Hagan v. Fairfield

• Decision Date: 25 July 1961
• Citation: 16 Cal.Rptr. 14,194 Cal.App.2d 240
• Court: California Court of Appeals Court of Appeals
• Parties: Evert L. HAGAN, Plaintiff and Appellant, v. Joseph W. FAIRFIELD, Vid Rosner, Miriam Benjamin, Defendants and Respondents. Civ. 24851.

Page 14

16 Cal.Rptr. 14

194 Cal.App.2d 240

Evert L. HAGAN, Plaintiff and Appellant, v. Joseph W. FAIRFIELD, Vid Rosner, Miriam Benjamin, Defendants and Respondents.

Civ. 24851.

District Court of Appeal, Second District, Division 3, California.

July 25, 1961.

Rehearing Denied Aug. 15, 1961.

Hearing Denied Sept. 20, 1961.

Jesse A. Hamilton, Los Angeles, for appellant.

Ethelyn F. Black and Max H. Gewirtz, Los Angeles, for respondents.

FORD, Justice.

The demurrer of the respondents Joseph W. Fairfield, Vid Rosner and Miriam Benjamin to the appellant Hagan's amended complaint was sustained without leave to amend. At the same time, the respondents' motion to dismiss the action on the ground that it was sham and frivolous was granted. The appellant has appealed from the judgment entered pursuant thereto.

A complaint containing one cause of action was filed on April 7, 1959, wherein part of the relief sought was that the defendants be compelled to register the shares of stock of the plaintiff Hagan on the books of Benedict Heights, Inc., and to issue a new certificate in his name evidencing such shares. The present respondents were named as parties defendant. Summons was issued. The respondents did not plead to the original complaint. On June 26, 1959, the appellant Hagan obtained an order that Charles M. Farrington be brought into the action as a coplaintiff. An amended complaint was thereupon filed.

Several causes of action are alleged in the amended complaint, the substance of the first thereof being as follows: 1. Benedict Heights, Inc., is a California corporation; upon or about March 1, 1951, the officers and directors were five persons, including the respondents Benjamin and Rosner; 'in about 1952, all of the said officers and directors relinquished and delegated all of their activities and duties as directors and officers in said Corporation, to Joseph W. Fairfield, and turned over to Joseph W. Fairfield, all the books, papers, records and dominion and control of all assets of said corporation; that since said date, said Corporation has not actively engaged in business, but that since said date all of the said Corporation's activities have been done and performed by said Fairfield, acting as managing agent of said Corporation without proper, or any, authority.' 2. In 1957, 1958 and 1959 plaintiffs (the appellant and Farrington) purchased from various stockholders of the corporation shares of its stock; the certificates were endorsed and delivered to the plaintiffs by the sellers; the plaintiffs are now the owners and holders 'of approximately 50 or more per cent' of the issued and outstanding shares of the corporation. 3. On or about September 20, 1957, and on March 13, 1959, 'plaintiff [sic] made written demand upon Defendants Joseph W. Fairfield, Vid Rosner, and Miriam Benjamin demanding that plaintiff's said Certificates be registered on the books of Benedict Heights, Inc., and that plaintiffs be permitted a shareholder's inspection of the books and records of said Corporation,' but the persons named refused to honor such demands. 4. Fairfield, while acting as agent and manager of the corporation, collected monies due to the corporation, and made disbursements without any authorization from the board of directors, and threatens to continue to do so; there has been no accounting to the stockholders or to the last board of directors of the corporation as to any transactions Fairfield has carried out since about 1952; there have been no meetings of stockholders or of directors since about 1952; Vid Rosner was the last elected president and Miriam Benjamin the last elected secretary of the corporation; both 'disclaim having had anything to do with the Corporation for several years last part' and 'presently disclaim any and all responsibility and authority as de facto officers and directors of said corporation'; Fairfield 'refuses to give any information to stockholders concerning any of the affiairs' of the corporation. 5. All of the assets of the corporation 'are under the domination and control of Joseph W. Fairfield'; 6. The 'fictitious Corporate person has for all practical purposes, disappeared, and for that reason Benedict Heights, Inc., has not been made a party to this proceeding.' 7. 'Benedict Heights, Inc., now own the approximate sum of $8000.00 cash and an uncollected Judgment in the approximate sum of $27,000.00.' 8. In September, 1957, Fairfield, purportedly as an attorney for the corporation, filed an action 'in this Court' to dissolve the corporation and procured service on the corporation by serving the Secretary of State. Under the prayer of the amended complaint, the relief sought by virtue of the first cause of action is 'an appropriate order requiring the defendants' to register the plaintiffs' shares of stock on the books of the corporation.

