Jacuzzi v. Jacuzzi Bros., Inc.

Decision Date29 April 1966
Citation51 Cal.Rptr. 25
CourtCalifornia Court of Appeals Court of Appeals
PartiesRodolfo JACUZZI et al., Plaintiffs, Appellants and Cross-Respondents, v. JACUZZI BROS., INCORPORATED, et al., Defendants, Respondents and Cross-Appellants. Civ. 22233, 22321.

Nathan Gray, Berkeley, Richard Swisher, Oakland, for appellants.

Joseph L. Alioto, Walter F. Calcagno, Richard Saveri, San Francisco, for respondents.

SIMS, Justice.

The proceedings reviewed herein arise out of a stockholders' derivative suit brought by the plaintiffs, stockholders of the defendant Jacuzzi Bros., Incorporated, on behalf of that corporation against five individuals, 1 named as directors and employees of the corporation who with their families control the majority of the shares of the corporation, and against Jacbros, S.A., Geneva, a Swiss corporation. It is alleged that the defendant Candido Jacuzzi, as general manager and director of the corporation, dominated and controlled the other defendants. The first cause of action seeks rescission of a sale of its foreign holdings by the domestic corporation, hereinafter referred to as Jacuzzi, to the Swiss corporation, hereinafter referred to as Jacbros, and an accounting on the principal ground, among several, that the consideration was inadequate. A second cause of action sought recovery on behalf of the corporation from Candido Jacuzzi because of an unfair royalty contract he secured from the company; a third cause of action sought a declaration of rights; and a fourth cause of action sought the removal of Candido as a director. As hereinafter appears the last three causes of action were subsequently dismissed.

The sale of the corporate assets was made May 30, 1959. Apparently the matter was thereafter investigated by the plaintiffs, minority but substantial stockholders, and suit was filed October 26, 1961 after refusal of their demand for a stockholders' meeting to revoke the sale. The defendants filed an answer which admitted the status of the respective defendants as alleged, the sale of the stock and contract rights from Jacuzzi to Jacbros, but denied any malfeasance and asserted that the court had no jurisdiction over Jacbros.

Discovery proceedings included two motions to produce documents which were complied with by the defendants and 29 depositions. The particular matters brought before this court stem from a third motion to produce documents which was instituted by notice of motion filed November 8, 1962, and from interrogatories served on defendants February 4, 1963. After proceedings regularly taken to that end a written order was signed and filed January 2, 1963 granting the motion for production of documents. On February 7, 1963 plaintiffs filed a notice of motion for sanctions against Jacuzzi, Candido and Jacbros for failure to comply with the order for production of documents. Hearings were regularly held and continued on this motion on February 15 and 27 and March 5 at which time the three defendants were given 30 days to comply. On April 5, 1963 proceedings were continued to May 7 and then to May 27, while those defendants petitioned this court for a writ of prohibition or other relief which was denied by Division Two of this court on April 22, 1963 and by the Supreme Court on May 22, 1963 (1 Civ. 21268). On May 27, 1963 a final hearing was held on the motion for sanctions for failure to comply with the motion for production of documents, and the matter was continued for submission and decision.

Meanwhile the defendants filed a motion for additional time to answer the interrogatories which had been served on February 4, 1963. This motion resulted in a continuance to April 15, 1963 to determine whether there would be compliance by that time. In the interim the defendants filed objections to the interrogatories which were overruled. On April 15, 1963 answers had been filed by Jacuzzi, and the matter was continued one week, at which time Candido filed answers. The same were reviewed by the court at hearings on April 22 and April 23, and a minute order of the latter date requiring further answers was incorporated into a written order signed and filed April 24th. On April 29, 1963 defendants' objections to the latter order were heard and denied. On May 21, 1963 plaintiffs filed their notice of motion for sanctions against all of the defendants for failure to answer interrogatories in compliance with the order of April 24th. On May 24th additional answers were filed by Candido. The matter was heard and argued on May 27, 1963 together with the motion for sanctions for failure to produce. On June 5, 1963 other defendants who had not answered joined in the answers filed by Jacuzzi on April 15th.

