mr. Priestley was endeavoring to find a person able and willing to take over the contract upon terms to be agreed upon. In this connection, he consulted his brother, J. G. Priestley, who in turn spoke to Mr. Aylmore concerning the matter.

Emil Peterson, a man of considerable means, had been a client of a deceased attorney who had been an office associate of Mr. Aylmore, and after the death of his associate, Aylmore had attended to some legal matters for Mr. Peterson, who had made considerable money as the result of mining operations in the Philippine Islands. At Aylmore's suggestion, Peterson became interested in the project of operating the Apex mine, and finally agreed to advance $20,000, as he testified, for the purpose of enabling Apex to resume mining operations, it being understood that Aylmore, J. G. Priestley and Peterson would be jointly interested in the project, though the nature of the contributions to be made by Aylmore and Priestley does not clearly appear. These three persons were, of course, primarily concerned with gaining control of the corporation by taking over a majority of its capital stock. Of the 4,450,000 shares owned by William J. and Elna G. Priestley, 950,000 shares stood on the books of the corporation in Mrs. Priestley's name, William J. Priestley owning the balance. In order to obtain stock control, it was necessary that Mrs. Priestley's 950,000 shares be included, and she was demanding that Before she relinquished her stock, or released Mr. Priestley's stock from her claim, her contract with her former husband be put in good standing, and, as she claims, be underwritten by some responsible party.

Emil Peterson was then a man sixty-five years of age, who had gone to the Philippines as a soldier in the United States army during the Spanish American war, and who, after the war, had settled in the Islands, where he was employed as foreman in a candy factory. He is a man of little education, as he testified, having 'got into what they called the fourth reader.' He never completed even a grade school course. Due to a fortunate investment in stock in a gold mine in the Islands, he became quite wealthy, and some time prior to 1940 had returned to the United States and taken up his residence in Seattle. He was never in business for himself, always having worked for others. He was willing to engage in a business venture which appeared likely to result profitably, by investing money therein, but was not willing to undertake the responsibility of any business management. It appears that in response to a suggestion that he guarantee the William J. Priestley contract with Elna G. Priestley, Peterson absolutely refused to do so, but was willing to advance $20,000 to reopen the Apex mine, provided that he and his associates could control the majority of the corporate stock.

After these negotiations, Aylmore wrote J. G. Priestley the following letter:

'Carrying out our verbal discussion in connection with taking over the management and control of the Apex Mine. In talking with my client and discussing the matter thoroughly, we have these propositions to make:

'1. The transfer from you to the undersigned, of all of the stockholdings of Mr. W. J. Priestley, amounting to approximately four and one-half million shares.

'This transfer of the stockholdings does not mean actual division thereof, but the control of the stock subject to distribution to the proper parties interested must be in the undersigned.

'In return for this control, I will place at your disposal the necessary cash money, the amount now definitely known as approximately $2,500.00, to clean up the lien of Mrs. W. J. Priestley which she holds against all of the holdings of Mr. W. J. Priestley, leaving the original contract that she has with Mr. W. J. Priestley to be carried out in monthly payments in the future.

'2. The undersigned will retain the services of Mr. W. J. Priestley as superintendent of the mine at an agreed salary.

'3. Sufficient money will be at the disposal of the company for the purpose of operating the mine at full capacity commensurate with the present equipment for the present season.

'4. Additional sums will be kept on deposit for the purpose of defraying unforeseen contingencies, all of which sums should total somewhere in the amount of Twenty-five Thousand Dollars ($25,000.00).

'Dated this 19th day of March, 1940.'

Mr Peterson advanced the money and Aylmore turned over to H. A. Martin,...