Perata v. Oakland Scavenger Co., 15125

• Decision Date: 28 May 1952
• Docket Number: No. 15125,15125
• Citation: 244 P.2d 940,111 Cal.App.2d 378
• Court: California Court of Appeals Court of Appeals
• Parties: PERATA et al. v. OAKLAND SCAVENGER CO.

Page 940

244 P.2d 940

111 Cal.App.2d 378

PERATA et al. v. OAKLAND SCAVENGER CO.

No. 15125.

District Court of Appeal, First District, Division 1, California.

May 28, 1952.

Rehearing Denied June 27, 1952.

Hearing Denied July 24, 1952.

St. Sure & Moore, Oakland, for appellants.

Elliott Johnson, W. I. Follett, Oakland, for respondents.

BRAY, Justice.

Questions Presented.

This appeal by defendant from a judgment in favor of plaintiffs raises primarily the interpretation of the by-laws of defendant corporation as to a stockholder who desires to terminate his connection with the corporation, and the question of whether the monthly payments to working stockholders were solely wages or included dividends.

Facts.

Defendant is a California corporation engaged in the scavenger business. Each of its 208 stockholders owns 100 shares of stock. In 1935 plaintiff Gamba became a stockholder by purchasing 100 shares for $12,500; plaintiff Perata inherited in 1920 his 100 shares; plaintiff Rossi purchased his in 1933 or 1934 for $11,500; and plaintiff Ferro purchased his in 1930 for $11,500. In 1939 the by-laws were amended in the present form and all stockholders, including plaintiffs, signed them. As required by the by-laws all stockholders worked in the company business. There were a number of nonstockholder employees, usually referred to as 'helpers.' During 1943 these helpers were paid from $7.50 to $8 per day. May 1, 1944, the rate was changed to from $8 to $9.50. October 15, 1944, it was changed to $8.50 to $9.50. Working stockholders were paid a monthly 'basic rate' which, during the period here involved, was $400 per month. From this amount was deducted any collections made by the stockholder and not turned in, income tax withholding, unemployment insurance and deductions for time off. There was a period during which the basic rate was $350 per month and $50 per month additional was paid the employee-stockholder. It is not clear just what this so-called 'side money' was. The trial court treated it as a part of the basic rate, and we have done so.

This controversy arose when each plaintiff respectively quit work, all except Perata without the express consent of the board of directors. Perata had broken his elbow in 1931, and because of it was bothered in his work. He told the director of men that he wanted time off as his doctor had told him to quit work. He was referred to the board. Later he was informed by the director that his request was granted. He left his employment November 30, 1943. Gamba went into the Merchant Marine, being given time off from March, 1942, until March, 1945. From March, 1942, until September, 1943, he received full pay less a deduction for employment of a substitute. For the balance of the period he received no pay. He returned to work June 1, 1945, and worked until March 1, 1946. In February he told the director and board that he was leaving because of his health and because he was dissatisfied. He was told that his stock could not be sold at that time. There was some talk to the effect that the only way he could get out of the company was to fight. He quit. Ferro quit December 31, 1945, giving notice to that effect at a regular monthly meeting in November, because he was dissatisfied. Rossi quit June 10, 1946. Prior thereto he presented to the board a letter from his doctor advising him to quit. He was told to wait a few months as the company was short of men. He refused. The stock of all plaintiffs was sold by the board on May 7, 1947. Each 100 shares brought $13,000, and that sum was paid by the company to each of the plaintiffs except Rossi. Approximately 16 months after Rossi quit he was notified that he was fined for not working $100 per month for the 16 months prior, from July 1, 1946, to November, 1947. Although fines were usually entered in the minute book of the board, no fines appear against any of the plaintiffs, not even Rossi. None of the plaintiffs received any pay or dividends from the date each quit work. Defendant's president testified that the board decided not to fine plaintiffs for not working but merely not to pay them. No formal action in this respect appears in the minutes. There was evidence that when all other stockholders wanted to quit they continued working until their stock was sold by the board. Plaintiffs brought this action to recover dividends payable from the time each quit until his stock was dold, contending that besides the declared dividends that portion of the monthly pay which exceeded the $8.00 per day stated in the by-laws and hereafter mentioned, or at least that portion which exceeded the wages paid for replacement of their work, constituted dividends.

