Shew v. Coon Bay Loafers, Inc.

• Court: Washington Supreme Court
• Writing for the Court: HILL; That the plaintiff has proved by a preponderance of the evidence that Coon Bay Loafers, Inc., held the 'swamp' property as a resulting trustee for W. D. Botting and wife, Carl Schweizer and wife, T. A. Kinsman and wife; HUNTER
• Citation: Shew v. Coon Bay Loafers, Inc., 455 P.2d 359, 76 Wn.2d 40 (Wash. 1969)
• Decision Date: 22 May 1969
• Docket Number: No. 38989
• Parties: Paul T. SHEW, Appellant, v. COON BAY LOAFERS, INC., a corporation; W. A. Botting and Carol Botting, his wife; carl Schweizer and Ruth Schweizer, his wife; T. A. Kinsman and Terry Kinsman, his wife, and J. J. Heneghan and Maryellen Heneghan, his wife, Respondents, Cross-Appellants.

Page 40

76 Wn.2d 40

455 P.2d 359

Paul T. SHEW, Appellant, v. COON BAY LOAFERS, INC., a corporation; W. A. Botting and Carol Botting, his wife; carl Schweizer and Ruth Schweizer his wife; T. A. Kinsman and Terry Kinsman, his wife, and J J. Heneghan and Maryellen Heneghan, his wife, Respondents Cross-Appellants.

No. 38989.

Supreme Court of Washington, En Banc.

May 22, 1969.

Black, Christensen & Nielsen, Bryce Black, Everett, for appellant.

Reed, McClure & Moceri, Hugh A. McClure, Seattle, for respondents.

HILL, Judge.

Six good friends formed a nonprofit corporation in 1953 to hold title to certain property which they were purchasing on Hood Canal for recreational purposes for themselves and their families. The name of the corporation, Coon Bay Loafers, Inc., bespeaks something of the spirit and purpose of this enterprise. With the approval of all existing members, a new member might buy in. A member, with unanimous consent, could transfer his membership. Membership in the corporation varied, but was never more than eight nor less than six.

The first piece of property acquired, known as the Home property, was conveyed to the corporation by two of the members whose interest therein was that of contract purchasers from Pope & Talbot, Inc. (purchase price $7,000). It was thereafter improved with a very substantial and commodious structure, known as the Lodge, built largely by labor and with material supplied by the members of the corporation. An adjoining tract, known as the Bluff property, was also purchased from Pope & Talbot, Inc. (purchase price $3,150). Payments were made on these two contracts by assessments on all of the 'members of the corporation.' ¹ Neither of these properties has any relationship to this litigation, as they were conceded to be the property of the corporation.

In late 1955, there was talk of acquiring another tract of 105 acres (known as the Swamp property), which would round out their holdings and make control of trespassers during he hunting season more effective. Five of the then 8-member group were willing to make the purchase; the other members felt that they were not able financially to take on their share of the additional contract payments on the Swamp property. The five agreed to make the purchase as an investment of their own, but with the understanding--at least on the part of some--that the other members of Coon Bay Loafers, Inc., could come in on it by paying their proportionate share. (This seems to be an academic matter as none of the other members ever expressed any desire to buy in.)

The date of the contract for the Swamp property was November 23, 1955, with Coon Bay Loafers, Inc., named as the purchaser and Pope & Talbot, Inc., as the seller. The total purchase price was $5,750; $575.00 down, $52.00 a month. The down payment was made by each of the five, who were purchasing the property, giving Coon Bay Loafers, Inc., a check for $115.00. The corporation then gave its check for $575.00 to Pope & Talbot, Inc.

The monthly payments were handled in the same way as on the other contracts, except that only the five paid the assessments covering the contract payments and taxes on the Swamp property. The treasurer of Coon Bay Loafers, Inc., made the payments to Pope & Talbot, Inc., and the county treasurer. This continued through 1956, 1957, and the first four months of 1958.

Paul Shew, one of the original incorporators and one of the five purchasers of the Swamp property, withdrew from the Coon Bay Loafers, Inc., effective as of July 31, 1958. His financial interest therein was computed on the basis of his equity in the Home property, the Bluff property and the Lodge in the amount of $2,064.23. To this amount was added the sum of $31.20 (explained in footnote 3), making a total of $2,095.43. This was paid to him in monthly installments. ² The money Mr. Shew received in consequence of his withdrawal from Coon Bay Loafers, Inc. was based on his equity in the corporate assets (the Home and Bluff properties and the Lodge). It had nothing whatever to do with the money that he had paid into the 5-man joint venture in the purchase of the Swamp property. He has never received back from any source any portion of the amount paid by him toward the acquisition of that property. ³ This included his down payment of $115.00 and 1/5 of the monthly payments through 1956, 1957 and four months of 1958. This, without taking his share of the taxes into consideration, would have approximated $400.00.

