Sauve v. K. C., Inc., 45678
| Court | United States State Supreme Court of Washington |
| Citation | 91 Wn.2d 698,591 P.2d 1207 |
| Docket Number | No. 45678,45678 |
| Parties | , Blue Sky L. Rep. P 71,494 Ruth SAUVE, Respondent, v. K. C., INC., a Washington Corporation, and Donald J. DeHan and Jane Doe DeHan, his wife, Appellants, James O. Flynn and Joyce E. Flynn, his wife, Petitioners, Stephen Flynn and Jane Doe Flynn, his wife, Defendants. |
| Decision Date | 15 March 1979 |
Page 698
v.
K. C., INC., a Washington Corporation, and Donald J. DeHan
and Jane Doe DeHan, his wife, Appellants,
James O. Flynn and Joyce E. Flynn, his wife, Petitioners,
Stephen Flynn and Jane Doe Flynn, his wife, Defendants.
Page 699
Steinberg & Steinberg, Jack Steinberg, Seattle, for petitioners.
Siderius, Lonergan & Crowley, Patrick Crowley, Seattle, Robert Kuvara, Kent, for respondent.
DOLLIVER, Justice.
Petitioners, officers of defendant corporation K. C., Inc., seek review of a decision of the Court of Appeals (Sauve v. K. C., Inc., 19 Wash.App. 659, 577 P.2d 599 (1978)), which affirmed the trial court judgment for plaintiff.
[591 P.2d 1208] K. C., Inc., operated a retail appliance store which leased household appliances to consumers with an option to purchase at the end of the lease period. The corporation and its principal officers financed their operation by obtaining $250,000 in loans from 45 individuals. Plaintiff, a widow, was interested in making an investment which would assure her a greater rate of interest than was available from a savings institution. In April 1972, she loaned $15,120 to the corporation in exchange for 84 documents entitled "Security Agreement (Conditional Sales Contract)". The documents purported to represent plaintiff's security interest in the new appliances which had been purchased with her money. Each document provided that, for the first 3 years following the date of the loan, the corporation was to pay plaintiff the interest due on the loan at a rate of 12 percent per annum, payable monthly, and that, at the expiration of this 3-year period, it was to repay the entire principal.
Plaintiff was told that, in the event the corporation defaulted on the interest payments, she could declare the entire principal immediately due or commence proceedings to repossess the appliances.
For 2 1/2 years the corporation paid plaintiff her monthly interest check. Five of those checks were dishonored by the bank which constituted a default under the agreement, and plaintiff demanded payment of the entire principal. The corporation paid only half of the principal, however, in exchange for Mrs. Sauve's return of half of the
Page 700
documents. The corporation went into voluntary bankruptcy in 1976. Plaintiff did not attempt to repossess the remaining appliances since she had no warehouse in which to store them. She thereafter brought an action against the corporation and its officers. The action alleged, Inter alia, a violation of the Securities Act of Washington (RCW 21.20) because neither the corporation nor the individuals acting on its behalf were registered as securities salespersons, nor were the documents registered as securities under the act.RCW 21.20.005(12) defines a "security" as follows:
"Security" means any note; stock; treasury stock; bond; Debenture; evidence of indebtedness ; certificate of interest or participation in any profit-sharing agreement; Collateral-trust certificate ; preorganization certificate or subscription; transferable share; Investment contract ; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas or mining title or lease or in payments out of production under such a title or lease; or, in general, any interest or instrument commonly known as a "security", or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing; or any sale of or indenture, bond or contract for the conveyance of land or any interest therein where such land is situated outside of the state of Washington and such sale or its offering is not conducted by a real estate broker licensed by the state of Washington. "Security" does not include any insurance or endowment policy or annuity...
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