State ex rel. Everett Trust & Sav. Bank v. Pacific Waxed Paper Co.

• Citation: 22 Wn.2d 844,157 P.2d 707
• Decision Date: 16 April 1945
• Docket Number: 29264.
• Court: United States State Supreme Court of Washington
• Parties: STATE ex rel. EVERETT TRUST & SAVINGS BANK v. PACIFIC WAXED PAPER CO. et al.

157 P.2d 707

22 Wn.2d 844

STATE ex rel. EVERETT TRUST & SAVINGS BANK v. PACIFIC WAXED PAPER CO. et al.

No. 29264.

Supreme Court of Washington

April 16, 1945

Department 1.

Action by the State of Washington, on the relation of Everett Trust & Savings Bank, as executor of the estate of Alvah H. B Jordan, sometimes known as A. H. B. Jordan, deceased, for a writ of mandamus to require the Pacific Waxed Paper Company and others to transfer on named defendant's books certain shares of its corporate stock formerly owned by the Paine-Mitchell Company, a dissolved corporation, and to issue to the executor shares in lieu thereof free of limitations which had been attached to the stock and to recognize the right of the executor to vote stock. From a judgment of dismissal, the relator appeals.

Affirmed.

Appeal from Superior Court, King County; Howard M Findley, judge.

O. D Anderson, of Everett, for appellant.

Falknor, Emory & Howe, of Seattle, for respondents.

GRADY Justice.

This action was brought by the State of Washington on relation of Everett Trust & Savings Bank as executor of the estate of Alvah H. B. Jordan to secure a writ of mandamus commanding the Pacific Waxed Paper Company, a corporation, and its president and secretary, to transfer on its books certain shares of its corporate stock formerly owned by the Paine-Mitchell Co., a dissolved corporation, and to issue to the executor shares in lieu thereof, free of the limitations and restrictions which has been attached to the stock owned by it and to recognize the right of the executor to vote the stock at all meetings of the stockholders of the corporation. An alternative writ of mandamus was issued by the superior court to which return was made by the defendant by an answer to the petition. A trial was had Before the court, at the close of which findings of fact and conclusions of law were made, and based thereon a judgment was entered dismissing the action. The court denied a motion for a new trial. The relator has taken an appeal from the judgment.

In this opinion we shall refer to the executor of the Jordan estate as appellant, the Pacific Waxed Paper Company as respondent and the various interested individuals by their surnames.

The factual situation so far as is necessary for a consideration of the legal questions presented, is as follows:

On July 20, 1931, Jordan was the owner of all of the capital stock of the Paine-Mitchell Co. except a few qualifying shares, and owned one preferred share of the respondent. At this time Engle was the owner of preferred and common stock of respondent, which stockholders had increased by December 11, 1942. On July 20, 1931, Paine-Mitchell Co. was the owner of common stock of respondent. All of the stock had voting power. The combined shares of Engle and Paine-Mitchell Co. were more than a majority of all of the issued stock.

On July 20, 1931, Engle and Paine-Mitchell Co. entered into a written agreement by which each party gave to the other a promise that Before he sold or caused to be transferred any part or portion of the stock then owned and held by him, he would notify the other party in writing of his intention to sell such stock or to cause the same to be transferred; also in the notice he would state the amount he had been offered for the stock, and the price, terms and conditions of the proposed sale, and for a period of fifteen days the other party could have the exclusive right and option to purchase the stock proposed to be sold for the price and upon the terms and conditions stated in the notice. The agreement provided that it should remain in force for a period of twenty-five years from its date.