Not until a New Year's Eve party December 31, 1961, did Mr. Shew learn that the Swamp property (less a small portion sold earlier in 1958, likewise without notice to him), together with all of the assets of the corporation, had been sold on October 24, 1961, for $151,000.

It developed that the remaining six members ⁴ of Coon Bay Loafers, Inc., were receiving this amount in installments divided in the following percentages: The two who had not participated in the Swamp property purchase were each receiving 11.9562 per cent of the payments as made; and the four who had participated in the Swamp property purchase were each receiving 19.0219 per cent. This indicated a very substantial allocation of value to the Swamp property.

Mr. Shew requested that he be permitted to participate in the proceeds of the sale of the Swamp property; and, failing to get any satisfaction, he commenced the present action seeking an accounting from the other four who had participated in the Swamp property purchase and to recover his proportionate share from the investment in that property. There was also the little matter of the amount which the four had received on the contract for the sale of the small portion of the Swamp property which had been sold in November, 1958. Although there are other defendants, ⁵ the other four members of Coon Bay Loafers, Inc., who had participated with Mr. Shew in acquiring the Swamp property will hereafter be referred to as the defendants.

The defendants raised some technical defenses such as the statute of limitations and laches, but as we view the controversy, the real issue was whether there was any substantial evidence to sustain the trial court's finding that Mr. Shew had abandoned his interest in the transaction whereby he and the four defendants were acquiring the Swamp property.

A chronological re sume is necessary to get the complete picture of what Mr. Shew knew or should have known relative to the Swamp property; and to determine whether the defendants had any duty to advise him of what was happening.

When Mr. Shaw gave notice of his intention to withdraw from the Coon Bay Loafers, Inc., effective July 31, 1958, he indicated that he would also prefer to withdraw from further participation in the Swamp property purchase, but would agree 'to continue if it will ease any problem arising from my withdrawal from Coon Bay Loafers.' There was no indication that he intended to waive his then existing interest in the Swamp property.

At a meeting on May 2, 1958, Mr. Shew's impending withdrawal was discussed. The five interested in the Swamp property decided to discontinue payments as of April, 1958, on the Swamp property; however, it was agreed they would continue efforts to make a sale 'until such time as this property is reclaimed by Pope & Talbot.' ⁶

Mr. Shew received a letter dated August 21, 1958, advising him that the 'remaining members' had decided to resume payments on the Swamp property. It contained this sentence: 'We assume you are still of the opinion that you are through with it and relinquishing any interest you have as of July 31, 1958.'

September 11, 1958, Mr. Shew answered saying, 'as I understand it, the swamp lot was not a part of the corporation so I do not know whether I am selling my equity in same, or not. Please advise.'

September 17, 1958, was the date of a letter ⁷ written to Mr. Shew by one of the defendants, Carl Schweizer, who testified that this letter was mailed. Mr. Shew testified that he never received it and, by way of possible explanation, said that he had been having marital difficulties at the time and had not been living at home during the latter part of 1958.

Less than two months later, November 10, 1958, a small portion of the Swamp property was sold for $4,500 ($1,000 down and the balance at $35 a month). This sale was for more than the balance then due on the entire Swamp property. Mr. Shew was never advised of this sale.

Carl Schweizer testified that he wrote another letter to Mr. Shew on November 17, 1959, and mailed it that day. ⁸ Shew also denied receiving this letter; his explanation for not receiving mail at this time has been suggested above.

The trial court said it placed great reliance upon these letters of September 17, 1958, and November 17, 1959 (Mr. Schweizer's office copies being admitted in evidence), together with the lack of any response from Mr. Shew as showing an abandonment by him of his interest in the Swamp property.

The trial court made a formal finding that Shew did receive the September 17, 1958, letter. ⁹

The trial court made the following finding on which its failure to accord Mr. Shew an accounting against the defendants must rest:

On September 15, ¹⁰ 1958, a letter was sent by Carl Schweizer to the plaintiff, Paul Shew, and received by him (Exhibit No. 20) which put the plaintiff on notice that his equity in the 'swamp' property was considered terminated unless he advised to the contrary. The plaintiff, knowing that his interest would be terminated unless he took further action, did not reply to said letter or at any time confer with any of the defendants herein, when he knew or as a reasonably prudent person should have known that some action was required on plaintiff's part to preserve his equity. (Finding No. 10)

The trial court also concluded that the plaintiff's cause of action was barred by laches and by the statute of limitations, RCW 4.16.080(3), as an action based upon an...