Findings.

The court made extensive findings, the substance of which were that long established custom required that each stockholder must own 100 shares and that by such custom and the by-laws each stockholder must work for the corporation subject to the provisions of the by-laws as to time off from work; that the company during the period in question earned net profits which varied from month to month; that it was provided by long established custom that each stockholder except the president and vice-president must at all times receive the same amount of money monthly except for deductions provided by the by-laws; that the stock of each plaintiff, endorsed in blank, was held by the corporation from date of issuance to date of sale, for safekeeping and to enable defendant to enforce the provisions of article V of the by-laws; that until the sale of the stock of each respective plaintiff he was entitled to receive from defendant the same amount as paid by defendant to any other stockholder except the president and vice-president and except as such amount should be reduced for time off as provided in article VII, section 12 of the by-laws, and less such portion of said money as constituted a reasonable wage for the work performed by a stockholder; that from November 30, 1943, to May 1, 1944, $8 per day and no more, from May 1, 1944, to May 7, 1947, $9.50 per day and no more, were reasonable wages to be paid each stockholder employed by defendant during the respective periods; that all monthly distribution to each of said stockholders over and above said sums were dividends to the extent they exceeded such reasonable wages; that such excess payments were made under the guise of compensation but were in fact not so paid but were paid without regard or reference to the services performed by each stockholder and in certain instances in the absence of the performance of any services; that such excess was paid out of the corporation earnings and was dividends; that each plaintiff was entitled to receive for the period between the time he quit working and the sale of his stock the difference between $400 per month and the reasonable wages of helpers above mentioned for all working days (the court figured 26 working days to a month). The court then awarded Perata as dividends for that period, figured in that way, the sum of $6,479.50, and for additional sums which were paid to the stockholders over that period as declared dividends, and for interest on both types of dividends, the total sum of $2,428.86, or a total sum of $8,908.36. It awarded Rossi, on the same basis, $3,422.35, Gamba, $7,870.71, and Ferro $3,181.93. No attack is made on the correctness of the arithmetic of the computations.

By-laws.

Those important here follow. ¹ Articles V and VI state that the corporation is, in effect, a membership corporation, and because it is particularly important that each stockholder shall enjoy the respect and confidence of all other stockholders and to insure that the stock shall not come into the hands of persons not acceptable to the other stockholders, each stockholder agrees that the restrictions and limitations upon the transfer of stock shall be a part of the by-laws and a contract between each stockholder and every other stockholder. Each stockholder is required to endorse his certificate of stock and deposit it with the board with whom it must remain during the 'lifetime of said stockholder.' Upon his death the title to the stock becomes vested in the board. No stockholder can sell or assign his stock to any person not approved by the board. In the event of the death of the stockholder provision is made for its transfer to a male relative, if such relative is acceptable to the board. If there be none, then the board may sell the stock at a price to be determined by the board and pay the proceeds to the wife or heir of the stockholder. If the stockholder is guilty of theft and is expelled from the corporation he shall accept from the board the reasonable value of his stock. The opinion and judgment of the board as to transfers of stock under this article are final and conclusive. All stockholders are required to attend all stockholders' meetings under penalty of fine. All operations of the corporation are secret and must not be divulged by the stockholders.

Article VII provides the duties of workers who are stockholders. They must pay for loss of tools or truck equipment and for all damages caused by them or a truck driven by them. Fines are provided if the stockholder fails to report for work or give notice of illness.

Section 9 of Article VII provides as follows: 'General Duties of Employees and Stockholders. Each employee or stockholder of this Corporation shall devote all his time to the work of this corporation and shall gather personally, according to the custom of this corporation, all rags, bottles, newspapers, paper and other articles of salvage within the field of his particular work. For each time he fails in this duty, he shall be fined an amount to be determined by the Board of Directors.'

Section 11 of article VII provides as follows: 'Failure or Refusal to Follow Orders of the Board of Directors. Each employee or stockholder of this corporation who shall refuse or...