Meyer v. Glenmoor Homes, Inc.

Decision Date09 November 1966
Citation54 Cal.Rptr. 786,246 Cal.App.2d 242
CourtCalifornia Court of Appeals Court of Appeals
PartiesLenore A. MEYER, Plaintiff and Respondent, v. GLENMOOR HOMES, INCORPORATED, Defendant and Appellant. Civ. 22881.

LeRoy A. Broun, Fremont, for appellant.

Spruance, Simonian & Pretzer, San Leandro, for respondent.

SIMS, Justice.

Defendant corporation has appealed from a judgment for plaintiff entered on a jury verdict, and from an order denying its motion for judgment notwithstanding the verdict in an action on a $25,000 note signed under the corporate name by plaintiff's deceased husband, the president of the corporation.

In its answer the corporation, in addition to a general denial, set forth lack of authority of the signer of the note, and lack of consideration. The case was submitted to the jury on these issues, and on the theory of equitable estoppel, as it applied both in favor of and against the payee. Defendant's principal contention is that the court erred in denying its motion for judgment notwithstanding the verdict. Inherent in this position is the proposition that there is no evidence sufficient to sustain the verdict and judgment. Defendant assumes this burden and asserts before this court that the evidence reflects as a matter of law that the execution of the note was never authorized by the corporation; that the corporation never bargained for or received any consideration in return for the execution and delivery of the note; and that the verdict and judgment cannot be sustained on the theory of equitable estoppel because the plaintiff failed to plead facts necessary for an estoppel and because the proof fails to show facts necessary to recovery on that theory. Related objections to the instructions given by the court embrace: (a) alleged error in instructing on equitable estoppel for the reasons stated above; (b) inadequacy of the instructions on equitable estoppel; (c) alleged error in certain instructions given and refused on the subject of agency; (d) alleged error in an instruction on consideration. Defendant further contends that if the doctrine of equitable estoppel were properly in the case, it should have been applied as a matter of law to preclude plaintiff from recovery on the note.

An analysis of these contentions, as applied to the facts of this case when viewed in the light of applicable principles of law, leads to the conclusion that the uncontroverted facts establish that plaintiff has no right to recover from the defendant on the note. It was therefore error to deny the defendant's instruction for a directed verdict and its subsequent motion for judgment notwithstanding the verdict. The alleged errors in the instructions are thereby rendered moot, and are hereinafter discussed only as they reflect upon the substantive law applicable to the facts.

Summary of Facts

In 1951 James R. Meyer, plaintiff's deceased husband, James L. Reeder, Sr., a builder, and Ralph E. Cotter, Jr., a civil engineer, became associated for the purpose of purchasing, developing, selling and investing in land and improvements. Defendant corporation was formed April 30, 1951. The first blueprints for homes that were built were drawn on Meyer's dining room table. The enterprises grew and numerous corporations were formed to carry on the undertakings in which the associates and others were interested. Plaintiff considered defendant corporation as 'the mother' or 'the corporation,' and the complex was often referred to as 'Glenmoor Homes.'

The three associates were the directors of defendant corporation. Meyer was the president and owned slightly less than 40 per cent of the outstanding stock. Reeder was the vice president and treasurer, and with Robert H. Reeder owned 20 per cent. Cotter was secretary and owned 40 per cent, and the remaining shares were owned by Raymond T. Jennings. Since 1954 John Cortner had been the assistant secretary and office manager of defendant corporation.

The ownership varied with the different corporations. Amongst the corporations was Glenmoor Sales Agency, Inc. which had been organized to handle real estate sales and to purchase and hold land for future development. It had three stockholders, Meyer, Cotter and Reeder, and they each owned one-third of the stock.

In 1960 premises at 4250 Central Avenue in Fremont, which was owned by Glenmoor Sales Agency, Inc., had been improved with an apartment house constructed by defendant corporation. The three associates desired to get permanent financing for the apartment to pay off the construction loan and hold the property as a long term investment. The financial institution required that they apply for the loan as individuals. The loan could have been obtained on their individual deed of trust with the signatures of their respective wives, but their accountant and attorney advised them to set it up as a partnership for easier and more efficient operation.

