Soderberg v. McRae

• Decision Date: 14 September 1912
• Citation: 70 Wash. 235,126 P. 538
• Parties: SODERBERG et ux. v. McRAE et al.
• Court: Washington Supreme Court

126 P. 538

70 Wash. 235

SODERBERG et ux. v. McRAE et al.

Supreme Court of Washington

September 14, 1912

Department 2. Appeal from Superior Court, San Juan County; George A Joiner, Judge.

Action by John A. Soderberg and wife against A. C. McRae and others. Judgment for plaintiffs, and defendants appeal. Remanded with instructions to modify.

See also, 67 Wash. 104, 120 P. 878.

George McKay and James Kiefer, both of Seattle for appellants.

Shank & Smith, of Seattle, for respondents.

MORRIS J.

The facts in this case are complicated and difficult of statement, and we shall not attempt to recite them all, contenting ourselves with only such a review of them as is necessarily involved in the discussion of the conclusions we have reached. Respondents commenced the action to obtain a conveyance of a certain 40 acres on Orcas Island, valuable as containing a deposit of lime rock. The title to this 40 was, prior to December, 1904, in M. H. Walter, and was on that day, through error in the description, conveyed to the Orcas Lime Company in exchange for another piece, known as lot 1. The following November Walter and Soderberg organized the Puget Sound Portland Cement Company, for the purpose of developing lime deposits on Orcas Island, including the 40 acres in suit, Soderberg having previously purchased from Walter an undivided one-half interest in certain properties owned by Walter, and which were supposed to cover by their legal description the lime quarry which the parties intended to operate in the name of the corporation subsequently organized. Soderberg and Walter then conveyed their interest in these lands to the corporation, in exchange for its stock, and the corporation then proceeded to open up the ledge of lime rock in this 40, supposing it had title to the same, and expended in this work $14,000. In December, 1905, Walter discovered that a mistake had been made in conveying this 40 to the Orcas Lime Company and, without informing Soderberg, entered into negotiations with the Orcas Lime Company to have the mistake corrected. The result of these negotiations was a conveyance by the Orcas Lime Company to A. E. McRae, who was at the time under a contract with the company to promote its interests in the development of the lime quarry; this conveyance being made to McRae at the request of Walter. At the time of the first transaction between Soderberg, Walter, and the Orcas Lime Company, as part consideration of the lands conveyed, two notes of $10,000 each were given by the Orcas Lime Company to Walter, secured by a mortgage on the lands; the mortgage containing conditions as to when and under what circumstances, relative to the production of lime from a the lands purchased, the notes should be payable. These notes had passed into the hands of McRae under a settlement of a suit founded upon the promoter's contract with Soderberg and Walter. Payment of these notes was refused by the Orcas Lime Company; it claiming that the conditions in the mortgage under which the notes were payable had not ripened. Subsequently the notes were used in negotiation between the Orcas Lime Company and Walter and McRae, whereby the title to the 40 passed to McRae. Shortly after McRae went East, and does not again appear upon the scene for about two years. The Puget Sound Company in the meantime continued its operations upon this 40; Soderberg not having been apprised of any of the facts surrounding the discovery of the error in conveying the 40, nor the negotiations between Walter, McRae, and the Orcas Lime Company, whereby title to the 40 passed to McRae. When Soderberg and Walter organized the Puget Sound Company, they borrowed $10,000 from the Scandinavian-American Bank of Seattle, pledging the stock of the company as collateral. This note was taken up by Soderberg, the stock delivered to him, and he commenced suit against Walter for contribution on the note, resulting in judgment and an assignment from Walter of his half of the stock in satisfaction of the judgment. This Puget Sound Company was subsequently dissolved by the Secretary of State for nonpayment of license fees. Its property has since been in the possession of Soderberg, who has paid the taxes and preserved the property. McRae and Walter had in the meantime organized another company, known as the Pacific Coast Portland Cement Company, and McRae had obtained from Walter a transfer to this company of Walter's stock in the Puget Sound Company.

We have not attempted to state all the facts entering into these transactions. There are others which throw side lights on the relations between the parties, and the attempts of Walter and McRae to possess themselves of the property in issue without the knowledge of Soderberg. Respondents' theory, which was adopted by the court below, is that McRae occupied such a fiduciary relation to the company that he could not use the information or knowledge he obtained adversely to the interest of the company and seek to set up an adverse title in himself, but that he should be held as trustee for the company. In attempting to realize upon the notes he secured in settlement of his controversy with Soderberg and Walter McRae was justified in seeking to obtain, in satisfaction of his claim against the Orcas Lime Company, as favorable a settlement as he could. The law, however, will not protect him when, in his endeavor to do so, he secretly acquires property which he seeks to use against the interest of the company to whose interest he had pledged his good faith. It is apparent...