Appeal from Circuit Court, Multnomah County. Patrick E. Dooley, Judge.
Kenneth M. Novack, Portland, argued the cause for appellant. With him on the briefs were Rives, Bonyhadi & Hall and Bruce M. Hall, Portland.
Nels Peterson, Portland, argued the cause for respondent. With him on the brief were Jack H. Cairns, Portland, and Peterson, Chaivoe & Peterson, Portland.
Tongue, Justice. O'Connell, Chief Justice, and McAllister, Denecke, Holman and Howell, Justices.
This is a suit by a corporation against its former president, both individually and as the executor of the estate of his deceased wife, alleging that he violated his fiduciary duty by making profits and receiving other benefits in various transactions with the corporation, and demanding an accounting. Plaintiff appeals from those portions of the decree which denied most, but not all, of such relief.
Plaintiff contends that the trial court erred as follows: (1) In not determining that the so-called "Phillips contract" was acquired by defendant and sold to plaintiff in breach of his fiduciary duty; (2) In not determining that the so-called "tank farm" was acquired by defendant and leased to plaintiff in breach of that duty; (3) In not cancelling the so-called "Seattle lease" by plaintiff of a warehouse owned by defendant and ordering the return of allegedly excessive rentals received by defendant; and (4) In not determining that defendant is liable to plaintiff for the cash value of two life insurance policies allegedly "expropriated" by him.
The plaintiff corporation is a Washington corporation in which the majority of the outstanding stock was formerly owned by the family of defendant,
who was its former president and the principal developer of its business. After the sale of defendant's stock to a newly formed holding corporation this suit was filed by the plaintiff corporation alleging irregularities relating to transactions which took place during the years while Mr. Newbern was its president. The trial judge found in favor of defendant with respect to the transactions involved in these assignments of error upon the grounds, among others, that under the facts and circumstances of this case there was no breach of fiduciary duty and that most of such transactions were ratified by the board of trustees of the corporation.*fn1
This being a de novo appeal in a suit in equity we have reviewed the entire record, including over 2,300 pages of testimony and voluminous exhibits, and agree with the oral findings and the conclusions of the trial judge in denying the relief demanded by plaintiff on the first three of these assignments of error.
The remaining assignment of error, however, is more difficult.
Facts, contentions and findings relating to insurance policies.
In 1938 the corporation issued bonds to raise needed capital funds. To make the purchase of these bonds more attractive, and out of concern over what might happen if Mr. Newbern should die, it was suggested that $50,000 in life insurance be taken out on
his life, naming the corporation as beneficiary. Two policies, each for $25,000, were then applied for by and issued to Mr. Newbern, and the first premiums were paid by him. These policies both provided that the beneficiary could be changed without notice to the designated beneficiary. In 1940 and 1942 these two policies were converted from term to straight life policies, but the beneficiary was not changed.
Most, if not all, of the remaining premiums on the policies, however, were paid by the corporation, totaling more than $50,000.*fn2 The corporation was not reimbursed by Mr. Newbern for these premium payments. The books of the corporation did not show these payments as business expense. Neither were these policies listed on its books as corporate assets, at least since 1955. There was evidence, however, that Mr. Newbern had given instructions not to do so. There was also evidence that for tax purposes the premium payments were reported as an asset purchase by the corporation. On the other hand, Mr. Newbern did not report these premium payments by the corporation as income to him.
In subsequent years these policies were borrowed upon by Mr. Newbern to provide funds for use by the corporation. They were also later assigned to the Small Business Administration ...