John Paul Lumber Co. v. Agnew

• Decision Date: 28 May 1954
• Citation: 270 P.2d 1044,125 Cal.App.2d 613
• Court: California Court of Appeals Court of Appeals
• Parties: JOHN PAUL LUMBER CO. v. AGNEW et al. Civ. 8389.

Page 1044

270 P.2d 1044

125 Cal.App.2d 613

JOHN PAUL LUMBER CO. v. AGNEW et al.

Civ. 8389.

District Court of Appeal, Third District, California.

May 28, 1954.

Rehearing Denied June 22, 1954.

Hearing Denied July 21, 1954.

Brobeck, Phleger & Harrison, San Francisco, George J. Raymond, Smith River, for appellant.

Falk & Falk, Eureka, for respondent.

VAN DYKE, Presiding Justice.

Plaintiff and respondent, John Paul Lumber Company, a Wisconsin corporation, brought this action against Samuel A. Agnew, defendant and appellant, to quiet title to certain timber lands in Del Norte County. It also asked that the court declare void and order cancelled of record certain deeds on which appellant relies as vesting title in him. It was the theory of respondent that, although these deeds purported to be those of the corporation, they were executed in its behalf by persons without authority to convey its lands. Appellant's position was, first, that these deeds had been executed by de jure officers of the corporation, duly authorized; second, that if those who executed the deeds on behalf of respondent were not de jure officers then they were de facto officers with authority to convey respondent's lands; third, that respondent had ratified the acts of those assuming to act for it; and, fourth, that respondent was estopped to deny the validity of those acts.

John Paul Lumber Company was organized about 1890; it acquired timber lands in Wisconsin, in Florida and in California. It actively operated for many years and when its Wisconsin timber was exhausted it changed the main scene of its operations to its Florida holdings. In Florida it did not actively operate but became a holding corporation, and the activities of its stockholders thereafter were carried out through numerous corporations, one of which, the East Coast Lumber Company, was organized to cut the timber held by the John Paul Lumber Company in Florida. Respondent never actively operated in California.

John Paul was the original founder of the respondent and was succeeded in the management of corporate enterprises by his two sons. The varied businesses which the founder and his sons after him engaged in were family affairs, and it is apparent from the record that all the stock was closely held within that group. The Florida operations did not prosper. The East Coast Lumber Company suffered such financial reverses that during the depression years it went into receivership and was eventually liquidated. A. G. Paul and R. H. Paul, the sons of John Paul, and their respective families owned the stock of the various corporations and the stock of respondent in a proportion of about one-half to one family and one-half to the other, and A. G. Paul and R. H. Paul came to be the managing directors of the corporate activities. During this Florida period which extended over many years respondent was practically an inactive company--its single function being to own properties which the other corporations used in their businesses. Under the financial reverses which the Paul families suffered, the Del Norte County lands held by the respondent company became tax delinquent. This first occurred in 1926, and at that time the directors of respondent were R. H. Paul; his son, R. H. Paul, Jr.; A. G. Paul; his son, A. G. Paul, Jr.; and one T. R. Guerry. The corporation records show that in July of 1927 Guerry resigned as secretary and director, and one T. R. Bowen was elected in his stead to both offices. In January, 1928, the stockholders elected the following directors: A. G. Paul, R. H. Paul, T. R. Bowen, R. H. Paul, Jr., and F. C. Paul. T. R. Bowen became secretary-treasurer. These offices were held by him until May 20, 1929, when he resigned both offices and went to South Carolina where he lived for about seven years. A. G. Paul, Jr. was appointed director and secretary-treasurer to succeed Bowen. In January, 1930, A. G. Paul, Jr., resigned as director and as secretary-treasurer, Marie L. Paul being elected to the office of director. So from the corporate records it appears that after January of 1930 neither A. G. Paul, Jr. nor T. R. Bowen were officers of the respondent. A. G. Paul, Jr., left Florida, went to Canada and then moved to Oregon where he lived for many years. There were neither director nor stockholder meetings of respondent corporation after January, 1930, and until October of 1947, just before the filing of this action.

