Reich v. Webb
| Citation | 218 Cal.App.2d 862,32 Cal.Rptr. 803 |
| Court | California Court of Appeals Court of Appeals |
| Decision Date | 05 August 1963 |
| Parties | Bernard REICH and Sylvia Reich, depositors and members of Beverly Hills Federal Savings and Loan Association, Individually and in behalf of Beverly Hills, Federal Savings and Loan Association and the other depositor-members of said Association similarly situated, Plaintiffs and Appellants, v. Eugene WEBB, Jr., Marguerite R. Webb, Southland Mortgage Corporation, Lytton Financial Corporation, Lytton Savings and Loan Association, Bart Lytton, and Beverly Hills Federal Savings and Loan Association, Defendants and Respondents. Civ. 26555. |
Vaughan, Brandlin, Robinson & Roemer, and Jack Corinblit, Los Angeles, for plaintiffs and appellants.
Whyte & Schifferman, John Whyte, and Robert P. Schifferman, Los Angeles, for respondents Webb.
Thomas W. Clarke, No. Hollywood, and Glen R. Miller, Beverly Hills, for respondent Beverly Hills Federal Savings and Loan Ass'n.
The defendant Beverly Hills Federal Savings and Loan Association (hereinafter referred to as Beverly Hills Federal) and the defendants Mr. and Mrs. Webb, husband and wife (referred to as the Webbs), demurred to the first amended complaint. The demurrers were sustained without leave to amend, and a judgment of dismissal was entered. Plaintiffs appeal from the judgment.
The first purported cause of action alleged in substance, as follows: Beverly Hills Federal was organized about 1936 as a federal savings and loan association under the name of Southland Federal Savings and Loan Association. About April 15, 1957, that name was changed to Beverly Hills Federal. Until early in 1961, defendant Mr. Webb was a director, the president, and the managing officer of Beverly Hills Federal; and defendant Mrs. Webb was also a director and officer thereof; and until said time they dominated and controlled the board of directors. The defendants Webb caused the defendant Southland Mortgage Corporation to be formed, and until early in 1961 substantially all its capital stock was owned by them, and they dominated and controlled the board of directors thereof.
The assets of Beverly Hills Federal are by law owned by the depositor-members in proportion to the amount of each member's deposits from time to time. Plaintiffs Reich are, and have been for several years, depositor-members of Beverly Hills Federal. They bring this action on behalf of Beverly Hills Federal and all of its depositor-members who may wish to join in this action.
A proper business opportunity of Beverly Hills Federal is and has been the related business of making appraisals of property and of servicing loans; and that all the fees, commissions, and profits which are incident to the business of such appraisals and servicing of loans were and are a business opportunity of Beverly Hills Federal and its members.
Plaintiffs allege upon information and belief that Southland Mortgage Corporation was formed by defendants Webb for the purpose of appropriating to that corporation and ultimately to themselves the said business opportunities of Beverly Hills Federal in that the Webbs by their control of Beverly Hills Federal prohibited it from participating in said corporate opportunities; and pursuant to the same scheme caused Southland Mortgage to acquire the business of making all the appraisals and inspections connected with the servicing of loans for Beverly Hills Federal, and as a result thereof Southland Mortgage received all the fees, commissions, and profits to which Beverly Hills Federal was entitled and would have received if it had been permitted to engage in said business opportunities.
During the past five years, defendants Southland Mortgage and the Webbs have received fees, commissions, and profits in an amount not yet determined by plaintiffs, but all of said fees, commissions, and profits are rightfully the property of Beverly Hills Federal and its members. All the business, assets, and profits of Southland Mortgage have been the property of Beverly Hills Federal and are held by said defendants Southland and the Webbs as constructive trustees for Beverly Hills Federal.
On August 15, 1961, plaintiffs made a demand upon the board of directors of Beverly Hills Federal to prosecute an action seeking the same relief as that which plaintiffs demand herein. The board failed and refused to take any action thereon. The refusal was because Lytton Financial Corporation is the owner of Southland Mortgage and Lytton Savings and Loan Association and also dominates and controls the board of directors of Beverly Hills Federal.
The second purported cause of action alleged in substance, as follows: Plaintiffs incorporate herein by reference the allegations of the first cause of action. At all times herein mentioned defendant Bart Lytton has been the president and a director of Lytton Financial Corporation (referred to as Lytton Financial) and has dominated and controlled Lytton Financial which is a holding company that holds the operating control of Lytton Savings and Loan Association. Early in 1961 the Webbs caused the assets and capital stock of Southland Mortgage to be sold and transferred to Lytton Financial, and a part of that transaction was the transfer of the control of Beverly Hills Federal and its board of directors from the Webbs to Lytton Financial. The sale and transfer of the control of Beverly Hills Federal took place contemporaneously with the sale of Southland Mortgage and was accomplished in part by the resignation of certain members of the board of directors formerly under the control of the Webbs and the substitution in their places of certain persons (Doe defendants) who are under the control of defendants Bart Lytton and Lytton Financial.
Plaintiffs allege upon information and belief that as a part of the said sale and transfer, the Webbs substituted Bart Lytton and other representatives of Lytton Financial as the proxy agents on proxies theretofore given to the Webbs by the members of Beverly Hills Federal.
Lytton Financial paid $1,500,000 to the Webbs in consideration for said sale and transfer.
The right to membership on the board of directors of Beverly Hills Federal and the right to control said association were unlawfully sold by the Webbs, and the proceeds of the sale are held in constructive trust for said association and its members by the Webbs.
The third purported cause of action alleged in substance, as follows: Plaintiffs incorporate herein by reference the allegations of the first and second causes of action. That after the sale of Southland Mortgage to Lytton Financial and the transfer of control of Beverly Hills Federal to Bart Lytton and Lytton Financial, and commencing about April 11, 1961, and continuing to date, the defendants Lytton and Lytton Financial in an unlawful exercise of control of Beverly Hills Federal caused Beverly Hills Federal to purchase from Lytton Savings certain notes and deeds of trust approximating $15,000,000 in face amount. Plaintiffs allege upon information and belief that by reason thereof the defendants Lytton and Lytton Financial have received profits, fees, and other monetary considerations from Beverly Hills Federal and its members in an amount not yet ascertained. Since early in 1961, Lytton, Lytton...
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