The matters were regularly continued to June 21, 1963 at which time they were submitted and a minute order was made as follows: 'Motions of Plaintiffs for sanctions are hereby submitted and each is granted as follows: Allegations of first cause of action in complaint and amendment thereto shall be taken to be established as alleged therein; answer to said first cause of action to be stricken and default judgment to be entered thereon; Allegations of said first cause of action that are incorporated into the second, third and fourth causes of action of complaint shall be taken to be established and portions of answer relating thereto shall be stricken; issues remaining to be tried in this cause shall relate to the second, third and fourth causes of action except as above modified; * * * Plaintiff to prepare order. Counsel notified.' These provisions were incorporated in a formal order signed and filed June 24, 1963 and entered June 26, 1963. On June 28, 1963 pursuant to a request therefor filed by plaintiffs the default of the defendants as to the first cause of action was entered.

On August 14, 1963, without notice to defendants and without their presence, the plaintiffs sought an 'Order for Entry of Judgment.' Evidence was introduced and the matter was continued to August 16 for further disposition. On that day plaintiffs filed a partial dismissal, dated August 14th and approved by the trial judge August 15th, which dismissed the second, third and fourth causes of action. A judgment was signed August 15th, filed August 16th and subsequently entered on August 19th. It ordered the restitution to Jacuzzi of assets of a then present fair market value of $5,408,101.05, income On the assets of $987,519.39, moneys expended for Jacbros of $289,966, interest on the foregoing sums of $146,967.04, or an aggregate of $6,823,553.48 with an offset of $699,578.92 for sums paid by Jacbros to Jacuzzi, leaving a net of $6,123,974.56. It further provided that the defendants, with the exception of Jacuzzi, were and each of them was liable for that sum less the value, as fixed in the judgment, of such assets were returned; and awarded miscellaneous as well as taxable costs to plaintiffs and compensation to their attorneys computed at 20 percent of the first $2,000,000 in value received and at 10 per cent of the balance.

On August 21, 1963 defendants served and filed their notice of motion for an order to vacate the order striking defendants' answer, to vacate and set aside default, to vacate and set aside judgment and to restore defendants' answer. This motion came on for hearing, as noticed, on September 12 and was continued to October 7 and then to October 17, 1963 when it was finally argued and submitted. On October 18, 1963 the court signed and there were filed a memorandum opinion and a written order, which incorporated the opinion by reference, granting the relief prayed for. The order recites that the relief granted is 'subject to the conditions hereinafter stated' and 'shall be effective upon the performance by said defendants of the following conditions:' the deposit with the court of the assets referred to in the judgment, and such additional security as the court may require, and the consent to appointment of a disinterested auditor by the court to audit the books of the principal corporations and their subsidiaries. The order further provided for extending the 15 day period granted for compliance. The provisions thereof are hereinafter more particularly set forth.

Plaintiffs, on behalf of themselves and Jacuzzi, on December 16, 1963, filed a notice of appeal from this order and from orders theretofore granted which had extended the defendants time for compliance. On January 6, 1964 plaintiff, and on January 14, 1964 defendants, filed their respective notices designating matters for the record on that appeal. Plaintiffs designate this notice of appeal as 'a precautionary notice of appeal * * * from the probably nonappealable conditional order of October 18, 1963'; and defendants assert that subsequent orders entered May 14, 1964 were the final appealable orders.

Meanwhile the defendants had manifested their intent to comply with the conditions of the order vacating the judgment. A consent and assignment executed by their attorneys was filed on October 18th, certificates of stock representing interests in Mexican, Canadian and Brazilian subsidiaries were deposited on the 31st, and the defendants secured an ex parte order extending their time for compliance to November 15th. A second deposit consisting of contract documents was made on November 13th and on the following day an order was made extending the time to November 29, 1963.

On November 20, 1963 defendants served and filed a notice of motion for an order that defendants had complied with the conditions of the earlier order. This matter was set for hearing on November 26th, at which time plaintiffs served and filed a notice of motion for an order enjoining the attorneys for defendants from representing Jacuzzi, and for an order enjoining defendants from controlling that corporation in the pending action. Hearing on the former motion was continued to December 9,...

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