The allegations of the first cause of action are incorporated by reference in the second cause of action. In addition, it is alleged: 1. On June 2, 1959, the registered owner of share No. 26 upon the books and records of the corporation executed and delivered to the plaintiff Hagan a proxy 'making him agent and attorney in fact to vote said share in all stockholder's meetings.' 2. In an action entitled Benedict Heights, Inc., v. Albert Lienhardt et al., a judgment was entered cancelling a deed from the corporation to Lienhardt of 9 lots and adjudging that the defendants receive from the plaintiff $977.73 on account of certain improvements; that thereafter the defendants Benjamin and Rosner, at the direction of Fairfield, executed a deed to the lots to Fairfield as grantee; 'no director's or stockholders meeting was held authorizing said transaction'; Fairfield paid $977.73 to 'Lienhardt et al.' but no consideration was paid to the corporation. 3. On December 2, 1952, 'the defendants Rosner and Benjamin, as President and Secretary respectively executed a deed to one Mary Gold covering approximately 33 acres of land then owned' by the corporation; the 33 acres then 'constituted the principal, main, and only valuable asset of the corporation'; 'no other directors were notified of said transfer nor was a meeting of stockholders held approving said transfer, nor did 51% of the stockholders consent in writing'; Mary Gold executed a deed of trust in favor of the corporation in the principal sum of $9,300; within two weeks thereafter Mary Gold procured a loan upon the 33 acres in the principal sum of $55,000. The relief sought under the second cause of action is that the defendants be enjoined from transferring or disbursing any assets of the corporation until the election of a new board of directors.

In the third cause of action, all of the allegations of the first cause of action are incorporated by reference as are the allegations of the second cause of action as to the proxy given to the plaintiff Hagan. It is further alleged as follows: 1. For the past six years there has been no meeting of the stockholders and no election of a board of directors of the corporation. 2. On June 11, 1959, the 'plaintiffs notified by United States mail each and all of the defendants of his [sic] stock ownership and requested that a stockholders meeting be held for the purpose of electing a board of directors.' 3. On June 13, 1959, the plaintiff Hagan notified each defendant of the proxy held by him and made a further request that a meeting of stockholders be called 'on account of said proxy'; such requests have been ignored and no meeting of stockholders has been called. Under the third cause of action, the relief sought is an order constituting the defendants 'as commissioners to hold a meeting of the stockholders of Benedict Heights, Inc.'

The grounds stated in the demurrer are: 1. The amended complaint does not state facts sufficient to constitute a cause of action. 2. The plaintiff has not the legal capacity to sue. 3. There are other actions pending between the same parties for the same cause. 4. The court has no jurisdiction over the subject matter of the action. 5. There is a defect of parties defendant. In support of the third ground stated, the demurring parties filed the declaration of Mr. Fairfield, pursuant to section 433 of the Code of Civil Procedure, for the purpose of invoking judicial notice on the part of the court of three other actions or proceedings pending in the same court.

The examination of the amended complaint is to be made in the light of the rule that a demurrer admits the truth of all allegations which are well pleaded. Lee v. Hensley, 103 Cal.App.2d 697, 704, 230 P.2d 159; see Boren v. State Personnel Board, 37 Cal.2d 634, 640, 234 P.2d 981. It must be assumed that the appellant can prove all the facts as alleged. Schaefer v. Berinstein, 140 Cal.App.2d 278, 288, 295 P.2d 113. Consideration will initially be given to the first cause of action of the amended complaint. The relief which the appellant primarily seeks thereunder is the registration of his shares of stock on the books of the corporation. Several of the stated grounds of the demurrer are clearly without merit as to that cause of action. Thus there is no lack on the part of the appellant of 'the legal capacity to sue.' Such defect would exist if the appellant had a good cause of action as against the respondents but was under a disability which prevented him from asserting it. See 1 Chadbourn, Grossman and Van Alstyne, California Pleading, § 573. A special demurrer for want of capacity to sue 'raises only the question of whether any general legal disability exists, such as infancy or insanity, or want of title in the plaintiff to the character in which he sues.' Klopstock v. Superior Court, 17 Cal.2d 13, at page 18, 108 P.2d 906, at page 909, 135 A.L.R. 318. As stated by the Supreme Court in Parker v. Bowron, 40 Cal.2d 344, at page 351, 254 P.2d 6, at page 9: 'Incapacity is merely a legal disability, such as infancy or insanity, which deprives a party of the right...