State Ex Rel. Hayes Oyster Co. v. Keypoint Oyster Co.

391 P.2d 979 (Wash. 1964)

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Nature of the Case

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Facts

Verne Hayes was one of the founders of Coast Oyster company. Coast was a public corporation and had acquired several large oyster property holdings. Verne was an officer and director of Coast from its incorporation and was president and manager and owner of 23 percent of its stock in the year 1960, and a portion of 1961, during which time the events leading to this litigation occurred. On October 21, 1958, Coast and Verne entered into a full employment contract by which Verne was to act as president and manager of Coast for a 10-year period and to refrain directly or indirectly from taking part in any business which would be in competition with the business of Coast, except Hayes Oyster. Hayes Oyster was a family-owned corporation in which Sam Hayes owned about 75 percent and Verne Hayes about 25 percent of its stock. In 1960, Coast was in financial difficulty. Verne inquired of Engman, a long-time employee of Coast and a man thoroughly familiar with the operation of the oyster properties if Engman would be interested in purchasing two of Coast's beds. Engman said yes but needed capital. Engman then asked Verne if he would 'come in' with him. Verne consulted Ward Kumm, attorney for and longtime director of Coast. Verne is alleged to have told Engman that Hayes Oyster could assist. They would form Keypoint. Engman and Verne would each own half. Coast’s board approved the sale at $250,000. Verne made no mention at any meetings for Coast that he might acquire an interest in Keypoint. Coast acquired no knowledge of the Engman-Verne deal. Once the deal was complete, Verne cashed out of Coast. Coast (P) sued Verne and Sam (D) seeking their Keypoint shares. The trial court acquitted Verne of any breach of duty to Coast and held that the agreement that Hayes Oyster should acquire ½ of Keypoint stock was valid. Coast appealed; Verne must turn over his secret profits. Hayes Oyster petitioned the Superior Court for a writ of mandamus to compel the transfer of stock.