Crofoot v. Blair Holdings Corp.
| Decision Date | 13 July 1953 |
| Docket Number | 15595,Nos. 15593,s. 15593 |
| Citation | 260 P.2d 156,119 Cal.App.2d 156 |
| Court | California Court of Appeals Court of Appeals |
| Parties | CROFOOT v. BLAIR HOLDINGS CORP. et al. RICE v. BLAIR HOLDINGS CORP. et al. |
Phillip Barnett and Rodney H. Robertson, San Francisco, for Crofoot & Bay City Bank.
Roger Anderson, San Francisco, for Paul Rice.
Keesling & Keesling and Henry C. Clausen, San Francisco, Wm. Dwight Whitney and Edward C. Perkins, New York City, of counsel, for respondents.
Crofoot and Rice separately appeal from an order correcting and confirming an arbitrator's award and from the judgment entered on the award. Section 1293 of the Code of Civil Procedure provides that 'An appeal may be taken from an order confirming, modifying, correcting or vacating an award, or from a judgment entered upon an award * * *.' This section certainly makes either the order of confirmation 'or' the judgment appealable. Whether the section requires an election between the two alternatives need not be decided because the parties have appealed from both, and the same points are presented on both appeals. The appeal of Rice from the judgment was not filed until the 61st day after its entry, see Rule 2(a) of the Rules on Appeal, but the 60th day was a holiday, so that the time to appeal was extended. Section 12 of the Code Civ.Proc.; Rules on Appeal, Rule 45(a); Grande v. Donovan, 55 Cal.App.2d 694, 131 P.2d 855.
Before discussing the details of this complicated controversy, a brief statement of facts should be set forth in order that the detailed facts can be related to the overall picture. Crofoot was the sole owner of the stock of T & C, a corporation engaged in the wholesale distribution, upon a nationwide scale, of popcorn vending machines and supplies. Rice managed this corporation on behalf of Crofoot. Crofoot arranged a sale of 27 shares of the capital stock of T & C, which was 54% of the total capital stock, to Blair Holdings Corporation, hereafter referred to as Blair. Written contracts were executed in April of 1947 whereby Crofoot made certain warranties and representations as to the correctness of the T & C balance sheets, current income statements, and certain listings of unfilled orders. These agreements also provided that Rice was to become president of T & C, and should remain as manager, and that Crofoot should become a member of the three-man board of directors. The agreements also gave Blair, within a designated time, the option of purchasing the balance of the shares of T & C. In October, 1947, within the time specified in the option, Blair exercised its rights and purchased the remaining 23 shares, that is, the balance of 46% of the capital stock of T & C. Shortly thereafter Blair exchanged 75,000 shares of its own stock in a complicated deal in satisfaction of the balance of its liabilities to Crofoot. Rice continued as president and manager, and Crofoot as director of T & C.
About a year after the exercise of the option, Blair claimed to have made a delayed discovery that the balance sheets, current income statements and lists of unfilled orders warranted by Crofoot to be true upon the initial sale of 54% of the T & C stock contained false statements, and that Crofoot and Rice, after the initial sale, in their official capacities, had concealed and failed to disclose the falsity of such representations. Blair thereupon sent notices to the San Francisco Stock Exchange, where the Blair shares were traded, and circularized the membership of the exchange, charging that Crofoot's title to the Blair shares was defective, and that Rice, who had received 7,050 Blair shares for services rendered to Crofoot, also had defective title to his shares. Blair also ordered its transfer agent to refuse to transfer any of the Crofoot and Rice shares, and ordered all dividends on the Crofoot-Rice shares to be withheld. This resulted in Crofoot and Rice being unable to sell their Blair shares. Crofoot had pledged a large portion of his Blair shares as security with the Bay City Bank & Trust Co., and this pledgee was prevented, for a substantial period, from selling these shares to protect its loans.