The property was conveyed from Glenmoor Sales Agency, Inc., to the three individuals by deed dated January 7, 1960 and recorded January 14, 1960. A second, quitclaim, deed from the respective wives to the three associates was prepared and was ultimately signed by the three spouses and recorded January 27, 1960.

This controversy arises out of the circumstances under which Meyer secured the signature of his wife. According to her testimony her husband said the corporation wished to borrow money. She inquired as to why she should give up rights rather than signing for the loan, and asked him the value of their interest. On being advised it was $50,000, she stated 'Fine, you have your boys, your corporation give me a note for my interest and I will sign a quitclaim deed.' Thereafter Cortner, the office manager, appeared with the $25,000 note which is the subject of this action, and she signed the document her husband had requested her to sign. The fact that this note was signed and delivered was not discovered by the remaining officers, directors and stockholders until after Meyer's death.

The property was held in partnership until Meyer's death March 3, 1962. It was thereafter liquidated, and his portion of the proceeds went into his estate. On January 26, 1961, Meyer executed a will in which he declared that all property in which he had any interest was community property. By this will and a codicil thereto executed February 27, 1962, Meyer left the bulk of his estate in two trusts, and put his wife to her election as to whether to take under the will. She is to receive the income and has a limited power of appointment as to one trust, and is entitled to invade the income and principal of the second trust under certain contingencies. She ultimately elected to take under the will.

The shares held by Meyer in defendant corporation were subject to the corporation's option to buy them from his estate. This option was exercised after his death.

The remaining facts appear in the body of the opinion.

Authority

There is no evidence in the case to show that the particular transaction, whereby the decedent signed 1 and caused the note of the corporation to be delivered to his wife in return for her joining in the execution of the quitclaim deed from the respective wives of the partners who had individually received the property from Glenmoor Sales Agency, Inc., was ever expressly authorized or ratified by defendant corporation or anyone, other than decedent, acting on its behalf. The testimony is all to the contrary.

The instrument does bear the corporate seal. Under the provisions of section 833 of the Corporations Code the note itself thereby constitutes 'prima facie evidence that (it) is the act of the corporation, that it was duly executed and signed by persons who were officers or agents of the corporation acting by authority duly given by the board of directors, and that the seal is the duly adopted corporate seal of the corporation, and that it has been affixed as such by a person duly authorized so to do, * * *.' It is thereby admissible in evidence without further proof of its execution. It has been stated: 'Where the corporate seal is used there is, of course, a Presumption of authority, * * *.' (6 Cal.Jur., p. 1095, as quoted with approval in Magnavox Company v. Jones (1930) 105 Cal.App. 98, 103, 286 P. 1084; emphasis added.) The statutory mandate does not go so far. 'Prima facie evidence is that which suffices for the proof of a particular fact, until contradicted and overcome by other evidence. For example: the certificate of a recording officer is prima facie evidence of a record, but it may afterwards be rejected upon proof that there is no such record.' (Code Civ.Proc. § 1833; Blood v. La Serena L. & W. Co. (1896) 113 Cal. 221, 225--226, 41 P. 1017, 45 P. 252; and see Associates Discount Corp. v. Tobb Co., Inc. (1966) 241 A.C.A. 663, 670, 50 Cal.Rptr. 738; and San Ramon Valley Bk. v. Walden Co. (1921) 53 Cal.App. 534, 536, 200 P. 662; and cf. Evidence Code (1967) §§ 602, 601 and 603 and 604 with 605 and 606.) Some cases indicate that prima facie evidence, since it must not only be contradicted but also overcome, will sustain a finding against contrary evidence. (See Miller & Lux, Inc. v. Secara (1924) 193 Cal. 755, 770--772, 227 P. 171; People v. Van Gorden (1964) 226 Cal.App.2d 634, 637, 38 Cal.Rptr. 265; and Frank Meline Co. v. Kleinberger (1930) 108 Cal.App. 60, 62--63, 290 P. 1042.)

If the record is so construed in this case the trial court properly denied defendant's instruction for a directed verdict and left the matter of authority to the jury within the principles of the following rule: 'It has long been the rule in this state that a nonsuit may be granted only when, disregarding conflicting evidence, giving to the plaintiff's evidence all the value to which it is legally entitled, and indulging in every legitimate inference which may be drawn from that evidence, the court properly determines that...

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