The deeds by which the lands of respondent were conveyed to appellant, some conveyances being direct to him, others being made ostensibly to third parties but for appellant's benefit, were executed by A. G. Paul, Jr., signing as vice president, and T. R. Bowen, signing as secretary. The first and the last two deeds in the series of seven by which the lands in question were conveyed were executed by A. G. Paul, Jr., as vice president. The other deeds purported to be executed for him by his wife, acting as his attorney in fact and signing his name as vice president. Upon this record the court found that these deeds were not executed by de jure officers of the corporation.

There was testimony that T. R. Bowen, a distant relative of Marie L. Paul, wife of A. G. Paul, Sr., had been employed by the East Coast Lumber Company as an accountant and general handyman; that he had never had any part in the management of respondent corporation and had owned none of its stock. He, himself, testified that he handled no affairs of the respondent since his resignation as director and secretary in 1929 until 1944. By this time he was again residing in Florida near the place where respondent's affairs had been handled up to the time when it became inactive and it appears that he became the principal actor in the transactions whereby, in 1944, the Del Norte County lands of respondent were conveyed to appellant. His activities in connection with the affairs of the respondent corporation, however, were limited to the making of the deeds to respondent's Del Norte County lands and to the receipt of the moneys paid therefor, which moneys he first deposited in bank and then transferred to his account as executor of the will of A. G. Paul, Sr., who had died in 1943. This estate was subsequently distributed to Marie L. Paul, widow of decedent. Bowen handled no other affairs for the company; indeed, the company had long been completely inactive, and remained so until action was taken preparatory to filing this suit. As to A. G. Paul, Jr., who, with Bowen, purported to act for the corporation in the execution of the deeds, he had had no connection whatever with any of the affairs of respondent from 1930, when he had left Florida, until the execution of the first deed. At that time he was in the navy. While on a short leave he visited Watertown, Florida, which town had been the site of operations of the John Paul Lumber Co., where his mother, Marie L. Paul, resided. At that time he saw certain correspondence having to do with Del Norte County lands, and coming from individuals who wanted to buy the properties. He talked with Bowen about the matter, told him he knew nothing about such matters, and asked Bowen if he (Paul) had any connection with respondent. Bowen told him that he was the vice president, and acting in that belief he later executed the first of the series of deeds, and the last two. His wife, to whom he had given a general power of attorney, commonly given by members of the armed services, executed the other deeds, purporting to act under this power of attorney and signing her husband's name as vice president of respondent.

Respondent's Del Norte County lands, as we have stated, became tax delinquent in 1926. They had later been tax deeded to the state and had remained in that status. In April, 1944, a Mr. Puter, who resided in the general area in which the lands were located and who was by occupation a searcher of titles, made application to the Del Norte County Supervisors for the public sale of these lands. Other applications may likewise have been made. The supervisors responded by advertising the sale for July 3, 1944. Puter wrote a letter to the respondent company at Watertown, Florida, and this letter came into the hands of Bowen. In the letter Puter stated that the lands would be sold for taxes; that he had other holdings of his own near these lands; that he wanted to buy the lands and would pay $1 an acre for the respondent's equity of redemption. It was, of course, apparent that if the lands were not to go to public sale they would have to be redeemed before the advertised date of sale, and that meant the payment of considerable sums of money to discharge the tax liens and prevent the divestiture of respondent's interest. It actually took approximately $9,000 to clear all the land of taxes. Bowen, purporting to act for respondent, authorized Puter to redeem the lands at Puter's cost, and purported, also, to give respondent's option to Puter to purchase the redeemed lands at the offered price. From time to time the lands were redeemed and conveyed to Putter. It is unnecessary to state in detail the series of transactions that followed. It is enough to say here that the lands were redeemed, appellant furnishing the money for that purpose and paying, in addition, the $1.00 per acre for respondent's equity of redemption. Bowen's testimony was that in all of these matters he acted in the honest belief that he was the secretary of respondent and was acting for its benefit. As to A. G. Paul, Jr., his testimony was to the effect that his assumption to act as vice president of respondent was based wholly upon Bowen's statements to him that he did hold such office. He said he knew nothing of the details of the various transactions by which the company's property was conveyed to appellant, and that for almost the entire period during which these transactions were taking place he was serving in the navy in distant theaters. In explanation of the actions...