123 Wash. 533 | Wash. | 1923
On or about June 1,1921, a written contract was entered into between appellant, as vendor, and tbe respondent corporation, as vendee, for tbe sale of the maufacturing plant theretofore operated by appellant to the respondent corporation, the purchase price named being $36,000, payable in installments. During all of the negotiations leading up to, and at the time of the execution of the contract, the same persons, with one exception, constituted the members of the boards of trustees of the two corporations. Respondent in its complaint alleged, in effect, that appellant, through its board of trustees, wrongfully and fraudulently took advantage of that fact and caused the contract to be executed with intent to deceive, and did thereby deceive, the respondent corporation and its other stockholders, in that less real estate was conveyed than was represented would be conveyed, and that the value of the whole property conveyed did not exceed $25,000.
It seems to be agreed between counsel that the law is that contracts between corporations whose trustees or directors are identical, or nearly so, will be closely scanned by the courts, and that the burden of establishing the fairness and the good faith of the transaction so consummated rests upon the party asserting it. To comply with this rule and overcome the effect of the identity of the two boards, appellant sought to show that its reason for making the contract grew out of its need for more capital in its business, and the thought that, by making the enterprise a cooperative one, additional capital could be acquired and labor difficulties could be avoided. With this in mind, two of appellant’s officers consulted an attorney, who afterwards organized the respondent corporation, and became one of its trustees, fairly laying the situation before bim and inquiring whether it would be better to proceed by
The trial court held, in effect, that a contract entered into under the circumstances here shown is voidable and may be set aside either upon the ground of fraud or unfairness and overreaching; that there was little to indicate actual fraud in the transaction, but that there was an over-valuation of the real estate in the sum of more than $10,000, and an overreaching to that extent, and that the contract was manifestly unfair to
Appellant makes many assignments of error, but discusses them all under a few heads, which course we shall also follow:
(1) The trial court permitted the attorney who organized the respondent corporation and became one of its trustees to testify as to all that took place from the time he was first consulted by two of the appellant’s trutees. It is contended that he was disqualified under subd. 2 of § 1214 of Rem. Comp. Stat., which reads: “An attorney or counsellor shall not, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of professional employment. ’ ’ The record fails to show that the attorney was ever employed by, or in any way acted for, the appellant. True, the men who first consulted him were appellant’s officers, but they consulted him as individuals, and when the course of action was agreed upon he acted only for and on behalf of the respondent corporation, and the only compensation which he ever asked or received came from that source. Of course, the respondent corporation consented to his testifying and is not now complaining.
(2) Evidence was received to the effect that one or more of the officers and trustees of the appellant made representations to a number of prospective stockholders of the respondent corporation touching the value of the property to be conveyed, and the extent of the real estate then owned, pointing out what was claimed to be included within its boundaries, which were in fact
(3) Appellant vigorously attacks the findings of the trial court to the effect that the purchase price named in the contract was grossly in excess of the real value of the property transferred, contending that there was no evidence properly before the court to sus
We are convinced that the court’s findings are sustained by a preponderance of the evidence, and that the facts distinguish this case from Baker v. Seattle-Tacoma Power Co., 61 Wash. 578, 112 Pac. 647, Ann. Cas. 1912C 859; Westland v. Post Land Co., 115 Wash. 329, 197 Pac. 44; Colville Valley Coal Co. v. Rogers,, ante p. 360, 211 Pac. 732, and like authorities. At any rate, when it is borne in mind that the same men acted for both seller and buyer, and that it is the conceded duty of the courts to scrutinize the transaction closely, and as said in the Westland ease, supra, “may even suspect fraud and overreaching,” we cannot say that appellant has met the burden thus placed upon it.
The judgment appealed from is affirmed.