Williams v. Queen Fisheries, Inc.

Supreme Court of Washington · 1970 · Corporations

469 P.2d 583 (1970)

Updated August 22, 2026

CorporationsFiduciary duties of corporate officersAgencyCompensation forfeitureUnjust enrichmentPrejudgment interestcorporate officerfiduciary duty

Facts

Queen was in financial trouble, and Bendiksen transferred his voting rights to Williams, who later obtained effective control and had the board adopt a resolution employing him for three years as president and general manager at a minimum salary of $20,000 per year. In 1966, Williams entered the lighterage business with Alaska Steamship Co. using Queen's equipment and employees, operated the business as AB&L in his own name, represented himself as owner, considered it his personal business, and planned to continue it with Schucka after leaving Queen, though he intended to turn net profits over to Queen. After Bendiksen regained control and Williams was removed from management, Williams nonetheless wrote checks on the AB&L account to himself and Schucka, and the trial court found he knew he lacked authority to do so. The court also found Schucka rendered additional services for the lighterage operation and that Williams later collected AB&L accounts and prepared an accounting, with the sums paid to each being reasonable compensation.

Issue

Whether Williams' operation of AB&L with Queen's assets and personnel breached his fiduciary duty of loyalty so as to justify discharge and defeat his employment-contract claim. Whether Queen was entitled to recover Williams' 1966 salary, recover payments made to Williams and Schucka for AB&L-related services, and obtain prejudgment interest on AB&L profits.

Rule

Corporate officers and directors stand in a fiduciary relationship to the corporation and owe undivided loyalty. A serious violation of the duty of loyalty is a material breach that constitutes good cause for discharge, and the fiduciary obligation may be breached even without corruption, dishonesty, or bad faith if the officer places himself where personal interests may tempt him to disregard the corporation's interests. A disloyal fiduciary does not have an automatic right to compensation, but the court may in its discretion allow full, reduced, or no compensation; additionally, a principal must pay reasonable compensation for services from which it benefitted when otherwise retention of the benefit would be unjust, and prejudgment interest is allowed only on liquidated claims computable exactly without reliance on opinion or discretion.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

Nina Ortega was president and general manager of Cascade Harbor Packing, a fictional seafood processor based in Seattle, under a three-year employment agreement. While still in office, she used the company's forklifts, bookkeeper, and line of credit to launch a freight service in her own name, telling customers she owned it personally but intending to remit any eventual net profits to the company.

If Cascade Harbor fires Nina before the contract term ends and Nina sues for breach of her employment agreement, which is the strongest result?

Explanation. A corporate officer owes undivided loyalty and breaches that duty by placing herself in a position where her personal interests may conflict with the corporation's interests. Using corporate equipment, employees, credit, or money to establish a personal business is a serious loyalty violation and constitutes a material breach justifying discharge. The majority made clear that bad faith or actual loss is not required.