These controversies resulted in a plethora of actions being filed, with complaints, answers, counterclaims and cross-complaints, and even cross-complaints to cross-complaints. By the beginning of 1949 two court actions were pending in New York and four in California, in which various Blair and Crofoot groups were parties. Basically these actions were aimed by the Blair interests at securing a rescission of the T & C transactions for breach of warranty, or at securing damages for deceit. The Crofoot and Rice group wanted to compel the transfer of the Blair shares, or wanted to secure damages for their conversion, for libel, for disparagement of title, for wrongful institution of civil process, and statutory penalties for failure to transfer the shares.
After most of the actions had come to issue, the parties on March 6, 1950, executed an agreement to arbitrate under Code of Civil Procedure, sections 1280 through 1293. The agreement provided that the parties agreed to arbitrate 'all issues existing between them and raised by any pleadings served by any of them in any of the said actions, other than superseded pleadings, prior to March 10, 1950 * * *
It was also provided that 'The Arbitrator shall be given such powers as are provided for by law,' and that It was agreed that the actions then on file should be stayed pending the arbitration.
The arbitrator selected was Professor George E. Osborne of the Stanford University Law School. He took evidence and heard argument for many days, received over 4,000 pages of depositions, and permitted some 600 exhibits to be introduced. After lengthy arguments, both written and oral, he rendered his award. The award itself is but 5 pages in length, but the findings and opinion cover some 215 pages, in which the arbitrator carefully, and in detail, disposed of practically every contention, major or minor, of the parties.
The award, generally speaking, found Crofoot liable in damages, in large amounts, for breach of the warranties contained in the initial agreement to buy and sell the T & C stock, and further found that, after that date, Crofoot and Rice had practiced deceit in their fiduciary relationships by concealing the existence and continuance of certain contingent liabilities of T & C, which resulted in Blair exercising the option to buy the balance of the stock of T & C. Damages were awarded Blair against Crofoot and Rice, but with various elections, set forth in detail in the award, to avoid the possibility of double recovery upon different causes of action relating to overlapping items of damage. The Blair parties were found liable to Crofoot and Rice for conversion and disparagement of title of the Blair stock. It was also held that the Blair parties had lost their rescission rights because of their laches and delay, because of their affirmation of the transaction after knowledge, and because of their failure to restore or offer to restore benefits received by them. A small statutory penalty was awarded against Blair in favor of Rice. If these awards to Crofoot and Rice be deducted as offsets from the sums awarded to Blair, the overall result of the award is a large judgment in favor of Blair, its precise amount being dependent upon the elections made by Blair, and upon the value of the Blair stock found to have been converted by Blair, and which it must repurchase.
The opinion and award of the arbitrator are the sole guide to the evidentiary facts upon these appeals. The court is not called upon to review the evidence produced before the arbitrator, and such is not included in the record on appeal. The record consists of the opinion and award of the arbitrator, of the pleadings in the various court actions, and the proceedings upon confirmation of the award.
After the award had been made, the Blair parties moved to confirm it, subject to certain modifications. This was opposed by Crofoot and Rice. They unsuccessfully sought a writ of prohibition to prevent confirmation, and argued vigorously before the superior court that the award should not be confirmed. The award, subject to correction of a mathematical calculation, was confirmed, and a judgment entered pursuant to its terms. The Crofoot parties attempted, by an application for an original writ, unsuccessfully, to halt the entry of that judgment. Crofoot and Rice thereupon appealed, as already indicated.
Reference should now be made to the pleadings in the six actions which were the subject of the arbitration.
Rice was not a party to the two New York actions. The first New York action, filed upon December 20, 1948, was by the Blair Holdings Corporation against Crofoot. This complaint stated two causes of action. The first sought to rescind both purchases of the T & C stock for false representations, and breach of warranty as to the income statements, balance sheets and unfilled orders of T & C. As to the breach of warranty, there was no allegation of knowledge of the falsity of the representations. The second sought damages for deceit. It realleged all the pertinent allegations of the first cause of action, added allegations as to knowledge of the falsity and intent to deceive of concealment of the breach of...
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