On March 24, 1932, Engle, Paine-Mitchell Co. and Jordan entered into a written agreement in which they recited their respective stockholdings in respondent and that the fact Jordan owned all of the stock of Paine-Mitchell Co. except qualifying shares constituted him the directing and managing executive of that corporation. The contract also recited that the assured continuation of the present cooperation between the parties thereto in the conduct of the business of the respondent and of its present policies resulting therefrom even after the death of either Engle or Jordan would be of inestimable value not only to the stockholdings of the parties and to the credit and financial position of respondent, but also to the interests of the minority stockholders. Based upon this background the parties then agreed that in the event of the death of Engle, if Paine-Mitchell Co. was then the owner of any of the stock of respondent it should be entitled to vote any stock owned by Engle in respondent at all meetings of stockholders of respondent for so long a time as Paine-Mitchell Co. continued to be the owner of the stock in respondent it owned at the time of the death of Engle. It was also agreed that to fully effecuate the objects and purposes of the agreement it should be deemed to be and should be the irrevocable proxy of Engle's heirs and legal representative to Paine-Mitchell Co. with full power of substitution to vote the Engle stock at all the meetings of stockholders of respondent. The contract also provided in the event of the death of Jordan that Engle should have the same voting right as to the stock of respondent owned by Paine-Mitchell Co. and Jordan, or either of them, and contained a similar irrevocable proxy provision in favor of Engle binding upon the successors, heirs, and legal representatives, respectively, of Paine-Mitchell Co. and Jordan. It was expressly provided that the contract should not in any way affect the one of July 20, 1931, between Engle and Paine-Mitchell Co.

On May 31, 1942, Jordan died testate. In his will he named appellant as executor, and it was appointed as such when the will was admitted to probate. The executor caused the Paine-Mitchell Co. to be voluntarily dissolved, and as a result the stock owned by it in respondent was transferred to appellant. The appellant sought to vote the stock at a meeting of the stockholders of respondent on February 26, 1943, but was denied the right to do so because of the proxy held by Engle.

The ultimate question to be decided is whether the proxy to vote the stock of respondent owned by Paine-Mitchell and Jordan was revocable.

The appellant also raises the questions whether the option agreement was a violation of the rule against perpetuities and whether the voluntary dissolution of Paine-Mitchell Co. automatically revoked the proxy.

Upon the question of whether the option agreement was invalid because it violated the rule against perpetuities respondent asserts that it was not raised in the court below. We have held many times that questions not raised in the court below will not be considered on appeal. We do not wish to depart from that rule, but it has its limitations. If the question is one that upon its answer depends whether the complaint states a cause of action and the complaint cannot be amended then it may be raised at any time. Fick v. Jones, 185 Wash. 365, 55 P.2d 334. In the case at bar the complaint set up the option agreement. If for any reason it was a void agreement, on appellant's theory the complaint would state a cause of action because the agency created by the proxy agreement was revocable. The theory presented by respondent on this branch of the case was that the option agreement created an interest in the subject matter of the agency of Engle to vote the stock and the proxy was irrevocable. Any reason to the contrary would support the complaint, and it may be urged at any time on the same principle that any question affecting the statement of a cause of action in a complaint, when it is incapable of amendment, may be urged at any time. We shall therefore consider the question as it is now presented.

We have adopted the statement of the rule against perpetuities as set forth in 21 R.C.L. 282 in Denny v. Hyland, 162 Wash. 68, 297 P. 1083, 1085, as follows: "The rule against perpetuities is usually stated as prohibiting the creation of future interests or estates, which by possibility may not become vested within a life or lives in being and twenty-one years, together with the period of gestation when the inclusion of the latter is necessary to cover cases of posthumous birth"--and stated: 'The rule, however, applies only to the vesting of future estates and does not apply to vested estates. The rule has reference to the time within which the title vests and has nothing to do with the postponement of the enjoyment.'

The option agreement did not create a future estate or interest to become vested at some future time. It was a promise by an owner of stock in a corporation that if at any time during the next twenty-five years he desired to sell his stock he would give the promisee the first opportunity for a period of 15 days to purchase it at such price and upon such terms and conditions as the promisor had been offered. It was in effect a promise to give an option in the event the promisor desired to sell his stock. When an attempt is made to apply the above rule to this situation it becomes apparent that it was not violated by the option agreement.

The general rule is that a proxy given by a stockholder to vote his corporate stock at a meeting of stockholders of a corporation is revocable by him even though the proxy by its terms is expressly made irrevocable.

Exceptions to this rule, as well as the general rule, are set forth in Arcweld Mfg. Co. v. Burney, 12 Wash.2d 212, 121 P.2d 350, 355; 2 Am.Jur. 61; 5 Fletcher Cyc. Corp., Perm. Ed., 187, 2 Thompson on Corp., 3rd Ed., 356; 2 C.J.S., Agency, §§ 73 and 75, pp. 1153 and 1159.

The exceptions are: (1) Where the authority or power is coupled within an...